Automobile Industry in India

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AUTOMOBILE INDUSTRY IN INDIA
Industry Overview
Since the first car
rolled out on the streets of Mumbai (then Bombay) in 1898, the Automobile Industry of India
has come a long way !uring its early stages the auto industry was o"erloo#ed by the then
$o"ernment and the %olicies were also not fa"orable &he liberali'ation %olicy and "arious
ta( reliefs by the $o"t of India in recent years has made remar#able im%acts on Indian
Automobile Industry Indian auto industry, which is currently growing at the %ace of around
18 ) %er annum, has become a hot destination for global auto %layers li#e *ol"o, $eneral
Motors and +ord
A well de"elo%ed trans%ortation system %lays a #ey role in the de"elo%ment of an economy,
and India is no e(ce%tion to it ,ith the growth of trans%ortation system the Automoti"e
Industry of India is also growing at ra%id s%eed, occu%ying an im%ortant %lace on the -can"as-
of Indian economy
&oday Indian automoti"e industry is fully ca%able of %roducing "arious #inds of "ehicles and
can be di"ided into ./ broad categories 0 1ars, two2wheelers and hea"y "ehicles
Snippets
• &he first automobile in India rolled in 1893 in Bombay
• India is being recogni'ed as %otential emerging auto mar#et
• +oreign %layers are adding to their in"estments in Indian auto industry
• ,ithin two2wheelers, motorcycles contribute 8.) of the segment si'e
• 4nli#e the 4SA, the Indian %assenger "ehicle mar#et is dominated by cars (39))
• &ata Motors dominates o"er 5.) of the Indian commercial "ehicle mar#et
• 67/rd of auto com%onent %roduction is consumed directly by 89Ms
• India is the largest three2wheeler mar#et in the world
• India is the largest two2wheeler manufacturer in the world
• India is the second largest tractor manufacturer in the world
• India is the fifth largest commercial "ehicle manufacturer in the world
• &he number one global motorcycle manufacturer is in India
• India is the fourth largest car mar#et in Asia 2 recently crossed the 1 million mar#
Segment Knowhow
Among the two2wheeler segment, motorcycles ha"e ma:or share in the mar#et ;ero ;onda
contributes <.) motorcycles to the mar#et In it ;onda holds =5) share in scooter and &*S
ma#es 86) of the mo%eds in the country
>age ?o 1
=.) of the three2wheelers are used as goods trans%ort %ur%ose >iaggio holds =.) of the
mar#et share Among the %assenger trans%ort, Ba:a: is the leader by ma#ing 58) of the three2
wheelers
1ars dominate the %assenger "ehicle mar#et by 39) Maruti Su'u#i has <6) share in
%assenger cars and is a com%lete mono%oly in multi %ur%ose "ehicles In utility "ehicles
Mahindra holds =6) share
In commercial "ehicle, &ata Motors dominates the mar#et with more than 5.) share &ata
Motors is also the world-s fifth largest medium @ hea"y commercial "ehicle manufacturer
Miscellaneous
;yderabad, the ;i2&ech 1ity, is going to come u% with the first automobile mall of the
country by the second half of 6..8 It would be set u% by city2based >ra:ay 9ngineers
Syndicate in area of more than /< acres &his -Auto%olis- would ha"e facilities for automobile
financing institutions and insurance ser"ices to create a com%lete range of ser"ices reAuired
for both auto com%anies and customers It will also ha"e a multi2%ur%ose con"ention centre
for auto fairs and %roduct launches
>age ?o 6
INDIAN AUTOMOBILE HISTORY
During the 1920s, cars exhibited design refinements such as balloon tires, pressed-steel
wheels, and four-wheel brakes.
In Brief
&he origin of automobile is not certain In this section of
automobile history, we will only discuss about the %hases of
automobile in the de"elo%ment and modernisation %rocess
since the first car was shi%%ed to India ,e will start
automoti"e history from this %oint of time
&he automobile industry has changed the way %eo%le li"e and
wor# &he earliest of modern cars was manufactured in the year
189< Shortly the first a%%earance of the car followed in India
As the century truned, three cars were im%orted in Mumbai
(India) ,ithin decade there were total of 1.6< cars in the city
In the begining of 1<th century >ortuguese arri"ed in 1hina and
the interaction of the two cultures led to a "ariety of new
technologies, including the creation of a wheel that turned under
its own %ower
&he actual horseless carriage was introduced in the year 189/ by
brothers 1harles and +ran# !uryea It was the first internal2
combustion motor car of America, and it was followed by ;enry
+ord-s first e(%erimental car that same year
8ne of the highest2rated early lu(ury automobiles was the 19.9
Bolls2Boyce Sil"er $host that featured a Auiet 52cylinder engine,
leather interior, folding windscreens and hood, and an aluminum
body It was usually dri"en by chauffeurs and em%hasis was on comfort and style rather than
s%eed
!uring the 196.s, the cars e(hibited design refinements such as balloon tires, %ressed2steel
wheels, and four2wheel bra#es $raham >aige !1 >haeton of 1969
featured an 82cylinder engine and an aluminum body
&he 19/3 >ontiac !e Cu(e sedan had roomy interior and rear2hinged
bac# door that suited more to the needs of families In 19/.s, "ehicles
were less bo(y and more streamlined than their %redecessors &he
19=.s saw features li#e automatic transmission, sealed2beam
headlights, and tubeless tires
&he year 19<3 brought %owerful high2%erformance cars such as
Mercedes2Ben' /..SC &his was the Indian automobile history, and
today modern cars are generally light, aerodynamically sha%ed, and
com%act
>age ?o /
INDUSTRY INVESTMENT
According to ommerce !inister "amal #ath, $ndia is an attracti%e destination for global
auto giants like, &!' (eneral !otors, )ord and *+undai who were setting base in
$ndia, despite the absence of specific trade agreements.
Current Scenario
• 8n the cost front of Indian automobile industry, 89Ms are eyeing India in a big way,
in"esting to source %roducts and com%onents at significant discounts to home mar#et
• 8n the re"enue side, 89Ms are acti"e in the booming %assenger car mar#et in India
Overview
Snippets
• By 6.1., India is e(%ected to witness o"er Bs /.,... crore of in"estment
• Maruti 4dyog has set u% the second car with an in"estment of Bs 5,<.. crore
• ;yundai will bring in more than Bs /,8.. crore to India
• &ata Motors will be in"esting Bs 6,... crore in its small car %ro:ect
• $eneral Motors will be in"esting Bs 1.. crore and +ord about Bs /<. crore
• Asho# Ceyland and &ata Motors ha"e each announced o"er Bs 1,... crore of
in"estment
Why India
&he economy of India is emerging &he following table show the ran#ing of India in the %ast
four years
Rank !!" !!# !!$ !!
1 1hina 1hina 1hina 1hina
India &hailand &hailand &hailand
$ &hailand India 4SA 4SA
= *ietnam *ietnam *ietnam Indonesia
" 4SA 4SA India *ietnam
% Bussia Bussia Indonesia India
3 Dorea Indonesia Dorea Dorea
>age ?o =
&win 'dvantages(
• Scaling costs
• 8%timising resources
)ote( 9(cellent source for I& based engineering solutions 2 for %roducts @ %rocess
integration
*acts + *igures
&he automobile industry in India is on an in"estment o"erdri"e Be it %assenger car or two2
wheeler manufacturers, commercial "ehicle ma#ers or three2wheeler com%anies 2 e"eryone
a%%ears to be in a scramble to hi#e %roduction ca%acities &he country is e(%ected to witness
o"er Bs /.,... crore of in"estment by 6.1.
&a#e note of this, Maruti 4dyog is coming u% with new Een and the diesel "ersion of Swift
during the ne(t few months ;yundai will also be unmas#ing the *erna and a brand new
diesel car $eneral Motors will be launching a mini and may be a com%act car
Most of the com%anies ha"e made their intentions clear Maruti 4dyog has set u% the second
car %lant with a manufacturing ca%acity of 6< la#h units %er annum for an in"estment of Bs
5,<.. crore (Bs /,6.. crore for diesel engines and Bs 6,318 crore for the car %lant itself)
;yundai and &ata Motors ha"e announced %lans for in"esting a similar amount o"er the ne(t
/ years ;yundai will bring in more than Bs /,8.. crore to India, &ata Motors will be
in"esting Bs 6,... crore in its small car %ro:ect
$eneral Motors will be in"esting Bs 1.. crore, +ord about Bs /<. crore and &oyota
announced modest e(%ansion %lans e"en as ;onda Siel has earmar#ed Bs /,... crore o"er
the ne(t decade for India 2 a si'eable chun# of this should come by 6.1. since the com%any is
also loo#ing to enter the lucrati"e small car segment
Some new entrants will also taste the water &hey are the big names in %assenger cars li#e
1itroen, *ol#swagen A$, ?issan (se%arately, a%art from its tie2u% with Su'u#i), Alfa Bomeo,
Maserati, Cand Bo"er and Aston Martin
&al#ing about the commercial "ehicle segment, Asho# Ceyland and &ata Motors ha"e each
announced well o"er Bs 1,... crore of in"estment In two2wheelers segment, 1hinese bi#e
ma:or Cifan ;arley2!a"idson are e(%ected to enter India soon ;ero ;onda is about to
establish its fourth manufacturing %lant
I),I') '-&OMOBI./ I),-S&R0 1ROW&2
>age ?o <
,he passenger car and motorc+cle segment in $ndian auto $ndustr+ is growing b+ --9 per
cent.
Current Scenario
• &he Indian automobile industry crossed a landmar# with total "ehicle %roduction of
1. million units
• 1ar sales was 8,86,.9= units against 8,6.,139 units in 6..=2.<
• &he two2wheeler mar#et grew by 1/5 %er cent with 3.,<5,/13 units against 56,.9,35<
units in 6..=2.<
• 1ommercial "ehicles segment grew at 1.1 %er cent with /,<.,58/ units against
/,18,=/. units in 6..=2.<
Overview
Snippets
• India, sourcing base for global auto ma:ors
• >assenger car and motorcycle segment is set to grow by 829)
• &he two2wheeler segment will cloc# 11<) rise by 6..3
• 1ommercial "ehicle to grow by <6 %er cent
• 9stimated com%onent mar#et si'e is 4SF 53 bn
*acts + *igures
India, in auto sector, is turning to be a sourcing base for the global auto ma:ors &he
%assenger car and the motorcycle segment is set to grow by 829 %er cent in coming cou%le of
years, says the I1BA re%ort &he industry is li#ely to maintain the growth momentum %ic#ed
u% in 6..62./
&he I1BA-s analysis %oints on the auto sector that the %assenger car mar#et in the country
was inching towards cars with higher dis%lacements &he s%orts2utility2"ehicle (S4*) that
was getting crowded e"eryday, would witness intense com%etition as many S4*s had been
com%etiti"ely %riced, the re%ort said
;onda, Su'u#i, $eneral Motors and ;yundai, the global automa#ers had already launched
their %remium S4*s in the mar#et to broaden their %ortfolio and create %roduct e(citement in
the segment estimated at about 1.,... units annually
In the two2wheeler segment, according to the re%ort, the motorcycles would cloc# 11< %er
cent rise during 6..=26..3 o"er its siblings2scooters and mo%eds Scooters sales would
decelerate and mo%eds would also see the same 8"erseas mar#et would %resent huge
o%%ortunities for the two2wheeler ma#ers
>age ?o 5
&he commercial "ehicles are li#ely to grow at a 1A$B of <6 %er cent ;ea"y commercial
"ehicles mar#et would rise at << %er cent and sales of light buses and truc#s would achie"e
=3 %er cent growth +or the tractors, the re%ort %redicts a growth at =5 %er cent
Indian 'uto Market 1rowth for the year !!"3!%
• &he domestic automobile industry sales grew 168 %er cent at 89,1.,66= units as
against 38,93,569 units in 6..=2.<
• &he automoti"e industry crossed a landmar# with total "ehicle %roduction of 1.
million units
• According to the Society of Indian Automobile Manufacturers (SIAM), car sales was
8,86,.9= units against 8,6.,139 units in 6..=2.<
• &he growth of domestic %assenger car mar#et was 3< %er cent
• 1ar e(%orts stood at 1,3.,19/ units against 1,5.,53. units in 6..=2.<
• &he two2wheeler segment, the mar#et grew by 1/5 %er cent with 3.,<5,/13 units
against 56,.9,35< units in 6..=2.<
• Motorcycles had the u%ward march, 131 %er cent in domestic mar#et touching
<8,1<,=13 units against =9,5=,3</ units in 6..=2.<
• Scooter segment grew by 1< %er cent, fall at 9,.8,1<9 units against 9,66,=68 units in
6..=2.<
• 1ommercial "ehicles segment grew at 1.1 %er cent with /,<.,58/ units against
/,18,=/. units in 6..=2.<
• Medium and hea"y commercial "ehicles managed a growth of =< %er cent against 6/
%er cent growth in the year ended March /1, 6..<
• Cight commercial "ehicles sales growth was 19= %er cent at 1,=/,6/3 units against
1,19,96= units in 6..=2.<
• &hree2wheelers sales rose by 13 %er cent at /,5.,183 units against /,.3,856 units in
6..=2.<
Market 'dvantage
• +ast %aced urbanisation to rise from 68) to =.) by 6.6.
• 4%ward migration of household income le"els
• Middle class e(%anding by /.2=. million e"ery year
• $rowing wor#ing %o%ulation
VEHICLE PRODUCTION IN INDIA
$ndia is the 11th largest .assenger ars producing countries in the world and /th largest
in *ea%+ ,rucks
>age ?o 3
Automobile Industry is the largest industry in India with an im%ressi"e growth in the last two
decades &he reason behind the growth was abolition of licensing in 1991 and %ermitting
automatic a%%ro"al and successi"e liberalisation of the sector
According to estimation the com%ound annual growth rate (1A$B) of Indian Automobile
sales will grow at 9<) and will touch a mar# of 1/,..8 million by 6.1. &he figure for
+G.< was 8=< million units &o ta% this large o%%ortunity, the Indian Auto 1om%anies along
with the global giants ha"e announced huge e(%ansion %lans
Maruti 4dyog Ctd was the largest =2,heelers %roducer in 6..<2.5 followed by &ata Motors
;yundai did well but the difference was nearly half of &ata Motors In 62,heelres segment,
;ero ;onda is leading %utting behind Ba:a: Auto Ctd 1hec# the table below to get com%lete
figure
Current Scenario
• &he growth rate of >assenger 1ars in 6..= was /.) in India where as the a"erage
growth rate of to% 16 >assenger 1ars %roducing countries were :ust <1) In ;ea"y
&ruc#s it was /6) and 1=5) res%ecti"ely
• 1om%onent industry-s growth was only 9) between 199326... But between 6...2
6..< it has grown to 6.) It is %ro:ected 13) between 6..<26.1=
Overview
Snippets
• Cargest industry in India
• By 6.1. there will be 1/,..8 million cars
• Maruti 4dyog Ctd is the leading =2wheelers manufacturer
• ;ero ;onda is the leading 62wheelers manufacturer
• 62wheelers are %roduced most followed by =2wheelers and /2wheelers
4roduction of #3Wheelers
Manufacturers
!!"3!%
5'pr3Mar6
In )os7
Manufacturers
!!"3!%
5'pr3Mar6
In )os7
8apanese O/M Korean O/M
>age ?o 8
Maruti 4dyog Ctd <36,.93 ;yundai Motor India Ctd 65.,==.
