Tata Motors Limited (TM) is an Indian multinational automotive manufacturing company. The company was previously known as Tata Engineering and Locomotive Company (TELCO); it was founded in 1945 and is headquartered in Mumbai, Maharashtra, India. The company is one of the largest automotive manufacturers in India. The company has manufacturing plants in India and Argentina, South Africa, and Great Britain and Thailand. Tata Motors also have research facilities in India, South Korea and Spain. Tata Motors acquired Jaguar Land Rover and South Korean commercial vehicle maker Tata Daewoo. Moreover, the company has joint ventures with Hitachi and Fiat Chrysler. The global automobile manufacture stays true to its roots and acknowledges its community responsibility. Therefore, the company plays its role in the community’s social uplift and sustained development by providing pre-natal care to education through its CSR program (Tata Motors, 2021). Porter’s five forces model is an appropriate analytical tool to evaluate the threats Tata Motors faces and the opportunities it can potentially explore
Competitive Rivalry in the Market
The competition in the automobile manufacturing industry varies from country to country. The presence of a larger consumer market and the entrance of international firms through joint ventures with local firms have increased the competition in the market (Burange, & Yamini, 2008). Mega corporations are competing in the Indian market, and the larger pool of consumers has attracted foreign firms to operate in the market. The major competitors of Tata Motors are Mahindra and Mahindra (M&M), Hero Motocorp and Bajaj Auto. Tata Motors is the largest Indian automobile manufacturer with a more than 45% share of commercial vehicle and a 6% share of passenger vehicles (Indian Companies, 2021). In 2020, Tata Motors earned $30.2 billion in sales (Forbes, 2021). Mahindra and Mahindra are the third largest manufacturer in India based on sales, and the company has recorded $11 billion in 2020 (Forbes, 2021). In the same fiscal year, Hero Motocorp recorded sales of $4.9 billion and earned a profit of $577 million (Forbes, 2021). Bajaj Auto, the company, is the part of Bajaj group; it has reported sales of $3.5 billion and earned a profit of $628 million (Forbes, 2021). Large-scale public and private conglomerates competing for the market share make the market highly competitive.
Threat of Substitutes
The threat of substitutes is moderate in the automobile industry; the industry has to evolve with time. The climate change and carbon footprint produced by the vehicles those run on fossil fuels is enormous. Therefore, the industry is under pressure to evolve towards more eco-friendly products. Currently, electric cars are making inroads, and they are competing for the market share from these vehicles. India is among the worst-hit countries by climate change, and they need to address that by effective carbon emission policy to reduce negative impacts on climate. The carbon footprint of the global car industry remained at 9% of annual global greenhouse gas emission (Green Peace, 2019). Global momentum is gaining for hybrid and electric vehicles; this will help reduce carbon emissions and fossil fuel dependence. Therefore, the threat of alternatives remains moderate to high.
The Threat of New Entrants
The threat of new entrants is perceived to be high when there are favorable conditions; they can acquire market share and availability of financing at reasonable terms. For the automobile manufacturing facility, significant funding is required to set up the new unit and become profitable; companies need a few years with a good market share. In addition, the acquisition of technology and expertise also cost a significant amount. Usually, there is also a regulatory environment to steer through. However, due to the massive carbon footprint due to combustion, the Indian government has announced an ambitious policy to switch all light consumers vehicles in New Delhi to electric cars by 2030 (Vidhi & Shrivastava, 2018). Globally, governments are taking actions to reduce emissions level and incentivizing electric vehicle makers. Therefore, once hard to break into push towards green energy has open options for car makes to enter the market. The threat of new entrants remains moderate to high.
Bargaining Power of Buyers
The buyers’ power to bargain depends upon the underlying factors and the industry. The other generic factors that impact buyer power are buyers’ concentration, better alternatives, and competitiveness of the market. The automobile manufacturing industry is highly competitive; significant players are competing for each market segment. There are many car manufacturers, and buyers are plenty of options to choose from; other electric vehicles are also on the market. In the automotive industry, buyers are highly price-sensitive, and they are keen on buying cars after comprehensive analysis thus, pushing the car manufacturers to adapt to user preference. Moreover, consumers are more prudent while buying automobiles and are very judicious (Uzwyshyn, 2012). Keeping the above in view, buyers have moderately strong bargaining power.
Bargaining Power of Supplier
Suppliers bargaining power depends upon the underlying factors affecting the supply chain. The critical factor affecting suppliers’ ability is the importance of suppliers, the nature of supplies and the value for the buyer’s supply chain. In the automotive industry, suppliers are of increased volume and thus have higher bargaining power. With time, suppliers have grown powerful, and a handful of mega suppliers provide auto manufacturers. They are concentrated and provide immense value for the business. Failure of a vital supplier would cause a severe supply chain disruption and pose a severe supply chain risk (Sharma & Bhat, 2012). The increased value of suppliers and the intense competition in the industry has led to suppliers’ concentration. Therefore, suppliers hold high bargaining power in the automobile industry.
References
Tata Motors. (2021). Corporate Social Responsibility. Available at: https://www.tatamotors.com/corporate-social-responsibility/
Indian Companies. (2021). Top 10 Automobile Companies in India 2021. Available at: https://indiancompanies.in/top-10-companies-in-india-automobile/
Green Peace. (2019). Car industry’s 2018 carbon footprint exceeds EU greenhouse gas emissions – Greenpeace. Available at: https://www.greenpeace.org/international/press-release/24131/car-industrys-2018-carbon-footprint-exceeds-eu-greenhouse-gas-emissions-greenpeace/#:~:text=Car%20industry’s%202018%20carbon%20footprint%20exceeds%20EU%20greenhouse%20gas%20emissions%20%E2%80%93%20Greenpeace,-Greenpeace%20International%2010&text=Frankfurt%2C%20Germany%20%E2%80%93%20The%20carbon%20footprint,new%20Greenpeace%20report%20%5B1%5D.
Vidhi, R., & Shrivastava, P. (2018). A review of electric vehicle lifecycle emissions and policy recommendations to increase EV penetration in India. Energies, 11(3), 483.
Uzwyshyn, R. (2012). The US Auto Industry in 2013: Five Forces to Consider. Automotive Industries, 191(3), 14-16
Sharma, S. K., & Bhat, A. (2012). An empirical investigation of the contribution of supply chain design characteristics on supply chain risks in Indian automobile industry. International Journal of Business Continuity and Risk Management, 3(2), 117-135.
Forbes. (2021). Tata Motors . Available at: https://www.forbes.com/companies/tata-motors/?sh=329ff9cee015
Forbes. (2021). Mahindra & Mahindra . Available at: https://www.forbes.com/companies/mahindra-mahindra/?sh=7fe8d4d9ce32
Forbes. (2021). Hero Motocorp . Available at: https://www.forbes.com/companies/hero-motocorp/?sh=7377dcf2a68a
Forbes. (2021). Bajaj Auto . Available at: https://www.forbes.com/companies/bajaj-auto/?sh=74994de45b57
Burange, L. G., & Yamini, S. (2008, February). Competitiveness of firms in Indian automobile industry. In International Conference on Transportation System Studies, Department of Economics, University of Mumbai, Mumbai.