MINI PROJECT - 2

PAPER CODE: KMBN 252

MORADABAD INSTITUTE OF TECHNOLOGY
DEPARTMENT OF MANAGEMENT
Affiliated to Dr. A.P.J. Abdul Kalam Technical University, Lucknow

Topic - Automobile Industry

MBA

Submitted By:Kapil kumar

Roll No:2200820700022

MBA SEMESTER II
SIGNATURE OF FACULTY GUIDE
 Table of Content
S.No. Topic Page
No.
INTRODUCTION OF INDUSTRY
1 ● General introduction
● Role of Automobile industry in Indian
Economy
● Automobile Infrastructure
ISSUES AND CHALLENGES
2 ● Production Recovery
● Less Vehicles sales
● Massive Laoff's
● Disrupted Supply Chain
EMERGING TECHNOLOGIES IN THE
3 INDUSTRY ● Big data and analytic
● Artificial Intelligence
● Human machine interfaces
● Autonomous vechiles
LIMITATIONS
4 ● Historical Costs
● Inflation not adjusted
● Personal Bias

● Reporting for a specific period

● Exclusion of intangible assets
● Comparability
● Fraudulent Practices:
● Ignorance of non-financial issues
● Non-verifiability
 CONCLUSION
5

Introduction to Automoblie industry:

● General introduction:
The automobile industry comprises a wide range of companies and
organizations involved in the design, development, manufacturing, marketing,
selling, repairing, and modification of motor vehicles.[1] It is one of the
world's largest industries by revenue (from 16 % such as in France up to 40 %
to countries like Slovakia). It is also the industry with the highest spending on
research & development per firm

The automobile industry began in the 1860s with hundreds of manufacturers

that pioneered the horseless carriage. For many decades, the United States
led the world in total automobile production. In 1929, before the Great
Depression, the world had 32,028,500 automobiles in use, and the U.S.
automobile industry produced over 90% of them. At that time, the U.S. had
one car per 4.87 persons.[4] After 1945, the U.S. produced about 75 percent
of world's auto production. In 1980, the U.S. was overtaken by Japan and
then became a world leader again in 1994. In 2006, Japan narrowly passed
the U.S. in production and held this rank until 2009, when China took the top
spot with 13.8 million units. With 19.3 million units manufactured in 2012,
China almost doubled the U.S. production of 10.3 million units, while Japan
was in third place with 9.9 million units.[5] From 1970 (140 models) over
1998 (260 models) to 2012 (684 models), the number of automobile models
in the U.S. has grown exponentially.[6]
Early car manufacturing involved manual assembly by a human worker. The
process evolved from engineers working on a stationary car, to a conveyor
belt system where the car passed through multiple stations of more
specialized engineers.

Role of Automobile Industry

Automobiles represent freedom and economic growth. Automobiles are a liberating

technology for people around the world. The personal automobile allows people to live,
work and play in ways that were unimaginable a century ago. Automobiles provide
access to markets, to doctors, to jobs. Nearly every car trip ends with either an
economic transaction or some other benefit to our quality of life. The auto industry is
the single greatest engine of economic growth in the world. The global auto industry is
a key sector of the economy for every major country in the world. The industry
continues to grow, registering a 30 percent increase over the past decade (1995-2005).
Autos create jobs, jobs, jobs.

Building 60 million vehicles requires the employment of about 9 million

people directly in making the vehicles and the parts that go into them. This is
over 5 percent of the world’s total manufacturing employment. It is estimated
that each direct auto job supports at least another 5 indirect jobs in the
community, resulting in more than 50 million jobs owed to the auto industry.
Many people are employed in related manufacturing and services. Autos are
built using the goods of many industries, including steel, iron, aluminum,
glass, plastics, glass, carpeting, textiles, computer chips, rubber and more.