&oyota Dirlos#ar Motor >"t Ctd ==,93< 'merican O/M
;onda Siel 1ars India Ctd =1,/51 $eneral Motors India >"t Ctd /.,583
Swara: Ma'da Ctd 11,9=5 +ord India >"t Ctd 65,9=5
&otal %9!:$9; &otal "9:%$$
/uropean O/M Indian O/M
S#oda Auto India >"t Ctd 9353 &ata Motors Ctd ==9,838
!aimler 1hrysler India >"t Ctd 1,38. Mahindra @ Mahindra Ctd 168,5.1
*ol"o India >"t Ctd 1,..= Asho# Ceyland Ctd 5<,.8<
&atra &ruc#s India Ctd 16< +orce Motors Ctd /<,368
+iat India >"t Ctd 531 9icher Motors Ctd 6=,/=8
;industan Motors Ctd 1<,=<8
&otal <$:$#9 &otal 9<;:!;=
4roduction of 3Wheelers
Manufacturers
!!"3!%
5'pr3
Mar6
In )os7
Manufacturers
!!"3!%
5'pr3
Mar6
In )os7
8apanese Indian
;ero ;onda Motors Ctd /,..5,=85 Ba:a: Auto Ctd 6,.=6,689
;onda Motorcycle @ Scooter India
(>"t) Ctd
5./,=/5 &*S Motor 1om%any Ctd 1,/55,855
Gamaha Motors India >"t Ctd 6=8,55< CMC Ctd 1.3,.==
Su'u#i Motorcycle India >"t Ctd 6,/68 Dinetic 9ngineering Ctd 86,/96
Ma:estic Auto Ctd <5,819
Dinetic Motor 1om%any Ctd </,88.
Boyal 9nfield (4nit of 9icher
Ctd)
/.,<95
&otal $:=%!:;<" &otal $:9$;:==%
If we ta#e a Auic# loo# of almost a decade, it is seen that two2wheelers are the most %roduced
in automobile industry followed by %assenger cars and then three wheelers &he following are
>age ?o 9
the number of units %roduced in 6../2.= and 6..=2.< (A%ril2Se%t .=) of different segment
of "ehicles0
)ame of the Sector )o7 of units 4roduction
!!$3!#
!!#3!"
(A%ril2Se%t .=)
1ommercial *ehicles 9 63<66= 1<581<
1ars 16 8=6=/3 =5<98/
Multi24tility *ehicles < 1=51./ 11=3/9
62wheelers 16 <56=9<. /.6/8.<
/2wheelers = /=.369 133<<=
&otal # 9;##$ $;$==;%
>age ?o 1.
AUTO EXPORT INDIA
$n auto export, passenger %ehicle exports ha%e grown o%er fi%e times from the start of the
decade and two-wheeler exports ha%e reached more than double.
Current Scenario
• +oreign auto ma#ers, including +ord Motor 1o , $eneral Motors 1or%, ;onda Motor
1o Ctd, &oyota Motor 1or%, !aimler1hrysler A$ and ;yundai Motor 1o Ctd, are
loo#ing to increase their %resence in India and use it as an e(%ort hub
• 9(%orts of auto com%onents, whose manufacturing costs are /.2=. %er cent lower
than in the ,est, ha"e grown at 6<) a year between 6... to 6..<
Overview
Snippets
• In 6../2.= the e(%ort of the industry was <<98)
• &wo2wheelers are mostly e(%orted from India
• &he reason behind the e(%ort is cost com%etiti"eness in terms of labor and raw
material
• &he e(%ort of auto com%onents has grown to 19) from the start of the decade
*acts + *igures
&he Indian automoti"e e(%ort industry %resently is finding a good recognition globally &he
auto industry along with the com%onent industry is contributing to the e(%ort effort of the
country In 6..62./, the e(%ort of the automobile industry had registered a growth rate of
5</<) In 6../2.=, it was <<98) &he following table briefs about the 6../2.= and 6..=2
.< (u%to A%ril2!ec 6..=) automobile e(%ort in numbers
Category <;;=3;; !!#3!" 5'pr3,ec6
>assenger 1ar 6<=58 161=38
Multi 4tility *ehicles 65<= /896
1ommercial *ehicles 1.1.8 199/1
&wo ,heelers 1....6 6<535<
&hree ,heelers 611/8 <1</<
>ercentage $rowth 2155 /68
>age ?o 11
/>port of 'uto Components(
In"estments in the auto ancillary sector are rising ra%idly In 1993, the si'e of the auto
com%onent industry was 4SF 6= billion and now in 6..=2.< it has become 4SF 83 billion
industry &he e(%ort of auto com%onents has grown at a com%ounded growth rate of 19 %er
cent o"er the %ast si( years
Hai >arabolic S%rings (H>SC) is a leading manufacturer of %arabolic s%rings in India and has
bagged two ma:or orders from international auto ma:ors, $eneral Motors ($9) and +ord
Bobert Bosch, auto %arts ma#er of $ermany has relocated manufacture of certain %roducts to
MI18, India 1rosslin# International ,heels, Malaysia-s leading automobile security
%ro"ider ,heels 9lectronic S!?, is setting u% its manufacturing unit at Baddi to ma#e India
the e(%ort hub for the SAAB1 region
>SA >eugeot 1itroIn, +rench automobile grou% has %laced orders for com%onents worth 4SF
1. million with Indian com%anies
+iat India e(%orted com%onents worth 4SF 8/ million in 6..=2.< to its o%erations in South
Africa $D? !ri"eline and !ubai based auto ancilliary ma:or >arts International %lans for an
in"estments in India
>age ?o 16
'nalysis of Indian />ports(
Strengths
• 1ost com%etiti"eness in terms of labor and raw material
• 9stablished manufacturing base 9conomics of scale due to domestic
mar#et
• >otential to harness global brand image of the %arent com%any
• $lobal hub %olicy for small car li#e ;yundai, Su'u#i, etc
Weakness
• >erce%tion about Auality
• Infrastructure bottlenec#s
Opportunities
• ;uge e(%ort mar#ets such as 9uro%e, America, Africa, and others for
Indian cars
&hreats
• 1hina, Malaysia, &hailand, etc
• Many other countries also ha"e strategies for e(%ort %romotion
/>port Imperatives(
Internal +actors0
• Attaining high Auality for global standards
• 1ontinuous cost reduction for global com%etiti"eness
9(ternal +actors0
• Im%ro"e infrastructure (%orts, roads, etc)
• Im%ro"e 9JIM regulations
>age ?o 1/
*9;I1C9 !IS&BIB4&I8? I? I?!IA
!aharashtra has maximum number of registered %ehicles in $ndia.
Overview
In this section we will discuss about distribution of "ehicles in Indian States and 4nion
&erritories If we loo# at the gra%h of "ehicle distribution by area, we will learn that in
Maharashtra, ma(imum number of "ehicles %ly 1hec# yourself from the following details0
)on3&ransport ?ehicles in States
• Maharashtra has the most number of "ehicles followed by &amil ?adu and $u:arat
&he figures are are 81//8/3, 8..=986 and 5<.8/93 units res%ecti"ely
• In cars , Maharashtra leads the %ath with 8/1651 registerd cars and ne(t to it is &amil
?adu and $u:arat ha"eing 59.631 and <.=8.1 registered units res%ecti"ely
• In two2wheelers, &amil ?adu has registered the ma(imum units, 565..9/
&ransport ?ehicles in States
• Maharashtra is the leader once again with a total of 1.5551. registered "ehicles
• In Cight Motor *ehicles for goods Maharashtra has registered 6681<3 "ehicles, &amil
?adu with 19<.59 "ehicles holds the second %osition
• In Cight Motor *ehicles for %assengers, Maharashtra to%s by ha"ing =5/<<. units and
Derala follows with 6356== units
• Most number of ta(is %ly is &amil ?adu which is followed by Derala and then by
Maharashtra &he figures are 11..8., 1.8<./ and 9=96. units res%ecti"ely
)on &ransport ?ehicles in -nion &erritories
• &otal non2trans%ort "ehicles in the Indian 4nion &erritories are =559=//
• !elhi has the ma(imum registered non2trans%ort "ehicles %lying, /3<1<86 ?e(t is
1handigarh with <=839. and >ondicherry with 63<=66 registered "ehicles
&ransport ?ehicles in -nion &erritories
• &otal number of trans%ort "ehicles in the Indian 4nion &erritories are 5999998
• !elhi has the ma(imum registered trans%ort "ehicles %lying, 619688 ?e(t is
>ondicherry with 13.<= and 1handigarh with 1698< registered "ehicles
&BA?S>8B& I? S&A&9
>age ?o 1=
&otal trans%ort "ehicles in the Indian states are 53/<691 Among them Maharashtra has the
ma(imum registered trans%ort "ehicles %lying ?e(t is &amil ?adu with 385<58 and $u:arat
with 319=39 registered "ehicles &he following %ie2chart and table will gi"e you a com%lete
%icture of trans%ort "ehicles in different states of the country
>age ?o 1<
>age ?o
States
&ransport
&rucks +
.orries
.ight Motor
?ehicles51oods6
Buses &a>ies
.ight Motor
?ehicles54assengers6
&otal
&ransport
'ndhra
4radesh
16=591 <8198 1=1/. 556.. 6=<9/< <.91<=
'runachal
[email protected]
6/6/ <<< 55< 699 1=/. <636
'ssam 393=/ 165<1 93.6 95=5 6=885 1/5568
Bihar =8616 153.3 1<=9/ 611=9 55/15 153833
Chhatisgarh /538< 1=365 19.. 18939 5<9/ 3898/
1oa 5c6 65<85 =<.= 336. 893< =338<
1uAarat 13=.56 188<1. ==6<. /5913 63<3=. 319=39
2aryana 1651.9 =915. 8.91 163<6 //6<8 669/3.
2imachal
4radesh
63==< 1.3/. <19. 1/9.9 6511 <988<
8ammu +
Kashmir
68.99 116/9 196</ 8918 1/8.8 81/13
8harkhand 5.5.1 9.98 6.6<5 //651 16/615
Karnataka 951== 83/5< 696/9 /59/9 183656 =/59=9
Kerala 3.558 166/9/ 56.3< 1.8<./ 6356== 5/988/
Madhya
4radesh
36653 63=61 6/89< <=9=9 =/.<< 661<83
Maharastra 668198 6681<3 <138< 9=96. =5/<<. 1.5551.
Manipur <816 1.13 6/<8 /<3 6/9< 119/9
Meghalaya 1=.68 6863 <./. 69/= 6=819
MiBoram 63=6 16.5 39= //=/ 8<8 89=/
)agaland =/<15 199= ===1 //15 11639 5=<=5
Orissa <6/.1 6</91 1=3/= 1=83. 19553 16595/
4unAaC 3/3=1 /1353 135.1 1118. /===6 1583/1
RaAasthan 1<<9/6 1.5== </./5 63989 <916< /.5365
Sikkim 1=85 668 683 =.5= 5.5<
&amil )adu 65/661 19<.59 31111 11..8. 1=3.83 385<58
&[email protected]@ ==99 1635 198< 1/3< 39.1 13./5
-ttaranchal 8<8= =/96 =65< 16=85 5666 /<9=9
-ttar
4radesh
9685/ <.=// 6</<3 69<66 3=596 636853
West Bengal 6/9155 /<665 5//9. =6/56 /8.1==
&O&'.
S&'&/S 546
61<986= 11<1669 <//696 399.<8 6.91888 53/<691
15
?8? &BA?S>8B& *9;I1C9 I? I?!IA? S&A&9S
&otal non2trans%ort "ehicles in the Indian states are <</5/5.1 Among them &amil ?adu has
the ma(imum registered non2trans%ort "ehicles %lying ?e(t is Maharashtra with 3.53663
and $u:arat with <388891 registered "ehicles &he following %ie2chart and table will gi"e you
a com%lete %icture of trans%ort "ehicles in different states of the country
>age ?o 13
States
)on3&ransport
&wo
Wheelers
Cars 8eeps
Omni
Buses
&ractors &railers Others
&otal
5)on3
&pt76
1rand
&otal
'ndhra
4radesh
/98<.=9 /16.95 <=5/1 /6/9= 5./6< ===89 /=8< ==96=59 <..156/
'runachal
[email protected]
1.5.< 6/=. 665. /// 1<< 139 1<836 611==
'ssam /3686< 9<.5/ 1/851 98.1 8<36 1991/ <6../< 5<555/
Bihar 3.961/ 518/6 K K 1116.. 55=93 =339 9</<61 1161/98
Chhatisgarh 8816=8 /=/5< 3163 /8<98 //851 1859 993.58 1.35.<1
1oa 68.383 5=3/< K =<1 /588 /=9551 /93==5
1uAarat =3.6<69 <.=8.1 1.=65/ 1659 65311/ 19=<.1 1==1< <388891 5<.8/3.
2aryana 1/<59<3 6/8815 59596 /<898/ 6=531 6.=9119 6638=89
2imachal
4radesh
1=9685 /==36 8333 6/ 1135/ =8/ /5<5 6.8=5. 658/=<
8ammu +
Kashmir
6/.<33 5=/.3 1.<39 1.1=9 <=3 1..5 /1315< /98=86
8harkhand 8==93/ 869.3 613<5 16/81 1./68 <<<< 9339.. 11.1115
Karnataka 6<6353= =.<561 =.9== /5=</ 119.=. 1199.< <181< //.1=<6 /3/8=.1
Kerala 1==91<= //5<=. 3.85= 6539/ 83.6 186/ 18=16 1916688 6<<6131
Madhya
4radesh
65..989 1/=.=< /<111 /.=35. 1<1<69 1.953 /6/3=.1 /=<8988
Maharastra <<83556 8/1651 6==.6< 16<99 19=9.6 1851.. 1.538 3.53663 81//8/3
Manipur 5893< 5<5. 3=3= =<. 1185 <=9 61/ 8<=.3 93/=5
Meghalaya 61.<. 1=<9< 9=.1 ==1 6/.= 336 =8<5/ 3//86
MiBoram 159=1 =1=5 5566 <<6 68651 /36.=
)agaland ===.1 /5/68 /<8/1 =1= 6<8= 1.56 11<53 1/6183 1953//
Orissa 1.3=83/ <9695 68985 16.< 699<= 6<135 161// 16/156/ 1/<8<85
4unAaC 6=1=968 6/961. 69391 =<.<<6 =.= /988 /1/883/ //.35.=
RaAasthan 6=69896 139959 16.58< /89=89 <<85< =.</ /1399</ /=85539
Sikkim ===1 1135 6=3/ = 8.9= 1=1<9
&amil )adu 565..9/ 59.631 </1=6 199<3 88113 /89=5 53888 3618=1= 8..=986
&[email protected]@ /65/= =9<= 1/== 1=/ 1.<. 653 =./96 <3=68
>age ?o 18
-ttaranchal /=538= /=833 56/8 /88 /.<5/ 3.8 19=3 =61<.< =<3=<=
-ttar
4radesh
==88=65 /655.= 85./< 1<5/3 3.9393 16/53 15556 <5<<<68 <968/9<
West Bengal 1=69818 =86=69 K =/8./ L /.666 1985636 6/55=15
&O&'.
S&'&/S 546
==/6638= <68/515 1.31916 1=3<86 /6<<1/= 9<3661 /6</<6 <</5/5.1 56.98896
I?!IA? A4&8M8BIC9 18M>A?I9S
$ndia is the 11th largest .assenger ars producing countries in the world and /th largest
in *ea%+ ,rucks.
