Industry Analysis (1/10)- 🚗🏍️🚛
As a part of Fundamental Analysis, EIC (Economy, Industry, Company) framework is one of the most exhaustive techniques. Large Investment funds, Mutual funds and Private equity firms employ this technique to valuate companies. After Identifying the economy to invest in, we should look at an industry level.
In the coming days/weeks, I will share my aggregated analysis from various sources on few industries. I believe this will aid in your investment decision-making process.
Automobile Industry:
Indian Automobile is the 5th Largest market in the world, contributing to almost 6.4% of India’s GDP and 35% of Manufacturing GDP. The Indian Automobile industry can be segmented into four major segments – Two-Wheeler (81% of the market), Passenger Vehicles (13% of the market), Three-Wheeler (3% of the market), Commercial Vehicles (3% of the market).
🌟 Cyclicity: Highly Cyclical in nature (Performs well when the economy is doing well)
🌟 Value Chain:
➡️ Research and Product Design
➡️ Raw Material Acquirement
➡️ Product Assembly
➡️ Logistics and Transportation
➡️ Marketing and Sales
🌟 Revenue Drivers
➡️ Consumer Preferences
➡️ Sales and After Sales services
➡️ Spare parts, insurance, resale.
🌟 Cost Drivers
➡️ Raw Materials (Acquirement, Storage, Transportation)
➡️ Stock in Trade (Pre-made components)
➡️ Labour fee
➡️ Advertisement expense
🌟 Growth Drivers:
➡️ Technological changes (EVs, BS VI engines)
➡️ Policy Support (MACRS depreciation method for asset-heavy companies)
➡️ Economic conditions (Exports favorability, Rising disposable Income)
🌟 Key Market Players:
➡️ #TATAMOTORS
As previously mentioned the automobile industry is highly cyclical, in the last two years economic conditions were not so favourable for automobile manufacturing- Supply chain disruptions led to price inflation of stock in trade and other inventory leading to reduced profits and reduced margins.