● Automobile Infrastructure
Vehicle infrastructure integration (VII) is an initiative fostering research and
applications development for a series of technologies directly linking road vehicles
to their physical surroundings, first and foremost in order to improve road safety.
The technology draws on several disciplines, including transport engineering,
electrical engineering, automotive engineering, and computer science. VII
specifically covers road transport although similar technologies are in place or
under development for other modes of transport. Planes, for example, use
ground-based beacons for automated guidance, allowing the autopilot to fly the
plane without human intervention. In highway engineering, improving the safety
of a roadway can enhance overall efficiency. VII targets improvements in both
safety and efficiency.

Vehicle infrastructure integration is a branch of engineering that deals with the

study and application of directly linking road vehicles to their physical
surroundings in order to improve road safety.

Issues and Challenges in Automobile industry

● PRODUCTION RECOVERY
While the pandemic led to massive production halts in 2020 due to intense social distancing norms and
nationwide lockdowns, 2021 saw some activity from industry players trying to kickstart a recovery.
However, their efforts were seriously constrained from the ongoing supply chain issues, semiconductor
shortages, and different degrees of lockdowns countries imposed to deal with the numerous waves and
variants of the virus. The resulting limited or complete production shutdowns further exasperated the
existing automotive industry challenges of resource shortages and excess unwanted production. This later
translated into significant financial losses, directly impacting the global GDP. 2022 brought a ray of hope
as the vaccination drives started to take effect, allowing nations to reopen industries unanxiously. As per
the latest ACEA numbers, nearly 8 million vehicles were manufactured in the EU in the first three quarters
of 2022, representing a 5.8% rise from the 2021 numbers for the same period. Other major markets,
including North America and China reported 11.8% and over 15.1% increase in their outputs respectively.
Many auto companies also altered their car-making approach.
The use of connected medical devices and AI-integrated software applications can
provide a massive amount of data to healthcare companies which they can use to
generate information.

This data can be of different types such as administrative data, patient medical
records, connected device data, transcript & clinical notes, and patient surveys.
 ● LESS VEHICLES SALE
Drastically reduced vehicle sales emerged as a critical challenge for the automotive industry
during peak COVID-19 period. Now, two years past that time, the issue of poor sales continues
to still plague the industry, with a domino effect of different factors taking turns to keep the
numbers low. During the pandemic, it was the global lockdowns that impacted sales as
stay-at-home mandates and remote working took away the need to travel. This of course did not
come as a surprise; a new vehicle purchase would be the least of priorities for consumers during
a global pandemic.

In 2021, the numbers recovered marginally, but remained low due to low inventories. Many
willing customers had to deal with inexplicably long wait times, with popular models coming
with a wait queue that was 12 months or longer. The long delivery times hinted towards a
reinvigorated demand at a time when the supply was lacking. In fact, when this demand was
rising, auto giants such as Toyota were scaling back production due to parts shortages. In
February 2021, Toyota announced that it was again lowering its vehicle production by over
150,000 units.Shifting customer expectation :

Customer had to no option but to use digital channels for their hospital
management. Accentrue Global Financial Services latest consumer
study shows that this approach has taken hold. 50% of customer now
interact with their hospital management through apps or websites at
least once a week.

● Massive Layoff's:
The auto sector has been dealing with the pressing issue of job losses since before the first lockdowns
took effect in 2020. The livelihoods of auto industry workers are being challenged by a spate of different
factors over the past few years, with manufacturing shutdowns and outdated skills being the most
prominent of them all.

Disruptive supply chain

The COVID-19 pandemic triggered a chain of events that have since continued to contribute
towards supply chain disruptions for the industry. China, which ranks among the top automobile
markets in the world, had over two-thirds of its automobile manufacturing capacity affected due
to the lockdowns. This also severely impacted the supply chain as the country is one of the
leading exporters of raw materials and components for the sector.