Current Scenario
• ;ero ;onda is the largest manufacturer of motorcycles
• ;yundai Motors India is the second largest %layer in %assenger car mar#et
• Sundram +asteners, Sundaram 1layton, Bharat +orge and Bico Auto su%%lies
com%onents to global ma:ors li#e +ord, $eneral Motors and Cand Bo"er
• &ata Motors is the fifth largest medium @ hea"y commercial "ehicle manufacturer in
the world
Overview
Snippets
• In 198.s ;industan Motors (;M) was leading car manufacturer in India
• ;M is %o%ular with its Ambassador model
• In 193.s, San:ay $andhi, son of Indira $andhi en"isioned M>eo%le-s 1arM
• Maruti 4dyog Ctd was set u% to manufacture budget cars
• In 199/ foreign auto ma#ers entered the Indian mar#et
*acts + *igures
&he onset of automobile industry in India saw com%anies li#e ;industan Motors, >remier
Automobiles and Standard Motors catering to the manufacture of automobiles for Indian
customers &he era, 19<.s 2 early 199.s was #nown as -license ra:,- when India was closed to
the world and im%orts ;industan Motors (;M) was the leader in car manufacturing and sales
until the 198.s, when the industry was o%ened u% from %rotection ;M, :oint "enture with
Mitsubishi %roduced Cancer and >a:ero, but is best #nown for its own model, Ambassador
Around 193., San:ay $andhi, elder son of the then >rime Minister Indira $andhi, en"isioned
the manufacture of an indigenous, cost2effecti"e, low maintenance com%act car for the Indian
middle2class &he cabinet %assed a unanimous resolution for the de"elo%ment and %roduction
of a M>eo%le-s 1arM It was christened Maruti Cimited ;owe"er, the com%any as Maruti
4dyog Ctd matured only after the death of San:ay $andhi &he Maruti8.. car went on sale
in 198/ By 199/ it sold u% to 1,95,86. cars
1991, the liberalisation of the Indian economy o%ened the mar#et for foreign automobile
ma#ers to "enture in India &he license ra: ended in 199/ and many foreign %layers entered
>age ?o 19
the Indian mar#et by way of Hoint "entures, collaborations or wholly owned subsidiary
1loCal 4layers in India(
Segments Companies
1ars7 S4*s • Su'u#i
• ;onda
• &oyota
• Mitsubishi
• $M
• +ord
• !aimler21hrysler
• S#oda
• +iat
• ;yundai
• &ata
• M @ M
&wo2wheelers • &*S
• ;ero ;onda
• Ba:a: Auto
• Gamaha
• Dinetic
• CMC
1*s • &ata
• Asho# Ceyland
• &atra
• 9icher2Mitsubishi
• Swara: Ma'da
• Mahindra @ Mahindra
• *ol"o
&ractors • 9scorts
• M @ M
[email protected]&
• >un:ab &ractors
• ?ew ;olland
• I&C2Benault
• Hohn2!eere
• Steyr
Manufacturing 2uC in India(
Company 4articulars
;yundai 9(%ort Base for Small 1ars
S#oda ;ub for e(%orts of cars to neighbouring countries
+ord 9(%orting 1D!s of I#on to South Africa @ other countries
Mitsubishi @ Gamaha ;ub for 16< cc Motorcycles
Maruti Su'u#i 9(%orts cars to 94
;onda ;ub for two2wheelers e(%orts
>age ?o 6.
Manufacturing 2uC for Components(
Company 4articulars
&oyota Motor $lobal ;ub for &ransmission
!aimier 1hrysler Sourcing more than 3. million 9uro
+ord +ull +ledged 1om%onent Sourcing &eam
+iat Sourcing 1om%onents
A4&8 I?S4BA?19
$n $ndia, auto insurance is mandator+ for all new %ehicles, be it commercial or for
personal use.
Auto insurance, also commonly #nown as "ehicle insurance or motor insurance, is an
insurance which consumers can %urchase for cars, truc#s, and other "ehicles In other words,
it is a contract between the owner of a "ehicle and the insurance com%any According to the
contract, the "ehicle owner agrees to %ay the %remium and the insurance com%any agrees to
%ay the losses as defined in the %olicy
Overview
*eatures
• &he %rimary use of auto insurance is to %ro"ide %rotection against losses incurred as a
result of traffic accidents
• &he auto insurance %ro"ides %ro%erty, liability and medical co"erage
• %ro%erty co"erage %ays for the damage to or theft of the "ehicle
• Ciability co"erage %ays for the legal res%onsibility to others for bodily in:ury or
%ro%erty damage
• Medical co"erage reimburses the cost of treating in:uries, rehabilitation and
sometimes lost wages and funeral e(%enses
'uto Insurance Coverage .evels
&he basic co"erage of auto insurance are cited below0
• &he insured %arty
• &he insured "ehicle
• &hird %arties
'uto Insurance Claim 4rocedure
&he following are the %rocess of claiming for the insurance0
• Insured should write the number of the other "ehicle in case of an accident or third
%arty claim
• ?ames of witness should also be written down
• +ile an +IB with the nearest %olice station
>age ?o 61
• Insured should then contact the insurance com%any and get a claim number
• A sur"eyor is a%%ointed who re%orts the a%%ro(imate "alue of loss or damage
• Based on the re%ort of the sur"eyor, insurance com%anies try to send the amount to
the insured within one to three wee#s
• An indi"idual might ha"e to %ay the re%air charges himself and later get it reimburse
,ocuments ReDuired for 'uto Insurance Claim
!ifferent documents are reAuired for claiming insurance ;ere we discuss it under three
different ty%es of insurance
*or 'ccident Claims
• 1laim form duly signed
• B1 co%y of the "ehicle
• !ri"ing license co%y
• +IB on a case2to2case basis
• 8riginal estimate
• 8riginal re%air in"oice, %ayment recei%t from the ser"ice center
*or &hird 4arty Claims
• 1laim form duly signed
• B1 co%y of the "ehicle
• !ri"ing license co%y
• 8riginal %olicy co%y
• 8riginal +IB co%y
• B&8 transfer %a%ers duly signed, mentioning that the "ehicle cannot be located
'uto Insurance Claim ReAected
&he claim for auto insurance is re:ected under the following circumstances0
• If it is a conseAuential lossN de%reciationN wear and tearN mechanical and electrical
brea#downN failure or brea#age
• ,hen the "ehicle is used outside the geogra%hical areaN when used contrary to
limitation as to useN dri"en by a %erson other than the dri"er stated in the dri"er-s
clause
• In case of war %erils, nuclear %erils and drun#en dri"ing
>age ?o 66
CASE STUDY HYUNDAI
Highlights of Hyundai
Since the foundation of 1953, ;yundai Motor 1om%any has achie"ed its %osition as the
leader of the Dorean automobile industry through the a%%lication of the latest technology and
de"elo%ment of its own models ;yundai cars ha"e succeeded in achie"ing international
com%etiti"eness, than#s to their outstanding %erformance, Auality and safety, as well as
;yundai-s high "alue2for2money ratings ;M1-s %rimary strength lies in new %roduct
de"elo%ment ,ith the belief that it can transform the -im%ossible- into the -%ossible-, ;M1 is
in"esting in the future by s%ending hea"ily in research and de"elo%ment to acAuire the high
technology needed to de"elo% newer and better %roducts
&o accom%lish this feat, ;M1 will be in"esting a total of .<F56< billion by the year 2001 in
research and de"elo%ment ;M1 is currently in"esting <O7o of its total sales re"enues in
[email protected]! fundsN howe"er, this figure will gradually increase to 8) of its total sales re"enue o"er
time
2yundai has its presence in <%= countries across the gloCe7 &he corporate philosophy of
the company is to develop mutually Ceneficial relationships with other nations and
communities7
&he com%any aims to achie"e such goals through organisational restructuring, e(tensi"e cost
reduction, %roducti"ity gains, Auality inno"ations, information technology de"elo%ment,
globalisation and cor%orate image enhancement ,ith ;M1-s cor%orate %hiloso%hy of
M1ustomer +irst, &echnology +irst, Puality +irst, and >eo%le +irstM, the ;yundai s%irit will
dri"e its young and moti"ated wor#force towards an e(citing future
;yundai Motor 1om%any recorded a record net %rofit of =1= billion Dorean ,on or F/56/3
million (at %re"ailing e(change rates) for year ended !ecember /1,1999 ,ith total "ehicle
>age ?o 6/
sales for 1999 amounting to 1,658,/<= units, earnings to%%ed 1=6 trillion Dorean ,on or
about F16=/ billion 2a 5/ ) increase o"er 1998 Sales of %assenger cars stood at 989,.=5
units and of commercial "ehicles at 639,/.8 units for the year &otal %roduction in 1999
reached 1,659,<=6 "ehicles, com%rising 995,5/= %assenger cars and 636,9.8 commercial
"ehicles ;yundai Motor 1om%any is aiming to achie"e total sales of 153 million units
during the year 6..., with 36.,... sales in the domestic mar#et and 9<.,... sales in e(%ort
mar#ets
&he 4lsan %lant in Dorea is the world-s single largest integrated automoti"e %roduction
facility, with annual %roduction ca%acity of 1=8 million units of a range of "ehicles including
%assenger cars and light @ hea"y commercial "ehicles
&he 1hon:u %lant has an annual %roduction ca%acity for 5.,... units for hea"y2duty
commercial "ehicles An additional 65.,... units of %assenger cars such as 9+ Sonata and
J$ $randeur are %roduced in the Asian %lant &he ?amyang Besearch @ !e"elo%ment
1entre in Dorea is the hub of ;M1-s [email protected]! efforts worldwide ,ith fi"e research centres in
Dorea and abroad, ;M1Qs research efforts are well organised by function and %ur%ose
In 1999, ;M1 established the integrated [email protected]! headAuarters, bringing together newly2
acAuired DaiQs [email protected]! with ;yundaiQs [email protected]! following the acAuisition of Dai Motor 1om%any,
;M1 sought to ma(imi'e its technological com%etiti"eness by integrating eight [email protected]!
centres &he result is si( [email protected]! centres located at 4lsan, ?amyang, Sohari, Sonaeng as well as
the combined car design centre and commercial *ehicle [email protected]! centre 8"erseas, ;M1
maintains, [email protected]! offices in !etroit, Cos Angeles, +ran#furt and Ha%an ,ith res%ect to Dai,
;M1 is maintaining the dual model design relationshi%, which allows Dai to retain brand
identity and enables customers a wider range of selection
;yundai Motor 1om%any, the to% automobile manufacture of Dorea, entered India through
wholly owned subsidiary 2yundai Motor India .td in 1995;M1, Dorea, has constructed
its largest o"erseas manufacturing %lant in India &he groundbrea#ing ceremony of the state2
of2art %lant in Irrungattu#ottai near 1hennai too# %lace in !ecember 1995
>age ?o 6=
,ith the long term goal of meeting the dreams and as%irations of the Indian %eo%le and
re"olutioni'ing the conce%t of dri"ing in the country by launching cars that bring the latest
automobile technology to the Indian roads
As a result, ;yundai Motor India has been able to achie"e many firsts in the Indian mar#et
2Second largest auto2manufacturer in the Indian %assenger car industry within one year of
o%erationsN +astest to cross first <.,... units in the Indian automobile industryN +astest to
achie"e the 1..... 2unit milestone in the Indian auto2industry, and many others
Milestones
• May 5, 1995 2$o"ernment of India-s a%%ro"al for 1..) subsidiaryN 1om%any
incor%orated
• !ecember 1., 1995 2$round2brea#ing ceremony at the Irrungattu#ottai %lant near
1hennai !ecember 1995 2Santro first de"elo%ed in 4lsan, Dorea
• May 63, 1998 2>ilot %roduction of Santro at %lant begins within a record 13 months of
ground brea#ing Se%tember 9, 1998 21ommercial %roduction at %lant begins
• Se%tember 6/, 1998 2;yundai Santro ma#es its world debut in India 8ctober 1=, 1998
2?ational deli"ery of Santro commences
• !ecember /1, 1998 21om%any com%letes 8,==3 sales for year 1998
• March <, 1999 2&he ;yundai Santro ad"ertising cam%aign starring Shah Bu#h Dhan
wins the best ad cam%aign award from Ad"ertising 1lub, 1alcutta
• March /1,1999 ;MIC ends the financial year 1998299 with total sales of 13,5=3 units
of SantroN Becomes second largest auto2manufacturer in the country
• August 6, 1999 21hennai %lant goes into 6nd shift %roduction to ste% u% >roduction
"olumes and reduce customer2waiting %eriod
• Se%tember 66, 1999 2+irst automobile com%any to announce a two year warranty on
Santro 8ctober 1=, 1999 2Caunch of ;yundai Accent
>age ?o 6<
• !ecember 66, 1999 2;yundai Motor India closes calendar year sales
• ?otches total sales of 5.,/61 units of both the Santro and the Accent in 1999
• Hanuary /1,6... 2;yundai Motor India, achie"es its highest sales e"er by selling 3=.6
units of Santro and 16=/ units of Accent in Hanuary 6...N
• +ebruary 1<, 6... 2;yundai Santro launch cam%aign starring Shah Bu#h Dhan
awarded the global Ad"ertising Mar#eting 9ffecti"eness Award by ?ew Gor#
+esti"als
• March /1, 6... 2;yundai Motor India %osts As 6/1. crore turno"er for 1999-2000;
1umulati"e sales crossed 9/,/16 units
• A%ril 63, 6... 21..,...M 1ar roll2out from the 1hennai %lant Assembly2Cine in :ust
19 months of its o%erations
• May 8, 6... 2Caunch of Santro 'i% dri"e
• Hune 16, 6... 2;yundai Santro crosses 1..,... car sales
• Hune 19, 6... 2;yundai Accent achie"es the landmar# of 1.,... car cumulati"e sales
Hune 61, 6... 2Caunch of !iesel "ersion of ;yundai Accent I
• Huly 61, 6... 2An e(%ort2shi%ment of 35. Accent %lus Santro cars rolls out of the
1hennai >ort for Algeria
>age ?o 65
INDIA ENVIRONMENTAL ANALYSIS
Current ar!et s"enario
As India celebrates its <. years of inde%endence, the %assenger car industry will celebrated a
centenary of its e(istence in India in 1998 !es%ite this head start, the industry has ne"er
Auite matched u% to the %erformance of its counter%arts in other %arts of the world &he all2
%er"asi"e atmos%here created by the go"ernment-s license ra: was %rimarily res%onsible for
this situation &he "arious layers of Acts sheltered the industry from e(ternal com%etition and
smothered the de"elo%ment of the Indian automobile industry Moreo"er, the industry was
considered low %riority as cars were considered to be an Munaffordable lu(uryM
,ith the liberali'ation of the Indian economy, the %assenger car industry was finally
deregulated in 199/ and many com%anies, both Indian and foreign, announced their %lans to
enter the mar#et of adeAuate technology and %urchasing %ower it resulted in the slow growth
of the industry e"en after a long time since inde%endence &he demand for cars increased
from 1<,31= in +G5. to /.,989 in +G8. at a 1A$B of only /<) &he entry of Maruti 4dyog
Ctd, a $oI H* with Su'u#i of Ha%an, in 198/ with a so2called M%eo%lesM car and a more
fa"orable %olicy framewor# resulted in a 1A$B of 185) in car sales from +G812+G9.
