A STUDY ON

ANALYSIS OF AUTO MOBILE INDUSTRY

Submitted in partial fulfillment of the requirements for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

BY
R.ANAND
MBA III SEMESTER
R.NO: O8931E0027
Under the esteemed guidance of
P. GUNA SHEELA
Assistant Professor
Department of MBA

SRI KOTTAM TULASI REDDY MEMORIAL COLLEGE OF ENGINEERING

KONDAIR, ITIKYALA MANDAL,

MAHABOOB NAGAR- DISTRICT-519125 (AP)
DEPARTMENT OF MASTER OF BUSINESS ADMINISTRATION

DEPARTMENT OF MASTER OF BUSINESS

ADMINISTRATION
1

SRI KOTTAM TULASI REDDY MEMORIALCOLLEGE OF

ENGINEERING

KONDAIR, ITIKYALA (MANDAL)

MAHABOOBNAGAR (DIST)-509125(A.P)
(Affiliated to J.N.T.U.H)

CERTIFICATE

This is to certify that the industry analysis report on AUTO

MOBILE INDUSTRY submitted by Mr.

R.ANAND in partial

fulfillment of the requirements for the award of degree of

MASTER OF BUSINESS ADMINISTRATION in Jawaharlal Nehru
technological university Hyd is a record of bonafied work carried
out by him in this department.

Internal guide
the department

Head of

Examiner:

ACKNOWLEDGEMENT

I am thankful to our guide, for her motivation, help and continuous support which made
this industry analysis happen. I am also indebted to her invaluable suggestions, which made
me to correct my faults and improve myself.
I express my deep sense of gratitude and thanks to B.PARIMALADEVI (Head of
Department) for her consistent support and guidance. I am also thankful to her for helping
me find and overcome many problems faced during the period.
I am very much obliged to SRI KOTTAM TULASI REDDY MEMORIAL
COLLEGE which has given me opportunity to carry our industry analysis in its premises.I
feel privileged to thank wholeheartedly our Director Dr.K.S.NAYANTHARA for giving me
this opportunity.

DECLARATION

I here by declare that this project entitled A STUDY OF REPORT ON AUTO

MOBILE INDUSTRY IN INDIA is a bonafied work carried out by me under the guidance
of Ms. P.GUNA SHEELA, Assistant professor, Dept. of Management SKTRMC,
Kondair. I also declare that report is original and not submitted to any other university/
Institution for the award of any degree / Diploma.

Date:
Place:
Signature of the student.

EXECUTIVE SUMMARY
The automobile industry, one of the core sectors, has undergone metamorphosis with the
advent of new business and manufacturing practices in the light of liberalization and
globalization. The sector seems to be optimistic of posting strong sales in the couple of years
in the view of a reasonable surge in demand. The Indian automobile market is gearing
towards international standards to meet the needs of the global automobile giants and become
a global hub.
A detailed analysis of Automobile industry has been covered in respect of past growth
and performance. Under this project to better understand the Industry we have used
Fundamental and Technical tools to make it more authentic n meaningful. An E.I.C approach
has been followed under Fundamental Analysis which covered effect of Recession, the
impact of inflation, FDIs, Export, GDP etc. on Automobile Industry. The Industry Analysis
has been done with the help of five forces model, BCG Matrix, SWOT analysis, industry life
cycle and the industry specific index..
For Industry Analysis as a part of Fundamental tool we have undergone with the
comparative analysis of TATA Motors as our leading Industry with Maruti Suzuki Indias
largest Car manufacturer. The fundamental aspect consists financial and Non-Financial
analysis of both the Industry. In the Technical aspect we have considered Share price
analysis, moving average, moving average crossover, Bollinger bands and M.A.C.D. of both
the Industry by keeping TATA Motors as our leading Industry.At the end conclusion and
recommendations have been specified so as to make the research work more meaningful and
purposeful.

OBJECTIVE OF THE PROJECT:

The objective of this project is deeply analyze our Indian Automobile Industry for investment
purpose by monitoring the growth rate and performance on the basis of historical data.
The main objectives of the Project study are:

Detailed analysis of Automobile industry which is gearing towards international standards

Analyze the impact of qualitative factors on industrys and companys prospects
Comparative analysis of two tough competitors TATA Motors and Maruti Suzuki
Application of various Technical Tools and Fundamental tools (like Financial and Nonfinancial statements).

WHAT IS AN INDUSTRY?
Definition:
An industry (from Latin industrius, "diligent, industrious") is the manufacturing of a
good or service within a category.[1] Although industry is a broad term for any kind of
economic production, in economics and urban planning industry is a synonym for the
secondary sector, which is a type of economic activity involved in the manufacturing of raw
materials into goods and products.[1]
There are four key industrial economic sectors: the primary sector, largely raw material
extraction industries such as mining and farming; the secondary sector, involving refining,
construction, and manufacturing; the tertiary sector, which deals with services (such as law
and medicine) and distribution of manufactured goods; and the quaternary sector, a relatively
new type of knowledge industry focusing on technological research, design and development
such as computer programming, and biochemistry. A fifth quinary sector has been proposed
encompassing nonprofit activities. The economy is also broadly separated into public sector
and private sector, with industry generally categorized as private. Industries are also any
business or manufacturing.
Industry in the sense of manufacturing became a key sector of production and labour
in European and North American countries during the Industrial Revolution, which upset
previous mercantile and feudal economies through many successive rapid advances in
technology, such as the steel and coal production. It is aided by technological advances, and
has continued to develop into new types and sectors to this day. Industrial countries then
assumed a capitalist economic policy. Railroads and steam-powered ships began speedily
establishing links with previously unreachable world markets, enabling private companies to
develop to then-unheard of size and wealth. Following the Industrial Revolution, perhaps a
third of the world's economic output is derived from manufacturing industriesmore than
agriculture's share.
Many developed countries (for example the UK, the U.S., and Canada) and many
developing/semi-developed countries (People's Republic of China, India etc.) depend

significantly on industry. Industries, the countries they reside in, and the economies of those
countries are interlinked in a complex web of interdependence.
The term industry refers to that part of business activity which is relates to production
processing or fabrication of products.

INDUSTRY ANALYSIS
Definition:
A market assessment tool designed to provide a business with
an idea of the complexity of a particular industry. Industry analysis
involves reviewing the economic ,political and market factors that
influence the way the industry develops. Major factors can include
the power wielded by suppliers and buyers, the condition of
competitors, and the likelihood of new market entrants.
THE BEGINNING OF NEW ERA :
With the invention of the wheel in 4000 BC, mans journey on the road of mechanized
transport had begun. Since then he continually sought to devise an automated, labor saving
machine to replace the horse. Innumerable attempts reached conclusion in the early 1760s
with the building of the first steam driven tractor by a French Captain, Nicolas Jacob Cugnot.
It was however left to Karl Benz and Gottlieb Damlier to produce the first vehicles powered
by the internal combustion engine in 1885. It was then that the petrol engine was introduced,
which made the car a practical and safe proposition. Then onwards, it has been one big
journey...on the roads

HISTORY OF AUTOMOBILE INDUSTRY:

Jan 30, 1880 - It was while ho was engaged in thor

ough examination of tho incidents of our local history at
tho opening of our Revolution, ... investigation purification
of tho Indian Bureau, just about two years ago. His
thoroughness and earnestnesB in the work wero praised on
every hand .

1926

Jan 11, 1926 - ... ... early this morning, and in the wreck WC Durant, head of
the Durant Motor Car Company and long prominent in the automotive
industry, ... The brakes had barely been applied when the big engine of the
West Indian crashed into the Durant private car, telescoping it and two
Pullmans
...
From IN WRECK; HAS NARROW ESCAPE; Automotive Leader Is
Shaken
Up

Related
web
pages
select.nytimes.com/gst/abstract.html?res ...

1983

Dec 14, 1983 - The first Maruti vehicle, a Maruti 800 [ Images ] model, rolled
out on December 14, 1983, and thereafter the company changed the face of
the
Indian
automobile
industry.
From Maruti rolls out five-millionth car - Related web pages
inhome.rediff.com/money/2005/apr/27maruti.htm

2001

Aug 23, 2001 - International 10-01-2003 India's auto industry drives offshore.
CALCUTTA, India ... motorways. Indeed, for India's auto industry, which, not
long ago was ruled primarily ... according to industry analysts, the Indian auto
industry
has
come
of
age
finally,
having
inves
...
From German auto industry showing strong engine. | Article from United
Press

Related
web
pages
www.highbeam.com/doc/1G1-77441446.html?refid ...

2002

Oct 22, 2002 - In line with SAE International, the Indian chapter will also
provide support to the Indian automobile industry in areas of idea exchange,
exposure to the latest technology, financial assistance, research support and
creation
of
high
calibre
manpower.
...
From SAE sees big role in India with chapter - Related web pages
www.thehindubusinessline.com/2002/10/22 ...

2003

Mar 13, 2003 - There is definitely maturity in the Indian automobile industry

2.

4.

6.

8.

with great impact on quality, according to Mr Gerrit Kuyntjes, General

Manager, Singapore office, JD Power Asia Pacific. Addressing a meeting here
when the JD Power awards for 2002 were given away to various
automobile
...
From Indian auto industry close to global standards - Related web pages
www.thehindubusinessline.com/2003/03/13 ...
10.
2004

Jan 17, 2004 - "The Indian automobile ancillary sector, despite its high cost
efficiency will not be able to compete with cheaper imports from Thailand and
... At the two-day Auto Trade Dialogue, jointly organised by the Ministry of
Heavy Industries and Society of Indian Automobile Manufacturers, ...
From Car industry wants 3 SEZs - Related web pages
www.rediff.com/money/2004/jan/17car.htm

2006

Mar 20, 2006 - After China, the Indian car industry is the second fastestgrowing automotive market, currently totaling about 8 million vehicles. ...
auto industry. In Russia, foreign automakers face inconsistent and
unpredictable regulations, and a history of government interference in the
market.
...
From Emerging Markets Beckon World Carmakers - Related web pages
www.businessweek.com/investor/content/mar2006 ...

2007

Apr 3, 2007 - India has begun an ambitious development programme for its
automotive industry, which it hopes will make it a global production hub by
2016. ... Efforts to create a manufacturing industry to supply the automotive
industry with components get underway, spearheaded by the Indian ...
From Timeline: India's automotive industry - Related web pages
news.bbc.co.uk/2/low/business/6478685.stm

2008

Dec 24, 2008 - In fact, Chenoy says, the financial crunch could offer a silver
lining to the Indian auto industry, as demand is expected to grow all over the
... Analysts say projections that the Indian auto industry will grow from $35
billion, at present, to $145 billion by 2016 still hold good. ...
From India's Auto Industry Faces Slowdown - Related web pages
voanews.com/english/2008-12-24-voa16.cfm

2009

Dec 4, 2009 - AFP/File The Shanghai Automotive Industry Corporation

logo is shown at their Tyson's Corner, Virginia. General BEIJING (AFP)
General Motors and Shanghai Automotive Industry Corp ... GM has recently
been making major efforts to increase sales in India and plans to launch a
small
car.
From GM and China's SAIC to launch India auto venture - Related web pages
news.yahoo.com/s/afp/20091204/bs_afp ...

12.

14.

16.

18.

PREVIEW OF AUTOMOBILE INDUSTRY:

The automobile industry, one of the core sectors, has undergone metamorphosis with
the advent of new business and manufacturing practices in the light of liberalization and
globalization. The sector seems to be optimistic of posting strong sales in the next couple of
years in view of a reasonable surge in demand.
The Indian automobile market is gearing towards having international standards to
meet the needs of the global automobile giants and become a global hub. Players are
strategizing to consolidate their position and gradually increase market penetration with the
launch of new models, targeting different segments. Since the sector is price driven, huge
investment is envisaged to remain competitive through cost advantage, for which
indigenization is highly important. The product becomes dearer if it is manufactured using
imported parts.
IT in the automobile sector plays a crucial role.. Some players are working towards
development of efficient production systems that control the entire production process with
high precision and accuracy. Such systems working on real time operating systems allow
efficient control of different parts of manufacturing and production. It is essential to leverage
skills of different engineering disciplines to build these kinds of integrated systems.
Analysts foresee high scope in the electronics for auto sector and expect the retailing of such
electronics products to contribute a major chunk of future revenues.
The government is increasing the research and development (R&D) fund for the
automobile industry over and above the Rs 1400 crores earmarked for eight years. All
laboratories in the country researching on automobile technology, such as BHEL which is
developing cell technology as alternative fuel, have also been brought together through the
setting up of a national R & D working group. The group is working out a plan to link all
major laboratories across the country to give a thrust to automotive research.
Indian automobile sector being a driver of product and process technologies, and has become
a excellent manufacturing base for global players, because of its high machine tool
capabilities, extremely capable component industry, most of the raw material locally
produced, low cost manufacturing base and highly skilled manpower.
10

Not only a large number of world manufacturers have set up production bases in
India but also a large number of foreign companies are collaborating with the auto component
suppliers and vendors.Indian Automobile Components Industry has been making rapid strides
towards achievement of world-class Quality Systems by imbibing ISO 9000/QS 9000 Quality
Systems whereby the Indian Automotive industry has become more competitive in the export
market due to its technological and quality advances, so much so that in quality conscious
markets such as.
Europe and America, it is emerging as a major player, based on its performance. India
today exports: Engine and engine parts, electrical parts, drive transmission & steering pats,
suspension & braking parts among others.The sector is striding inroads into the rural middle
class after its inroads into the urban markets and rural rich. It is trying to bring in varying
products to suit requirements of different class segments of customers.

