Automobile Demand and Supply Analysis in India

1791 Words Nov 8th, 2010 8 Pages
INTRODUCTION

Indian Automotive Industry started its new journey from 1991 with de-licensing of the sector and subsequent opening up for 100 percent FDI through automatic route. Since then almost all the global majors have set up their facilities in India taking the production of vehicle from 2 million in 1991 to 9.7 million in 2006.

The surge in number of people with higher purchasing power along with strong growth in economy over a past few years has attracted the major auto manufacturers. The market linked exchange rate and availability of trained manpower at competitive cost has added to the attraction of Indian market. This increasing pull of Indian market on one hand and the near stagnant rate of growth in auto sector in markets
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* Demand is driven by growing environmental concern and the Indian government 's proactive measures to implement Euro-II emission norms.

3. Price of substitutes or complements

Substitutes: Goods that can serve as replacements for one another: when the price of one increases, demand for the other goes up. * When the price of a Honda city goes up, the demand for its substitute the Hyundai automobile goes up.
Complements/complementary goods: Goods that “go together”, i.e. a decrease in the price of one results in an increase in demand for the other.

* If the price of petrol increases, the demand for automobile and its complementary good will fall. If the price of Automobiles were to rise dramatically, less people would chose to buy and use automobiles, switching perhaps to public transport - trains perhaps!. It follows that under these circumstances the demand for the complementary good - Petrol - would also decrease. 4. Expectations of future Price Changes
Just as an actual increase in the price of a product may reduce demand, so the expectation that prices are about to rise will increase demand, as people buy more now, in order to avoid paying a higher price latter. * For example if price

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