2024-2025

ECONOMICS PROJECT

TOPIC- AUTOMOBILES INDUSTRY

SUBMITTED BY: SUBMITTED TO:

Dr. Mitali Tiwari

Kanishk Tomar
BA.LLB [1ST SEM] [assistant professor] (economics)

Acknowledgement
I would like to express our heartfelt gratitude to Dr. Mitali Tiwari of Dr. Ram

Manohar Lohiya National Law University, Lucknow, for her invaluable

guidance, encouragement, and support throughout the completion of this

project. Her expertise and thoughtful mentorship have been crucial to the

success of this work.

I also extend our thanks to the university library for providing access to

essential resources and research materials that greatly facilitated our efforts.

Additionally, I am grateful to our college seniors for their guidance and advice,

whose valuable insights and suggestions enriched our approach and

understanding during the project.

Name – Kanishk Tomar

[BA.LLB, 1ST SEMESTER]
 DR.RAM MANOHAR LOHIYA

NATIONAL LAW UNIVERSITY

UTTAR PARDESH, LUCKNOW

Certificate
This is to certify that KANISHK TOMAR, of BA.LLB, 1st Semester has

successfully completed the project AUTOMOBILE INDUSTRY under the

guidance of DR. MITALI TIWARI during year 2024-25.

Professor’s signature
 INDEX

S.N TOPIC PAGE.NO

O
1. INTRODUCTION 1-1

2. INTENSITY OF INDUSTRY RIVALRY 2-2

3. 3-4
THREAT OF POTENTIAL ENTRANTS

4 BARGAINING POWER OF SUPPLIERS 4-5

5. BARGAINING POWER OF BUYERS 5-5

6. THREAT OF SUBSTITUTE GOODS 6-6

7. POLITICAL/LEGAL 7-8

8. ECONOMIC 8-8

9. SOCIAL 9-9

10. TECHNOLOGICAL 10-10

11. TRAITS OF AN ENTREPRENEUR 11-11

12. REFRENCES 12-12

 Introduction

The aerospace industry is a crucial driver of technological innovation, defense

capabilities, and economic growth globally. In India, the aerospace industry is
gaining momentum as both a strategic sector for national defense and a key
component of the country's manufacturing and technological ambitions. While
India's aerospace sector is still developing compared to global giants like the
United States and Europe, it has seen significant growth in recent years due to
government initiatives, increasing domestic demand, and collaboration with
global aerospace companies. This project aims to analyze the Indian aerospace
industry in the context of the global landscape, focusing on its structure, market
trends, key players, economic impact, challenges, and future outlook.
 Industry Structure in India
India's aerospace industry, much like its global counterparts, can be categorized
into two major segments: Civil Aviation and Defence and Space. Both segments
are integral to the country's strategic and economic goals, and the government,
alongside private enterprises. As India aims to become a global player in
aerospace, the industry’s structure reflects a blend of domestic manufacturing,
technology transfer, and strategic partnerships.

Civil Aviation

India’s civil aviation sector is one of the fastest-growing in the world, driven by
a combination of rising middle-class income, increased urbanization, and
supportive government policies. The sector includes airlines, aircraft
manufacturing, airport infrastructure, and maintenance, repair, and overhaul
(MRO) services. India is currently the third-largest domestic aviation market,
with forecasts predicting it could become the largest in the near future. Several
factors contribute to the growth of this sector:

1. Rising Demand for Air Travel: The demand for air travel has grown
exponentially due to the rising middle-class population and affordable
pricing offered by budget carriers like Indigo, SpiceJet, and GoAir.
India's domestic air passenger traffic reached a record high of 15.2 crore
passengers. This was an 8.34% year-on-year increase.

2. Government Initiatives: The UDAN scheme has been pivotal in

improving regional air connectivity, especially in Tier II and Tier III
cities. The scheme provides financial incentives to airlines to operate
flights in underserved and unserved airports, thereby boosting regional
aviation.

