The increasing focus on environment compelled consumers to demand cars with better emission technologies. The section will discuss the demand and supply factors of the industry and how these factors impact the industry. Web. Automobile sector in India. Government Policies and Taxes If there is a change in the government policies regarding the increase in the road tax charged or the tax which is to be paid per unit sold, the supply of a car will fluctuate with the nature of the change. 2013. Interestingly, most employment in this industry is upstream of the original equipment manufacturers (OEMs) since Klier and Rubenstein emphasize that carmakers increasingly focus on final assembly having largely passed on the responsibility of manufacturing the bulk of their auto parts to independent suppliers. The drop in interest rates usually helps very few people to probably shift from the base model to a deluxe model. The key factors of production for car manufacturing are raw materials like steel and rubber, labour and capital. We accept sample papers from students via the submission form. If this essay belongs to you and you no longer want us to display it, you can put a claim on it and we will remove it. There are three types of manufacturers in the industry, high volume-full range producers, specialist producers and niche producers ((Niewenhuis and Wells, 16). It is a key contributor to the global economy. ), Octroi (tax on entry of goods for use/consumption within areas of the Local Bodies), Tax on Markets and Tax/User Charges for utilities. Web. 3.26 It is an indicator to economic growth in real terms because healthy and growing automobile sector indicates overall growing economy, agro-economy, good roads, rising income and employment. This led to increasing demand for low-end, better mileage providing vehicles of good quality. As productivity increases cost of production decreases and supply increases. The paper concludes that microeconomic factors impact the industry and affect its demand and supply. Come browse our large digital warehouse of free sample essays. CONTENT Sr. No. Costs like labor costs, machinery and input costs also influence the supply with the increase or decrease in these costs. Drawing on industry interviews, six interconnected socio-technical factors are identified that guide the vehicle design and manufacturing process. The main taxes/duties that the Union Government is empowered to levy are:- Income Tax (except tax on agricultural income, which the State Governments can levy), Customs duties, Central Excise and Sales Tax and Service Tax. If the price of the car is high in the market, the manufacturer or the supplier will want to supply more units in the market so he can earn more profits. Locational Factors that affect Automobile […] 17 Apr. Types of Excise Duties Basic Excise Duty: This is the duty leviable under First Schedule to the Central Excise Tariff Act, 1985 at the rates mentioned in the said Schedule. 2013. 0.0230 Increasing in oil prices is adversely affects the industry demand, but also increasing opportunities for product innovation. Don't waste time. https://phdessay.com/microeconomic-factors-in-automobile-industry-in-india/. The import of technology/technological upgradation on the royalty payment of 5% without any duration limit and lump sum payment of USD 2 million is allowed under automatic route in this sector * The automotive industry comprising of the automobile and the auto component sectors has made rapid strides since delicensing and opening up of the sector to FDI in 1991 * The industry had an investment of about Rs. Of that, $327.1 billion was auto manufacturing and $218.3 billion was vehicle retail sales. 3. February 2020. Read this essay on Micro & Macro Factors Affecting the Auto Industry, India. Presence across Segments Manufacturers with presence across various product segments can ensure higher volume and better capacity utilization by using the common manufacturing capacity. The share of exports from domestic production is currently at 12-13%, which is much lower than current export hubs. “A Microeconomic Analysis of the Full-Size Automobile Market”. -0.7051 Taxation. With rising popularity of sport car and innovations in this field, few consumers shifted to this segment of cars. Your financial data is encrypted, safe, and will remain strictly confidential - this is our unbreakable WOW! The industry that has been chosen for this study is automotive industry for two reasons. -0.6997 Fiat Chrysler and Renault’s attempt to join forces was a response to turmoil in the auto industry, which accounts for much of the world’s factory jobs. 1.05 Lipschultz, J.T.S. Available from: https://www.wowessays.com/free-samples/microeconomics-of-automobile-industry-research-paper-examples/, "Microeconomics Of Automobile Industry Research Paper Examples." 2013. Fuel economy oriented customers moved to solar operated and electrically operated cars. It is changing the traditional dealership model in the industry and paving way for presence of multiple channels, thus benefitting the end customers. Ford also sells luxury sport car Aston Martin. WowEssays. 2003 ID Excise Duty Central Excise duty is an indirect tax levied on those automobiles which are manufactured in India and are meant for home consumption. GM sold eight different brands of cars – Buick, Cadillac, Chevrolet, GMC, Hummer, Pontiac, Saab and Saturn at one point of time (Davis, n.pag.). Availability of substitutes also affects demand in automobile industry. It contributes almost 3% to the gross domestic … The companies are tying up with the financial institutions having rural presence to provide additional financing options to customers in such areas. The two important variables to study microeconomics of automobile industry are demand factors and supply factors. Cost of Capital Est. (2017, Mar 16). The industry is also concentrated in these regions mostly. “What Factors Affect the Labor Supply and Demand for the Automobile Industry?” smallbusiness.chron.com, 2013. This supply mainly catered to meet the demand from households where the automobiles constituted the second largest expenditure item next only to housing. To study the factors contributing to the growth of automobile industry. Managerial economics = the science of directing scarce resources to manage effectively > each needs to understand how they. As proportionate spends on essential items is decreasing, spends on luxury goods increase. Crisis in the automobile industry can worsen India’s economy because it contributes to half of the manufacturing GDP. 77% in 1992-93 to 5% in 2006-07. Report Linker. Published Beta: Growth in per capita income and rising aspirations and changing lifestyle is leading to increased preference for cars over two-wheelers, which is also having a positive rub off on car demand. Bargaining Power of Suppliers Threat of New Entrants Threat of Substitutes Industry Rivalry Bargaining Power of Customers Bargaining Power of Suppliers Threat of New Entrants Threat of Substitutes 1. 