Emerging technologies in the Automobile industry

● Digital marketing and sales

● The COVID-19 outbreak made us give up many habits

but also gave rise to new trends. Automotive companies
have moved towards providing a digital platform, which
makes way for an immersive and seamless digital
experience using virtual and augmented reality. ● ●
Online sales of automotive vehicles have already been
implemented by large automobile institutes to provide
their customers with a superior experience of buying
and selling cars. But it came to effect during the
coronavirus pandemic. It will definitely minimize
physical interactions. It includes the usage of VR
(Virtual Reality), IoT (Internet of Things) and AR
(Augmented Reality) to implement the latest
technologies including the use of multi-hybrid cloud
network architectures.
●
● In May 2020, Nissan introduced its digital sales
initiatives in India to promote customer engagement
through online platforms and minimize physical
interactions. ‘Nissan Virtual Showroom’ allows
 customers to take a 360-degree tour of the brand’s
vehicles and explore their features. Users can take a
walk around of the exteriors also have a look inside the
vehicles’ cabins.

Biometric Seat Technology

● Biometric technology began with a fingerprint

recognition system to unlock smartphones, rapidly
evolving into facial and iris recognition over the
years.Now Biometric technology is gaining attention as a
next-generation technology that not only improves
security but also improves the quality of life for
convenience and health care. This is the reason that
automotive industry is actively introducing biometric
technologies in the form of biometric seatBiometric Seat
works through a series of highly reactive sensors which
are able to monitor the driver’s breathing rate, heart rate
and body temperature. By using this information, the car
can send out warnings if it calculates that the driver is too
stressed or tense to be behind the wheel. These sensors are
located in the steering wheel and seat belts, which triggers
automatic speed limit, audio warning, and ability to dial
the emergency services ● Firmware Over the Air (FOTA)
● UpdateFOTA, or firmware over-the-air, is a technology
that enables firmware downloads and updates for specific
electronic control units (ECUs) inside a car. As the
number of ECUs in vehicles increases, the sharing of
diagnostic and operational data from on-board systems
and components reduces costs of recall car
manufacturers, increases product quality and
operational efficiency, as well as deliver post-sale vehicle
performance and feature enhancements.

● For example, it can upgrade vehicles’ steering systems,

make driving operation easier, upgrade the response of
the accelerator pedal, make acceleration more linear
and comfortable, and more. Before the Tesla Model 3
went on the market, there was a problem with its
braking. The braking distance of 100 km / h was 46 m.
Following the subsequent OTA upgrade, the braking
distance was shortened to 6 meters, greatly improving
safety while driving
 ● Internet of Things (IoT) refers to the overall network of interconnected
devices as well as the technology that enables inter-device and inter-cloud
communication. The medical industry, often referred to as the Internet of
Medical Things, includes cutting-edge medical technology like wearable
sensors, 5G-enabled devices, and remote patient monitoring.

Limitation in Automobile Industry:

● Historical costs:
Financial reports are reported on historical costs. When we check a
financial statement, it is not reported according to the current position
of the company. Therefore, when we judge the performance or other
factors of a company, there is always a historical cost involved in the
process, which is misleading because we want the reports to be in their
current position. Therefore, financial statements do not provide the
current value of assets and liabilities which is a big limitation of them.
● Inflation not adjusted:
In financial statements, the assets and liabilities recorded are not
inflation adjusted. Inflation is the price rise that occurs for a bucket of
selected goods at a certain point in time. Missing high inflation value
means items are recorded at lower costs. Such records can be
misleading for the readers because they will take the price of items at a
lower rate than actual when inflation is not adjusted in the financial
statements.

● Personal Bias:
There is always a personal bias attached to the formation of financial
statements. The assets and liabilities are usually determined by
individuals or a group who have their own judgments which are applied
to the formation of financial statements. Therefore, the amortization of
assets, depreciation methods, etc., are prone to the personal judgment
of the person using those assets. In order to prepare the assets,
therefore, the people who prepare the assets depend on personal
judgments. As personal judgment often leads to judge mental errors,
financial statements are usually erroneous in nature.