States like Rajasthan, Uttar Pradesh, Maharashtra, Andhra Pradesh and West Bengal
are vying to woo global players with proposals including heavy tax exemptions and to create
a more investor friendly regime, each state is proposing to provide all regulatory clearances at
express speed.
The Government should promote Research & Development in automotive industry by
strengthening the efforts of industry in this direction by providing suitable fiscal and financial
incentives. The current policy allows Weighted Tax Deduction under I.T. Act, 1961 for
sponsored research and in-house R&D expenditure. This will be improved further for
research and development activities of vehicle and component manufacturers from the
current level of 125%.
In addition, Vehicle manufacturers will also be considered for a rebate on the
applicable excise duty for every 1% of the gross turnover of the company expended during
the year on Research and Development carried either in-house under a distinct dedicated
entity, faculty or division within the company assessed as competent and qualified for the
purpose or in any other R&D institution in the country. This would include R & D leading to
adoption of low emission technologies and energy saving devices.
Government will encourage setting up of independent auto design firms by providing
them tax breaks, concessional duty on plant/equipment imports and granting automatic
approval. Allocations to automotive cess fund created for R&D of automotive industry shall
be increased and the scope of activities covered under it enlarged.
The landmarks along the way:
1928- The first imported car was seen on Indian roads

1942- Hindustan Motors incorporated

1944- Premier automobiles started
1948- First car manufactured in India
1953- The Government of India decreed that only those firms which have a manufacturing
11

program should be allowed to operate

1955- Only seven firms, namely, Hindustan Motors Limited, Automobile Products of India

Limited, Ashok Leyland Limited, Standard Motors Products of India Limited. Premier
Automobiles Limited, Mahindra & Mahindra and TELCO received approval.
1960 - 1970 - The two, three wheeler industries established a foothold in the Indian

scenario.
1970 - 1980 - Not much change was witnessed during this period. The major factors

affecting
the industry were the implementation of the MRTP Act (Monopolies and Restrictive Trade
Practices Act), FERA (Foreign Exchange Regulation Act) and the Oil Shock of 1973.

1980 - 1990 - The first phase of liberalization was announced by the Govt. -With the
liberalization of the Government's protectionist policies, the advantages hitherto
enjoyed by the Indian car manufacturers like monopoly, oligopoly, slowly began to
disappear.
1991 - Under the Govt.'s new National Industrial Policy, the license raj was dispensed with,
and the automobile industries were allowed to expand freely.
1993 - With the winds of liberalization sweeping the Indian car market, many multinationals
like Daewoo, Peugeot, general Motors, Mercedes-Benz and Fiat came into the Indian
car market.
1997 - The National Highway Policy was announced which will hopefully have a positive
impact on the automobile industry. The Government also laid down the emission
standards to be met by car manufacturers in India in the coming millennium. There
were two successively stringent emission levels to be met by April 2000 and April
2005, respectively. These norms were benchmarked on the basis of those already
adopted in Europe, hence the names Euro I (equivalent to India 2000) and the Indian
equivalent of Euro II.
1999 - The Honble Supreme Court passed an order directing all car manufacturers to comply
with Euro I emission norms (India 2000 norms) by the 1st of May, 1999 in National
Capital Region(NCR) of Delhi. The deadline was later extended to 1st June, 1999
2004 - Tata Motors becomes the first Indian auto company to be listed on the New York
Stock Exchange.

12

AUTOMOBILE INDUSTRY WHEELS OF CHANGE:

India had its date with this wonderful vehicle first time in 1898. Then for the next
fifty years, cars were imported to satisfy domestic demand. Between 1910 and 20's the
automobile industry made a humble beginning by setting up assembly plants in Mumbai,
Calcutta and Chennai. The import/assembly of vehicles grew consistently after the 1920's,
crossing the 30,000 mark in 1930. In 1946, Premier Automobile Ltd (PAL) earned the
distinction of manufacturing the first car in the country by assembling 'Dodge DeSoto' and
'Plymouth' cars at its Kurla plant. Hindustan Motors (HM), which started as a manufacturer
of auto components graduated to manufacture cars in 1949. Thanks to the Licence Raj which
restricted foreign competitors to enter the Indian car market, Indian roads were ruled by
Ambassador Car from Hindustan Motors and the Fiat from Premier Auto Ltd. for many of the
initial years.
In 1952, the GOI set up a tariff commission to devise regulations to develop an
indigenous automobile industry in the country. After the commission submitted its
recommendations, the GOI asked assembly plants, which did not have plans to set up
manufacturing facilities, to shut operations. As a result General Motors, Ford and other
assemblers closed operations in the country. The year was 1954 and this decision of the
government marked a turning point in the history of the Indian car industry. The GOI also had
a say in what type of vehicle each manufacturer should make. Therefore, each product was
safely cocooned in its own segment with no fears of any impending competition. Also, no
new entrant was allowed even though they had plans of a full-fledged manufacturing
program. The restrictive set of policies was chiefly aimed at building an indigenous auto
industry. However, the restrictions on foreign collaborations led to limitations on import of
technology through technical agreements. In the absence of adequate technology and
purchasing power, the car industry grew at a snail's pace in the 60s. The demand for cars in
1960 was to the tune of 15,714. In the next two decades the number increased to 30,989 i.e. a
CAGR of only 3.5 per cent.
The other control imposed on carmakers related to production capacity and
distribution. The GOI control even extended to fixation of prices for cars and dealer
commissions. This triggered the start of a protracted legal battle in 1969 between some
13

carmakers and GOI. Simply put, the three decades following the establishment of the
passenger car industry in India and leading upto the early 1980s, proved to be the 'dark ages'
for the consumer, as his choice throughout this period was limited to two models viz.
Ambassador and Padmini. It was only in 1985, after the entry of Maruti Udyog, that the car
makers were given a free hand to fix the prices of cars, thus, effectively abolishing all
controls relating to the pricing of the end product.
In the early 80's, a series of liberal policy changes were announced marking another
turning point for the automobile industry. The GOI entered the car business, with a 74% stake
in Maruti Udyog Ltd (MUL), the joint venture with Suzuki Motors Ltd of Japan. The very
face of the industry was changed for ever in 1983 with the entry of public sector Maruti
Udyog in a joint venture with the Suzuki Corporation of Japan. Car sales grew by 42 per cent
yoy in 1985 after Maruti 800 was launched. Thanks to MUL car sales registered a CAGR of
18.6 per cent i.e. from 1981 to 1990.

In 1985, the GOI announced its famous broadbanding policy which gave new licenses
to broad groups of automotive products like two and four-wheeled vehicles. Though a liberal
move, the licensing system was still very much intact. MUL introduced 'Maruti 800' in 1983
providing a complete facelift to the Indian car industry. The car was launched as a "peoples
car" with a price tag of Rs 40,000. This changed the industry's profile dramatically. Maruti
800 was well accepted by middle income families in the country and its sales increased from
1,200 units in FY84 to more than 200,000 units in FY99. However in FY2000, this figure
came down due to rising competition from Hyundai's 'Santro', Telco's Indica and Daewoo's
'Matiz'.
MUL extended its product range to include vans, multi-utility vehicles (MUVs) and
mid-sized cars. The company has single handedly driven the sales of cars in the country
cornering around 79.6% market share. With increasing competition from new entrants, this
market share has plummeted to almost 62% in FY2000.
A brief 3-year downturn till 1993 and car sales bounced back to register a 17 per cent
growth rate in 1997.Since then, the economy slumped into recession and sales of cars
remained quite stagnant FY97 and FY99. The Financial year 2000 has, however, been the
turnaround year for the Auto industry with the economy looking up. The automobile industry,
crossed
the
half
million
mark
for
the
first
time
in
FY2000.
Overwhelmed by newer models from new and existing players had led to an impressive shift
from a constrained supply situation to a surplus one. Within the past decade, about 30 models
have entered the Indian market with a number of models still awaiting launch. The delicensing of auto industry in 1993 opened the gates to a virtual flood of international auto
makers into the country with an idea to tap the large population. Also the lifting of
quantitative restrictions on imports by the recent policy is expected to add up to the flurry of
foreign cars in to the country.
The Indian Automobile industry registered one of the strongest growth rates in FY04.
Aided by sustained economic recovery, the industry registered high growth rates in all major
segments.
The growth story was led by Medium and Heavy Commercial Vehicles (M&HCVs)
registering a 40% growth while Light Commercial Vehicles (LCVs) recorded a 32% jump in
14

total sales. Passenger cars also registered an impressive 34% growth in FY04 and total sales
volume crossed the 1 million mark for the first time. Interestingly, two wheelers registered
the lowest but healthy growth rate of 13% in FY04. While motorcycle volumes tripped on a
high base, scooters registered a 10%
growth after 4 years of continuous decline. Three wheelers grew by 23% in FY04.
Apart from strong economic growth in all sectors, low interest rate regime, normal
monsoon, continued infrastructure investment, fiscal measures like cut in excise duty (in case
of cars), etc provided impetus for the growth. The year also saw a sharp 56% rise in export
volumes with all the sectors registering more than 40% growth, signalling the
rising international competitiveness of the industry.
Profitability improvements were recorded in companies across segments driven by rise
in volumes and lower interest costs to some extent, notwithstanding the rise in prices of
certain inputs like steel.

INDUSTRY STRUCTURE
Structure:
The Indian automobile industry can be broadly classified into:

2 /3 Wheelers
Passenger Cars
Commercial Vehicles (LCV/HCV/MCV)
UV (Utility vehicles)
Tractors

The models in the car market can be fitted to different segments as given below:
Category

Models

Economy segment (upto Rs 0.25mn)

Maruti Omni, Maruti 800 etc.

Mid-size segment (Rs 0.25-0.45 mn)

Fiat Uno, Hyundai Santro, tata Indica,

Maruti Alto etc.

Luxury car segment (Rs 0.45- 1mn)

Tata Indigo, Honda City, Mitsibushi

Lancer, Ford Ikon, Opel Astra, Hyundai
Accent & others
Mercedes Benz & other imported models

Super luxury segment (above Rs 1mn)

The economy segment has a very large foothold over the Indian automobile market as
compared to the mid-size and luxury segment.
Segment

Market Share (%)

15

Economy
Mid-size and luxury

90.2
9.8

Segmentation of Automobile Industry:

The automobile industry comprises of Heavy vehicles (trucks, buses, tempos,
tractors); passenger cars; Two-wheelers; Commercial Vehicles; and Three-wheelers.
Following is the segmentation that how much each sector comprises of whole Indian
Automobile Industry.