After witnessing a downturn from +G9. to +G9/, car sales bounced bac# to register 13)
growth rate till +G93 Since then, the economy slum%ed into recession and this affected the
growth of the automobile industry as a whole As a result car sales remained almost stagnant
in the %eriod between +G93 and +G99 ;owe"er, with the re"i"al in the economy, +G6...
turned out to be a significant year for the industry in which it recorded "olume sales
of 5/8,81< units as against =.9,9<1 units in the %re"ious year &hus, the 1A$B for the %eriod
+G95 2 +G6... stands at 155)
&a#ing into consideration the rise in e(%endable income le"els and necessity of %ersonal
trans%ortation as a result of inefficient or deficient %ublic trans%ortation means, the demand
for cars is e(%ected to increase +G6... was an indicator of the growth %hase to follow,
registering a 6.2year high growth rate of <5) &he second highest growth was recorded in
198< at =6) when Maruti had entered the mar#et Biding on the %o%ularity of the small car
segment, cou%led with the boost in sales of the mid si'e segment, total sales grew by <5)
>age ?o 63
;owe"er, such high le"els of growth are highly unsustainable in the long run gi"en the fact
that there are as yet unutili'ed ca%acities in the industry &his would ma#e the Auestion of
sur"i"al im%ortant and carma#ers would ha"e to %lay their cards well to remain in contention
Moreo"er, sales growth in +G6... was calculated on a lower base of +G99 Dee%ing in mind
these factors, one could %redict a demand growth of 1<26.) in the years to follow $oing by
this trend, the demand for cars during +G6..1 would be around 53.,3<< units
&he flood of new entrants into the car industry as a result of liberali'ation has led to a
com%lete transformation of the sector &he car segment is flooded with new models from new
and e(isting %layers, a "isible shift from a constrained su%%ly situation to a sur%lus In the last
decade or so, as many as /. models ha"e in"aded the mar#et, ma#ing it a case of
embarrassment of riches Moreo"er a lot many models are waiting to hit the ram% by the end
of the year
&he ca%acity of car %roduction has increased substantially in the last three years and is
e(%ected to grow manifold in the coming years &he ca%acity for car %roduction in the
country is e(%ected to increase from around 3<.,... in +G99 to 1,61.,... in +G.1 &he
industry will, thus, witness substantial o"er ca%acity in the ne(t few years &he car buyer will
be the ma:or beneficiary of the mar#eting war in the segment as they will be able to get
technologically better %roducts at good terms and conditions But with an e(%ected sha#e out,
the threat of discontinuation of a model is also high
?onetheless, times ha"e changed significantly 2 the days of the customer chasing the dealer
to %urchase %oor Auality cars bac#ed by inefficient ser"ice are history &oday, the customer
dictates the terms
>age ?o 68
Industry stru"ture
&he Indian car industry can be classified, based on the %rice of the car, into the -small- car or
the economy segment (u% to Bs.6<mn), mid2si'e segment (Bs.6<2.=<mn), lu(ury car
segment (Bs.=<21mn) and su%er lu(ury car segment (abo"e Bs1mn) &he models in the car
mar#et can be fitted to different segments as gi"en below0
Category Models
9conomy segment (u% to Bs.6<mn) Maruti 8mni, Maruti 8.., >admini
Mid2si'e segment (Bs.6<2.=<mn),
>remier 118?9, Ambassador ?o"a, +iat 4no, Een,
;yundai Santro, !aewoo Mati', &ata Indica, Maruti
1..., 1ontessa
Cu(ury car segment (Bs.=<21mn)
>eugeot /.9, &ata 9state, &ata Sierra, Maruti 9steem,
1eilo 9(ecuti"e, ;onda 1ity, Mitsubishi Cancer, +ord
I#on, 8%el Astra, +iat Siena, 8%el 1orsa, !aewoo
?e(ia, ;yundai Accent
Su%er lu(ury segment (Abo"e
Bs1mn)
Mercedes Ben' and other im%orted models
&he demand for %assenger cars can be segmented on the basis of the user segment as those
bought by ta(i o%erators, go"ernment7non go"ernment institutions, indi"idual buyers etc A
ma:or %ortion of the demand in India accrues mainly from %ersonal "ehicle owners
&he distribution of car sales in +G6... in terms of the abo"e mentioned segments is as gi"en
in the chart below
Segment Market Share 5E6
9conomy 9.6
>age ?o 69
Mid si'e and Cu(ury 98
&he table shows that sales in the economy segment still rules the roost with a large number of
entrants %ur"eying their wares in the segment and with a great degree of success too
;owe"er, in the %ast se"eral months, sales in the mid2si'ed car segment has also %ic#ed u%
than#s to the wider choice set a"ailable and a steady rise in income le"els A loo# at the table
below will suffice
Month /conomy cars Mid3siBed cars
E Of mid3siBed car
sales
Aug299 <1,/<< =,8<8 85
Se%299 <6,11/ <,/9= 9=
8ct299 ==,.5< /,6<. 59
?o"299 =3,699 /,538 36
!ec299 =<,/.. 5,<// 165
Han2.. =<,<./ 5,1=1 119
+eb2.. =3,/66 5,868 165
Mar2.. <9,6<9 1.,1.1 1=5
A%r2.. =<,5<= 3,<83 1=/
May2.. =/,/95 3,==3 1=5
Source: Auto Car India
&he last ten months saw sales in the small7economy car segment stagnate while that in the
mid2si'ed category has %ic#ed u% barring a two2month %eriod of 8ctober and ?o"ember
1999 when it fell below =,... units If the %ercentage of mid2si'ed cars sold in August 1999
was 85) it :um%ed to 1=5) in May 6...
>age ?o /.
!elhi leads the others in terms of sales with /8) of sales in the northern region ha%%ening
there Its share of nationwide sales is 153) Maharashtra follows ne(t with 1./) of
national sales
Mar!et share
&he mar#et shares of leading %layers for the month of May 6... is as gi"en below0
Company Market Share
Maruti 4dyog <6=)
;yundai Motors 1==)
&elco 99)
!aewoo Motors 11<)
;industan Motors /9)
Ind Auto 61)
;onda Siel 13)
8thers =1)
0ource 1 0$A!
M4C has lost mar#et share during the %ast two years +rom a high of around 8.), it has now
come down to 566) in +G6... 8fferings from new %layers li#e +ord, ;yundai, !aewoo
and &elco ha"e ca%tured a substantial mar#et share from M4C >AC >uegeot and +iat India,
which ha"e commanded a good %art of the mar#et in +G93, ha"e now fallen bac# on hard
times
!uring +G6..., the economy cars as usual headed the %assenger car rally Maruti which is
facing a constant threat from ;yundai (Santro) and !aewoo (Mati'), came out with Ha%an-s
>age ?o /1
largest selling model Wagon R. Also, the mid si'ed segment saw some action signifying its
growth %otential &he car mar#et, which had witnessed a flurry of new launches in the
economy segment in +G99, was now %arty to slee# entrants in the mid si'ed segment from
;yundai (Accent), +ord India (+ord I#on), !aewoo (?e(ia) and +iat India (Siena) Also
M4C (Baleno) and $M (8%el 1orsa) belonging to the higher end mid si'ed segment also hit
the ram% &he constantly escalating com%etition in the economy segment forced the %layers
into further %rice cuts Becently, Maruti lowered the %rices of its economy cars by as much as
Bs=.,...
Increased su%%ort through finance from auto manufacturers was Auite e"ident in +G6...
&his has and will in the future induce e(isting owners of cars to go for technologically
su%erior %roducts in the same segment leading to shar% dro% in %rices of second2hand cars
&his will also create a %latform for u%gradation of e(isting two2wheeler owners to four2
wheelers
Deand#su$$ly s"enario
,emand
&he demand for cars in the %ast was su%%ly dri"en, as demand did not match su%%ly &his led
to high %remium and long waiting %eriods for the cars But change in go"ernment %olicies
cou%led with aggressi"e ca%acity additions and u%gradation of models by M4C in the early
nineties led to increase in su%%ly and subseAuently reduced the waiting %eriods for economy
cars
&he demand for cars was su%%ressed by "arious su%%ly constraints &he demand for cars
increased from 1<,31= in +G5. to /.,989 in +G8. at a 1A$B of only /<) &he entry of
Maruti 4dyog Ctd ($oI2Su'u#i H*) in 198/ with a M%eo%lesM car and a more fa"orable %olicy
framewor# resulted in a 1A$B of 185) in car sales from +G812+G9.
After witnessing a downturn from +G9. to +G9/, car sales bounced bac# to register 13)
growth rate till +G93 Since then, the economy slum%ed into recession and this affected the
growth of the automobile industry as a whole As a result car sales remained almost stagnant
in the %eriod between +G93 and +G99 1A$B recorded during the +G9=2+G99 %eriod was
>age ?o /6
1==), reaching sales of =.9,56= cars in +G99 ;owe"er, during +G6..., with the re"i"al of
economy, the segment went great guns %osting a sales growth of <5)yoy
&he table below indicates the %ast sales trend for cars 2
Cars *0;# *0;" *0;% *0;9 *0;= *0;; *0!!!
*olume 6.9,6./ 65=,866 /=<,=85 =1.,996 =13,3/5 =.9,56= 5/8,81<
$rowth )yoy
63. 63. /.. 19. 6. 26. <<8
0ource 1 0$A!
&he demand for cars is de%endent on a number of factors &he #ey "ariables are %er ca%ita
income, introduction of new models, a"ailability @ cost of car financing schemes, %rice of
cars, incidence of duties and ta(es, de%reciation norms, fuel cost and its subsidi'ation, %ublic
trans%ort facilities etc &he first four factors "i', increase in %er ca%ita income, introduction of
new models, a"ailability @ cost of car financing ha"e %ositi"e relationshi% with the demand
whereas others ha"e an in"erse relationshi% with demand for cars
&he demand for cars in the future can be estimated with the hel% of ma#ing use of macro
economic "ariables li#e growth in $!>, %er ca%ita income etc or house hold %enetration
techniAue An attem%t is made to estimate the %otential demand for %assenger cars based on
the household %enetration le"el of %assenger cars as e(%lained in Anne(ure = of the re%ort
&he demand for cars in the future is e(%ected to come %redominantly from the e(isting two2
wheeler owners who will be u%grading to a four2wheeler, due to rising income and necessity
of car for %ersonal trans%ortation %ur%oses &herefore, e(cluding the owners of mo%eds, the
%otential demand for cars in the ne(t fifteen to twenty years can be ta#en as <.) of the
e(isting two2wheeler %o%ulation of around 68mn units
>age ?o //
But with the release of new models in the higher end of the economy segment, the su%%ly of
second hand economy cars is e(%ected to increase substantially, which will be costing :ust
about two times the %rice of %remium range two2wheelers &his could affect the demand for
first hand7new cars Also, with cross demand from utility "ehicles, a"ailability of finance and
other factors the abo"e mentioned %otential for cars will be difficult to reali'e $rowth in the
segment thus is e(%ected to ho"er around 1<26.)yoy
&he dominance of economy segment will continue in the future as it will %ro"ide large
"olume to Indian car industry &his is because a ma:ority of customers for cars will graduate
from two2wheelers &he demand for mid2si'ed and %remium cars is e(%ected to rise as new
models enter the mar#et, income le"els rise and %resent car owners u%grading from the
economy segment to higher end cars
Supply
&he su%%ly of cars in Indian industry till 1991, was de%endent u%on the %roduction ca%acity
of indi"idual %layers &he %roduction of cars has increased from =6,=3< units to 181,=6. units
from 1981 to 1991 res%ecti"ely &he growth in %roduction of cars has "aried in the last three
decades from :ust 1) in 193.28. to 61) in 198.29. and abo"e 1<) in 19912 95 &he table
below gi"es the %roduction numbers of %assenger cars in the %ast few years
Cars *0;# *0;" *0;% *0;9 *0;= *0;; *0!!!
>roduction 6.3,5<8 65=,=58 /=8,1=5 =.3,</9 =.1,..6 /9.,/<< <33,6=/
$rowth )yoy 636 63= /15 131 (15) (63) /6=
Source : SIAM (excludes te !igures related to "ae#oo and $onda Siel%
&he ma:or increase in %roduction of cars in the 8.-s was due to the entry of M4C in 198/,
which hel%ed increase car %roduction by 6.,... to /.,... cars %er annum till the early
nineties
,ith the entry of M4C, the face of the %assenger car industry changed fore"er 9(isting
%roducers who had o%erated in a %rotected, high margin en"ironment faced the %ros%ect of
not :ust diminishing mar#et share, but a shift in focus from %roducing "ehicles to selling
them But M4C made use of the o%%ortunity o%en to its technologically su%erior %roduct and
>age ?o /=
increased its ca%acity from 1..,... cars in +G9. to 6=.,... cars in +G95 and /<.,... cars
in +G98
&he o%ening of economy in 199/, attracted world ma:ors who :oined hands with e(isting auto
ma:ors, to start their o%erations at the earliest &he first ones to enter the field were Mercedes
Ben' in :oint "enture with &elco to manufacture 966., 96<.! models, >eugeot in H* with
>AC to manufacture >eugeot /.9C, +iat in H* with >AC to manufacture +iat 4no
&his has hel%ed in increasing the number of models a"ailable to the customer from 8 to /.
and hence %ro"ided a wide choice to him &his has also hel%ed in reducing the a"erage
waiting %eriod and %remium on cars, which were a %art and %arcel of car cost in the eighties
%o&ernent 'oli"y
&he liberal %olicy on foreign %artici%ation through technical and financial collaboration in
early eighties led to substantial %roduct u%gradation and introduction of new models But it
was alleged that the %olicy was discriminatory in fa"or of M4C, while others li#e &elco,
>AC, ;M were denied %ermission to %roduce cars in collaboration with Ha%anese com%anies
&he $8I controls the car sector by way of framing %olicies on de%reciation norms, im%ort
duty on cars and %arts used in it, %etrol %rices and im%ort duty of steel
&he %erce%tion of a car as a lu(ury good lead to hea"y e(cise duty on cars But with the onset
of the liberali'ation %rocess in the early nineties, the go"ernment has continually rationali'ed
the e(cise duty regime >resently, there is a duty of =.) (15) R 6=)) on motor "ehicles,
designed for trans%ort of not more than si( %ersons (e(cluding the dri"er) 8n "ehicles
designed for trans%ort of more than si( %ersons, but not more than 16 %ersons, the duty is
/6) (15) R 15)) 8"er and abo"e the e(cise duty, cess by the 1entral $o"ernment, states
are now charging a uniform sales ta( of 16) &his came in being after the 1<th of May 6...
