Causes Of Danger In The Automotive Business And Automotive Business Development

What are causes of danger in the automotive business as one see it?

I think 3 important risks are ruined image of brand, changes in legislation (CO2 limits in particular) & cyclical risk.

Example- Toyota experienced some company image problems when they need to call back million cars due to technicality problems & defects in 2009-2010. Problem of lost image of brand is that it becomes difficult to change & one has typically invested huge amounts into R&D for specific car model that is non-recoverable.

The EU has already put in place fresh regulations governing CO2 limits that are for vehicles that will be introduced in the market which will be further expanded in the coming years. I think that in particular the new limits which take effect from 2020 would become a tough challenge for auto makers and especially a superior car maker as BMW. Regulations will be based on total number of cars sold and not for individual cars, which means that a brand like BMW may have to sell more small cars, or even look into selling electrical cars.

The last major risk is the industry’s dependence on the general economic environment. For instance, probably 90 percent of new cars sold are financed by loans & as such a new credit crunch could have a major negative impact on car sales.

What drives automotive business development currently?

Advancement regionally in Asia, especially China, has driven business advancement from sometime which went away. I think Asia remains as driver for advancement for upcoming years as Europe & North America have markets which are mature along less opportunity to grow. However, it may be that growth in Asia will slow down on average.

What factors do one look at while anticipating earnings?

I look at cycle of product, as most car models typically sell in 18-24 months into market & slowed in 5 years. Therefore, it becomes important to get no. of fresh models into market. Furthermore, one looks at share of market & development at certain regions, depending on what guesses one had made.

Typically, one would anticipate for next few years in detail, & then have more stagnant degree of development (of 4%) period up until the continuity growth.

INTERVIEW WITH EXPERIENCED BMW CAR OWNERS DR. A.K GUPTA &FRIENDS IN NEW DELHI

Is any particular internal drivers one looks into business of automotive?

No particular drivers of business that we really look at.

Do you look for specific drivers of company while interpreting automotive industry or comparing premium manufacturers of car?

Margin is actually quite different among 3 German superior automobile makers (Mercedes, BMW & Audi). Mercedes Benz, actually lags when one compare with Audi & BMW, although Mercedes has high transaction price. It tells us regarding cost basis which are not same and more efficient for Audi & BMW as both Audi & BMW are using a common platform & common parts (around 60%) for building their cars in comparison to Mercedes Benz, who does not use a common platform and they do also use less common parts (around 5 percent). This does ultimately lead to higher cost per unit for Mercedes Benz.

What gives BMW a cutthroat over others, w.r.t superior segment?

As per experience I believe costing structure, what provides cutthroat over others. It has common base for all its cars production which leads reduction of costing as fixed amount gets divided among large no.

Nevertheless, Mercedes-Benz has adopted this approach now, however, competitive edge right now is with BMW.

What drivers are letting to danger in automotive business?

3 drivers considered necessary to superior segment.

- Advancements done into rate of banks.

- Unprocessed material prices

- Degree at which money is being exchanged.