8 OUT OF TOP 10 GLOBAL COMPANIES HAVE INDIA PRESENCE

They contribute 60 % of global production 25 % of India Production

Key players in the Indian auto industry - Passenger Cars and
Commercial vehicles

The largest player in the Indian industry. Plans to launch

new and excit products in the Indian markets, including
the 100,000 car

Suzukis JV in India and the largest passenger car

manufacturer in India

The third largest passenger car manufacturer in India

16

and one of the largest exporters of vehicles. Has

established India as one of its manufactur bases in
the world. Is planning to invest heavily to boost
exports
from
Has vision of capturing 10 % share of the Indian
passenger car marke
2010.
One of the leading players in the Indian premium
cars segment One of the leading players in the Indian
premium cars segment

17

One of the leading players in the Indian

premium cars segment.
Plans to enter the small car segment by relaunching the Matiz
One of the largest players in the UV / MUV segment

The 2nd largest CV manufacturer in Indi.

a
KEY PLAYERS IN THE INDIAN AUTO INDUSTRY - TWO
WHEELERS

The largest 2 wheeler manufacturer in the world and 1st

in Ind The 2nd largest 2- wheeler manufacturer in India
and the largest.
3 wheeler manufacturer. Has plans for
establishing a manufacturing
facility in
Indonesia .
The third largest 2 wheeler manufacturer in India. Has
plans for establishing a manufacturing facility in
Indonesia

Has recently entered the Indian market through its

direct subsidiary
( in addition to its JV Hero Honda)
Has recently entered the Indian market through its
direct subsidiary

18

INDUSTRY PERFORMANCE
Automobile Production Trends :
CATEGORY
Passenger
Vehicles
Commercial
Vehicles
Three
Wheelers
Two Wheelers
Grand Total

2003-04
989,560

2004-05
1,209,876

2005-06
1,309,300

2006-07
1,545,223

2007-08
1,777,583

2008-09
1,838,697

275,040

353,703

391,083

519,982

549,006

417,126

356,223

374,445

434,423

556,126

500,660

501,030

5,622,741
7,243,564

6,529,829
8,467,853

7,608,697
9,743,503

8,466,666
11,087,997

8,026,681
10,853,930

8,418,626
11,175,479

Automobile Exports Trends :

CATEGORY

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

Passenger

129,291

166,402

175,572

198,452

218,401

335739

17,432

29,940

40,600

49,537

58,994

42673

68,144

66,795

76,881

143,896

141,225

148074

265,052

366,407

513,169

619,644

819,713

1004174

Grand Total
479,919
629,544
Automobile Domestic Sales Trends :

806,222

1,011,529

1,238,333

1,530,666

Vehicles
Commercial
Vehicles
Three
Wheelers
Two Wheelers

CATEGORY

2003-04

2004-05

2005-06
19

2006-07

2007-08

2008-09

Passenger

902,096

1,061,572

1,143,076

1,379,979

1,549,882

1,551,880

260,114

318,430

351,041

467,765

490,494

384,122

284,078

307,862

359,920

403,910

364,781

349,719

Two Wheelers

5,364,249

6,209,765

7,052,391

7,872,334

7,249,278

7,437,670

Grand Total

6,810,537

7,897,629

8,906,428

10,123,988

9,654,435

9,723,391

Vehicles
Commercial
Vehicles
Three
Wheelers

FIVE FORCES MODEL:

Michael Porter identifies five forces that influence an industry. These forces are

Degree of Rivalry
Despite the high concentration ratio seen in the automotive sector, rivalry in the Indian
auto sector is intense due to the entry of foreign companies in the market. The industry
rivalry is extremely high with any being product being matched in a few months by the
competitors. This instinct of the industry is primarily driven by technical capabilities
acquired over years of gestation under the technical collaboration with international
players.
Threat of Substitutes
The threat of substitutes to the automotive industry is fairly mild. Numerous other forms
of transportation are available, but none offer the utility, convenience, independence and
value offered by automobiles. The switching cost associated with using a different mode
of transportation, may be high in terms of personal time, convenience and utility.
Barriers to entry
The barriers to enter automotive industry are substantial. For a new company, the startup
capital required to establish manufacturing capacity to achieve minimum efficient scale
is prohibitive. Although the barriers to new companies are substantial, establishing
companies are entering the new markets through strategic partnerships or through buying
out or merging with other companies. However, a domestic company, with local

20

knowledge and expertise, has the potential to compete its home market against the global
firms who are not well established there.

Suppliers power
In the relationship between the industry and its suppliers, the power axis is tipped in
industrys favor. The industry is comprised of powerful buyers who are generally able to
dictate their terms to the suppliers.

Buyers Power
In the relationship between the automotive industry and its ultimate consumers, the
power axis is tipped in the consumers favor. This is due to the fairly standardized nature
and the low switching costs associated with selecting from among competing brands.

1.) BCG Matrix

In an economy, different industries are present and different industries have different growth
rate as compared to the growth of the economy. In an economy, there are a number of major
industries and they all occupy different positions in the BCG matrix according to their
growth and contribution towards the economy. In the Indian economy, some of the major
sectors are FMCG, automobiles, banking and insurance, steel, telecom, software,
pharmacology and retail sectors and these can be placed in the different positions in the
matrix as shown below:

Hig
h
M
a
r
k
e
t

STA

QUESTION

Banking
&

Telecom
Reta
il

AUTOMOBIL
ES
Softwa
re

G
r
o
w
t
h
21

DO

CASH
FMC
G

Lo

2.) Industrial Life Cycle

The industrial life cycle is a term used for classifying industry vitality over time. Industry life
cycle classification generally groups industries into one of four stages: pioneer, growth, maturity
and decline.
In the pioneer phase, the product has not been widely accepted or adopted. Business strategies
are developing, and there is high risk of failure. However, successful companies can grow at
extraordinary rates. The Indian automobile sector has passed this stage quite successfully.
In the growth phase, the product market has been established and there is at least some historical
guide to ground demand estimates. The industry is growing rapidly, often at an accelerating rate
of sales and earnings growth. Indian Automotive Industry is booming with a growth rate of
around 15 % annually. The cumulative growth of the Passenger Vehicles segment during April
2007 March 2008 was 12.17 percent. Passenger Cars grew by 11.79 percent, Utility Vehicles
by 10.57 percent and Multi Purpose Vehicles by 21.39 percent in this period.
The Commercial Vehicles segment grew marginally at 4.07 percent. While Medium &
Heavy Commercial Vehicles declined by 1.66 percent, Light Commercial Vehicles recorded a
growth of 12.29 percent. Three Wheelers sales fell by 9.71 percent with sales of Goods Carriers
declining drastically by 20.49 percent and Passenger Carriers declined by 2.13 percent during
April- March 2008 compared to the last year. Two Wheelers registered a negative growth rate of
7.92 % during this period, with motorcycles and electric two wheelers segments declining by
11.90 percent and 44.93% respect. However, Scooters and

Mopeds segment grew by 11.64%

and 16.63% respect. The growth rate of the automobile industry in India is greater than the
GDP growth rate of the economy, so the automobile sector can be very well be said to be in the
growth phase As the product matures, growth slows as penetration reaches practical limits. Companies
began to focus on market share rather than growth. Industry demand tends to follow the overall economy,
22

but the scope of growth of the automobile sector is very much possible in India due to the increasing
income of the middle class and their income as well as standard of living.

3.) SWOT Analysis

A scan of the internal and external environment is an important part of the strategic planning
process. Environmental factors internal to the firm usually can be classified as strengths (S) or
weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats
(T). Such an analysis of the strategic environment is referred to as a SWOT analysis. SWOT
analysis of the Indian automobile sector gives the following points:

Strengths:

Large domestic market

Sustainable labor cost advantage

Competitive auto component vendor base

23

Government incentives for manufacturing plants

Strong engineering skills in design etc

Weaknesses:

Low labor productivity

High interest costs and high overheads make the production uncompetitive

Various forms of taxes push up the cost of production

Low investment in Research and Development

Infrastructure bottleneck

Opportunities:

Commercial vehicles: SC ban on overloading

Heavy thrust on mining and construction activity

Increase in the income level

Cut in excise duties

Rising rural demand

Threats:

Rising input costs

Rising interest rates

Cut throat competition

24

INDUSTRY INVESTMENT
According to Commerce Minister Kamal Nath, India is an attractive destination for global auto
giants like BMW, General Motors, Ford
and Hyundai who were setting base in India, despite the absence of specific trade agreements.
CURRENT SCENARIO:
On the cost front of Indian automobile industry, OEMs are eyeing India in a big way,
investing to source products and components at significant discounts to home market.
On the revenue side, OEMs are active in the booming passenger car market in India.
OVERVIEW
Snippets:
By 2010, India is expected to witness over Rs 30,000 crore of investment.
Maruti Udyog has set up the second car with an investment of Rs 6,500 crore.
Hyundai will bring in more than Rs 3,800 crore to India.
Tata Motors will be investing Rs 2,000 crore in its small car project.
General Motors will be investing Rs 100 crore and Ford about Rs 350 crore.
Ashok Leyland and Tata Motors have each announced over Rs 1,000 crore of investment.

WHY INDIA
The economy of India is emerging. The following table show the ranking of India in the past four
years.
Rank
1
2
3

2005
China
India
Thailand

2004

2003

China
Thailand
India

China
Thailand
USA
25

2002
China
Thailand
USA

4
5
6
7

Vietnam
USA
Russia
Korea

Vietnam
USA
Russia
Indonesia

Vietnam
India
Indonesia
Korea

Indonesia
Vietnam
India
Korea

Increased urbanisation, low pricing policies, improvement in products and technology have
fuelled demand for 4-wheelers. The markets are clearly segmented between economy models
and premium models. The easy availability of finance and increased levels of disposable
incomes has led to higher demand for premium models. Rural areas have also become an
exciting market to cater to.
The growth of the economy has also resulted in a shift in consumer preferences in each of the
segment. Gradual shift can be seen in buyers from mopeds to economy scooters, from
economy scooters to premium and from premium to motorcycles
Among the two-wheeler segment, motorcycles have major share in the market. Hero Honda
contributes 50% motorcycles to the market. In it Honda holds 46% share in scooter and TVS
makes 82% of the mopeds in the country.

40% of the three-wheelers are used as goods transport purpose. Piaggio holds 40% of the
market share. Among the passenger transport, Bajaj is the leader by making 68% of the threewheelers.

Cars dominate the passenger vehicle market by 79%. Maruti Suzuki has 52% share in
passenger cars and is a complete monopoly in multipurpose vehicles. In utility vehicles
Mahindra holds 42% share.

26

In commercial vehicle, Tata Motors dominates the market with more than 60% share. Tata
Motors is also the world's fifth largest medium & heavy commercial vehicle manufacturer.
{figures from reliable sources}

INDUSTRY SPECIFIC INDEX:

Industry specific index also called as sectoral index are those indices, which represent a
specific industry sector. All stocks in a sectoral index belong to that sector only. Hence an index
like the BSE auto index is made of auto stocks. Sectoral Indices are very useful in tracking the
movement and performance of particular sector.
BSE Auto Index comprises all the major auto stocks in the BSE 500 Index.

BSE AUTO Index 5 Year Chart

Automobile Industry Index at BSE for 5 Year

27

COMPANY
Above is the Indian Auto Industry Index(BSE) shows the ups and downs over the period
of 5 years. Intially in 2003 when major giants got listed on stock exchange TATA Motors,
Maruti Suzuki, etc. indian auto industry start picking up growth slowly in the first end of 1 st
quarter index reaches to its highest in his history. Than we saw a steady fall in the index and in
the mid 2006 reaches to years lowest point it again start booming and than year on year we saw a
up and down movement in the index as lots of new players came in Indian market with foreign
colaboration but when 2008 came with global slowdown it brings the demand of automobile so
low that index reaches to its lowest in past 5year .
Most of the company even shut down their manufacturing units for more than a week,
production came down because of less demand in the economy. Also no further launches were
made in mid or late 2008 and postponed to next year. We have also saw a fall in FDIs in
automobile Industry. But in the beginning of 2009 right from 1 st quarter auto industry again start
regaining and we saw a tremondous growth in auto industry which never seen before not in india
but all over the world. The demand of 2 and 4 Wheelers start increasing rapidly which also force
auto industry to employ more workers to meet demand and with in the 2 nd quarter of FY2009-10
Auto index reaches to its highest ever crossed mark of 6000. And this growth of industry will be
carry further as festive season still to come, so there is a lot of scope to growth in this industry.

