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13 challenges of being in the International automobile business!

15 May, 2018

It is an established fact that every business venture is faced with a multitude of challenges. When the said business crosses the realms of domestic territory, it encounters challenges of a different nature and perplexity. An automobile player who attempts to enter the international business is no exception to these challenges.

We have listed a few challenges below: -

  • Diverse culture: Every country has different ethics and ethos. Synergy of the brand with local culture is the key to enter the market.
  • Heavy custom and import duty: Some of the countries have duties as high as 250% (For e.g. Nepal). This makes our vehicles very expensive as compared to Indian prices. For e.g., a Tata Safari Storme VX 4X4 is priced at INR 16 Lakhs in India and is available in Nepal for INR 40 Lakhs.
  • Inconstant import duties: Erratic and frequent fluctuation of import duties poses newfound challenges every few years. This also handicaps the strategy formulation for PV-IB. For e.g., Sri Lanka import duty has changed 7 times in last 4 years.
  • Political uncertainty: Stable governments are a rarity in the world. Nepal has seen 38 Prime Ministers so far as compared to 16 in India. With every change of government there are changes in the Foreign Trade Policies and we have to align with new policies frequently.
  • Complexity of custom clearance/shipping: Documentation/on the ground law of the land/sea requires a whole gamut of support. Basically, Supply Chain Complexity is very high.
  • Brand Prominence: Tata Motors as a brand name is very popular in India. International markets at times have a different story altogether. The brand has to be established from scratch.
  • Availability of product: This works as per requirement of a specific country. For e.g. 80% of global market in terms of volume is Left Hand Drive (LHD). Another example is Sri Lanka: As per the current regulation and custom duties, a manufacturer who has a vehicle with less than 1 L engine and equipped with Airbag and ABS has a significant skewed advantage.
  • Currency fluctuation in International market: With every fluctuation the parameters of the business case change significantly.
  • Foreign laws and regulations: Legal compliances and Tata Code of Conduct: Ensuring ethical conduct and law abidance at all times during business transactions.
  • Language barriers:  Ethnic groups all over the world have innumerable languages and connotations.
  • Variance in Payment Methods: International Accounting and Payment Methods and the complexity that comes with them.
  • Transit time: Latin America mostly requires 2 months for the ship to sail, 20 for South Africa and 7 for Sri Lanka.

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