3. Airport Infrastructure: India's airport infrastructure has also seen

considerable investment, with new terminals, runways, and expansions of
key hubs like Indira Gandhi International Airport (Delhi) and Chhatrapati
Shivaji Maharaj International Airport (Mumbai). The government has
encouraged the development of smaller regional airports under NABH
(NextGen Airports for Bharat) Nirman to support the growth of the
aviation sector.
 4. Manufacturing and MRO Services: With initiatives like Make in India,
the government is promoting domestic aircraft manufacturing and the
growth of MRO services. India is positioning itself as an MRO hub for
South Asia, with companies like GMR Aero Technic and Air India
Engineering Services Limited (AIESL) leading the market. Global
players such as Airbus and Boeing have partnered with Indian companies
for aircraft assembly and component manufacturing.

Defense and Space

India's defense aerospace sector is critical to the nation's strategic interests,

driven by government-led initiatives to enhance the country's defense
capabilities and reduce dependence on foreign imports. The defense aerospace
industry in India is composed of state-run organizations and private companies
involved in the production of military aircraft, helicopters, drones, and missiles.
Additionally, the space sector, led by ISRO, is globally renowned for its cost-
effective and successful space missions, positioning India as a major player in
the global space race.
1. Government Agencies and Initiatives:
o Defense Research and Development Organization (DRDO):
DRDO plays a pivotal role in India's defense aerospace, focusing
on the development of state-of-the-art military technologies,
including fighter jets, unmanned aerial vehicles (UAVs), and
defense systems.
o Hindustan Aeronautics Limited (HAL): HAL is the largest
aerospace company in India, specializing in the design,
manufacturing, and maintenance of defense aircraft and
helicopters. HAL has been at the forefront of developing
indigenous aircraft like the Tejas Light Combat Aircraft (LCA) and
the Dhruv Advanced Light Helicopter (ALH).
2. Indigenization and Self-Reliance: India's focus on reducing its
dependence on foreign suppliers for defense equipment has led to
increased investments in indigenization. The Atmanirbhar Bharat
initiative promotes domestic production of critical defense technologies.
HAL’s LCA Tejas, the Rafale fighter jets procured from France, and
indigenous missile systems like the BrahMos and Akash showcase the
country's efforts to bolster self-reliance.
3. Private Sector Participation: India’s private sector is increasingly
contributing to defense aerospace, with companies like Tata Advanced
Systems, Larsen & Toubro (L&T), Bharat Forge, and Mahindra Defense
Systems entering into joint ventures and partnerships with global defense
contractors like Lockheed Martin and Boeing. These partnerships
 facilitate technology transfer and boost the capabilities of Indian firms in
defense manufacturing.
4. Space Sector: The Indian Space Research Organisation (ISRO) is one of
the most renowned space agencies globally, known for its low-cost yet
highly successful space missions. ISRO's Mars Orbiter Mission
(Mangalyaan), Chandrayaan missions to the moon, and numerous satellite
launches have solidified India's position in the global space industry.
ISRO's PSLV (Polar Satellite Launch Vehicle) is particularly well-
regarded for its reliability and cost-efficiency, making India a preferred
partner for launching small satellites for other nations.
The growing involvement of the private sector in space technology is another
significant trend. Private companies such as Skyroot Aerospace and Agnikul
Cosmos are leading the charge in developing reusable launch vehicles and
rocket technologies. The opening of the space sector to private participation
under the Indian National Space Promotion and Authorization Center (IN-
SPACe) will likely spur more innovation and investment.

Key Players in India

1. Hindustan Aeronautics Limited (HAL): HAL is a state-owned entity and
India's largest aerospace company. It is a critical player in defense
aviation, producing both fixed-wing aircraft and helicopters for the Indian
Armed Forces. HAL is involved in the manufacturing of the Tejas LCA,
Sukhoi Su-30MKI, and the ALH Dhruv, among others.
2. Indian Space Research Organisation (ISRO): ISRO, a government-run
space agency, is known for its budget-friendly yet successful space
missions. ISRO’s key projects, such as the Chandrayaan moon missions
and the Mars Orbiter Mission, have garnered international recognition.
ISRO’s ability to offer cost-effective satellite launches through the PSLV
has made it a preferred partner for many global entities.
3. Tata Group: Through Tata Advanced Systems Limited (TASL), the
conglomerate has partnered with global giants like Lockheed Martin to
manufacture aircraft components, as well as work on advanced defense
systems. Tata is also involved in manufacturing parts for the Airbus A320
and Boeing 737.
4. Mahindra Aerospace: A division of the Mahindra Group, manufactures
aircraft components and small aircraft for civil and military use. It has a
growing footprint in both the domestic and global aerospace markets,
with products such as utility aircraft and aerospace engineering services.
5. Bharat Electronics Limited (BEL): BEL is another public sector entity
specializing in defense electronics. It produces advanced avionics, radars,
and electronic warfare systems, providing crucial support to India’s
defense aerospace initiatives.
 6. Private Startups: The aerospace ecosystem in India is also seeing a rise in
startups, particularly in the space segment. Startups like Pixxel, Bellatrix
Aerospace, and Dhruva Space are developing satellite technology,
propulsion systems, and small satellite launch services.