DEMAND
The demand for cars in the past was supply driven as demand did not match supply. This
led to high premium and long waiting periods for the cars. But change in government policies
coupled with aggressive capacity additions and upgradation of models by MUL in the early
nineties led to increase in supply and subsequently reduced the waiting periods for economy
cars.The demand for cars was suppressed by various supply constraints. The demand for cars
increased from 15,714 in FY60 to 30,989 in FY80 at a CAGR of only 3.5%. The entry of Maruti

28

Udyog Ltd (GoI-Suzuki JV) in 1983 with a "peoples" car and a more favorable policy
framework resulted in a CAGR of 18.6% in car sales from FY81-FY90.
After witnessing a downturn from FY90 to FY93, car sales bounced back to register 17%
growth rate till FY97. Since then, the economy slumped into recession and this affected the
growth of the automobile industry as a whole. As a result car sales remained almost stagnant in
the period between FY97 and FY99. CAGR recorded during the FY94-FY99 period was 14.4%,
reaching sales of 409,624 cars in FY99. However, during FY2000, with the revival of economy,
the segment went great guns posting a sales growth of 56%yoy. The table below indicates the
past sales trend for cars Cars

2004

2005

2006

2007

2008

2009

Volume

209,203
27.0

264,822
27.0

345,486
30.0

410,992
19.0

417,736
2.0

409,624
-2.0

Growth
%yoy
The demand for cars is dependent on a number of factors. The key variables are per
capita income, introduction of new models, availability & cost of car financing schemes, price of
cars, incidence of duties and taxes, depreciation norms, fuel cost and its subsidization, public
transport facilities etc. The first four factors viz, increase in per capita income, introduction of
new models, availability & cost of car financing have positive relationship with the demand
whereas others have an inverse relationship with demand for cars.
The demand for cars in the future can be estimated with the help of making use of macro
economic variables like growth in GDP, per capita income etc. or house hold penetration
technique. An attempt is made to estimate the potential demand for passenger cars based on the
household penetration level of passenger cars as explained in Annexure 4 of the report.
The demand for cars in the future is expected to come predominantly from the existing
two-wheeler owners who will be upgrading to a four-wheeler, due to rising income and necessity
of car for personal transportation purposes. Therefore, excluding the owners of mopeds, the
potential demand for cars in the next fifteen to twenty years can be taken as 50% of the existing
two-wheeler population of around 28mn units.
But with the release of new models in the higher end of the economy segment, the supply
of second hand economy cars is expected to increase substantially, which will be costing just
about two times the price of premium range two-wheelers. This could affect the demand for first
hand/new cars. Also, with cross demand from utility vehicles, availability of finance and other
factors the above mentioned potential for cars will be difficult to realize. Growth in the
segment thus is expected to hover around 15-20%yoy.
The dominance of economy segment will continue in the future as it will provide large
volume to Indian car industry. This is because a majority of customers for cars will graduate
29

from two-wheelers. The demand for mid-sized and premium cars is expected to rise as new
models enter the market, income levels rise and present car owners upgrading from the economy
segment to higher end cars.
SUPPLY:
The supply of cars in Indian industry till 1991 was dependent upon the production
capacity of individual players. The production of cars has increased from 42,475 units to 181,420
units from 1981 to 1991 respectively. The growth in production of cars has varied in the last
three decades from just 1% in 1970-80 to 21% in 1980-90 and above 15% in 1991- 96. The table
below gives the production numbers of passenger cars in the past few years.
Cars
Production

2003
207,658
27.2

2004
264,468

2005
348,146

2006
407,539

2007
401,002

2008
390,355

2009
577,243

27.4

31.6

17.1

(1.6)

(2.7)

32.4

Growth
%yoy
The major increase in production of cars in the 80's was due to the entry of MUL in 1983,
which helped increase car production by 20,000 to 30,000 cars per annum till the early
nineties.With the entry of MUL, the face of the passenger car industry changed forever. Existing
producers who had operated in a protected, high margin environment faced the prospect of not
just diminishing market share, but a shift in focus from producing vehicles to selling them. But
MUL made use of the opportunity open to its technologically superior product and increased its
capacity from 100,000 cars in FY90 to 240,000 cars in FY96 and 350,000 cars in FY98.
The opening of economy in 1993, attracted world majors who joined hands with existing
auto majors, to start their operations at the earliest. The first ones to enter the field were
Mercedes Benz in joint venture with Telco to manufacture E220, E250D models, Peugeot in JV
with PAL to manufacture Peugeot 309L, Fiat in JV with PAL to manufacture Fiat Uno.
This has helped in increasing the number of models available to the customer from 8 to
30 and hence provided a wide choice to him. This has also helped in reducing the average
waiting period and premium on cars, which were a part and parcel of car cost in the eighties.
CAPACITY:
The present production capacities is detailed in the table below. This has increased from an
estimated 600,000 units in FY98 to the present 727,000 units in FY2000.
Car Capacity

FY2000

Expected

Maruti Udyog

250,000

350,000

30

Hyundai

110,000

130,000

Telco

100,000

150,000

Daewoo

72,000

130,000

Ford India

50,000

70,000

Fiat India

60,000

60,000

General Motors

25,000

100,000

Honda Siel

30,000

30,000

Hindustan Motors
Total

30,000

50,000

727,000

1,070,000

Thus, capacity utilization in FY2000 stands at 79.4%. This is still better than utilization
levels the world over which stands at around 40%. Production capacities are expected to increase
in the next two years as players introduce new models. The major increase in supply, as was
witnessed in FY2000, will be in the mid-size and luxury segment. The supply in the future,
taking into account the plans announced by the car majors are expected to grow to 1,070,000 cars
by 2002.

The segment which has seen a number of new entrants in the recent past will see two new
models from the stable of Maruti namely the 'Alto', which will be available in the 800cc and
1000cc configuration. However, industry sources have indicated that after the hectic action of the
past two years, this segment will slowly witness some stability in terms of sales volumes and
prices. The entry of new players is expected to create a marketing warfare in the car industry. A
start has already been made by sharp reduction in prices of Daewoo 'Cielo' and Maruti 800.
Lately, the price of Wagon R was also lowered by MUL to face the intensifying competition.
However, with manufacturers having to comply with Euro emission norms, car manufacturers
have sold their products at lowered margins. This is expected to affect their ability to reduce
prices in the future.
Increased support through finance from auto manufacturers was quite evident in FY2000.
This has and will in the future induce existing owners of cars to go for technologically superior
products in the same segment leading to sharp drop in prices of second-hand cars. This will also
create a platform for upgradation of existing two-wheeler owners to four-wheelers.
The luxury segment will see more new entrants namely Toyota of Japan, Skoda of Czech
Republic and Proton of Malaysia in the years to come. Recently, companies like MUL, GM and
31

Hindustan Motors have come out with new models to cover the present gap in the segment.
Therefore, the customer will be having a wider choice to choose depending on his specific needs
CONTRIBUTION OF VARIOUS SECTOR TO GDP

Industry; 17%
service

agriculture

agric ulture; 20%

Industry

service; 63%

32

MARKETING:
The industry is estimated to be a US$ 34 billion industry with exports contributing 5 per cent
of the revenues. The growth of the Indian middle class with increasing purchasing power along
with the strong growth of the economy over the past few years has attracted global major auto
manufacturers to the Indian market. Moreover, India provides trained manpower at
competitive costs making India a favoured global manufacturing hub. The Indian automobile
industry is going through a technological change where each firm is engaged in changing its
processes and technologies to maintain the competitive advantage and provide customers with
the optimized products and services. The de-licensing of the sector in 1991 and the
subsequent opening up of 100 per cent foreign direct investment (FDI) through the
automatic route marked the beginning of a new era for the Indian automotive industry.
Since then almost all the global major automobile players have set up their facilities in India
taking the level of production of vehicles from 2 million in 1991 to 10.83 million in 200708.
Stagnation of the auto sector in markets such as Europe, US and Japan on the other, have
resulted in shifting of new capacities and flow of capital to the Indian auto industry. The Indian
automobile industry has been growing at the rate of 1527 per cent over the past five years.
In two wheelers industry, Indian companies are the largest manufacturers in the world. Bikes
are a major segment in the industry, the other two being scooters and mopeds. Moreover,
Indian car makers are earning acclaim worldwide. The home-grown automaker, Maruti
Suzuki has emerged as the fourth most reputed among auto companies in the world, even
ahead of its parent Suzuki Motor Co of Japan, according to the Global 200: The World's
Best Corporate Reputations list, compiled by US-based Reputation Institute.
EVOLUTION OF THE INDIAN AUTOMOBILE INDUSTRY:
Pre 1983
1983-1993
Closed market
Suzuki, Japan and GOI joint
Growth of market limited venture to form Maruti Udyog
by supply
Joint ventures with companies in
Outdated models
commercial
vehicles
and
Players
components
Hindustan Motors
Players
Premier
Maruti Udyog
Telco
Hindustan Motors
Ashok Leyland
Premier
Mahindra & Mahindra
Telco
Ashok Leyland
Mahindra & Mahindra

33

1993-2007
De-licensing of the sector in
1993
Global major OEMs start
assembly in India
(GM, Ford, Honda, Hyundai,
etc.)
Imports allowed from April
2001; alignment
of duty on components and
parts to ASEAN
levels
Implementation of VAT

PRODUCTION: INDIA AS THE MANUFACTURING HUB

India with its rapidly growing middle class, market-oriented stable economy, availability of
trained manpower at competitive cost, fairly well-developed credit and financing facilities and
local availability of almost all the raw materials at a competitive cost has emerged as one of
the favourite investment destinations for the automotive manufacturers.

Japanese auto major, Nissan Motor Co, has identified India as one of the five low-cost
countries to manufacture its new generation compact cars, including the Micro.

Hyundai has made India its global hub for manufacturing small cars. It will invest US$
1 billion in its second plant in Chennai by 2013. In addition, it is also investing US$ 40
million in its R&D facility in Hyderabad.

General Motors has so far invested about US$ 1 billion into its Indian operations. It has
already started production of its small car, Spark in its new Talegaon factory in
Maharashtra, which has been set up with an investment of US$ 300 million.

Mercedes-Benz will invest about US$ 64. 21 million in its plant at Chakan near Pune,
which would begin operations in February-March next year. The plant would have a
production capacity of 2,500 trucks and buses and 10,000 cars over two shifts per year.

Renault has entered into 50:50 joint ventures with Nissan Motors and together they
have set up a manufacturing facility near Chennai at a cost of US$ 901.35 million to
deliver 400,000 cars annually.

Skoda Auto plans to make India its regional manufacturing hub. It will start producing
cars in India by 2010 with a manufacturing target of 50,000 units. Besides the domestic
market, these will also be exported to neighbouring countries like Nepal, Sri Lanka,
Burma and Bangladesh.

DOMESTIC MARKET:According to the Society of Indian Automobile Manufacturers

(SIAM), the Indian auto industry recorded a production growth of 8.39 per cent during the
34

current fiscal year till October 2008, over the same period in the previous fiscal.

SALES: The growth of the passenger vehicles segment during AprilOctober 2008 was
4.87 per cent over the same period, the previous year. Passenger cars grew by 3.51 per cent,
utility vehicles by 6.33 per cent and multi-purpose vehicles by 18.15 per cent in this period.
However, cumulative sales of commercial vehicles segment registered a decline during the
period. The segment registered a decline of 2.97 per cent during AprilOctober 2008 as
compared to the same period last year.
In the three-wheelers segment, passenger carriers grew by 19.64 per cent during April-
October 2008.

Two-wheelers registered a growth of 6.65 per cent during AprilOctober 2008. Mopeds,
motorcycles and scooters grew by 4.77 per cent, 6.59 per cent and 6.79 per cent, respectively.
Electric two-wheelers segment also grew by 54.25 per cent.

INDIA AS THE EXPORT HUB :

In terms of manufacturing excellence and availability of low-cost quality components as well
as a fast expanding domestic market, India is all set to become the global export hub of the
automobile industry. The exports markets have helped carmakers such as Maruti Suzuki and
Hyundai Motor India post greater sales overseas than in the domestic market. According to the
figures released by SIAM, the period from AprilOctober 2008 saw automobile exports
registering a growth of 29.36 per cent.
As the world moves away from big cars to smaller makes, owing to high fuel costs and general
recessionary trends, the small car advantage presents a huge business opportunity for car
makers in India. The Indian car market accounts for 71 per cent of small cars, while in China it
accounts for 33 per cent. Home-grown auto major, Maruti Suzuki, the country's largest car
maker, currently exports Alto, M800, Omni, Wagon R and Zen Estilo to non-European markets
such as Chile, UAE, Algeria and East Africa. The Japanese car maker, which exported 53,000
units in 200708, will up it to 200,000 units by 2010.
Korean car maker Hyundai exports 40 per cent of its small car production, primarily 'i10'
and 'Santro', which sells as 'Autos' in 97 countries across the world. The sales of its
newly-launched compact car i10 touched 106,749 units in the overseas markets within seven
35

months of being launched in December 2007.

As a part of its strategy to make India an export hub for compact cars, Hyundai Motors has
raised production to 0.6 million units per annum. The latest addition to the list is Nissan, which
plans to buy 50,000 A-Star compact cars from its rival Maruti Suzuki and export to markets in
Europe as well as make small cars in India and start exporting it to Latin American and African
countries by 2010. The car makers in the markets like Latin America and Europe too have
ramped up sourcing orders of small cars from Indian companies.

