{"id":10149,"date":"2020-04-21T13:31:25","date_gmt":"2020-04-21T08:01:25","guid":{"rendered":"https:\/\/swaritadvisors.com\/learning\/?p=10149"},"modified":"2021-03-24T18:33:00","modified_gmt":"2021-03-24T13:03:00","slug":"an-insight-of-mergers-and-acquisitions-in-automobile-industry","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/learning\/an-insight-of-mergers-and-acquisitions-in-automobile-industry\/","title":{"rendered":"An Insight of Mergers and Acquisitions in Automobile Industry"},"content":{"rendered":"\n<p class=\"has-drop-cap\">The Indian automobile industry is running at the top gear, and it is anticipated to become 3<sup>rd<\/sup> largest automotive market worldwide by the year 2026. Presently, the industry manufactures around 25 mn vehicles and exports 3.5 mn vehicles. India sustains a robust position in the international heavy vehicles domain since it is the largest manufacturer of tractors, 2<sup>nd<\/sup> largest bus manufacturer, and holds 3<sup>rd<\/sup> position in largest manufacturers of heavy trucks. <strong>The automotive market contributes to a share of 7.1% to India\u2019s GDP.<\/strong> Despite being a dominant sector, the automobile industry has faced several challenges. This write-up will highlight the role of <strong><a href=\"https:\/\/swaritadvisors.com\/mergers-and-acquisitions\" class=\"text-primary\"><em>Mergers and Acquisitions<\/em><\/a><\/strong> in scaling up the automobile industry and overcome many challenges.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a30713fb1fa5\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a30713fb1fa5\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/learning\/an-insight-of-mergers-and-acquisitions-in-automobile-industry\/#Importance_of_M_A_in_the_Automobile_Industry\" title=\"Importance of M&amp;A in the Automobile Industry \">Importance of M&amp;A in the Automobile Industry <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/learning\/an-insight-of-mergers-and-acquisitions-in-automobile-industry\/#Reasons_for_Merger_and_Acquisition_in_the_Automobile_Industry\" title=\"Reasons for Merger and Acquisition in the Automobile\nIndustry \">Reasons for Merger and Acquisition in the Automobile\nIndustry <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/learning\/an-insight-of-mergers-and-acquisitions-in-automobile-industry\/#A_General_overview_of_Automobile_Sector_in_India\" title=\"A General overview of Automobile Sector in India\">A General overview of Automobile Sector in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/learning\/an-insight-of-mergers-and-acquisitions-in-automobile-industry\/#Top_5_challenges_in_the_Automotive_Industry\" title=\"Top 5 challenges in the Automotive Industry \">Top 5 challenges in the Automotive Industry <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/swaritadvisors.com\/learning\/an-insight-of-mergers-and-acquisitions-in-automobile-industry\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Importance_of_M_A_in_the_Automobile_Industry\"><\/span>Importance of M&amp;A in the Automobile Industry <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The automobile industry is driven by\ntechnological advancement and the ever-changing demands of the consumers. It raises\nthe complexity of the automotive environment and tightens the competition. M&amp;A\nacts as a strategic instrument to grow and expand the business; hence its\nimportance has been escalated in the automobile industry. Merger and\nAcquisition is a potent instrument to accommodate new market requirements and generate\nprofit from them. However, each M&amp;A transaction can also result in a\nconsiderable risk that can have a severe impact on the company\u2019s growth. <\/p>\n\n\n\n<p>The automotive players aim to safeguard their business using the strategic technique of Mergers and Acquisitions. Companies conduct M&amp;A transactions after proper due diligence. Some automobile entities choose to merge with their competitors to fulfil the gaps in the technology portfolio. <\/p>\n\n\n\n<p>For many years Mergers and Acquisitions plays an essential part in the development of the <strong>automobile industry<\/strong><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Automotive_industry\" class=\"text-primary\"><strong>[1]<\/strong><\/a><\/sup>. The automotive industry is one of the most active and substantial markets for M&amp;A in terms of number and volume of transactions. It is mainly due to a massive consolidation for manufacturers and suppliers during the last decades, prompted by the tightening of competition from globalization.