Swot analysis of automobile industry. The automobile or automotive industry consists of various companies collaborating like marketing and promotion, sale of vehicles, production, research and development, and designs. It’s the world’s largest industry in terms of profit and revenue.
Public transport, bikes, vehicles, and cars fall under the category of automobiles, and they play a significant role in the development of any society along with the transport infrastructure. It’s worth noting it here that the fuel stations, vehicle repair and maintenance shops, and vehicle delivery service do not fall under the category of the automobile industry.
Today, we’ll discuss the swot analysis of the automobile industry. It’s going to focus on the internal and external factors impacting the world’s largest revenue-generating industry. For macro-environmental factors, check out the pestle analysis of the automobile industry. Here’s the swot analysis of the automobile industry as follows;
Strengths of Automobile Industry
Cheaper Manufacturing Units
Some of the main automobile brands have transferred their production facilities into emerging Asian countries like India and China. It has helped them to enjoy the cheap labor cost and lower production and material cost. They are maintaining high profitability by doing so.
The demand for Luxury Vehicles
The demand for luxury commercial vehicles like Bharat Benz, Chrysler, Daimler, and Volvo is increasing in developing countries. More demand means more sales, and it would bring more profitability to the company.
The automobile industry has become very competitive in recent years. The intense competition is forcing companies to expand their market and enter into developing countries. However, the demands of the emerging markets are a bit different, and they want VFM (value for money) vehicle. It means that the vehicle should provide better mileage, fuel efficiency, and economical price range.
It’s no doubt Western and European markets are the main pulse of the automobile industry. But the Asian automobile market is growing and has a lot of potentials. That’s why many brands are shifting their attention because of the better economic condition, changing lifestyles, and more disposable income.
R & D / Innovation
Automobile brands are investing a lot of resources in the research and development of renewable clean. Some of the brands like BMW, Toyota, and Tesla have already launched electric vehicles, while others are working e-vehicle technology.
The automobile industry symbolizes economic growth and freedom. It allows people an unimaginable lifestyle with luxury, freedom, and travel. It provides you an opportunity to perform multiple tasks with one vehicle that weren’t possible in the past.
Weaknesses of the Automobile Industry
Regulations licensing of vehicles, registration, tax duty, the validity of the vehicle numbers, and no entry of foreign vehicles in some states are making it difficult for the automobile companies to run their business. In fact, they’re resisting its growth.
Customers’ Bargaining Power
A lot number of competitors in the market and they’re pushing their products in the market. Now, a customer has got a lot of options to choose from, and it has given the power to the customers to purchase whatever they like.
Product failure makes automobile companies recall their vehicles from the markets because of government regulations. If the brand doesn’t abide by regulations, it would further increase the cost.
Opportunities available to Automobile Industry
OEM (original equipment manufacturer) should consider working with experts and manufacturers of the other industries. However, OEM has to change its functionality in order to go outside of the industry. That’s why they’re looking for global investors and suppliers to join the platform; it would expand the industry’s growth.
As we know that the BRIC (Brazil, Russia, India, and China) nations and Asian countries have great growth potential. The whole region is so vast that it has so many unexplored markets. That’s why the world’s leading companies are shifting their focus there.
The usage of technology and digitalization have made people leisure and comfortable. That’s why automotive companies are manufacturing comfortable and safe vehicles to keep in the lifestyle of people. It has also increased the sales of cars and vehicles and the growth in the industry is good for the business.
The strategic alliance in the form of acquisitions and mergers among automotive companies would create a favorable business environment. It would ease the tension of competition. They won’t have to spend a lot of resources to beat the competitors and win the market share if they could work in collaboration.
The trend of fuel and cost-efficient vehicles is increasing among customers for the past few years. It has presented a great opportunity for automotive companies to jump in and deliver what customers want. It would provide an additional benefit of an environmentally friendly feature for the marketing of the brand.
Threats Automobile Industry has to face
The pandemic of covid-19 has slowed down global economic activity. The purchasing power of the people has dropped because of unemployment and uncertain economic circumstance. Consequently, the sale of automobile companies has decreased significantly because of the lockdown, travel restriction, mandatory vaccination before traveling, and masking.
Costly R & D
Automotive companies have to spend a plethora of resources in research and development annually in order to stay in the game. R & D has become a necessity for them because they can’t launch new features and models without it. The increase R & D cost is decreasing companies’ profitability.
The fuel prices are highly unstable and volatile. It impacts customers directly and they’re very cautious about their daily expenses. Ultimately it impacts the sale of the company. The automotive companies still have a long way to become fully sustainable and efficient modes of transportation.
The automobile industry has become very competitive and various brands are using multiple ways to gain a competitive advantage in the market. The declining economic conditions have made it even more difficult for the companies to survive.
Conclusion: Automobile Industry Swot Analysis
After an in-depth study of the swot analysis of the automobile industry, we’ve concluded that the automobile industry is indeed the world’s most profitable industry. The economic recession, increasing cost, and growing competitors are some of the main challenges in the industry. The automobile brands should keep these challenges in mind before taking any corporate decision.
Ahsan Ali Shaw is an accomplished Business Writer, Analyst, and Public Speaker. Other than that, he’s a fun loving person.