FDI, MERGERS, ACQUISITIONS AND JOINT VENTURES In sync with the

dynamics of an open market, mergers and acquisitions and joint ventures have continued to be
the driving force in the Indian automobile industry. Leading Japanese, Korean, European,
French, Italian and American automobile companies have either set up their own
manufacturing base in India or have tied up with Indian automotive firms to roll out new
products from Indian market. The list includes Toyota, Nissan, Renault, Fiat, Honda,
Kawasaki, Cummins and many more. On the other hand, Indian companies have also been
bullish in acquiring foreign automobile companies to reinforce their presence in the global
market.
The biggest acquisition in the first half of 2008 has been the Tata Motors' acquisition of
Jaguar-Land Rover from US automobile firm for US$ 2.3 billion. During this period, another
auto major, Mahindra & Mahindra has acquired three Italian companies - G R Grafica
Ricerca, Metalcastello and Engines Engineering. Another event is Daimler AG's
acquisition of 26 per cent stake in Sutlej Motors.
The prominent private equity deals in the first half of the year include Golbot Holding's (a
Goldman Sach arm) 3.68 per cent stake in M&M for US$ 175 million, AIG Global
Investment's US$ 20 million in Unipart, AIG's 14.5 per cent in Kinetic Engineering and Phi
Advisors' 10 per cent in M&M's subsidiary First Choice.

EMERGING TRENDS: SMALL CARS, HYBRID CARS : One of the innovative

cars which is prominent in existence in the southern zone of India is the electric car, Reva.
Reva has now begun to capture other markets too, with emphasis shifting to saving fuel. Other
carmakers such as Hero Electric and M&M are coming out with electric versions. Recently,
after the launch of Nano by Tata Motors, the global automotive market has shifted its focus
on the huge potential of small car segment. The landmark innovation has shed light on a vast
market of potential consumers who were hitherto unable to afford a car.
The Invest India Incomes and Savings Survey 2007, by IIMS Data works, and another study
by CRISIL Research suggest that there is a huge demand base for entry level cars in India. The
36

immediate potential demand base for a car of 1.6 million units, according to the former, is
based on the respondents, who do not own a car at present but aspire to own one in the next 12
months. Nearly all automotive giants have geared up towards leveraging the prospect of this
segment.

Quite a few of Indian auto-makersMaruti-Suzuki with its 'Splash' and 'A Star',
Hyundai with 'i20', Fiat with 'Grande Punto'plan to roll out new small car models by
the end of 2008.

General Motors plans to roll out its new mini car next year from its Talegaon plant,
near Pune. This will be followed by the launch of a sedan category car named Cruz by
2010.

Tata Motors is also set to offer an all-new version of its Indica, which has lured the
Indian auto consumer segment for the last many years.

Many new players would also make an entry into the small car segment. Honda, with
its much-awaited 'Jazz', and Volkswagen, with an Indian version of its popular 'Polo
compact', are among the prominent ones.

Global biggies like Toyota and General Motors are also expected to join the
bandwagon by 2010.

Apart from that it is the hybrid car that has caught the attention of the Indian auto
manufacturers. India's first hybrid car, Honda's 'Civic' sedan has been launched in June
2008.

Following the precedence, home-grown majors like, Tata Motors and Mahindra &
Mahindra are developing hybrid cars.

Even BMW is planning to introduce its hybrid car to India within two years of its
global launch due in the next 18 months.

AUTOMOTIVE MISSION PLAN 20062016:

The vision of the Automotive Mission Plan (AMP) 20062016 is to emerge as the destination
of choice in the world for design and manufacture of automobiles and auto components with
output reaching a level of US$ 145 billion accounting for more than 10 per cent of the GDP
and providing additional employment to 25 million people by 2016.
37

As per the AMP, it is estimated that the total turnover of the automotive industry in India
would be in the order of US$ 122 billion159 billion in 2016. It is expected that in real terms,
India would continue to enjoy its eminent position of being the largest tractor and threewheeler manufacturers in the world and the worlds second largest two-wheeler manufacturer.
By 2016, India would emerge as the worlds seventh largest car producer (as compared to
the eleventh largest currently) and retain the fourth largest position in world truck
manufacturing sector. Further, by 2016, the automotive sector would double its
contribution to the countrys GDP from current levels of 5 per cent to 10 per cent.

LEADING PLAYERS AND SEGMENTS IN WHICH THEY OPERATE

Manufacturer
Ashok Leyland
Asian Motor Works
Atul Auto
Bajaj Auto
BMW India
Daimler Chrysler India
Eicher Motors
Electrotherm India Electric
Fiat India
Force Motors
Ford India
General Motors India
Hero Honda Motors
Hindustan Motors
Honda
Hyundai
Kinetic Motor
Mahindra & Mahindra
Majestic Auto
Maruti Suzuki
Piaggio
Reva Electric Car Co.
Royal Enfield Motors
Scooters India
Skoda Auto India
Suzuki Motorcycles
Swaraj Mazda Ltd.
Tata Motors
Tatra Vectra Motors

Segments
LCVs, M&HCVs, Buses
M&HCVs
Three wheelers
Two and Three Wheelers
Cars and MUVs
Cars
LCVs, M&HCVs, Buses
Two Wheelers
Cars
Three Wheelers, MUVs and LCVs
Cars and MUVs
Cars & MUVs
Two Wheelers
Cars, MUVs and LCVs
Two Wheelers, Cars and MUVs
Motors Cars and MUVs
Two Wheelers
Three Wheelers, Cars, MUVs, LCVs
Three Wheelers
Cars, MUVs
Three Wheelers, LCVs
Electric Cars
Two Wheelers
Three Wheelers
Cars
Two Wheelers
LCVs, M&HCVSs, Buses
Cars, MUVs, LCVs, M&HCVs, Buses
M&HCVs
38

Toyota Kirloskar
TVS Motor Co.
Volvo India
Yamaha Motor India

Cars, MUVs
Two Wheelers
M&HCVs, Buses
Two Wheelers

MARKET RESEARCH
Market research often refers to either primary or secondary research. Secondary research
involves a company using information compiled from various sources, which is about a new or
existing product.. Primary market research involves qualitative research (such as focus groups or
one-on-one interviews) and quantitative research (such as surveys) as well as field tests or
observations conducted for or tailored specifically to that product. Primary research, which is
also called field research or original research, is useful for finding new information and getting
customers' views on products.

SCORPIO:
Having defined the competitive framework, the next task undertaken was that of analyzing the
consumer. Consumer segments of B and C category car buyers were analyzed in terms of their
expectations from a car, their perceptions about cars and their relationship. Proprietary
techniques of research, of the advertising agency Interface Communications, like Mind & Mood,
ICON and VIP were used to understand this consumer. The findings were:
* Size matters- big size stands for status
* Consumers seek latest technology
* Imagery but at affordable prices
* The sheer thrill and passion of driving an SUV
* Power of the vehicle makes a statement
* But along with the others, luxury was a very important parameter
* International vehicles define imagery

THE MARKETING ENVIRONMENT

39

Marketing environment consists of the actors and forces outside marketing that affect marketing
managements ability to build and maintain successful relationships with target customers. The
marketing environment offers both opportunities and threats. The environment continues to
change rapidly. The marketing environment is made up of Micro-environment and Macroenvironment.
The Micro environment consists of the actors close to the company that affect its ability to
serve its customers. These actors are: the company, suppliers, marketing intermediaries, customer
markets, competitors and publics.
The Macro environment consists of the larger societal forces that affect the microenvironment.
These forces are: demographic, economic, natural, technological, political and cultural forces.

GM STUXX:
THE DEMOGRAPHIC ENVIRONMENT
The demographic position will be on the United States. Since, the target market is for the middle
class; it will provide a boost for the 32% of the total population. This product will produce a
superior value to customers who always value the brand. Also,
it will keep the popularity of the product at their trend. In this case, more and more customers
will be able to keep this product if it satisfies their condition. Additionally,
the middle class group will be loyal to this product brand and as generation goes by;
this product will be there forever. On the other hand, this product is also designed for students,
and working class people. This is due to the fancy and environmental design.
Students will be so grateful to have fancy car while the working class group will tend to afford
such an affordable environmental car design.
THE NATURAL ENVIRONMENT
This product is basically designed to reduce the carbon emission from fuels and help to preserve
our environment. It is very important to design such car to help decrease the rate of carbon
dioxide from the air and provide a better condition to tackle global warming. This car will
provide a boost to the natural environment because it is safer and has an image to be friendlier to
the environment itself. In this case, more and more people will tend to buy such car to protect the
environment by reducing the carbon emission to the air.

THE ECONOMICAL ENVIRONMENT

40

The world is facing a shortage of fuel and it has become an economical crisis to
everycountry. This is evidence as the price of fuel is increasing and the probability of the price of
a barrel to increase at any day is very high. Therefore, this product will help customers to save
money because it consumes less fuel. The fuel consumption is one of the best criteria based on
this product. On the other hand, customers will be able to satisfy with this kind of product
because it is not too expensive and everybody has the privilege to afford one. This product will
satisfy the superior value of all different customers since it has a very good design to solve to
fuel shortage, less expensive, and can be affordable to anyone.
THE TECHNOLOGICAL ENVIRONMENT
The fastest growing of information technology helps this product to be at its best. Its
design is basically provided with the help of information technology. Looking at its design, this
product benefits a lot from the technological sectors. This proves that this product is favourable
to the environment. Also, this product can be modified or even upgraded to the standard where it
will be suitable at any environmental condition. TheInformation technology is very effective in
letting this product to be very efficient. In this case, it helps customers to satisfy this kind of
product in this technological environment.
THE SOCIAL AND CULTURAL ENVIRONMENT
It is believed that protecting the environment is a great concern. Therefore, this product is
purposely designed to be environmentally friendly. As a result, most people in the United States
and elsewhere are willing to offer such kind of product to save the environment. If more and
more people are keen to buy such kind of product then the environment would be safe at any
cost. Consequently, people will be more supportive to save what is best for the communities and
the environment.

SEGMENTATION:
A market segment consists of a group of customers who share a similar set of wants
The marketer does not create the segments; the marketers task is to identify the segments and
decide which one(s) to target. Segment marketing offers several benefits over mass marketing.
The company can create a more fine-tuned product or service offering and price it appropriately
for the target segment. The company can more easily select the best distribution and
communication channels, and it will also have a clearer picture of its competitors, which are the
companies going after the same segment.In the context of automotive sector, we would be
classifying it in the following ways-:

BASED ON THE PRICE OF THE CAR

BASED ON THE LENGTH OF THE CAR
41

 BASED ON THE USER SEGMENT

BASED ON THE PRICE OF THE CAR

On the basis of price of car we can segment the car in following ways-:
Economy Segment
o The economy segment of car ranges up to Rs. 2.5 lacs. The products in ths segment are Maruti
800, Alto and the newly launched product of TATA motors i.e. NANO.
Mid- Size Segment
o The mid-size segment of car ranges from 2.5 lacs to 4.5 lacs. It includes the products like
Hyundai santro, Maruti zen, Tata Indica etc.
Luxury car segment
o The luxury segment of car ranges from 4.5 lacs to 10 lacs. It includes the products like Honda
city, Hyundai Verna, Mahindra Scorpio etc.
Super luxury car segment
o The super luxury segment of car ranges above 10 lacs. This segment satisfies the elite class of
the society. It includes the products like Skoda Laura, Honda Accord, BMW, Mercedes, Audi etc.

BASED ON THE LENGTH OF THE CAR:

A segment- Cars that are less than 3.5 meters long (800, omni)
B segment- Cars between 3.5 meters to 4 meters long( Zen, SX4, Santro)
C Segment- Cars between 4 meters to 4.5 meters long (Verna, Honda city, ford fiesta)
D segment- Cars that are more than 4.5 meters long( Mercedez, Sonata, Accord, Skoda)

BASED ON THE USER :

Segmentation of automotive sector is also based on the user of the products. Like the example of
TATA Motors, when it observed that their product INDICA is used extensively by the taxi
operators, it came up with a new model of the car having Round Tail Lights to distinguish it from
the car having vertical tail lights used by the individual buyers.
Individual Buyers
Taxi operators -:
Government /non-government institutions
TARGET MARKETS:

42

The segment that gives the greatest opportunity to the marketer is called target marketing.
VOLVO MOTORS
Volvo Motors develops its cars for buyer to whom automobile safety is a major concern. Volvo
therefore positions its as a safest a customer can buy.

HYUNDAI MOTORS :
Hyundai marketing strategy is differentiated marketing. Its primary consumer target is
middle to upper income professionals who need true value for their money and comfortable ride
in city conditions. Its secondary consumer target is college students who need style and speed. Its
primary business target is midsized to large sized corporate that want to help their managers and
employees by providing them a car for ease of transport. Its secondary business target is
entrepreneurs and small business owners who want to provide discounts to managers buying a
new car.
Each of the four marketing strategies conveys Hyundai differentiation to the target marketing
segments identified above.

Hyundai Santro is targeting middle professionals

Accent was launched to target corporate clients

NICHE MARKET
A niche is a more narrowly defined group seeking a distinctive mix of benefits. Marketers
usually identify niches by dividing a segment into sub segments.
BMW is targeting high class people but it is mainly targeting the young people who earn a lot of
money up to the age of 35-40 years and want to have a stylish saloon.
Mercedes is also targeting high class people but it is mainly targeting the CEOs, chairmen, etc
of age group of 50-60 years.