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Reasons_for_Merger_and_Acquisition_in_the_Automobile_Industry\"><\/span>Reasons for Merger and Acquisition in the Automobile\nIndustry <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The automobile sector is dynamic in nature\nthat compels manufacturers to produce vehicles that are well-equipped, less\nexpensive, and meets various other norms. Here is the list of factors that have\nled to the Merger &amp; Acquisitions among the automobile players:<\/p>\n\n\n\n<ul><li><strong>Cost Efficiency: <\/strong>By doing M&amp;A, automobile manufacturers avail the benefit from the economies of scale. As customers are becoming more vigilant, they seek for better equipped and environment compliant vehicles. To satiate the same, a large sum of investments is required along with expensive R&amp;D programs. The world biggest automobile manufacturers rely on M&amp;A. Thereby; they invest in production facilities in the emerging markets to minimize production costs. Such emerging markets include China, Latin America, Malaysia and Southeast Asia.<\/li><li><strong>Collaborate in new markets by establishing Global Alliances<\/strong>: As per the report of <strong><a href=\"https:\/\/swaritadvisors.com\/learning\/roles-responsibility-of-investment-bankers-in-ma\/\" class=\"text-primary\"><em>investment bankers<\/em><\/a><\/strong>, many international automotive firms like Valeo SA, Johnson Controls Inc., GKN Driveline and Magna International Inc., want to enlarge their presence in India. The Indian automobile industry is the hub for multinational automobile players.<\/li><\/ul>\n\n\n\n<ul><li><strong>Consolidation of Industry<\/strong>: The automakers across the world are divided into three tiers, wherein the first tier includes Ford, GM, Toyota, Volkswagen and Honda. The manufacturers of the other two tiers strive to merge with lower-tier automakers in order to defeat the first tier companies. <\/li><li><strong>Reinforce Core Competency<\/strong>: A significant aspect of the automotive industry is the rapid up-gradation of technology. Therefore, companies deploy M&amp;A to strengthen their operations as per the latest technology; else, they can get eliminated from the stage of the international market. <\/li><li><strong>Geographic Outlook<\/strong>: &nbsp;Indian automotive companies preserve their share of cross-border Mergers and Acquisitions. It is the fastest-growing automobile market that drives massive foreign investments by several renowned automakers &amp; suppliers. The increasing global competition enforces domestic manufacturers to pursue M&amp;A as a strategic tool to boost in-house production. <\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"A_General_overview_of_Automobile_Sector_in_India\"><\/span>A General overview of Automobile Sector in India<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The Indian\nautomobile industry had witnessed tremendous growth since its launch back in\n1898.&nbsp;Presently, the automotive sector is contributing a major portion to\nthe&nbsp;economy of India, both in terms of revenue and employment\nopportunities. The sector employs more than 10 million people in the nation.&nbsp;<\/p>\n\n\n\n<p>Indian automotive domain mainly comprises&nbsp;of passenger cars, heavy vehicles and two-wheelers.&nbsp;The heavy vehicle manufacturing is dominated by the popular automobile players such as Mahindra and Mahindra, Eicher&nbsp;Motors, Tata Telco and Ashok Leyland. On the other hand,&nbsp;Maruti&nbsp;Udyog, Hindustan Motors, Ford India Ltd, Hyundai Motors and Tata Motors stand on the forefront for car manufacturers.&nbsp;In the two-wheeler category, Bajaj, TVS, Yamaha and Hero Honda are some dominant players. <\/p>\n\n\n\n<p>There\nare numerous limitations&nbsp;that the automotive industry has overcome until\ntoday.&nbsp;&nbsp;Measures like a reduction of tariffs on the imports,&nbsp;refining\nthe policies of banks and relaxation of the forex\/equity provisions have a big\nrole to play to shape up a better picture of the Indian automobile industry.<\/p>\n\n\n\n<p>&nbsp;The industry is prepped up for major challenges in the coming years.&nbsp; Many budding automobile entrepreneurs are finding difficulty to cope up with changing regulations of the government, market dynamics and relative prices. In such cases, Mergers and Acquisitions come to the rescue.