9arlier, states used to charge sales ta( "arying from / to 1=) But M4C "ehicles recei"e
fa"orable treatment in terms of sales ta( as well
>age ?o /<
'oli"y on $etroleu $rodu"ts( auto eission and de$re"iation
8n the "ehicle emission front, :udicial acti"ism has goaded the go"ernment to ta#e certain
%olicy measures in the recent %ast which has led to stricter emission norms for automobiles
As %er a Su%reme 1ourt :udgement, banning registration of all non 9uro I com%liant cars
within !elhi, all "ehicles should become 9uro I com%liant by A%ril 6... (In the ?ational
1a%ital Begion of !elhi, 9uro II norms are now in o%eration) As a result, almost all the
e(isting %layers and new entrants ha"e started introducing models com%lying with the said
norms &his de"elo%ment has led to an increase in the %rices of cars, which by an estimate,
could be anywhere between 1.21<)
Autooti&e 'oli"y
&he main %ro%osals of the new %olicy are0
• &he new "entures would ha"e to indigenise u% to <.) within / years and 3.) by the
end of se"enth year of starting commercial %roduction
• &hey will ha"e to in"est a minimum of F<. million as eAuity ca%ital o"er a %eriod of
/2= years
• &he "enture will ha"e to become foreign e(change neutral o"er a %eriod of <23 years
• &he "entures will be allowed to e(%ort com%onents @ ancillaries, a%art from cars
• A moratorium of 6 years would be gi"en to com%anies for meeting the e(%ort
commitment
&he new %olicy is e(%ected to %ro"ide de"elo%ment of ancillarisation and increase
em%loyment o%%ortunities But for some of the new car "entures, auto %olicy will be a s%eed
bra#er as they ha"e to sign a new M84 with the go"ernment and ma#e necessary
arrangement to meet the new %olicy
>age ?o /5
Suary
Although it is %ossible to %redict with some confidence the Aualitati"e im%act of indi"idual
structural changes, there are difficulties, first, in %redicting the Auantitati"e im%act of
structural changes, and second, in %redicting the aggregate effect of simultaneous structural
changes that ha"e conflicting effects on %rofitability &he Indian car industry is still in a
nascent stage &he economy car segment accounts for the ma:ority of the cars sold ;owe"er,
as the economy %ic#s u% steam again and the Indian mar#et matures, the car industry will
also climb u% the learning cur"e &he industry has "irtually no com%etition from substitutes at
least for the ne(t decade ;igh entry barriers due to high ca%ital costs are also a %ositi"e
indicator for the e(isting car manufacturers ;owe"er, the intense com%etition between firms
and increasing bargaining %ower of the buyers indicate towards intensifying com%etition and
de%ressing %rofitability It will also lead to an increasing need of wor#ing ca%ital for these
com%anies who will be faced with longer credit %eriods and higher in"entory holdings
;owe"er, gi"en the low motori'ation in India and increasing %er ca%ita incomes, the %otential
e(ists for the Indian car industry to increase %rofitability by generating significant "olumes
and reducing manufacturing costs Significant o%%ortunities e(ist for %layers to s%ot ga%s in
the mar#et and cater to %articular niche mar#ets li#e s%orts utility "ehicles (S4*s) and
mini"ans &he diminishing %ower of the su%%lier industry will hel% the industry in im%ro"ing
the Auality of car com%onents and getting longer %ayment %eriods &he #ey to success in the
Indian car mar#et will be offering good2Auality cars that offer "alue for money, run
inno"ati"e mar#eting cam%aigns to attract %otential buyers, and offer e(cellent after2sales
ser"ice 1om%anies, which ha"e a range of "ehicles in all the segments of the mar#et li#e
Maruti, will be at a significant ad"antage due to their ability to cross2subsidi'e models But,
>age ?o /3
one thing is clear 2 &he great Indian car wars ha"e :ust started and whiche"er com%any wins,
the final winner will be &;9 I?!IA? 14S&8M9B
COM'ETITIVE ANALYSIS
,e "iew the Indian %assenger car industry from these fi"e angles leading to the e(%ected
changes in the coming years in the underlying structure of the Indian %assenger car industry
Rivalry Cetween /staClished Competitors
• ;ighly 1oncentrated Industry0 &he Indian car industry is highly concentrated with
Maruti itself accounting for about 8.) of all sales &he lac# of com%etition in the
economy segment to Maruti 8.. has gi"en the com%any considerable %ower Its
dominance in this segment gi"es it the %ower to cross2subsidi'e its models in the other
segments ;owe"er, this scenario is changing drastically from last three years with a
number of new models being launched to challenge Maruti 8..-s dominance &he
scenario in the economy segment could be similar to that in the %remium segment
currently with intense %rice com%etition &he slashing of 1ielo-s %rice by 6<) has led
to +ord and 8%el introducing chea%er models
• !i"ersity of 1om%etitors0 198= and 199/ ha"e been landmar# years for the Indian car
industry &he entry of Maruti in 198= changed the com%le(ion of the industry as for
the first time Indians had the o%%ortunity to buy a car which was com%arable to the
Ha%anese automobiles 199/ was a historic year as the industry was deregulated and
India became the latest battlefield for global auto ma:ors &he last few years ha"e seen
the industry integrate with the global automobile industry and e"ol"e into being
e(tremely com%etiti"e +or the first time, Maruti-s %osition as the leader of the car
industry will be se"erely challenged es%ecially if the three new cars (&elco Indica,
>age ?o /8
!aewoo Mati', ;yundai Santro) in the economy segment can deli"er the %romised
%erformance
• >roduct !ifferentiation0 8ne of the #ey trends obser"ed in the car industry during the
last decade is that the %roducts of different com%anies ha"e become increasingly
similar es%ecially in the economy and mid2si'e segment &here is a %erce%tible shift
towards McarsM being treated as a commodity rather than as a consumer good In the
%remium car segment in India, differentiation between different models is declining as
com%anies stri"e to increase "olumes by cutting %rices 9"en 8%el Astra has decided
to introduce a new model without any frills to reduce its %rice by Bs 1. million
• 9(cess 1a%acity and 9(it Barriers0 &he entry of numerous %layers in the car industry
can lead to significant o"er2ca%acity &his is li#ely to lead to significant %rice cuts (as
seen by !aewoo-s recent %rice cut of 1ielo) as com%anies will need to generate
"olumes to co"er their fi(ed costs &he car industry faces high e(it barriers in India
due to "arious go"ernment laws, which ma#e it difficult for a com%any to shutdown
and fire all its em%loyees Also, many of the new %layers ha"e in"ested hea"ily to set
u% new %lants and de"elo% the ancillary industry close to its manufacturing location
&his means that these com%anies will suffer from high e(it barriers and might be
forced to continue o%erations e"en if they do not generate enough "olumes
• Increase in ,or#ing 1a%ital ?eeds0 &he intense ri"alry between the automobile
com%anies will mean that the com%anies would ha"e to gi"e longer credit %eriods to
its dealers &he substantial o"er2ca%acity in the industry will lead to increased
in"entory holding &hese two factors %oint towards an increase in wor#ing ca%ital
needs of car com%anies
&he competition Cetween firms in the car industry is e>pected to intensify consideraCly
as newer companies will start reducing MarutiFs dominance of the market7 &he e>pected
significant over3capacity in the industry: increasing working capital needs: and high e>it
Carriers coupled with low differentiation Cetween models especially in the economy
segment will put downward pressure on prices and profitaCility of companies7
Co$etition fro Su)stitutes
>age ?o /9
• InadeAuate >ublic &rans%ortation System0 In de"elo%ed nations, city %lanners ha"e
tried to relie"e traffic congestion and %ollution by creating an efficient %ublic
trans%ortation system ;owe"er, they ha"e been remar#ably ineffecti"e in
encouraging motorists to forsa#e their cars for buses or subway &he %ublic
trans%ortation system in India is not only e(tremely inadeAuate, it is notably %oor in
Auality &his scenario is not e(%ected to change drastically in the ne(t ten years
• !e"elo%mental Stage of 9lectric 1ars0 All the ma:or car manufacturers in the world
are currently de"elo%ing electric cars or hybrid cars to reduce %ollution in the coming
years ;owe"er, these technologies will reAuires considerable length of time to
become commercially feasible in de"elo%ing nations
&he lack of adeDuate puClic transportation system coupled with the fact that the electric
or hyCrid cars are still in the developmental stage means that the Indian car industry
faces minimal competition from suCstitutes7
Threat of Ne* Entrants
• 9conomies of Scale0 In the automobile industry, economies of scale act as a
significant entry barrier since it is a ca%ital2intensi"e industry $lobally, it has been
witnessed that car manufacturers with low "olumes find it e(tremely difficult to
sur"i"e gi"en the high %er unit cost &he acAuisitions of Bolls Boyce, Haguar, Bo"er,
and AM17Hee% are a testament to this 8n the other hand by entering on a large scale,
one runs the ris# of drastic under2utili'ation of ca%acity as obser"ed by !aewoo-s
e(%erience in India Since the economy segment cars are e(%ected to dri"e "olume
growth in India in the coming years, it is e(tremely im%ortant for a manufacturer to
ha"e a model in this segment to reduce his %er unit cost
• $o"ernment >olicy0 &he license2ra: regime of the Indian go"ernment till 1991 acted
as a significant barrier for any new entrants in the %assenger car industry Moreo"er,
the go"ernment-s %erce%tion of the car being a Mlu(uryM rather than a modern
MnecessityM resulted in this sector being labeled as Mlow %riorityM ;owe"er, the
liberali'ation of the Indian economy has remo"ed this hindrance
>age ?o =.
• 9(cise duty0 &he car industry had been as#ing for reduction in e(cise duty so as to
reduce the end %rices of cars to customers and increase the slogging demand ,ith
continuation of liberali'ation and shift in the %erce%tion (of car being a lu(ury
%roduct) will lead to reduction in duties o"er a %eriod of two to three years &his will
reduce the %rices of cars leading to further boost in demand
• Sales ta( duty0 &he le"y of uniform sales ta( in all the states, will ha"e a negati"e
im%act on the demand front, due to increased %rices
• ;uge 1a%ital 1osts0 ;uge ca%ital costs act as a significant entry barrier and only
established com%anies with dee% %oc#ets %ossess the resources to enter the
automobile industry Significant costs are in"ol"ed in the de"elo%ment of a new car as
can be seen by &elco-s Indica which has incurred an e(%enditure of Bs 13 bn
• Absolute 1ost Ad"antages0 Maruti-s %resence in the car industry since 198= gi"es it
considerable cost ad"antages o"er the new entrants ?ot only are its %lants highly
de%reciated and its cars highly indigenised as com%ared to its com%etitors, it has a
wide distribution and ser"ices networ#, which will reAuire mammoth resources to
re%licate
'lthough liCeraliBation of the Indian economy has reduced the impact of government
policy as an entry Carrier: the car industry still enAoys high entry Carriers due to huge
capital costs involved in setting up efficient plants and numerous cost advantages
enAoyed Cy Maruti7 &he recent pull3out of 4eugeot is an e>ample that even a gloCal
automoCile company could find it e>tremely difficult to operate in India if it faces laCor
trouCle and proClems with its Aoint venture partner7
+argaining 'o*er of +uyers
• BuyersF 4rice Sensitivity0 1ar buyers in India are e(tremely %rice2sensiti"e
es%ecially in the economy segment Although Maruti had "ery aggressi"ely res%onded
to %rice war launched by three new cars in the economy segment , we can e(%ect the
%rice com%etition to intensify since buyers would be more willing to switch while
intense com%etition among the com%anies would reAuire them to generate "olumes
>age ?o =1
• Relative Bargaining 4ower0 $one are the days when the Indian car buyer had to buy
one of the /.,... Ambassadors or +iats, which were %roduced &he %enetration of
satellite tele"ision has globali'ed the Indian customer &he Indian consumer is no
longer satisfied with an outdated Mercedes 9266. or >eugeot /.9 when one can see
the latest S2Series 1on"ertible flying down Bodeo !ri"e in Cos Angeles 1ar
com%anies ha"e been forced to re"am% their dealer networ# +rom a small shed for a
dealershi%, the shift is towards huge dealershi%s who not only offer com%lete range of
ser"ices for the car but also ma#e sure that the customer has a re%lacement "ehicle so
that they may not become immobile Many com%anies ha"e mobile sAuads to ta#e
care of the car if it brea#s down on the road &he entry of global %layers has re2
defined the dealer2customer relationshi% in India
• 'vailaCility of /asy *inancing0 &he entry of numerous car com%anies has brought
along with it a massi"e increase in the a"ailability of chea% finance for the Indian
consumer &his has led to fierce com%etition among the car com%anies and has e"en
led to free gifts being doled out to buyers to lure them to %urchase a %articular car
• -sed Car Market0 &he used car mar#et is still in the nascent stage in India as
com%ared to the de"elo%ed nations li#e 4nited States which ha"e a thri"ing used car
mar#et A thri"ing used car mar#et reduces the ownershi% %eriod of cars and hel%s in
increasing demand for new cars Becently, Mercedes Ben' in India was offering
discounts of /.2/<) for s%aringly used 966.s as it had decided to %hase out this
model
&he entry of the gloCal car manufacturers has transferred the Calance of power into the
hands of the Cuyer7 &he Indian car Cuyer is not only e>tremely price conscious: Cut also
wants the highest value and service7 2uge dealerships: memCer cluCs: moCile sDuads:
and replacement vehicles are Aust some of the sops Ceing offered to the customer7 &he
availaCility of cheap financing and maturing of the used car market will also increase
the choices for the consumers7 With many new models waiting to Ce launched: the
Indian car Cuyer will only have more power to choose and dictate terms to the dealer7
+argaining 'o*er of Su$$liers
>age ?o =6
• !iminishing Su%%lier >ower0 8ne of the #ey trends obser"ed in the global auto
industry is the significant increase in outsourcing of car %arts In India, the
de"elo%ment of the auto ancillary industry has also brought in this %henomenon
;owe"er, the large number of com%etitors for su%%lying each %art im%lies that in the
coming years, su%%lier %ower will diminish to a large e(tent e(ce%t for su%%liers who
ha"e almost mono%olistic %owers li#e Mico2Bosch Also, there is a increasing shift
towards reduction in "endor base for a car com%any which means that the chosen
su%%liers also ha"e to ma#e substantial financial in"estments to enhance the Auality of
their %roducts Moreo"er, the lowering of tariffs will e(%ose the Indian automobile
ancillary industry to fierce com%etition from better2Auality im%orts All these factors
will lead to a situation where the automobile manufacturer will ha"e substantial
bargaining %ower with the su%%liers in terms of Auality and %ricing of the %roduct
Supplier power in the automoCile industry will diminish greatly in the coming years due
to the large numCer of competing suppliers: threat of cheaper and Cetter3Duality
imports: and an increasing trend towards reduction of a car companyFs vendor Case7
>age ?o =/
S,OT ANALYSIS -OR HY.NDAI
Strengths
;yundai ha"e basic ad"antages o"er its com%etition

1 +irst entry ad"antage0 ;yundai was among the first entrants in the small car segment
!aewoo had already entered with its lu(ury car 1ielo It had slashed the %rice of the
car by 1176 lacs :ust si( months after its entry because its %ricing was high which had
caused dro% in sales &his acted as a negati"e factor for !aewoo and %ositi"e for
;yundai because it was offering a low cost economy "ehicle
6 !ealer networ#0 Its dealer networ# was s%read o"er <. cities and 36 authori'ed
dealers &hey also had // s%are ser"ice stations along with the 36 ser"ice stations
%ro"ided by the dealers &hey had com%any owned showrooms at 1hennai, !elhi and
Mumbai As com%ared to this, Maruti had only 6. dealers when they started in 198/
and !aewoo was still struggling to get a firm foothold o"er its dealers in some %arts
of the country In case of Indica, &ata :ust con"erted all its truc# dealers into car
dealers ;owe"er this wor#ed against them because car dealers are far more
so%histicated as com%ared to truc# dri"ers
/ Aggressi"e ad"ertising0 it attac#ed com%etition by com%aring and stating facts and
not stating anything negati"e about the com%etition
>age ?o ==
= >roduct %ricing0 their %roduct was %riced in the /2lac range where it ate all the Maruti
8.. customer and also Een customers Actually they were trying to %ro"ide SA Een at
the %rice of MarutiT
< S%are %arts0 &he cost of the s%are %arts were #e%t at =.) low cost than any other
com%any to ma#e them as affordable as %ossible to the customer
,ea!ness
&a#ing into consideration MarutiQs mono%oly, (mar#et share of 3. %er) the Dorean chaebol
had to fight a host of odds, besides low awareness le"els, before the odd2 cent) was one
Cooming com%etition was another 1om%atriot !aewoo, already established with 1ielo in the
mid2si'e segment, was %re%aring to launch Mati' Its distribution networ# was functional and
Mati' was recei"ing ra"e re"iews in 9uro%e IndiaQs biggest business house, &ata, was