Marketing Mix:

43

A Marketing mix is the division of groups to make a

particular product
by pricing, product, branding,
place, and quality. Although some Day1 marketers
have added other P's, such as personnel, packaging
and physical evidence, the fundamentals of marketing
typically identifies the four P's of the marketing mix
as referring to "Marketing Mix" is set of correlated
tools that work together to achieve company's
objectives, they are: product, price, promotion, place.
The set of controllable tactical marketing tools, product, price,place and promotion - that the firm
blends to produce the response it wants in the target market:

Product - A tangible object or an intangible service that is mass produced or

manufactured on a large scale with a specific volume of units. Intangible products are often
service based like the tourism industry & the hotel industry. Typical examples of a mass
produced tangible object are the motor car and the disposable razor. A less obvious but
ubiquitous mass produced service is a computer operating system.

Price The price is the amount a customer pays for the product. It is determined by a
number of factors including market share, competition, material costs, product identity and
the customer's perceived value of the product. The business may increase or decrease the
price of product if other stores have the same product.

Place Place represents the location where a product can be purchased. It is often
referred to as the distribution channel. It can include any physical store as well as virtual
stores on the Internet.

Promotion Promotion represents all of the communications that a marketer may use in
the marketplace. Promotion has four distinct elements - advertising, public relations, word
of mouth and point of sale. A certain amount of crossover occurs when promotion uses the
four principal elements together, which is common in film promotion. Advertising covers
any communication that is paid for, from television and cinema commercials, radio and
Internet adverts through print media and billboards. One of the most notable means of
promotion today is the Promotional Product, as in useful items distributed to targeted
audiences with no obligation attached. This category has grown each year for the past
decade while most other forms have suffered. It is the only form of advertising that targets
all five senses and has the recipient thanking the giver. Public relations are where the
communication is not directly paid for and includes press releases, sponsorship deals,
exhibitions, conferences, seminars or trade fairs and events. Word of mouth is any
apparently informal communication about the product by ordinary individuals, satisfied
customers or people specifically engaged to create word of mouth momentum. Sales staff
often plays an important role in word of mouth and Public Relations.

44

PRODUCT
MARUTI SWIFT:
European Styling. Japanese Engineering. Dream-Like Handling.

The new Swift is a generation different from Suzuki design. Styled with a clear sense of
muscularity, its
one-and-a-half
box, aggressive
form makes for
a
look
of
stability,
a
sense that it is packed with energy and ready to deliver a dynamicdrive. Its solid look is
complemented by an equally rooted road presence and class-defining ride quality. New
chassis systems allow for the front suspension lower arms, steering, gear box and rear engine
mounting to be attached to a suspension frame. You get lower road noise, and a greater feeling
of stability as you sail over our roads with feather-touch ease.

(a) TATA INDICA

Though a late entrant, the Indica quickly established itself as the benchmark for the segment. By
offering exciting features, the car changed the rules of the category in Space, Power, Style,
Safety and Economy for international market. The Indica ensured a pleasant ride and handling
experience as it had features like wide large tyres, generous leg room and independent front and
rear suspension. It developed a new segment of diesel small cars along with its petrol offering.
The luggage space was also the best in its class.
The rigid 980 kgs steel body of the car was rigorously tested at India's first and only crash test
facility. A collapsible steering wheel, impact absorbing bumpers, anti-submarine seats, crumple
zones and side impact beams are just a few of the features that make the Indica one of the safest
cars on the roads today. Savings are ensured with the fuel-efficient 1.4L diesel engine, while the
1.4L petrol engine is optimized for performance.
45

Indica features for international market:

Collapsible steering column

Side-impact beam

Energy-absorbing crumple zones in the front

Anti-submarine seats

Child-safety locks on rear doors

Laminated front and rear windshield glass

SCORPIO:
Rational benefits: World class vehicle, good looks, car like comfort,
great value Emotional benefits: Ownership experience of thrill,
excitement and powerRelational benefits: Young modern, premium,
city companion / extension of lifestyle.

Product, Services And Branding Strategy :

What is a Product?
Product is anything that can be offered to a market for attention, acquisition, use, or
consumption that might satisfy a want or need. Products include more than just tangible goods.
Broadly defined, products include physical objects, services, events, persons, places,
organizations, ideas or mixes of these entities. Services are a form of product that consists of
activities, benefits or satisfactions offered for sale that are essentially intangible and do not result
in the ownership of anything.
Example: banking, hotel and airline.
Products, Services and Experiences:
Today, companies are creating and managing customer experiences with their products.
Levels of Products and Services:
Product Planners need to think on three levels:
1. Core Benefit: This addresses the question What the buyer is really buying?. At this level,
marketers must define the core: problem-solving benefits or services that consumer seeks.
2. Actual Product: At this level, the core benefits must be turned into actual products. Product
planners need to develop product and service features, design, quality level, brand name and
packaging.
46

3. Augmented Product: Finally at this level, the product planners must bundle the products with
services. They must build an augmented product by offering additional consumer services and
benefits.
HYUNDAI SANTRO:
CORE PRODUCT
Core Product is the problem solving services or benefits that consumers purchase the product for,
and by applying this concept to Santro you can state that the core product is speed,
transportation, and freedom to go anywhere, easy traveling, and convenience.
ACTUAL PRODUCT:
Actual product meaning the products parts, quality, features, design, brand name and
other attributes received. Now, if we use these things and combine it with Santro we can state
that the actual product is: Santro, as the brand name, it matters little about the name, because
HYUNDAI is very famous already, people will recognize the brand in an instance, and features
such as the fact that the car is fully customizable, so you can add most things to your car, i.e.
Stereo, big speakers, rims for the tires, TV in seat etc., also design, where you can choose
between a lot of colours, seat colour, and fabrics, all the things you can imagine. And of course
the quality, the car will be regular HYUNDAI standard, meaning quality will be the same as for
any other car made by HYUNDAI, which is high quality.
AUGMENTED PRODUCT
Augmented product is the additional consumer services and benefits built around the core
and actual product, as well as add value and differentiate the product from its competition. The
augmented product for Santro is after-sale services such as free yearly check up, as well as a free
oil check after 2 years, free installation of additional features when you customize your car, and
help with car insurance, and quick repair services.

PRODUCT CLASSIFICATIONS:
GM STUXX:
From the 4 product classifications, convenience, shopping, specialty and unsought, the
Stuxx is classified as a specialty good, since specialty goods are purchased infrequently, and
most of the times, buyers make special purchasing effort. By listing some of the characteristics
for specialty products we can say that substitutes are not accepted, and that the product is
infrequently purchased, and since our Stuxx is a GM we know that there are some brand loyalty
as well. And if we look at the strategy, we can note limited distribution, and consumers might
seek our product regardless of location,

STAGES IN DEVELOPING PRODUCT AND SERVICE ATTRIBUTES

47

PRODUCT ATTRIBUTES:
Product attributes consist of several categories, such as Product quality, Product features, Product
style and design. For Stuxx product quality is the performance quality, because it can be used a
lot and still last for a long time (Durability). And as for Product style we know that Stuxx offers
many colours and many styles used to attract attention from trendy consumers, and general
consumers, the style however does not contribute to better performance. For Product design, the
car has a very special chassis that allows many changes, making this a fully customizable car,
where you are free to alter appearance, features, construction, such as adding items on the back
of the car, lowering the car making it look more stylish like a race car.

BRANDING:
There are several advantages for buyers when talking about branding, first of all product
recognition, everyone knows GM, so if they know GM, then they know Stuxx as well. Quality
on Stuxx is same standard as the rest of GMs cars. There are. But not only buyers have
advantages, no, sellers as well. Here are a few examples, basis for products quality, provides
legal protection, helps to segment the markets.
BRAND STRATEGY :
A study of international brand names was done and a classification of brand names of midsize
cars and SUVs was done into groups. International brand naming trends and strategies were
analyzed. New names were generated. These brand names were researched massively first by
qualitative techniques and then by quantitative techniques.
The name that emerged as most popular, and which was also the most liked name internally at
Mahindra was SCORPIO.

BRAND ENDORSEMENT STRATEGY:

The relation between Scorpio and the mother brand Mahindra was also deliberated upon. The
strategy chosen for Brand Endorsement was - Scorpio from Mahindra - shadow endorsement,
one which does not shout Mahindra.
The Mahindra brand image was not modern and young. There was a need to create a strong
distinct modern brand. Hence Mahindra as a Masterbrand could not contribute towards
enhancing the Value Proposition. Yet Mahindra had to provide source reassurance. Also the
distribution would be through Mahindra dealerships. Hence it became a shadow endorser.

PACKAGING
48

Since product is a car, packaging might not be of much importance. Cars usually dont come in a
box. However, since Santro is made for students and older, they have decided to make a big box,
free of all charges, if the car is a gift for someones birthday. Santro is a good choice as a first
car; parents can easily buy it as a gift for their young teenagers/students.

LABELING
No labelling, however for curious users, there will be a small brochure about the ingredients
car parts, so they can see how exactly the car works, and what and where the different parts are
from.

Product Support Services:

As for product support services, there are 3 things to know: Assess the value of current services
and obtain ideas for new services. Assess the cost of providing the extra services and putting
together a package of services that delights the customers and yields profits for the company. All
these, are already applied to Santro if we look at Augmented Product, which I wrote about
earlier. Customers would be delighted about those extra services, and might tell friends about
them and in the end make more profit for the company.

Product Line Decisions (The Product Mix):

When it comes to product line decisions, and product mix to be exact; we will find that there are
3 types, namely width, length and depth. As for Stuxx, it is definitely width, because Stuxx is a
different product line for GM.

PRICE:
Maruti Swift:
After launching cars for the masses since so many years, Indias largest automobile manufacturer
is now targeting the premium segment with their latest model from the Suzukis stable. Pricing of
this premium hatchback is start from Rs.4 lakh. This price range would practically rip apart
Hyundais offering in Getz, which is priced at a much higher tag of Rs. 4.5 lakh. Both the
companies are known for their value based offerings and Maruti with their extensive service
network and brand reputation for making reliable cars should get the customers nod over their
competition.

Tata Indica:

49

Tata Motors adopted a competitive pricing strategy for Indica in the global market. Prices were
fixed on the basis of the norms prevailing in the international market. Also the prices offered by
their competitors like Toyota, Ford, Fiat, were kept in mind while deciding the prices.

Scorpio

Pricing Strategy: to be a premium brand yethaving universal appeal .Scorpio was to compete
with the midsize cars like Hyundai Accent, Ford Ikon, Opel Corsa, Maruti Suzuki Esteem on the
one side and UVs like Toyota Quails, Tata Safari and the Tata Sumo on the other. Scorpio
adopted the penetrative pricing strategy positioned in the psychological price barrier of Rs. 5 -7
Lakhs.

PROMOTION:
Maruti Swift:

When Maruti Udyog launched the Swift, the automotive industry was agog with expectation that
the car had the makings of a real winner. Three versions were launched with the base variant
carrying a retail tag of Rs 3.85 lakh, ex-showroom, New Delhi, and this aggressive pricing only
reinforced this feeling.

Event Organized By Maruti to Promote Swift:

Fever FM and Maruti Suzuki Swift organize a Night Rally for
Delhi-ites In a co-operative marketing initiative, Fever FM and
Maruti Suzuki Swift came together to organize a Night Rally in
Delhi. The Swift Night Life Rally was organized for the Swift Life
Club. The brand tied up with the station to extend the experience to
the people who were unable to participate in the activity.

50

The company plans to stage road shows, to display vehicles in the pavilions during various
college festivals and exhibition.

Hyundai
Television advertisements
Advertisements to promote and market our product are shown on leading television
channels. Major music and sports channels promote and they reach out to the youth will be
promoted through Star, Zee, Sony and
A TV Commercial by Hyundai doordarshan etc as it has more viewers.
Radio:
Radio is the medium with the widest coverage. Studies have recently shown high levels of
exposure to radio broadcasting both within urban and rural areas, whether or not listeners
actually own a set. Many people listen to other people's radios or hear them in public places. So
radio announcements are made and advertisements are announced on the radio about the product
features and price, qualities, etc.

Print Ads

Daily advertisements in leading newspapers and magazines are used to promote the product.
Leaflets at the initial stage are distributed at railway stations, malls, college areas and various
other locations.
Print ad by BMW:
Workshops and Seminars
Workshops and seminars are held in colleges and big corporate to make people aware about the
companies past performance and product features, its affordability and usage, vast distribution
network.
Banners, neon signsL:
Hoardings, banners, neon signs are displayed at clubs,
discs, outside theatres, highways and shops to promote its
brand car.
Booklets and pamphlets:

51

Booklets are kept at car showrooms, retail battery outlets, etc for the customer to read. These
booklets provide information about its company; the products offered which suits the customers
need accordingly.