● Reporting for a specific period:

Financial reports are usually prepared for a specific period of time and
they become unusable in other periods. For example, financial
statements made for the current year may not be usable after five
years
of time. As changes keep occurring in various specific time periods,
users of financial statements should be aware of the changing nature of
business over the years. In fact, financial statements may become
useless after a certain period of time. Therefore, analysts who study a
company’s performance must take as many references as possible to
make a judgment about the company’s future.

● Exclusion of intangible assets:

It is a major limitation of financial statements. Financial statements
usually do not include intangible assets and hence many of the items
get excluded from the coverage of financial statements in the case of
the financial performance of a company. For example, the goodwill of a
company is not reflected in the balance sheet of the company. This
creates a particular gap in the case of start-ups who create great
goodwill depending on their domain knowledge but cannot show this
on financial statements.

● Comparability:
Investors and analysts often compare two companies in the same
industry or sector using their financial statements. However, as the
accounting practices used, valuation of the company, personal
judgment, etc. are different for different companies, they are often not
comparable to one another. Therefore, the use of financial reports and
statement for comparing the performance of two companies is often an
ardent task for analysts.

● Fraudulent Practices:
 Financial statements are prone to fraudulent practices and hence must
be carefully observed before taking a call on any of them. There may be
many motives for the financial managers to skew the company's reports
to show the company is healthy when its actual condition is not so.
There have been many reports of mishandling the financial processes
and inflating or deflating the financial statements. The financial reports
are just pieces of accounting practices and so they can easily be
manipulated. Although it is impossible to manipulate books forever,
there are chances of fraud in accounting. Therefore, one must be vigilant
for fraudulent cases in the case of financial statements.

● Ignorance of non-financial issues:

It is a major concern for the stakeholders that financial reports do not
discuss non-financial issues like environmental, social, and governance
concerns. They do not also consider the steps taken by the company to
improve the conditions too. These issues are being discussed
increasingly in the current period of time, and there is an increased
awareness among the stakeholders However, the financial statements
do not provide any information or discussion over the same.

Non-verifiability:
●

Although auditors can audit financial reports, they are usually of no use
to the readers because they cannot verify them. The financial
statements, once prepared, act as the final call on the financial statute
of the company. Non-verifiability is a major concern because it often
offers accountants the power to manipulate the books. However, one
can use the nature of non-verifiability as an act of responsibility to
prepare the financial statements responsibly which can increase the
faith of stakeholders in that particular company.

● Cannot predict the future:

Although many analysts and many investors use many tools to use the
financial statement to predict the future, it is impossible to do so.
There
has been no financial policy that can predict the future with full
compatibility and competence. The non-predictability of the future is
the rule of nature and financial statements cannot supersede it.

Conclusion:
Despite having some super qualities that aid businesses in becoming
organized and profitable, financial statements also have some notable
limitations. Knowing these limitations is invaluable for business owners
as well as managers and accountants. Some of these limitations are
surprising in nature because many won’t ever consider them to be so.
For example, personal bias, non-verifiability, and non-predictability of
the future are some of them. Knowing the limitations of the financial
statement is therefore very useful and practically valuable in nature.
The principal macroeconomic vulnerabilities are well known, not least
among them the possibility of rising inflation in the country’s most
advanced in the business cycle. But it is the potential interactions
between these vulnerabilities that may require more attention. Stock
prices in many countries still seem high by historical standards, even
after stripping out "new era" stocks, for which new valuation criteria
could conceivably apply. The US dollar also appears to be stronger than
is compatible with the stabilisation of longer-term external debt ratios.
Given the increased extent to which projected returns on equity have
driven international capital flows in recent years, the possibility of a
simultaneous adjustment in both markets would seem greater than
historical correlations might indicate. The likely implication of such an
outcome would be slower demand due to wealth effects, even as
inflation rose in response to both internal and external pressures.
Whether the former would be judged useful or not, since it would help
offset the inflationary pressures, would of course very much depend on
how big and orderly the wealth adjustment proved to be.