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PESTEL Analysis of the Indian Automobile Industry

PESTEL Analysis of the Indian Automobile Industry

The Indian automobile industry has greatly expanded in the recent past. Analysts state that this expansion is still ongoing and this industry will easily surpass some of those established in the developed countries if current development projects continue. There are certain factors that greatly influence the automobile industry in India and these can be broken down into:

  • Political
  • Economic
  • Social
  • Technological
  • Environmental
  • Legal
Political factors

The Indian automobile industry has attracted many investors. All these are pooled in three main regions despite the expansive size of the country. This is due to the fact that these areas are more developed as compared to other regions. The government has a hand in this because it has invested in the development of these regions.

Politically speaking, the automobile industry has greatly benefited from the government of India. The government has set up bodies which help the automobile industry in carrying out research and development. These bodies also maintain a monitoring system for the automobile industry.

Economic factors

India has also been experiencing economic growth at an average 6% and the automobile industry contributes 22% to the GDP of the country. This makes it a very important income generating activity for the country. This growth has rippled its way to create consumers as there is a huge growing middle class in India. This class of people is increasingly purchasing automobiles and this is evident in the increased sales of certain vehicles in the past decade.

Without economic growth, India would not be able to attract as many foreign investors in the automobile industry. It is thus important for the country to sustain this upward growth as it will affect all its manufacturing industries.

Additionally, the price of certain crucial commodities has also influenced the automobile. Crude oil and petroleum products always affect the automobile industries. Rise in the world market price of these products makes things expensive and this trickles down to automobile manufacture as well as maintenance.

Social factors

India is fast becoming an automobile industry hub because of its large population. This forms a bustling market for the manufacturers. The tastes of the populations may vary but manufacturers always take note of the fast selling automobiles and create appropriate designs. For instance, in the past three years, there has been a surge of two-wheeler vehicles because of their convenience in the country. Many automobile industries have created these vehicles for domestic consumers.

Technological factors

The automobile industry has grown because there are several technological inventions. These are used not only in manufacture of the vehicles but also to reduce expenses for the vehicle buyers. The government is also helping in research and development to ensure that both producers and consumers are happy and encouraged to invest in the automobile industry.

Environmental factors

Environmental factors have influenced automobile industry in India because more investors are opting to manufacture environmental friendly vehicles. These include, vehicles that consume less fuels and emit less fumes. There are also some investors that have chosen to manufacture the electric vehicle in a bid to conserve energy and also the environment.

Legal factors

Legal factors have played a role in the recent expansion of the Indian automobile industry. This is because the industry is extremely incentivized with investors being given 100% foreign direct investment pass. There are also zero taxes for the investors who ship the cars to other countries from their manufacturing bases in India. By easing the legal rules affecting the industry, the government of India has encouraged varied automobile companies to set up shop in the country.

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Online sources:

https://www.academia.edu/4457128/Strategic_Management_PEST_Analysis_of_Indian_Automobile_Industry

http://www.slideshare.net/SyedBehrozAliRizvi/pest-analysis-for-indian-automobile-industry

http://writepass.com/journal/2012/12/strategic-analysis-pestel-swot-and-five-forces-of-ford-automobile/