20 Apr. 75% in 2006-07. Web. Car finance rates dropped from 17% in 2000-01 to 11%in 2005-06. Brands that are considered technologically more advanced will be preferred to other brands. They are using data according to the customers return and earning capacity for attracting the customers for their vehicles. In automobile industry, technological changes are quick and supplies are higher. Efficient Operations Competition in PV segment is very intense and this requires the existing players to initiate steps to reduce their cost of production. The Smart Cube. 5| 100/60/12. Microeconomics. [Accessed January 15, 2021]. ROE: (2020, February, 02) Microeconomics Of Automobile Industry Research Paper Examples. Apart from policies, upward revision of labour is also determined by competition of labour among firms. Also it is difficult to measure since repurchases are rare. This has resulted in a sharp decline in investment in the European auto-markets. High levels of unemployment and lack of Job security reduce consumer confidence, inversely affecting demand. Due to escalation in competition in Indian car market, frequency of new model launches has increased. For example, by end of twentieth century, US buyers and turned to light trucks, much heavier than cars, thus largely negating the gains made in more efficient car designs (Niewenhuis and Wells 12). Depreciation, too, is a cost to which the market pays attention; variation in value retention rates likely reflect qualitative aspects of products, such as their reliability, comfort, and quality of manufacture (Lipschultz 160). Based on the present profit levels in the market, one can expect the entrance of new firms into the market or not. Wide Dealer Network and Availability of Finance. The paper has been written with four main parts. The Industry association ACMA reports that over 170 of its members have already received ISO-9000 certification and 23 have received QS9000 certification. Question: La) What Are The Microeconomic Factors That Affect The UAE Automobile Industry? Percent Institutional Moreover, some industries depend on the automobile industry by supplying input goods. A Market Equilibrium is achieved at the point of intersection of the demand line and the supply line. 22.65% Web. The industry, like any other industry in real world, is not characterised by perfect information symmetry. Scholars The second section of the paper discusses the construct of automobile industry in terms of microeconomics. “Microeconomics: Microeconomics in Action”. But still any new model launch meets with increase in sales volume for the company. These together govern the economies of automobile sector. The industry employs 4 million people directly, and many more indirectly. Microeconomics Of Automobile Industry Research Paper Examples. 2013. Web. Introduction * Tenth largest in the world * Expected to overtake China * Huge attraction for foreign car manufacturers * Dominated by domestic companies * Contributes 3.1% to the nominal GDP 3. Car companies can tout their car's performance, safety, and price. Loc.gov, 2004. The entrance is however also affected by the start-up costs * Economies of scale: The Minimum Efficient Scale (MES) is the point at which unit costs are minimized. More energy efficient cars are another segment of cars that is gaining popularity. Price performance comparison favors heavily towards Maruti in most product categories. With Britain on the road to cutting lies with the European mainland, automobile manufacturers are confronted with an uncertain marketand the risks of higher operating costs. 81% This also acts as opportunity for automobile manufacturers, as consumers will be attracted by high mileage options during these scenarios. Aggressive pricing is needed to sustain growth in such situations * Diversity of rivals: Industry becomes unstable as the diversification increases. Haven’t found the relevant content? The industry has developed over a period of more than 100 years to become a vast entity of many inter-connected parts (Niewenhuis and Wells 15). The goal of Ford is to build products that are immensely desirable so that they get profit. -0.0078 4. Conclusion Market economies are assumed to have many buyers and sellers, high competition and many substitutes. The industry is typically capital intensive and thus involves high fixed costs * Slow market growth In growing market, firms can improve their economies. Exports. From the 1970s, the industry saw emergence of green consumers who takes environmental criteria into account while making a purchase decision (Niewenhuis and Wells, 12). Kd(BT): The competition is intense as several players have products in the categories given by Maruti. 5| 100/60/12. The government needs to bring policies to improve the situation of the automobile industry to prevent more job losses. The average age of a CC-segment car owner has also dropped from 35 years to 31 years in India. Typically a customer upgrades from one segment to higher segment and the presence across various segments ensures that the company retains its existing customers. General Motors was one of the most reputed companies of USA at one time and it was doing extremely well financially. Economics & Business Journal: Inquires & Perspectives, 1 (1), Oct 2008. -1.29% Cost of production is an important determinant of the amount of automobiles supplied by firms in such oligopoly market. ... A convenient way to measure such qualitative factors as the market’s 06 Feb 2016 2. The key microeconomic factors affecting supply in automobile industry include cost of production, technology position, competition and product penetration. As the market is oligopoly, differentiation strategies work in the market and can boost demand. Bargaining Power of Suppliers * Suppliers can influence the industry by deciding on the price at which the raw materials can be sold. Automobile Industry Hailed as ‘the industry of industries’ by Peter Drucker, the founding father of the study of management, in 1946, the automobile industry had evolved continuously with changing times from craft production in 1890s to mass production in 1910s to lean production techniques in the 1970s. automotive industry – with the focus on the use rather than the production of vehicles, in order to make the lives of individual users more enjoyable, more efficient and safer: in other words, “eascy.” This study sets out to show the promising prospects that will open up the way to restructuring the automotive industry. Demographic changes have also affected the demand of automobiles and growth of automobile industry. Demand and supply refer to the relationship price has with the quantity consumers demand and the quantity supplied by producers. 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