Industry Overview

INDUSTRY OVERVIEW: GLOBALLY
The automotive gear industry has been forecasted to have the CAGR of 5.5% as per the period
2020-2025. Gears are the important part of the automotive system. The market growth of the
gears is directly dependent upon the vehicle sale.
There is a shift in the automotive market towards the expensive, automatic transmission, energy
efficient units, this can raise the value gains. The sale of gears used in wind and solar power
machines is expected to grow.
There are various factors which are restraining the gear market like growing demand of electric
vehicles, and emission of regulations. The use of gears in the electric vehicles is very less
because of less transmission systems.
Asia Pacific region is the major producer of the vehicles due to which it leads the automotive
gear market. It is followed by Europe and North America. However, the production of the
vehicles has gone down around the world due to economic crisis, US-China trade conflict and
covid-19 pandemic. An observation has been made that there would be decline in the gear
market throughout 2020 and reduction in Y-o-Y growth rate in 2021.
India and China the production of the vehicles has been increasing as the manufacturers are
focusing on raising the production due to this the demand for the gears is expected to grow in
future. The low penetration of automobiles and infrastructure development in emerging nations
has increased the demand for personal transportation and commercial vehicles.
There is an increase in the fuel-efficient vehicles and light weight automotive parts, these are the
two main drivers for the growth of the market. Europe and North America are the mature
markets of automotive gear, with the holding of second largest market share.
There are various pollical factors that can influence the Gear market globally. These factors
include some political factors like: -
 US-China trade war, even though they have reached to the phase one trade deal, still it is
not a permanent resolution of their trade war. Economies globally have to choose
between US and China. There will be elections in November, 2020. This show that the
political risk in higher and will impact globally. If the Trump will be chosen as the
president then, there will be stability in the regulations and there will be more chances for
the increase in the gear market as the contract can be given to India. As the spare parts
and the accessories of motor vehicle are exported to US by India.
 The political risk in the UK has been improved. This is the sign of well stability. The
focus of the country is on negotiation for its future relationship with Europe. The
European Commission president is seeking to launch for Green Trade in 2020. Where as
in Italy there has been coalition between the Democratic Party and Five Star Movement.
As the parties have separate views on the issue. India has good relations with the
European countries and there is a prediction of increase in sales, this may can lead to
growth of Gear market.
 In Asia / Pacific the government regulations regarding the vehicle safety and reducing
their weight and increase in the feasibility of the vehicles stimulates the market growth.
Finance Minister of India took various initiatives to improve the automobile industry like
depreciation policies on the vehicles were changed, ban on the purchase of vehicles for
government department was also lifted and many more monetary supports was provided.
These initiatives were taken to boost the automobile industry and this ultimately led to
Growth of the Gear Market.
EXCHANE RATE RISK
When a company does a business nationally i.e., buys or sells the goods in different countries.
The company has to make the payment or earn in the foreign currency. Exchange rate becomes
the major factor in this type of interaction because the value of the foreign currency changes with
the time. Therefor the currency can change between the of transaction. A lag of 30 to 90 days in
accounts payable is common so the global companies often have at least 30-day window when
fluctuations in exchange rates could result in paying or earning more or less than they planned.
Global firms seek to reduce this risk by using 3 different common strategies like Spot rate,
Hedging and currency swaps.
Incase Indian company is importing company and US company is an exporting company. The
transaction take place in the foreign currency. If the $ rate increase this will lead to more of
exports and because of which the exporting company will have more sales and earn high profits
and the stock market of the exporting company will increase. Whereas if the $ price falls then the
importing company will be beneficial as they have to pay less for the product.

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INDUSTRY OVERVIEW: GLOBALLY

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