resorting to nationalistic %ride to smoothen the entry of its own small car, Indica
&here are three critical %urchase elements for e"ery customer 2 the cor%orate brand, the car
brand and the ser"ice brand ;yundaiQs Santro was no match for its ri"als on any of these
%arameters ;yundai could not afford to s%are any effort It began with the customer
1 After the failure of a Dorean com%any !aewooQs 1ielo consumer was not sure
about an un#nown com%any li#e ;yundai, which was the second com%any in line
to enter India
6 &hey didnQt ha"e the ad"antage of e(%erience in India Maruti were the
indis%ensable leaders of Indian automobile industry till now so its was a dicey
situation for ;yundai to enter India
/ 9(isting dealer networ# of Maruti was so huge that to stand o%%osite it was not
easy
= ;yundai had to come u% with an integrated %lant to e(%and their grounds in India
because they had to %roduce locally to cut the cost And for long2term benefits
&hey had also go through go"ernment hassles to set u% a fully integrated %lant
>age ?o =<
,hereas Maruti has almost 1.. locali'ed %roduction, which hel% them to decrease
%rices
O$$ortunities
1 &here was one more %ositi"e side to their launch was that both the models that they
ha"e launched had being launched all around the world at the same time 4nli#e other
com%anies which launched their older models in other countries to India, which
affected their goodwill and credibility
6 &hey also %ractice the %unch line Sleadershi% through listeningT
/ ?et selling0 they started selling through auto mart India All sites may not be doing
eAually well, but there is certainly are customers on the Internet &here real %eo%le
who actually want to buy cars
Threats
1 &hey were the first to introduce road ser"ice in India to combat Maruti because their
dealer networ# was to too huge to fight
6 Second hand car mar#et was huge in India they tried to counter it by introducing
many finance schemes &hey also launched ;yundai finance, which was an umbrella
for many finance com%anies &his finance ga"e as much as 9.) finance to
consumers, which attracted many second hand car ta#ers &he fact that the Indian
customers are not money mined was re"eled by the increased in sales of Santro
because of its su%erior technology
Lo"al ar!et trends
• Sales, %articularly in the small car segment, will dri"e %assenger car sales in the near
term ;owe"er, within the ne(t two years, ca%acity is e(%ected to be twice the total
demand for cars
• ,ith de"elo%ments in the small car segment acAuiring a degree of stability in terms of
%rice com%etition, the action is shifting to the mid2si'e car segment Sales in this
>age ?o =5
segment will %ic# u% as new models come in and income le"els rise but it is still some
time till it comes anywhere close to the economy si'ed segment
• ,hat will also dri"e car sales is the wide a"ailability of finance schemes by a "ariety
of ban#s and +I-s
• Sales in the used car mar#et is also e(%ected to do well as more and more older
models get re%laced by newer ones at a faster %ace &he coming in of 9uro III and I*
norms will also increase scra%%age rates
• In "iew of e(%ected sur%lus in the domestic mar#et, India will emerge as one of the
leading car sourcing %oint in the Indian subcontinent
%LO+AL ENVIRONMENT
O&er&ie*
&he modern day %assenger car is a modern economy-s draught animal, dri"ing the growth of
u%stream industries li#e steel, iron, aluminum, rubber, %lastics, glass, and electronics and
down stream industries li#e ad"ertising and mar#eting, trans%ort and insurance &he car
industry generates large amount of em%loyment o%%ortunities in the economy +or e(am%le in
the 4S, e"ery si(th wor#er is in"ol"ed in the ma#ing of an automobile
&he world car %roduction has increased from ==55mn in 1995 to an estimated =8/mn cars in
1999 Ha%an, 1anada and 4SA brought about the ma:or increase, which contribute to </) of
the world-s car %roduction
&he 4SA and Ha%an are the leaders with around =6) of the total world mar#et ;owe"er,
since the last two to three years, the international %assenger car industry has been witnessing
an o"er ca%acity of more than /.) &he trend suggests that industry "olumes may grow by
:ust 6) or around 1.mn "ehicles %er year If this situation continues for the ne(t few years
the world car mar#et may witness sha#eout in the near future Already signs towards this are
being obser"ed as the %henomenon of mergers catches on As %er industry e(%erts the number
>age ?o =3
of ma:or %layers in the world car mar#et may come down from %resent le"el of /. to < in
ne(t ten to fifteen years &he recent mergers in the international car mar#et are +ord2*ol"o,
Benault2?issan, and !aimler21hrysler A few more %layers are e(%ected to :oin the fray in the
ne(t few years so as to strengthen their hold in the world mar#et
Among the to% car manufacturing com%anies $eneral Motors and +ord Motors grou% of 4SA
lead with a contribution of 1<8) and 115), of world car %roduction, res%ecti"ely
*ol#swagen and &oyota stand third and fourth with more than 9) contribution each to the
world car %roduction
-uture trends and outloo!
+irstly, the international car mar#et is growing by around 6) %a and this set to continue for
the ne(t few years &his slow down is due to the increasing le"el of saturation in the largest
car mar#ets of the world Analysts from 9I4 state that this saturation le"el may e"en translate
into negati"e growth, gi"en the recent trend of carma#ers to o%t for Auality com%onents,
which will increase the "ehicleQs useful life
Secondly, the Southeast Asian crises ha"e been a dam%ener to the collecti"e fortunes of
"arious carma#ers worldwide According to 9I4 estimates, some countries in the region ha"e
witnessed cumulati"e falls of 3.) this year In Indonesia record sales re%orted in 1993 are
not e(%ected to be matched until 6..< In Malaysia it is e(%ected to be 6../ before %ea#
sales and %roduction "olumes are re%eated and in the >hili%%ines the mar#et will ta#e se"en
years to reco"er In &hailand, the mar#et for cars and commercial "ehicles is e(%ected to fall
from almost 5..,... units %er year to 16<,... this year
&hirdly, the global domination by the large automoti"e %layers has slowly abated with local
manufacturers getting hold o"er the mar#et Ha%an, western 9uro%e and the ?orth American
>age ?o =8
+ree2&rade Agreement area com%rising 4SA, Me(ico and 1anada are e(%ected to account for
31) of the global %ar# by 6..<, down from almost 33) at the start of the 199.s &his has
come about, as the conce%t of Mregion2centricM cars is becoming %o%ular
/ey earning dri&ers
1overnment policy0 &he $8I %olicy will continue to dominate the su%%ly of cars &he
different norms with great significance to the sector are im%ort duty on 1D!7 SD! #its, auto
com%onents, foreign e(change and neutrali'ation schedule for new "entures etc
/>cise duty( &he car industry had been as#ing for reduction in e(cise duty so as to reduce the
end %rices of cars to customers and increase the slogging demand ,ith continuation of
liberali'ation and shift in the %erce%tion (of car being a lu(ury %roduct) will lead to reduction
in duties o"er a %eriod of two to three years &his will reduce the %rices of cars leading to
further boost in demand
Sales ta> duty( &he le"y of uniform sales ta( in all the states, will ha"e a negati"e im%act on
the demand front, due to increased %rices
Competition in the sector( ,ith the entry of all the world ma:ors in the car segment, the
com%etition is e(%ected to heat u% substantial in the ne(t two years &his will lead to sha#eout
in the industry and only those com%anies ha"ing a bac#ing of multinationals with strong
commitment will be able to continue o%erations in the segment &his may also lead to ta#e
o"er acti"ity in the Indian car industry
Release of new models( &he flood of "ariations in e(isting and new models will %ro"ide
wide range of choice for the customer one year down the line Also these new models will be
able to car"e a niche for themsel"es in the crowded mar#et
Outloo!
International trend
• &he global automoti"e car mar#et is growing at a rate of only 6) %er annum and is
not e(%ected to %ic# u% in the near term $rowth has dro%%ed due to the increasing
>age ?o =9
le"els of saturation in the larger car mar#ets of the world ,orldwide the trend is
towards ensuring that one-s %roducts are su%erior in terms of Auality &his will
enhance the useful life of cars and, hence, slow down growth in sales
• &he global domination of the larger automoti"e manufacturers is slowly on the wane
and the trend in sales is shifting towards more Mregio2centricM %roducts Automa#ers
that ha"e been en:oying a generally %ros%erous s%ell would ha"e to rethin# on the way
"ehicles are designed, manufactured, distributed or sold Already, %layers li#e $M,
*ol#swagen and &oyota ha"e begun to re2e(amine their dealer relationshi%s and
%ricing strategies 1arma#ers would now ha"e to thin# in terms of a new customer
focus and %ro"ide better financing and ser"icing
• Strategic tie2u%s, mergers and acAuisitions ha"e become the tal# of the day A few
instances are !aimler Ben'-s tie2u% with 1hrysler of the 4S, +ord-s acAuiring of
!aewoo and tie u% with *ol"o 1ar 1or%oration and Benault acAuiring a sta#e in
?issan Such deals would certainly lead to economy in terms of costs but it remains to
be seen whether they will also create significant new o%%ortunities for growth
NAT.RE O- INDIAN CONS.MER
Cars# $art of our li&es
Automobiles ha"e become an indis%ensable %art of our li"es, an e(tension of the human body
that %ro"ides us faster, chea%er and more con"enient mobility e"ery %assing day Behind this
betterment go the efforts of those in the industry, in the form of im%ro"ement through
technological research
,hat actually lie behind this betterment of the automobiles are the o%inions, reAuirements,
li#es and disli#es of those who use these "ehicles &hese wheeled machines affect our li"es in
ways more than one
?umerous sur"eys and research are conducted throughout the world e"ery now and then to
re"eal one or the other as%ect of automobiles, be it about the %ollution caused due to "ehicle
%o%ulation in cities, or rising motor accidents and causes, "ehicular technology, alternati"e
medicine and so on
>age ?o <.
Consuer )eha&iour o&er the last de"ade
In the Indian conte(t, where resources are scarce, and incomes limited, these %oints do
become rele"ant, e"en though most Indians consumers are generally cautious in ma#ing their
%urchases ,hen it comes to consumer so%histication, the mar#et for cars shows some
interesting trends o"er the last decade &ill around 1991, cars were there to ta#e families from
%oint A to %oint B then, suddenlyN e(%ensi"e mid2si'ed cars rolled in now cars are trying to
become %ersonality statements fro indi"idualists Most lu(ury car %urchase decisions, though,
still seem to be going chiefly by the status under%innings So an 8%el2Astra and ;onda 1ity
are same in the neighborhood %erce%tion
Many more %eo%le see cars, including business associates who need to be meet shoulder2to2
shoulder But thatQs not the full e(%lanation After the aeons of frugality, %eo%le arenQt at ease
with the %ursuit of lu(ury Many consumers are on different %oints in the continuum from
sim%le li"ing to "isible consum%tion, from UweQ to UmeQ, and from blending in to the stand
out &hereQs a dichotomy between their u%bringing and the new world ideology, and some are
torn between the two ,ith cars, itQs the later that wins
Barring a few non3 conformists: Indian consumers are acutely status3conscious7 'nd
Crand3 consciousness is closely related to the perceived status value of the product Ceing
consumed
I$a"t of ad&ertising on the Indian "onsuers
,hile most Indians may not go out and buy e(%ensi"e things they don-t need merely due to
subliminal media suggestions, the %ower of ad"ertising can ha"e an im%act on discretionary
s%ending and can also result in changes in "alue systems and %ersonal tastes 2 %articularly so
on that small minority of Indians that has the e(tra income to s%end
&a#ing the recent fascination for cars into considerations +or %eo%le to really en:oy the use
of a %ersonal car, a country must ha"e enough land for wide roads and large %ar#ing lots And
that-s e(actly how e"ery automobile ad in India shows off new cars 1ars for the Indian
mar#et are shown scurrying along wide and "acant highways in dreamy countryside settings,
com%letely unrelated to the actual Indian reality or e(%erience After all, some of India-s most
>age ?o <1
scenic destinations aren-t e"en connected by motorable roads, and "irtually all Indian cities
are so densely %o%ulated that e"en newer residential and commercial areas are %lanned with
narrow roads and limited %ar#ing facilities &here is thus something "ery surreal about the
Indian media-s glamori'ation of the car
I$a"t on Indian industrialists and $oliti"ians
But it is not only the media, but ca%tains of Indian industry and %oliticians who ha"e also
been hoo#ed by the so2called magic of the %ri"ate car Much of the em%hasis in
this liberali'ation decade has been on the %ersonal car 1hief Ministers of different states ha"e
"ied with each other in offering concessions to car manufacturers to set u% %lants in their
states But no one seems to ha"e %aid any attention to the actual economics of owning and
running a car +or most Indians, :ust the running costs of a car are so %rohibiti"e that e"en
with suitable credit facilities, the o%tion of owning a car becomes %rohibiti"e It is little
wonder that the demand for cars has ta%ered off after a "ery short2li"ed boom
La"! of infrastru"ture
A decade after liberali'ation, the monthly sale of cars has fallen off to about =<...2<.,... a
month Although each car may contribute 3...28... dollars (or more) to the national $!>
2 consider how so few Indians are being able to afford a car 9"en assuming a car lasts for 162
1< years 2 it means that only 528 million Indians, (and still fewer households) en:oy the
benefit of a %ri"ate car But imagine, if the country %roduced better means of %ublic
trans%ortation Assuming that a mini2bus costs only three times as much to %roduce as a car,
and assuming that the a"erage mini2bus seats about /. %eo%le (or more) comfortably, there is
a ten2fold increase in trans%ortation o%tions
9"en discounting all the %roblems and headaches of owning a car in India, it is ob"ious that a
car only raises the standard of li"ing for a small minority But im%ro"ements in %ublic
trans%ort raise the standards of li"ing across the board ;owe"er, this im%ro"ement in the
o"erall standard of li"ing may not show u% as dramatically in the $!> numbers
>age ?o <6
/ey Deand Dri&ers
• &raditionally, dis%osable income was %ercei"ed as the one critical factor that dro"e
%assenger car demand ;owe"er, household income is no longer the single most
im%ortant factor in determining the demand for "ehicles
• 8ther critical factors are the mobility needs of %eo%le and the a"ailability of chea%
finance &he to% three income grou%s 2 middle, u%%er middle, and high 2 ha"e grown
from 1.) in 1985 to 13) of the %o%ulation and co"ers o"er <6 million families &he
number of high2income households is growing "ery ra%idly, more so in the rural
areas &hese findings ha"e re"olutionary im%lications for the %assenger car mar#et
• &he de"elo%ment of the used car mar#et will also %lay a ma:or role, as the customers
will be encouraged to trade in their old cars &he #ey to the growth of future mar#ets
is to ma#e maintenance2free "ehicles, to im%ro"e the road infrastructure, and to
reformulate fuels and lubricants so as to reduce "ehicle2o%erating costs
NAT.RE O- COR'ORTE CONS.MERS
In India, the cor%orate consumers were not loo#ed u%on as ma:or target mar#et till late
198.Qs ;owe"er with increasing amount of industriali'ation and more com%etition settling in
the Indian car mar#et the organisational consumers started getting more and more im%ortance
in regards to %ros%ecti"e customer "alue

,ith the %assage of the years, howe"er, the definition of ser"ice to change drastically among
ser"ice %ro"iders and the organisational buying beha"iour was studied &he increasing
amount of awareness about the Auality of the %roduct and better negotiable offers made
com%anies in the better %osition to negotiate with the different car manufacturers
Custoer ser&i"e and $ersonal relationshi$s
In ;yundai they belie"e that customer ser"ice is the ma:or thrust for the organisational
mar#et and in"ol"es forming and maintaining %ersonal relationshi%s A commitment to
>age ?o </
ser"ice is usually tailored to the needs of all entities, with e(%ectations de%ending on the
nature of com%anyQs business and its ob:ecti"es in the Indian mar#et &his commitment
in"ol"es co2ordination among de%artments
Belationshi%s are further e(tended between intermediaries, with the intention of building
"alue and winning re%eat business In ;yundai, they demand that the dealers ha"e to satisfy
the certain amount of Aualification to li"e u% to the so%histication standards of the customers
and #ee% a sufficient in"entory of %arts to maintain in acce%table le"el of customer ser"ice
+or cor%orate customers itQs necessary to ha"e relationshi% mar#eting for the dealers &he
cor%orate are not entertained by the com%any but by any of the dealers &he dealers ha"e to
a%%oint for !SAQs for the com%anies and negotiate with them the %rice for the lots in which
the customers are going to buy
&he %hiloso%hy of selling in bul# a single model to a %articular com%any, which was followed
