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An Analysis of Automobile Industry of India as a Market Structure
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Case study of oligopoly on automobile industry

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oligopoly on automobile industry

Case study of oligopoly on automobile industry

  1. 1. CASE STUDY OF OLIGOPOLY ON AUTOMOBILE INDUSTRY Presented by :- Sumit Behura Suchitra samantray Farid Ahmad Chinmaya Mohanty Nilam priyadarsini Sethy
  2. 2. OLIGOPOLY • Oligopoly is a market structure in which the market or the industry is dominated by small number of sellers. • In other word Oligopoly means the market structure in which there are a few seller selling a homogeneous product or differentiated products.
  3. 3. FEATURES Few seller Homogeneous or differentiated product Barriers to entry and exit High investment Constant struggle Lack of uniformity Lack of certainty Price rigidity
  4. 4. Selling homogeneous products - pure oligopoly .Example :industry producing cement steel ,petrol ,cooking gas , chemical, aluminium and sugar . Selling differentiated product – differentiated oligopoly .Example : Automobiles, TV sets , soft drinks , computers ,cigarettes ,etc.
  5. 5. OLIGOPOLY IN AUTOMOBILE INDUSTRY • The Indian Car Industry Oligopoly • Hindustan Motors – the first Indian Car company to start production in India - founded in 1942 by Mr. B.M. Birla; Ambassador – The flagship car • Establishment of other car manufacturing companies like Premier Automobiles(1944); Premier Padmini – The flagship car, now also used for cab services
  6. 6. Reasons for the Oligopoly structure • In 1947, Government of India and private sector launched efforts to create Automotive components manufacturing industry • Slow growth in 1950s and 1960s; Reason: License Raj, Nationalization, Socialistic approach, MRTP Act • The Industries (Development and Regulation) Act passed in 1951 to implement Industrial Policy Resolution of 1948 – one of the reasons for closed market • The Act empowered Government to prescribe Prices, Methods, Volume of Production, Channels of Distribution
  7. 7. Impact of Oligopoly structure • Impact on Automobile industry – Growth very slow because of Low Demand and Low Economic Status of the country • Government restrictions provided no motivation or incentive for firms to do technological upgradation. • Supply was low and there weren’t many competitors • Impact on Consumers –Consumers did not have many choices; the Demand was fairly low as Cars were still a Luxury and availability of same models
  8. 8. The Causes of Transformation • Sanjay Gandhi owned Maruti Technical Services Limited which was liquidated • After his death, Indira Gandhi government collaborated with Suzuki Motors, a Japanese firm, for collaboration – Formation of Maruti Udyog Limited and renamed later Maruti Suzuki in 2007
  9. 9. Effects of the Transformation • New firms, including foreign players, entered with modern engineering, efficient processes and modern shop-floor layouts • Indian automobile industry grew at 14.31% per annum in 1991 era compared to 8.56% per annum during 1985-91 • Delicencing of sector attracted many major Global automobile(GM, Ford, Honda, Hyundai etc.) to start assembly in India
  10. 10. Automobile Industries associated with India • Quite a few Domestic Indian Automotive companies: Tata Motors, Mahindra, ICML, Hindustan Motors, Premier Automobiles Ltd., San Motors etc. • Foreign Automotive companies in India:  Manufactured or assembled in India: BMW India, Ford India, General Motors India, Chevrolet, Honda , Hyundai Motor India Imported to India: Audi, Bentley, BMW, Lamborghini, Land Rover, Mercedes Benz, Nissan etc.
  11. 11. Price Leadership Model • Intense competition amongst various players • 30th December 1998 - Indica launched by Telco for `2,59,000 (petrol) and `2,85,000 (Diesel) • 31st December 1998 – Maruti slashes prices by 5-12%; Maruti 800 price slashed to `1,85,000 from `2,09,000 • Ratan Tata – “Even for those who do not own or buy an Indica, good news, we’ve triggered price drops in Maruti and made the car market a friendlier place”
  12. 12. Current Trends • Tata has come up with ` 1 Lakh car – Tata Nano • This again has created price war • Nissan-Renault to develop a Rs 300000 car using India’s “frugal engineering expertise” • Bajaj to experiment with the idea of a small car
  13. 13. Market Share In the Passenger Car category, Maruti Suzuki is still the market leader with around 50% market share
  14. 14. COMOARISION •Considering huge market potential, production of passenger cars is projected to grow at CAGR of 11% between 2010-11 and 2013-14. Comparison: •1982 Number of manufacturers: 3 Vehicle sales: 20000 Number of models: 3 •2009: Number of manufacturers: 15 Vehicle sales: 19,80,000 approx. Number of models: 53
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oligopoly on automobile industry


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