TOYOTA COROLLA:
The Promotion for Toyota Corolla consists of a blend of activities making its Promotion Mix. Its
Promotion Mix consists of almost all the possible techniques of Promotion used for any other
product. Some of the major elements of Promotion Mix of Toyota Corolla are listed as under:
Advertising:
It uses many different techniques of Advertisement as a part of its Advertising Strategy.
Most of the Print Ads of Toyota Corolla are individually targeted at one of these factors such as
Comfort, Performance, Styling, Power, Leg Room, Design, and Driving Pleasure. One most
common feature of almost all the Ads is that in every Advertisement, the fact that it is the
Worlds Largest Selling Car and its presence across 160 countries is present. This is done to
because the company wants to differentiate the product in terms of its Reliability that it is an
entrusted brand of 30 Million people across the globe. The fact that it is present in 160 countries
proves that it is a Global Car.
There are 3 TV Commercials of this Car in India. The Commercials show that this Car is targeted
mainly at the Indian youth and young Executive. It has been positioned as a little sportier which
is the main reason that it is for young people and is also like by them too.
The Brochures, Posters/Leaflets are such designed that shows that Corolla is a car for people
who demand Performance, Style, Power and Sheer Driving Pleasure. The car being a perfect
combination of these factors makes it a huge success across its segment.
The Other Sources of Advertisement include Bill Boards, Display Signs, POP, Displays,
Symbol/Logo. The company does the Advertising of Corolla by displaying Bill Boards and
Display Signs at various target places where it feels that prospective buyer will come across it. At
the showroom also, there are huge amount of Point Of Purchase Displays and also
Symbols/Logo which add to it.
One of the major sources of Sales Promotion is Trade Fairs like AUTO EXPO, MOTOR
SHOW etc. The company used to take part in these types of fairs and used it for its Sales
Promotion. But now the trend is shifting because the company thinks that if they want to launch
a product on a National Level, then there is no need for such kind of shows as now there are
various other powerful sources of media available to them. Moreover the cost spent on these
kinds of fairs was not justified. So therefore the company is now keeping away from fairs. In
1999 Toyota last time participant at the RAC rally in Britain.

52

Some other Sales Promotion technique used by the company is the Festival Season Offers it
introduces in the market at the time of Diwali, New Year, Christmas, Navratri etc to boost short
term sales.

METHODS OF SELLING
PERSONAL SELLING:
Personal Selling largely takes place at the Dealers End. The
way the customer is attended depends mainly on the Dealer
as he acts as an interface between the company and the
Consumer.The various cases in which Personal Selling takes
place is Individual Sales, Corporate Sales, Sales
Presentations, Fair and trade Shows. Mostly in case of
Individual Sales the Customer goes to the showroom and
takes a look at the product. There he is attended to by the
Sales Personnel of the Dealership. Sometimes the Senior Sales Executive has to make Sales
Presentation to Corporate Buyers. Personal Selling is also practiced at Trade Fairs and Auto
Shows wherein the Company appointed Sales Personnel attend prospective customers and also
book their orders.
DIRECT MARKETING:
In the case of Direct Marketing the Company Officials directly contact the Prospective buyers
with the information available through various sources. For example in case of Road Shows,
Trade Fairs, Auto shows etc. Sometimes the existing customers also provide references of
prospective buyers such as their friends or relatives.

Toyota Stall at the Auto Expo:

GM STUXX:
GMI has launched several industry first programs such as Opel Club Card facility, Opel rnivals,
Opel Autobahn newsletter, chauffeur training programmes, mobile road-show caravan, car
exchange programme for Opel customers, OK 5-Star used car programme, There is two-year and
four-year warranty schemes, 2 year service holiday etc. Such programmes have helped GM in
building its brand equity and developing a loyal customer base.

Scorpio:
Brand Promise: Luxury of a car. Thrill of an SUV this brand
positioning addresses the key consumer Insight and the product
delivers the promise. The position is also a unique proposition, which
will help the brand have a distinct image in the consumers mind.
53

Baseline - Nothing Else will do

The baseline captures the essence of the brand, which is superiority and uncompromising
attitude. It also summarises the spirit behind the making of the Scorpio.
Media Strategy:
*Dramatic and high impact launch
* High visibility
* Push brand image even by the media vehicle
Building impact through multiple-media:
* PR, Mass Media, Direct Marketing, Events
Public Relations:
Pre-launch excitement and buzz was created by a full blown PR program. Media coverage on the
IDAM process, the people behind the Scorpio, the obsession, the world class technology, etc set
the tone for the hyped up launch. PR was also the first tool used for launching the Scorpio. The
coverage of the launch was massive. It got four cover stories
Mass Media:
While the media targets would be achieved through the right selection of the media mix, the
Scorpio media posture was to ensure that Scorpio was present on the decided media but with a
difference. Scorpio would use media innovations to create differentiation on the traditional
media and do things in a bigger and better manner.
Customer Relationship Management (CRM):
CRM as a tool was used to create positive word-of-mouth, to monitor customer experiences and
generate referrals. A series of CRM activities were implemented with regular direct
communication, events and customer research. The CRM plan included a welcome Pack on
filling up Scorpio Club (Top Gear) form, satisfaction surveys, Events, Festive offers, Rewards
Program, etc.

TATA INDICA:
More car per car is the famous tagline of this product. The Indicas positioning has remained
consistent with the brand's offering in an increasingly competitive market. The Indica is now
synonymous with the word More, by encapsulating the inherent product strengths and marrying
them with the customer trait of desiring More.

54

A promotion strategy for Indica v2 in international market is more or less same as that of the
Indian market. Media innovations have been a key to the success of the Indica.

PLACE
Maruti Swift:
The car manufacturing company, called Maruti Suzuki Automobiles India Limited, is a joint
venture between Maruti Udyog and Suzuki Motor Corporation holding a 70 per cent and 30 per
cent stake respectively.
The Rs1,524.2 crore plant has a capacity to roll out 1 lakh cars per year with a capacity to scale
up to 2.5 lakh units per annum. The car manufacturing plant will begin commercial production
by the end of 2006.
The engine and the transmission plant has owned by Suzuki Power train India Limited in which
Suzuki Motor Corporation would hold 51 per cent stake and Maruti Udyog holding the balance.
The ultimate total plant capacity is three lakh diesel engines. However, the initial production is 1
lakh diesel engines, 20,000 petrol engines and 1.4 lakh transmission assemblies.

TATA INDICA:
Tata automobile group have a very large distribution network all over the world. Tata Indica v2 is
exported and assembled in many countries. South Africa has an assembling unit for consumer
vehicles. Other places where the companys products (Tata Indica) are exported and in some
assembled also are mentioned below:

Africa :- Algeria , Angola , Ethiopia , Ghana , Kenya , Mauritius , Sudan , Uganda , South
Africa , Senegal etc.
Europe: - Greece, Hungary, Italy, Malta, Portugal, Spain,
Switzerland, UK and Ireland.
CIS: - Belarus, Russia, Ukraine.
Asia: - Bangladesh, Malaysia, Sri-Lanka, Nepal, Bhutan.
Australia continent

PEOPLE:

55

There are various types of people in any Organization. The various types of people in case of
Toyota can be classified as Customers, Sales Executives, Society, Government, Competitors, and
Media.
The most important out of these is our Customers. A customer can be any person who purchases
the product; he may or may not use that product for himself. A consumer is one who actually
uses the product himself. For example a father purchases Corolla for his son. In this case the
father will be the Customer and son will be the Consumer. The main people involved in the
purchase decision of the car are the Family Members. In a recent study conducted, it was found
out that these days children play a major role in deciding which car to buy for the family. The
company has to seriously take into consideration all these factors. Also the factors that whether
one uses the car for travelling, office, shopping or family/personal etc.
As this car falls into a segment where price range is between 9-11 Lacs, so the company has to
target those people who not only have the ability to spend that much amount of money but are
also willing to spend that much amount of money. Data regarding the purchasing power of
different classes of people is also very necessary. Customers tastes and preferences have to be
taken into consideration.
Next comes the Sales Executives who deal with the final customers and finish the sales call. The
Sales Executives play a major role. As the people of the organization they are a window through
which the customers interact with the company. They have to be trained properly through
customized modules designed especially for them taking into consideration the various factors.
Corolla Owners Profile :

Age

: 25-45

Occupation

: Business Class or High Level Service Executives

Social Class

: These people (Lower Upper to Higher Upper Class) generally have an

existing C segment car before they purchase Corolla

Areas

: Urban/ Sub Urban, major Cities/Towns

Income Level

: More than Rs. 2 lacs p.m.

PHYSICAL EVIDENCE:
The Physical Evidence is created by displaying physically the product. Along with that
creating an atmosphere for the customers where in they feel the presence of product. Toyota
creates a powerful physical evidence for its customers through its Showrooms, Hoardings, Logo
etc. All the showrooms are designed on a common platform. The interiors of all the showrooms
across India are the same. The designs for the same are created by a team of Professionals in this
field. The designs are prepared very carefully keeping into consideration various factors such as
customers tastes and preferences, likes and dislikes etc. You will always find a Toyota
showroom having the Toyota Bill Board outside with white base and red foreground. This creates
a physical presence and people can feel the product.

56

SHOWROOM INTERIOR AND EXTERIOR:

DEALING WITH THE COMPETITION:

Poor firms ignore their competitors; average firms copy their competitors; winning firms lead
their competitors
PHILIP KOTLER

GENERAL ATTACK STRATEGY

FRONTAL ATTACK: the attacker matches its opponents product, advertising, price and distribution.

57

In this advertisement BMW is using frontal attack strategy against its biggest competitor AUDI

COMPETITIEVE FACTORS OF AUTOMOBILE INDUSTRY OF INDIA

The automotive sector is one of Indias largest and fastest growing manufacturing
sectors. It is ranked the 11th largest passenger car producer in the world. In the
category of motorcycles and scooters, India is ranked 1st and 2nd respectively.
With India increasingly liberalizing its market place, many new joint ventures
evolved, resulting in close to 24 global auto manufacturers setting up their shop in
India.
Competition in India:
As a result, competition in Indias automobile had been heating up in the recent years. Many
global players in the automobile have already set up presence in India. Most of them are through
tie-ups with dominant local players, while some are done entirely on their own.
In the absence of strong competition in the past, the local car manufacturer Maruti Udyog Ltd
(MUL) has virtually dominated the Indian automotive market in the passenger segments since
the 1980s. As the automotive manufacturing sector rapidly evolved through the dynamics of
open market and deregulation, many new joint ventures (both technical and financial) were
formed between local players with leading global manufacturers. In 1982, MUL, then a wholly
58

government-owned company, signed up a collaboration agreement with Suzuki of Japan to

establish the volume production of contemporary models. Subsequently, the licensing regime
was scrapped in 1993 paving way for 17 new ventures, of which 16 are now manufacturing cars
since then; there has also been an emergence of new competition for higher value segments of
the passenger car market. Hence, local players like MUL also began to face competition from
new foreign car makers. Ford entered the mid-range market with the Ikon model in April 1998, a
move which was followed by Honda, Mitsubishi, Hyundai, and Daewoo. Other players, Hyundai
and Daewoo, have since improved their share of the passenger car market with new models.
For the 4-wheelers segment, MUL/Suzuki dominates the automotive landscape holding a 33%
share of the passenger car market in 2004/05. In the second place is Tata Motors, a local
company, commanding 26% share, while Hyundai Motor ranked third with 15% share and the
rest
split
amongst
close
to
2
dozen
other
manufacturers.
For the 2-wheelers segment, it remains quite a local dominant game but global players also have
obvious presence in the market. Major players in this segment include Bajaj Auto, TVS Suzuki,
LML Limited, Hero-Honda Motors, Yamaha Motor India, Kinetic Engineering, Maharashtra
Scooters Majestic Auto, Kinetic-Honda Motors, Royal Enfield (India), Scooters (India), Greaves
Ltd. Foreign manufacturers also have presence in India through their 100% owned subsidiaries,
e.g. Honda Motorcycle, Scooter India Pvt. Ltd. M/s Honda Motor Co., Japan, Yamaha Motor,
Japan. The largest player is Hero Honda Motors, accounting for 40% of market share, followed
by Bajaj Auto and TVS Motor, which account for 27% and 18% respectively.