by the dealers, is outdated ?ow days it is belie"ed that cars can be sold in small Auantities to
different %rice at negotiable %rice and hence u can increase your customer base if the %roduct
is good and the customer gets "alue for money conce%t
The "on"e$t of &alue
;yundai has its own conce%t of "alue to be followed by all its dealers because they belie"e
that the dealers the face of the com%anies and they are the ones who %ortray the "alues in the
com%any ;ence, they are gi"en e(tensi"e training to deal with different ty%es of the
customers &he %rice factor, which is "ery critical in the Indian mar#et, is ta#en care by
introducing "arious financial schemes ;yundai ha"e also gone to the e(tent of introducing
;yundai finance
'ROD.CT AND SERVICE STRATE%Y
Market testing
8riginally, ;yundai had intended to launch accent, a 1<2 litre sedan But mar#et research
indicated the need for a com%act family car
>age ?o <=
2yundaiGs team approached the customer with Hcar clinicsG7 Organised across the
country: they were meant to provide an in3depth understanding of the customer with
respect to all aspects of a car: Cased on his e>perience with e>isting products7 &he
findings threw up the following critical evaluation factors( price: space: performance:
comfort and safety7
)ew3product development strategy
Get, the com%any obser"ed that Indian roads were often o"erloaded, what with turbans and
sarees to be accommodated &o find a "oluminous com%act car the com%any ado%ted the Utall
boyQ design of its Ato' o%erating in 4lsan, South Dorea It was %rom%tly redesigned for
Indian conditions, with a modified fuel2in:ection system and sus%ension And thus, in
!ecember 1995, was born the Santro
With consumer insights in place: 2yundai went Cack to the drawing Coard7 Considering
the space parameter for a small car: it concluded that the only way to make it look
roomier was to increase the height7 &hat also gave Santro a radically different look7 &he
original 'toB grille and tail3light position: which didnGt go down well with the consumer:
were changed7 In consonance with the poor3Duality Indian fuel: 2yundai changed the
M4*I 5multi3fuel point inAection6 caliCrations and reprogrammed the engine control
unit7 While most manufacturers are moving to four valves 5for performance6: 2yundai
retained the three3valve cylinder to make a trade3off Cetween power and economy7
4roduct differentiation
Santro is intended to be something of a miniature s%orts2utility "ehicle(S4*) 4nli#e the
flimsy2loo#ing 8.., Santro not only tough, the engine deli"ers UtorAueQ (how strongly it can
%ull loads e"en at low s%eeds) for traffic2hea"y Indian road conditions2 gi"ing it a steering
feel of %ower Almost %arado(ically, the car can 'i% along s%eedily, when reAuired And best
of all, the seating is high, which deli"ers Uroad commandQ on roads where not :ust might, but
height is right
Brand strategy
>age ?o <<
&rust, ;yundai recogni'ed, was one of the Indian customerQs ma:or concerns Being a barely2
#nown Dorean grou% (often confused with ;onda), it had to anchor itself in s%ace as a
de%endable brand
,ith some dollar 51/ million in"ested in India, ;yundai was #een to %ose as the leading
alternati"e to Maruti Also, it wanted to offer technology that other carma#ers had thought too
ad"anced for slowly emerging Indian mar#et So in 8ctober 1998 ;yundai hit roads with a
multi%oint fuel in:ection (M>+I) engine the first small car with this relati"ely fuel2efficient
and eco friendly technology &he base C9 model %riced at Bs/1 lacs was "ery com%etiti"e
against Maruti Een, the standard u%grade from the 8.. till then &he fancy CS model at Bs
/3 lacs had %ower steering, %ower windowsN central loc#ing internally o%erated %etrol lid
and other enhanced features (&hereQs an e"en fancier $S model too)
Most im%ressi"e of all was the manner in which ;yundai introduced this com%lete family car
to Indian household &his was through an im%ressi"e ad cam%aign shot on the young and
energetic Shahru#h Dhan &he brand gained immensely from %ositi"e word of mouth on how
trouble free the car was &his went well with the brands s%orty, youthful and energetic image
;a"ing made a dramatic entry, Santro chose to down%lay its earlier ad"ertising theme
%referring to s%ea# of technology and %roduct features ;yundai wanted Santro to become the
first %reference to anyone who had once dri"en or ridden in it Such was the brands re%utation
this was not too tall an order
&o #ee% the brands bu'' going ;yundai need to focus on s%ecific need thus it 'eroed in on
maneu"erability and %ar#ability, and came u% with Santro 'i% dri"e, and modeled that had a
s%ecial ad cam%aign the %hrase that rung home, and %eo%le are actually as#ing for 'i% dri"e
It has also changed SantroQs line u% earlier the to% end model used to sell :ust 6.) the rest
being the base model ?ow 'i% dri"e accounts for o"er half the sales, with to% and the base
model doing about 1<) each
4roduct innovation
>age ?o <5
It is in the same s%irit of #ee%ing the consumer e(cited by no"elty, that ;yundai has recently
redesigned SantroQs bac# hood, tail lights and front fender a%%earance
DISTRI+.TION STRATE%Y
&he distribution function integrates the functions of %hysical distribution and logistics in
;yundai 1om%uteri'ed integration of order %rocessing, warehousing, and dis%atching as
well as utilisation of technological ad"ances as well as the utilisation of technological
ad"ances in communications are essential in the distribution strategy
&he distribution strategy is decided by the to% le"el and #e%t with minimum intermediaries to
#ee% the damage to the %roduct minimum &he distribution channel for ;yundai is by road or
rail 9(%orts are routed though sea ;yundai has a criterion for selecting a%%ro%riate
middlemen and guidelines for fostering channel co2o%eration while considering
en"ironmental factors
*or the same: it has Ceen choosing the right dealers Cased on set Cenchmarks7 *or
e>ample: it is imperative that the dealer Cuilds and nurture relationships with the
customer7 In 2yundai they Celieve that technical inputs for product understanding can
Ce taught: what is hard to inculcate is the interpersonal skills and attitudinal change in
dealers7 2yundai claims that a large numCer of its dealers are either MB's or
engineers7 It argues that this helped in providing the Crand with crediCility and a
positive word3of3mouth7 &he impact is evident in the fact that almost #! per cent of
SantroGs sales comes through referrals7 It is also learnt that the e>isting network of 9!
dealers have invested close to Rs $!! crore and transporters have added their Cit to gear
the supply chain to get Santro on to the roads7
Logisti"s
&he logistics %rogram is basically is designed to focus on customer se"ice and channel
member su%%ort
Cogistics is mainly done for two thingsN one for the cars and other for the s%are %arts
&he cars were trans%orted by the centrali'ed %lant allo"er the country &hey didnQt maintain
any de%ots and the cars landed directly in the godowns of the dealers
>age ?o <3
S%are %arts had to reach the ser"ice stations immediately and hence they had to be stac#ed in
the de%ots &here were = regional de%ots and the s%are %arts were dis%atched to the dealers
from the de%ots as and when reAuired
All the cars and s%are %arts were trans%orted through road and rail By road to eastern,
southern and western regions and to northern region by rail, this would hel% them to control
cost
&he cars were bought into truc#s or trailers and hence there is no chance of the car being
damaged or used till it lands in the dealersQ godowns as com%ared to >remier, which dro"e
the cars all along and the customers ne"er got a brand new cars ;ence Auality of the car was
maintained

>age ?o <8
LO%ISTIC
S
CARS SPARE
PARTS
DEALER
GODOWNS
RE%IONAL
DE'OTS
DEALER
%ODO,NS
SERVICE
STATION
C2')1/ I) 1'M/ 4.')
&he initial strategy of ;yundai Motor was to introduce both A1 and non2A1 "ersions, with
the former %riced at around Bs / lacs while the A1 "ariants would be %riced around the E9?
*J to encircle it on both sides, one lower than the Een while the other would be higher
;owe"er, the com%any has subseAuently changed the entire %ricing strategy and instead
reduced the %rice of the A1 "ariants by o"er Bs =<,... to %eg the base model at Bs 699
la#hs
;yundai Motor has also dis%ensed with the non2A1 "ersion totally &he design of the non2
A1 "ersion of Santro does not allow the o%tion to fi( an A1 later if the customer so wants,
unless the engine is totally o"erhauled
;ence, the non2A1 o%tion was decided against and Santro was %lanned to be launched in A1
"ariants only
>age ?o <9
*I)')CI'. SC2/M/S
;yundai has already tied u% with Ban# of America for the financing of the car and is tal#ing
to 18 other finance com%anies for the same &he cars carry a warranty of one year with
unlimited amount
2yundai is also e>ploring the options of setting up a car finance company in India:
either as a wholly owned suCsidiary or through a Aoint venture with a domestic financial
company7
India is in the initial stages of motorisation: and this Auncture in its evolution favours the
small car7
'ROMOTION SRATE%Y
',?/R&ISI)1
&he masterstro#e of ;yundai during the launch was the bang2on2target ad"ertising cam%aign
Saatchi @ Saatchi was the chosen as the official agency to communicate in an Indian conte(t
22 in 1< or 6.2second commercials 22 the idea that ;yundai was launching this technologically
brilliant car +or short2term Auic# results a celebrity was the best bet Shah Bu#h Dhan was
the %i"ot in this &he celebrity route was %referred o"er a mere endorsement to in"ol"e the
consumer to #now more about the com%any and itQs offering ;e was to ser"e as a model
Indian consumer who is as ignorant about ;yundai as any other consumer in the country
', C'M4'I1)S
&he Bs1. crore, si(2month long 3 ad cam%aigns featured the Ufun2lo"ing but matureQ
Shahru#h #han in a seriali'ed story of ;yundai %ersuading him to endorse the brand &he
cam%aign has wide2swee%ing ob:ecti"es including a cor%orate intro, networ#, technology and
finally the %roduct
&he teaser cam%aign that began in A%ril 1998 aimed to build the cor%orate image for
;yundai A series of fi"e ads, showing the managing director of ;yundai India, Mr Dim,
introducing the com%any to Shahru#h and trying to get him to do the Santro ad wor#ed with
>age ?o 5.
the mid2mar#et customer Santro was targeting &he whole ob:ecti"e was to create a le"el
%laying ground for ;yundai
S'./S *ORC/
;yundai had a %rofessional unified 5..2sales force set u% before the launch with the
managing director Mr Dim, was brought bac# from Dorea headAuarter will rest of the team
was assembled from the best of the country ;yundai had B*B Subbu as the director
mar#eting @ sales at ;yundai

4-B.ICI&0
?ews conferences in different %arts of the country were called during the launch of the
com%any on the country
&here were "arious ?ews releases highlighting different strategies of the com%any in
different news%a%ers, maga'ines, wee#ly etc the %rimary aim was to ma#e the %eo%le aware
of the story fa"oring the com%any and its offerings
S'./S 4ROMO&IO)S(
+or the customers
&hey started their <2crore cam%aign in /6 cities by ha"ing road shows
1 In !elhi they held a horse racing at H Hwalia ground and e(hibitions organi'ed for the
dealers allo"er the country
6 Also in cities li#e ?asi#, Surat, >une they had organi'ed entertainment %rogrammes
li#e roc# shows, %o% shows etc and games &hese %rogrammes were conducted for /
days %eriod where in the morning they used to demonstrate the cars and in the
e"ening they used held the shows
/ &here were customer loyalty %rograms In this %rograms the dealers to as# them for
the feedbac# or any com%laints with the car in the first wee# month or year called the
>age ?o 51
customer &hey also notify the customer about their %eriodic ser"icing, any new
scheme that ha"e come u%

= &here was a Mills @ Mills rally held for all the ;yundai customers in !elhi &his was
treasure hunt organi'ed which had an a%%reciating res%onse
< 8n the launch oh Accent all the Santro owners were in"ited for dinner %arty
5 &here was a Ureferral schemeQ introduced by the com%any in which the com%any sends
a than# you card to the customer and if a customer gi"es three or more references he
is gi"en a free gift or the customers gi"es < inAuires free and gets accessories free
3 &he warranties were e(tended by 1 year for both the cars &he Santro originally had 62
year warranty, which was increased to / years and AccentQs to two years &his e"en
hel%ed to build confidence among the customers about the com%any &he com%any
was sending signals that they are here to stay
8 &here was this cam%aign called catch them young in which the dealers had tied u%
with the nearby hottest %laces "isited by the youth es%ecially the boutiAues, beauty
%arlours, salons, discos, bowling alleys etc and ga"e an free test dri"e cou%ons, the
%eo%le who would come for the test dri"e was gi"en a free wrist watch
9 &here were drawing com%etitions held by the dealers &he child was %ro"ided with
colours and %a%er meanwhile %arents were gi"en test2dri"es and told about the car At
the end of the com%etition each child was gi"en a gift
1. ;yundai also %enetrated rural mar#ets they organi'ed demos and set u% dealers in
Surat, ?ausari, *a%i, Habal%ur etc they also had road shows in Mehssana and
$a'iabad were the sales caught really fast
>age ?o 56
*OR &2/ ,/'./RS
1 &'us and 'ull( strategies for the dealers by offering them discounts and other
offerings
6 &he dealers who com%leted the sales target were gi"en incenti"es by ta#ing them to
yearly tri%s abroad free of cost &he first year they were ta#en to Dorea to see the
%lant, the second year to America and the third year to Australia
/ &hey ensured that s)are )arts #ere sold onl* +* autori,ed dealers so that the
customer would comebac# and this would be a re"enue generator for the dealer add
an e(tra benefit to the customer as the Auality is rest assured as com%ared to Maruti
whose %arts are a"ailable e"ery where
MAR/ETIN% STRATE%Y
4ositioning strategy
In a mar#et that was yet to see clear %ositionings, the Ufamily carQ %osition was to ser"e
Santro in the long stead Maruti %ic#ed u% its ser"ice networ# as a differentiator ?ow on a
fairly strong ground, ;yundai reacted with user testimonials Mati' continues its attem%t to
anchor itself in customer mind s%ace Dhan did the tric#, after all Shahru#h has changed the
rules of the film industry and Santro did the same in the %assenger car industry
+rom the day ;yundai made a mid2course correction, dum%ing the 1,=9<2cc Accent in fa"our
of a smaller car, it was clear that its offering had to be a com%lete family car Get, gi"en its
relati"e obscurity in the Indian mar#et, it had to offer tangible differentiators &hat
%hiloso%hy has been translated into a su%erior engine and a s%acious interior while air2
conditioning has become a standard feature in all the < "ersions of the Santro
A com%any can loo# after its customers and its changing reAuirements only if it ma#es
%rofits An entity with a bleeding bottomline will find it difficult to ser"ice customers needs
&his situation can be disastrous for a car manufacturer, which incidentally does not thri"e so
much on technology but more on customer ser"ices management
>age ?o 5/
Strategy is all about common sense and understanding what the consumer wants, what is
good for the customer is also good for the com%any ;yundai had come a long way from the
time when it needed Shahru#h Dhan for recognition &he film star offered them instant
recognition and hel%ed in brand building when they were fresh entrants into the Indian
mar#et
$i"ing an e(am%le, that when he went for discussions with oil and finance com%anies before
the launch of the %roduct, ;yundai was almost an un#nown entity in the car business Si(
months after the Shahru#h cam%aign unfolded, the com%any did not need an introduction to
deal with any business segment
;yundaiQs %lan re"ol"ed around entering through the "olume mar#et and brea#ing e"en,
which A is what it did by introducing Santro, the tall boy car It then mo"ed to the mid2range
V Accent V to attain %rofitability, followed by getting a toehold into the %remium lu(ury
category through Sonata to reinforce its brand %resence Subbu mentioned that since entry
%rice was critical, it be2came im%erati"e to attain cost com%etiti"eness and commit single
"endor source to achie"e economies of scale
;igh le"els of world2class localisation were achie"ed ;yundaiQs underlying theme was
leadershi% through listening to the consumers &he result of its endearing relationshi% with its
customers is reflected now in =. %er cent of is sales coming through customer referrals, and
mar#et leadershi% in its segment
,emand and supply
In the mid 1998 the go"ernment announced ban on carbonated engines suddenly increased
the demand for euro 1 "ehicles At the moment only ;yundai Santro and !aewooQs Mati' had
M>+I engine &he sudden s%ur in demand caused a little unrest in the com%any and the
com%any had to ta#e a decision of starting too shifts to meet the increased demand &he
>age ?o 5=
%roduction, which was around /<..2=... a year, was increased to 5... in a s%an of two
years
&he com%any basically too# this decision because at that the time the waiting %eriod for
Santro was = wee#s and for which the customer had to %ay a %remium to get his "ehicle fast
&o a"oid this the ste% was ta#en following the com%any %olicy
,ithin se"en months of launch in India, ;yundai Motors India (;MI) has sold 6.,...