The key factors that influence the intensity of rivalry in the automobile

industry include the number of competitors, the brand recognition of the

competitors and the frequency with which new automobile products are

introduced by competitors. According to Potter’s case study the global

automobile industry is highly concentrated.

The case study indicates that about seven firms have around 10 to 15 percent

of the market share. The reason for this is the high acquisition levels and

collaboration activities in the global automobile industry, which minimizes

competition regardless the frequency of purchase or recognition of the

different brands in the industry.

As a result, the intensity of competitive rivalry in the industry is moderate.

The implication of the moderate competitive intensity is that automobile

firms still manage to make significant profits especially since the level of

competition is suppressed by the joint ventures and alliances among

automobile firms in the industry.

 Threat of New Entrant

The threat of new entrants is influenced by:

 the strength of brands of existing competitors,
 technology and financial requirements and entry barriers (Porter 1980). ,
but the capital and cost of production and manufacturing is quite high. For
this reason the intensity of treat of new entrant is weak, because of large
amount of investment is requied, the difficulty in achieving economics of
scale or small companies, high level of competition from the exiting brands,
and the legal requirements. which makes the industry competitive and highly
profitable.

Brand loyalty of the customers:

Government policies regarding the Automobile sector
26 NOVEMBER 2021, MINISTRY OF EXTERNAL AFFAIRS:

1) Effective vaccination drives and other government initiatives have had a positive impact
on the Indian automobile industry
2) International brands like Mercedes-Benz, Audi, Jaguar, and BMW have already made
inroads into the country with their EVs
3) A PLI of Rs. 26,058 crore has been approved to boost the indigenous production of EV
and Hydrogen-cell related technologies.
 Bargaining power of suppliers

The suppliers in the automotive industry possess a low bargaining power since
there is many suppliers for this industry. The power of suppliers is influenced
by the following factors:

► The number of suppliers

► Replaceability of the supplies and the exclusivity of the supplies (Porter,
1980).
 Potter indicates that suppliers of the global automobile industry have become
solution provider and knowledge partners with the automobile firms. Moreover,
technology is increasingly becoming more intelligent enabling the suppliers to
gain larger economies of scale giving them the power to bargain.

However, in the global automobile industry 33% and 17% of all suppliers have
their manufacturing facilities in Eastern Europe and China respectively which
raises the issue of Intellectual property rights and theft of technology. These has
caused a decline in the

power of mot suppliers as this trend is expanding to other parts of the world. For
this reasons, the intensity of the power of suppliers is moderately strong, which
means that the firms are forced to collaborate and partner with suppliers to
minimize cost of raw material to maximize profits.

Bargaining power of buyers

Threat of substitute goods
Threat of substitutes in the automobile industry is determined by technology

advancement, affordability and availability of potential substitutes and

customer’s acceptance (Porter, 1980). According to the case study, the global

automobile industry threat of substitution is mainly due to environment issues

and economic consideration, where people see alternatives that are cheaper and

greener.

The automobile industry contributes about 70% of the emission of CO2, and

consumers are ready to take up alternatives that are more environmentally

friendly. However, such substitutes are mostly provided by the same automobile

firms. In this case, the intensity of threat of substitutes in the industry is weak

making the industry attractive and profitable

 Political/Legal Factors

Now, though, the old ways of manufacturing and designing are going out of
favor with consumers at the same time regulators are getting stricter and more
fearsome.