&nbsp; <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Top_5_challenges_in_the_Automotive_Industry\"><\/span>Top 5 challenges in the Automotive Industry <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><em>Following are key challenges faced by the Indian automobile manufacturers:&nbsp;<\/em><\/p>\n\n\n\n<ul><li><strong>Competing\nwith the huge Chinese Market<\/strong>: The biggest challenge&nbsp;for\nIndian automakers to compete with the ever-expanding market of China.&nbsp;In\nthe last 15 years, China has been a leading automobile market. The planners of\nthe automotive industries need to plan a strategy considering the outlook of\nChina.&nbsp;<\/li><\/ul>\n\n\n\n<ul><li><strong>Evolution\nof the concept of Connected Cars<\/strong>:&nbsp;It has brought a revolutionary\nchange in the automotive industry. Connecting cars is a technology-driven\nconcept that serves as a communication hub which receives and transfers data from\nits surroundings. However, in India, this technology is still in its inception stage\nand there are many uncertainties circumscribing <\/li><li><strong>Increased\nrate of competition<\/strong>. Another myriad\nproblem occurring in the automotive industry is the flattening of sales demand\nin the markets like Japan and Europe. The increase in automobile manufacturers\nin international markets has a direct impact on the Indian market and slows\ndown the sales rate with increased competition.&nbsp;<\/li><\/ul>\n\n\n\n<ul><li><strong>To\nbalance the demands of Government and Technology<\/strong>:&nbsp;Automakers have to meet stringent\nlegislation that focuses on controlling carbon dioxide emissions\nto&nbsp;improve fuel economy.&nbsp;So, it is imperative to choose the right technology\nto cater to ever-changing social preferences and comply with the regulatory\nsystem.&nbsp;<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The current changes in the automotive\nenvironment and the global shift in the technology are the biggest issues\nIndian automakers. One can determine that Mergers and Acquisitions is the best option\nfor the automobile industry to survive in the cutting throat competition. <\/p>\n\n\n\n<p>M&amp;A renders a big share to the\nautomotive industry by facilitating cost saving through the economies of scale.\nOne critical factor in achieving success in M&amp;A and increase the outcome is\nthrough standardization of the process. Considering future prospects, one can\nexpect a rapid increase in M&amp;A activity, particularly on the supplier\u2019s\nside of the automobile markets.<\/p>\n\n\n\n<p>The\nautomotive industry is one of the&nbsp;richest industries in India. However, it\nhas to fraught with challenges and issues. By overcoming these challenges, the&nbsp;Indian&nbsp;automotive\nindustry&nbsp;shall become one of the biggest automotive distributors&nbsp;in\nthe global market.&nbsp;<\/p>\n\n\n\n<p>Swarit Advisors&nbsp;is a <strong><a href=\"https:\/\/swaritadvisors.com\/\"><em>consulting firm in India<\/em><\/a><\/strong> that has a wide knowledge of Mergers and Acquisitions in the automotive ecosystem. Being reputed consultants&nbsp;for more than a decade, we can resolve different issues concerning M&amp;A.&nbsp;Our domain knowledge can help your automotive company to make the right strategic decisions. <\/p>\n\n\n\n<div class=\"read\"><p><b>Also, Read:<\/b> <mark><a href=\"https:\/\/swaritadvisors.com\/learning\/analysis-of-merger-and-acquisition\/\">Analysis of Merger and Acquisition<\/a><\/mark>.<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"<p>The Indian automobile industry is running at the top gear, and it is anticipated to become 3rd largest automotive market worldwide by the year 2026. Presently, the industry manufactures around 25 mn vehicles and exports 3.5 mn vehicles. India sustains a robust position in the international heavy vehicles domain since it is the largest manufacturer [&hellip;]<\/p>\n","protected":false},"author":10,"featured_media":10152,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[546],"tags":[602],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/10149"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/comments?post=10149"}],"version-history":[{"count":9,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/10149\/revisions"}],"predecessor-version":[{"id":18386,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/10149\/revisions\/18386"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/media\/10152"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/media?parent=10149"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/categories?post=10149"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/tags?post=10149"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}