Santros !aewoo, launching its Mati' in the same slot and same time, has %eddled all of
<,... And yet, Mati' outsells the Ato', the Santro-s %arent worldwide So what did !aewoo
do wrong in IndiaW &o start with, it learnt nothing from its 1ielo %ricing debacle (&he 1ielo
first tried to %osition itself in the 8%el Astra7+ord 9scort class with its %rice, before doing a
"olte2face and dro%%ing %rice to Maruti 9steem le"els)
.ocation analysis
&he F1/< billion South Dorean automa#er ;yundai has identified India as its most im%ortant
o"erseas %roduction base &he com%any has outlined in"estment of o"er F11 billion for its
Indian %ro:ect, which, a%art from e(%anding an integrated %roduction facility for "arious
models, will also include a state2of2the2art research and de"elo%ment centre that will ha"e the
ca%ability of designing and de"elo%ing new models
Why IndiaI
In com%arison to other third world countries India is much better o%tion due to o%ening u% of
economic reforms in 199.
&here was sur"ey conducted in 9=29< end by end of 9< end the decision to enter India was
ta#en by the authorities &he %rimary reasons were that India was a growing mar#et as
com%ared to other de"elo%ing countries and in the automobile there not many %layers which
ga"e them lots to sco%e 8ne more reason that su%%orted their decision was that is some
countries there were restriction for 1..) subsidiary
>age ?o 5<
&hey had more limitation that any country where &oyota had entered they couldnQt their %ut
their foot on because they are such a huge com%etition that ;yundai cannot counter attac#
them %rimary reason being that &oyota offers %roducts in all segments of the automobile
mar#et and all of their %roducts at Aualitati"ely lot more su%erior So India was the country
they were loo#ing for
Second car mar#et couldnQt %ose as a threat to them because Australia ha"ing almost = times
larger organi'ed second had mar#et still the successfully e(isted and in India second hand
mar#et was com%letely unorgani'ed so they could ma#e their %resence felt in the mar#et
&here were also sur"ey conducted to see the "iability of the %laces for %lant and the
distribution networ#
1hennai was selected because of its %ro(imity to the %ort and that that was hel% them to cut
cost as well as 1hennai was well connected to land trans%ort &he one more ma:or ad"antage
of 1hennai was that the labour their understood 9nglish and there were com%arati"ely less
labour %roblems &hey had their Dorean "endor lobby and they set u% their manufacturing
around the %lant in 1hennai
Its Bs 6,/..2crore 1/.2la#h2unit2ca%acity manufacturing facility at Sri%erambudur in &amil
?adu is ;yundai-s largest integrated unit outside South Dorea Since ;yundai ma#es its own
engines and transmissions, its costs are more controllable than those of, say, !aewoo, which
will be im%orting Semi2Dnoc#ed !own (s#d) #its for its Mati' ,ith an army of 5. "endors,
;yundai has already achie"ed a localisation le"el of 3. %er cent com%ared to !aewoo-s =<
%er cent 9"en Maruti 4dyog had a localisation le"el of 6< %er cent when it launched the 8..
in 198/ Agrees D Mahesh, the 1eo of the Bs 5.2crore Sundaram Bra#e Cinings0
MCocalisation is critical for cost com%etiti"eness and long2term strategyM
&hey also produced certain parts: which were recyclaCle: which helped them to get
concessions as environment friendly company7
&hey didnGt opt for a Aoint venture primarily Cecause deciding on the strategies
wouldnGt take long vis3J3vis in a 8? the Indian partner have to Ce involved which would
>age ?o 55
take much of the time in taking decisions7 &hey were Duite clear aCout the
manufacturing Case and an integrated plant Cuilt to their needs7 Initially: they wanted a
<"!! cc car Cut discovered that the need of the hour in India was small car7 &he Santro
was the result and it was ensured that Santro was a State3of3art car with the latest
technology7
*inancials
&he com%any has outlined in"estment of o"er F11 billion for its Indian %ro:ect
;yundai Motor India e(%ects to brea# e"en in the fourth year of its o%erations &he com%any
announced the 8ctober2launch of fi"e "ariants of the Santro in the %rice range between Bs 68
la#h and Bs =.. la#h
&he additional F=.. million will be used for the second %hase of e(%ansion in 6..1 to raise
the manufacturing ca%acity to 6..,... cars %er annum A technical [email protected]! centre and a modern
test trac# will also be set u%
&he com%any, which has an eAuity ca%ital base of F686 million, has %egged the debt2eAuity
ratio of the cost of its 1hennai %ro:ect at 1<01, and is negotiating with "arious ban#s and
financial institutions, both domestic and foreign, for term loans as well as to meet wor#ing
ca%ital reAuirements
E0'LORIN% %LO+AL STRATE%IES
-oreign ar!ets
;yundai are ma:or %layers in certain segments in 4S In 4D, Australia, ?ew Eealand, South
Africa they ha"e their %resence in mid car segment where they ha"e Accent and Sonata In
eastern countries li#e Indonesia, Singa%ore they are not doing well &hey are the Ma:or
>layers in Dorea
E1$ansion $lans
;yundai is conducting a feasibility study to ascertain if it can manufacture fully built models
of the Ato' in India for e(%ort to South Dorea
>age ?o 53
&he Ato' was the %recursor to the small car Santro that has been launched in India
&he Ato' has met with %henomenal success in 9uro%e and other e(%ort mar#ets Because of
ca%acity constraints we ha"e had to focus on e(%orts As a result we ha"e an order bac#log of
5 months %roduction in the domestic Dorean mar#et
&his has also influenced ;yundai-s decision to study if the Ato' can be manufactured in India
for e(%orts
&he Ato' has a different engine ca%acity It also has a left hand dri"e, while the Santro being
manufactured in India has a right hand dri"e ,e will ha"e to ma#e some in"estments to start
manufacturing left hand dri"e cars here But no decisions ha"e been ta#en yet
;yundai-s car %ant in 1hennai is also fle(ible enough to %roduce more than one model within
a short s%an of time ;yundai Motor India launched the successor to the mid2si'ed car the
Accent late ne(t year it also has the %roduction of Sonata done there, which the new model
added to the bandwagon
;yundai is going to manufacture the Sonata in India with a definite %roductionising strategy,
Sonata will, thus, start off with a local content of /. %er cent
&he fully integrated %lant now has a ca%acity of 16 la#h cars e(%andable to 6 la#h cars in the
second %hase
E1$orts
;yundai has gi"en a commitment of Bs =<.. crore worth of e(%orts within the ne(t 9 years
and e(%ects to start e(%orting once the 1hennai %lant is at full ca%acity o%eration
&his %lant not only %roduces for the domestic mar#et but also for the e(%ort mar#ets li#e
>a#istan, Bangladesh, Bhutan, Sri Can#a, Algeria, Indonesia 1y%rus, Mauritius, other
9uro%ean mar#ets, ?e%al and African Mar#et Among which Algeria being a huge mar#et
where they e(%ort yearly 1... Santros and =.. Accents
&hese engines and com%onents that are e(%orted to Dorea will be fitted into cars that are
meant for re2e(%ort to other mar#ets including 9uro%e and the 4S &his is e(%ected to free
some ca%acity for the Dorean chaebol to cater to domestic demand
>age ?o 58
;yundai Motor also %lans to set u% a manufacturing facility with an annual %roduction
ca%acity of 1<.,... gear transmission sets, engines and body shells to be e(%orted to its
"arious assembly facilities in other countries li#e South Africa, 9gy%t and &ur#ey
&his will form %art of ;yundaiQs %lan to set u% a com%osite manufacturing base in India for
cars and com%onents to be su%%lied to different o"erseas mar#ets and %roduction facilities of
the com%any
;yundai Motor, which has only two manufacturing bases outside Dorea India and &ur#ey
%lans to e(%ort cars from India to South Asian, mar#ets li#e >a#istan and Sri Can#a, and
e(%lore similar %ossibilities in South 9ast Asian region India will be the com%anyQs sole
manufacturing base for Santro in the world
-.T.RE 'LANS
After entering the %remium !2segment with the Sonata launch, ;yundai Motor India Ctd
(;MIC) is li#ely to enter the S%ort 4tility *ehicle (S4*) segment with its Santa +e
&he com%any is currently underta#ing a feasibility study for the %ro:ect ;owe"er, the "ehicle
will ta#e another year and a half to hit the Indian mar#et
Santa +e would be %roduced here instead of ado%ting the com%letely built unit (1B4) route
&hey also ha"e no %lans about 1B4 im%orts for our new offerings, as our %arent com%any
has no concerns about their "iability
;MIC would be entering the S4* segment only at the u%%er2end and would not be offering
its lower2end S4*s for the Indian mar#et0 Santa +e would be an ideal introduction, as it has
an ad"anced engine to meet Indian fuel conditions
1om%any officials said that with an indigenous content of /. %er cent, Santa +e would ideally
be %riced around the Bs 18 la#h mar# &he S4* segment was interesting, though "olumes
would be ty%ically small
>age ?o 59
Santa +e is one of the few American cars currently with a waiting list, according to the
com%any Santa +e has a %rice range of F15,=99 through F6=,... in the American mar#et
Santa +e is an all weather S4* with off2road ca%ability and modern safety features Similar
in si'e to a Ce(us BJ/.., Santa +e has all2aluminum *25 engine
C.STOMERS 'ERCE'TION A+O.T HY.NDAI
Change in "hoi"es
8"er the years the customer focus has changed from %ublic owned "ehicles to %ri"ate
"ehicles In %ri"ate "ehicles motorcycles were %referred by the middle and lower classes
;owe"er with the entry of small car segment more and more %eo%le want lu(ury on four
wheels in the best %ossible %rice &he com%anies in turn ha"e lots to offer with increasing
com%letion in the mar#et and the customer ta#es the ad"antage
A sur"ey ta#en in India about the best %ossible "ehicle to be %ossessed the %assenger car gets
the highest rating
Custoer for Hyundai
In ;yundai customer focus is "ery essential for the com%any em%loyees as well as the
dealers &he com%any through "arious le"el of training %asses this to them In ;yundai they
belie"e that selling a car is different and ha"ing a satisfied consumer is different Based on
these assum%tions ;yundai ha"e gi"en its dealers certain guidelines, which they use to
achie"e better customer satisfaction &hese %arameters and different from the con"entional
way the Indian manufacturers loo# at their customers Some of them are0
23 !efine customer satisfaction as being eAual to sales success in terms of %riorities0
satisfying customers will result in more sales &hin#(
.ifetime customers
43 >ut customer satisfaction into the conte(t of all dealershi% ob:ecti"es0 e"erything you
do must satisfy the customer as well as sell cars, ser"ice or %arts
>age ?o 3.
0
5
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35
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53 8nly with a "ision, and then a solid action %lan, will you arri"e at your customer
satisfaction goals0 first0 the "ision then0 the action %lan to achie"e the "ision -eir
)unc line is LEADERSHIP THROUGH LISTENING
&hey ha"e also formulated a satisfaction inde( for Indian car customer based of different
%arameters &his inde( is based on many %arameters including %roduct #nowledge, Auality of
the %roduct, number of after sales ser"ices, Auality of ser"ice, com%laint handling, and ste%s
on feedbac# ta#en etc this model was de"elo%ed ta#ing sam%le of 1.. customers of all the
e(isting brands of %assenger cars in India Based on this customer satisfaction inde( ;yundai
tried to fill in the ga%s in the ser"ices they %ro"ided
&he inde( shows the satisfaction le"el of different ty%es of customer allo"er India before the
entry of ;yundai and other foreign com%anies in India0
Inde
(
shows that there was hardly any conce%t e(isting such as feedbac#, ser"ice and %roduct
#nowledge But customers were not #nowledgeable in case of %rice, which is %re"ailing the
world o"erN in short the customer had little o%tion about the %rice Puality and after sales
ser"ices (in case of networ#) was satisfactory because the Auality conce%t was introduced by
Maruti which in com%arison to Ambassador or a +ait was far more better and all the local
Customer survey
>age ?o 31
+or the %ur%ose of the final analysis of the ser"ice %erce%tion carried by the com%any and
%ercei"ed by its customers there was sur"ey conducted in which the customers "oice their
%erce%tion about the com%any
&he gi"en sur"ey shows that the not all what is said and done is what the customer thin#s
about the com%any ;owe"er, the o"er all %erce%tion on an a"erage is good, if not e(cellent
&he %roduct is good but the a"ailability of s%are %arts is minimum because the com%any
doesnQt want any circulation of s%are %arts ;owe"er the customer does not agree fully with
the com%any it wants its ser"icing cost to be less and instantly
>age ?o 36

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