[I] Tariffs and other tax challenges

It’s not just domestic US manufacturing that’s under threat here. Europe’s largest economy,

Germany – also a big player in the automotive industry, and home to Audi, BMW,

Volkswagen, Mercedes-Benz and Porsche – has not only faced tariff wars, but is also dealing

with the uncertainty of Brexit hanging over the continent. In Asia, Japan – home to the likes

of Toyota, Honda, Nissan, Mazda, Subaru and Mitsubishi – is also trying to work out how to

deal with the threat of a 25% tariff on imports into the US. Local manufacturers have warned

about the damaging impact of imposing tariffs on imported cars and parts, and share prices

have been volatile across the automotive industry as a result.

A study by the Ifo Institute for Economic Research in Germany estimates that imports to the

US would drop dramatically if an additional 25% tariff were imposed. And the uncertainty

over the tariff’s start date is creating headaches across the board, with organizations unable to

plan output with any certainty or to take measures to mitigate the risk of a downward trend in

the automotive industry

[II] The environment and automotive industry manufacturing

the automotive industry is facing another more long-term top legal issue: that of
environmental regulation. Lawmakers are making fuel efficiency a higher
priority, with a set of national standards called the Corporate Average Fuel
Economy (CAFE) in place since the 1970s getting a recent upgrade to increase
fuel efficiency goals.
Car makers also face increasing scrutiny of emissions laws. It takes a lot of
research and development money to test and mass produce emissions-limiting
devices – organizations often set up a specific entity to separate R&D in the
subsidiary structure. Plus, the automotive industry in Europe is not just facing
regulation around the end product, but also the manufacturing process itself;
the EU Industrial Emissions Directive seeks to regulate pollutant emissions
from industrial installations, which means en

tity managers on the Continent must work with teams keeping track of both
production processes and the environmental and sustainability impact of the
production itself
 Economic Factors of Automobile industries

 Inflation: Higher inflation in a country tends to depreciate its currency value,

making its exports more competitive and imports more expensive1.
 Interest rates: Lower interest rates in a country may stimulate domestic demand for
automobiles, but also reduce the attractiveness of its currency for foreign investors, leading to
depreciation12.
 Trade balance: A trade deficit or surplus in a country reflects the net demand and
supply of its currency in the global market, affecting its exchange rate value13.
 Capital flows: Foreign direct investment, portfolio investment, and other capital
flows into or out of a country can influence the demand and supply of its currency, affecting
its exchange rate value14.
 Exchange rate risk exposure: Automobile companies that operate in multiple
countries or source inputs from abroad are exposed to exchange rate fluctuations, which can
affect their profitability, cash flows and market value5. They may use hedging tools to
manage this risk.

Social Factors of Automobile industries

- Lifestyle and preferences of people impact their choice of types of automobiles

- Mobility behavior of users will influence traffic demand, vehicle mileage, usage frequency,
and business models
- Millennials (gen Y) have a lower rate of car ownership than previous generations

and rely more on Internet research and social media for car buying decisions
-Digital marketing and e-commerce are becoming more important for the

automobile industry, as consumers use online platforms to research, compare,

and purchase vehicles

Technological Factors of Automobile industries

 Artificial intelligence (AI) that enables drivers to improve safety, efficiency and
comfort.
 3D printing that allows for faster and cheaper prototyping and customization of car
parts.
 Biometric seat capabilities that can monitor the driver’s health and alert them of any
issues.
 Big data analytics that can optimize vehicle performance, maintenance and customer
satisfaction.
 Autonomous vehicles (AVs) that can drive themselves without human intervention.
 Shared mobility that can reduce traffic congestion, pollution and ownership costs by
offering on-demand transportation services1.
 Connectivity that can enhance the user experience, safety and security by linking the
vehicle to the internet, other vehicles and infrastructure.
 Human-machine interface (HMI) that can improve the interaction between the driver
and the vehicle through voice, gesture, touch and eye control

Traits of an Entrepreneur

HENRY FORD
[THE PROBLEM SOLVER]
 References

- www.spglobal.com
-studycorgi.com
-www.researchgate.net
-www.jstor.org
-study-aids.co.uk
-www.linkedin.com
-www.cram.com
-https://www.bing.com/images