59

DISTRIBUTION CHANNELS
SCORPIO:
Since the Scorpio was targeted at an urban clientele it needed a stronger distribution presence in
Metros and urban areas. Hence, the distribution channel had to focus on providing an appealing
experience for modern car buyers and on offering international standards of auto retail.
The Scorpio was launched in a phased manner - first in Metros Mumbai, Delhi, Bangalore,
Chennai. Twenty cities were included over a period of 4 months and within a year 50 cities were
covered. This ensured attention to main markets and to ensure that initial production of the
vehicle could match demand. Dealerships were revamped prior to launch in a particular city.

The Marketing Distribution Channel of Toyota Kirloskar Motor India, the Manufacturer
of Corolla, is a Single Level Channel depicted

60

Flagship Dealer

Consumer

DISTRIBUTION CHANNEL OF HYUNDAI:

STOCKIST

DEALERS

SUB DEALERS

BOOKING AGENTS

61

The value chain:

The Value-Chain Network within Stuxx is a significant medium for measuring the
products quality and performance, from Inbound Logistics-to- Operations-to-Outbound
Logistics-to- Marketing/Sales-to-Service. As a manufacturing firm, GM that produces Stuxx
manufactures the vehicle and then distributes it to its store all over USA. The whole team
network has a common purpose in operation and that is to produce and to sell it to make the
customer smiling when disembarking. This common belief has brought a successful feedback to
the overall sales and because providing the service for selling is considered an important task by
the employees at Stuxx, it has never failed. Stores are designed so that accommodating a
customer is luxurious but keeping his/her perception to as not expensive-sense.

HUMAN RESOURCE MANAGEMENT:

62

Personnel management is that part of management process which is primarily concerned

with the human constituents of an organization.
Objectives:

To help the organization reach its goals.

To employ the skills and abilities of the workforce efficiently.

To provide the organization with well-trained and well-motivated employees.

To increase to the fullest the employees job satisfaction and self-actualization.

To develop and maintain a quality of work life.

To communicate HR policies to all employees.

To be Ethically and Socially Responsive to the needs of society.

Importance:

Social significance: proper management of personnels, enhances their dignity by

satisfying their social needs.

Professional significance: By providing healthy working environment, it promotes team

work in the employees.

Significance for Individual Enterprise: It can help the organization in accomplishing.

HR VISION :
Lead and Facilitate continuous Change towards organisational Excellence ; create a
learning And vibrant organisation with High sense of pride amongst its Members

CULTURE BUILDING INITIATIVES

SINCE INCEPTION:
Japanese Spirit Management philosophy of Team
C
ommon uniform
O
pen office
C
ommon Canteen
63

FOCUS OF EFFECTIVE MANAGENENT PROCESS

Top Driven HR MD is also Director HR

HRs role of a facilitator
Line managers as HR Managers
Year of the Customer

HR INTERNAL CUSTOMER FOCUS

Focus on Internal & External Customer

HR INITIATIVES

Prepare MUL Strategic Business Plan-2000-2003; To achieve the Vision & Goal
Improve the performance Appraisal system - its process, skill & usage
Introduce a Potential Appraisal System
Improvements in internal & external Training & its effective utilisation. Training need
identification.
Systematic career planning ; Job Rotation ; Empowerment; Job enrichment
Periodic communication meeting at various level; Roll out of Vision
Raise cost consciousness for cost control and reduction
Exposure on Brand Strategy to all non- marketing staff
Retention of Talent.

INDUCTION SUCCESSION:

Transparent Recruitment & Selection process

Recruitment on an All India Basis no sectoral or
Region specific
Recruitment of Best available Talent in the Country

ENGINEERS CAMPUS - IITS/RECS/RORKEE/HBTI

ALL-INDIA TEST
MBAs IIMs/XLRI
CAs - Rank Holders
Technicians - ITIs diploma holders after All
India Exam & Apprenticeship In MUL
Lateral Entry for Experienced Professionals

64

SUCCESSION PLANNING
POTENTIAL & PERFORMANCE
VACANCY BASED

Open Office Easy accessibility, Speedy

Communication and decision making
Morning Meetings
Morning Exercises
Management Committee Meetings every
Tuesday
Single unaffiliated Union
Excellent Industrial Relations scenario no
loss of mandays due to strike/lockout etc. in
past 5 yrs.
Maruti Udyog Sahyog Samiti a forum for
Non-Unionised Staff
Delayered Organisation Structure
Workers(Techn. / Asst.), Supervisors,
Executives, Managers

INDUCTION PROGRAMME
Objective:
The objective of this program is to facilitate smooth induction of the new DSEs into their
place of work i.e. Maruti dealerships. This program attempts to orient the new DSEs on a few
important parameters, which are listed below:

Overview of Maruti and Suzuki:

Building understanding of the car market in India and various segments

Understand MULs product range and positioning in each segment
Understanding the basics in the automobile industry
Overview of each Maruti model and the MUL Advantage
Overview of the selling process and how to uncover needs of a customer to do need based
selling
65

 Role of financing as a sales tool and the various financing options available
Ensuring personal effectiveness
Understand the attributes of a good DSE

MEANING OF RECRUITMENT

It is the process of searching the potential candidate and offers him or her the job

It is positive in nature in the Indian context. Process of identifying and hiring bestqualified candidate.
RECRUITMENT PROCESS OF MARUTI UDYOG LTD:
The recruiting procedure at a Maruti dealership is as follows:
FOR A PARTICULAR DEALERSHIP
The dealership should release an advertisement.
Depending on availability of infrastructure
Interview of shortlisted/ qualified personnel
MEANING OF SELECTION:
It is the process of searching the potential candidate. It is negative in nature in the Indian
context. But it is positive in the US context.

Steps in Selection Process of Maruti udyog ltd:

Selection process consists of a series of steps, at each stage, facts may come light which
may lead to the rejection of the applicant. It is a series of successive hurdles or barriers which
an applicant must cross. These hurdles or screens are designed to eliminate an
unqualified candidate at any point in the selection process There is no standards selection
procedure to be used in all organizations or for all jobs. The complexity of
selection procedures increases with the level and responsibility of the position to be filled.

Preliminary Interview (screening applications)

Application Form
Selection Test
Employment Interview
Medical Examination
Reference Checks
Final Approval
Employment.
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 Induction.
Follow up (Evaluation)
IMPORTANCE OF TRAINING
Training and Development helps in optimizing the utilization of human resource that further
helps the employee to achieve the organizational goals as well as their individual goals.

Annual Training Plan - All Levels

Training customised to meet Organisational Objectives
Topics selected based on Vision, Values & Departmental
Feedback of Industry-wide Managers
Competency Mapping to identify Individual Training Needs
Technical Training on latest Technologies abroad at SMC, Japan

STRONG FOCUS ON TRAINING INITIATIVES:

Build a Learning Organisation
Continuous Value Additions to Professional Skills
Customised Training
Training to the personnel of Business Partners
OVERSEAS TRAINING :
Training held in co-ordination with SMC, Japan and
AOTS (Assoc. for Overseas Tech. Scholarship)
(covered 1600 employees under the various schemes)
6 months SMC Training for Technicians
OJT in SMC, Japan (2 batches/yr of 50 each)
9 months Javada Training for Press, Tool & Die
Specialists - Design & Maintenance
AOTS Managerial Training (4-10weeks) for Manager &above - Managerial Best
Practices
AOTS Technical Training (3.5 to 6 months) for
Supervisors & above - Technological Knowhow
R & D Training (2 yrs.) - Research on new Technologies
APPRAISAL REWARD
Appraisal:
A systematic, periodic and so far as humanly possible, an impartial rating of an
employees excellence in matters pertaining to his present job and to his potentialities for a better
job.
New Appraisal System based on KRAs &Targets
Review of Targets at regular Intervals
People Development an important KRA
REWARD

67

 Promotions based on Performance

Productivity & Profit-linked Incentive Schemes
Training including Long-term SMC Japan Trg.
Highest paid workforce in the Industry, if not the Country
LEADERSHIP
Vision, Value & Team Building Workshops for Top Management
CFT (Cross Functional Teams) of Managers for Major Thrust Areas
Managers sent to Joint Ventures to upgrade their practices to MUL standards
CAREER DESIGN
It is defined as the process of deciding on the content of a job in terms of its duties and
responsibilities on the methods to be used in carrying out the job, in terms of techniques, systems
and procedures and on the relationships that should exist between the job holder and his
superiors, subordinates and colleagues
Performance & Potential based Appraisals
Fast Track Option for High-performers
Promotions after Managers Vacancy based
Interviews for promotions above Managers
SELECTION OF SUPERVISORS:
Performance / Attendance / Discipline record
Written Test & Interview
Job Rotation - including Inter-functional
OUTSOURCING HR:
Part of our Long-term Strategic Plan
Currently Trainers hired from outside
RETENTION EMPLOYEE WELFARE :
Employee retention is a process in which the employees are encouraged to remain with
the organization for the maximum period of time or until the completion of the project.
Employee retention is beneficial for the organization as well as the employee.
EMPLOYEE WELFARE:
Residential Colonies for Employees Chakkarpur & Bhondsi
Hospitalisation Reimbursement on actuals without Ceiling
Vehicle Loans
Household Equipment Loans
House Building Advance
Annual Advance
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 MUL PF Trust for better Mgt., Service & speedy redress

Proposed MUL Pension Scheme
Learning Opportunity - Benchmark in Auto Technology
Professional Value addition through Training
Opportunity for foreign training at SMC, Japan
Job Rotation & Job enrichment
EMPLOYEE ENGAGEMENT -ESOPs
Maruti Udyog Ltd. Employees Mutual Benefit Fund Scheme Managed by a 10-member
Trust Fixed Equity of 0.26% Lock-in period of 3 years Transferable Internally
SUGGESTION SCHEME QUALITY CIRCLES:
For better quality and productivity
Through involvement of all employees and teamwork
During the year 1999-2000 : Suggestions Implemented - 52,054
Cost Saving (in crores) - Rs. 131.69 Crores
Number of QC Groups - 510
QC Meetings held - 7189
Target for SS & QC for 2000-01:
Suggestions Implemented - Prod. & VI - 1implmented/employee/month
Other areas - 8.4 implemented/employee/month
Cost Saving Rs. 165 crores (25%)increase for the Industry
QC Meeting - 13 meetings/QC Gp./ Year
Target - 34 marks / suggestion
Industry-wide QC Groups (8-15 members per group)
Monthly QC Meetings on the First Wednesday each Month
Industry-wide QC Competitions - Best Team sent to SMC
MDs lunch with Best QC Team & Best Suggestion Winner
SUGGESTIONS : MONETARY REWARD:
Criteria - Idea
Efforts
Result : Cost reduction / Q Improvement / Productivity
Improvement
FUTURE CHALLENGES
Realigning organisation culture based on new vision & values
Objective performance management & development system
Transparent job rotation & job enrichment
Performance linked reward and recognition system
69

Career planning & promotion policy

Revised recruitment policy
Competency mapping
Strong fucus on training initiatives
Build a learnng organisation
Continuous value addition to professional skill
Customised training
Training to the personnel of business partners
Internal Communication
Union alignment
Employee involvment & participation

THE CHALLENGES
External Level :
Integrating into Global Supply Chains
WTO Multilateral trade regimes
FTAs (i.e. Bi-lateral Trade)
Country Level :
Infrastructure
Cascading effect of Taxes
Cost of Capital
Cost of Power
Inflexible labor laws Inflexible labor laws
Firm Level :
Export as a mind set
QCDDM equation taken for granted
Logistics
Warranties & Liabilities
Challenges for CEOs

Dilemma of Investment
Addressing fast Global Business Environment
Changing mind set of teams
Developing & Employing people with right right skills skills

Appropriate Strategies the key to success:

Government :
Flexible Labor laws :
70

Stringent labor laws in India are hindering the over all development of the Industry.
Changing these archaic laws will help in attracting investment and lead to expansion of the
industry.

Cutting down R.M cost:

Government should reduce import duty and taxes on raw materials for auto ancillary
industry which will bring down their raw material cost to counter Chinese threat.
Corpus for R& D & expansion:
Since most of auto ancillary companies are up coming their range of operation is limited
to a few products. In order to encourage these companies to venture into new product categories
Government should allocate Soft loans.
Auto expo zones:
On lines on software technology parks, govt. should establish export zones of autoancillary industries, equipping them with infrastructure & offering them tax sops or holidays.
Research center:
Government should establish a research center dedicated to automobile research called Indian
institute of automobile research which can work with auto industry to develop cutting edge
technology.
INDUSTRY:
Marketing and Advertising in potential markets:
ACMA in collaboration with CII or FICCI should organize Trade fairs showcasing Indian Auto
ancillary industry both in India and abroad.
Acquiring Auto ancillary companies in potential markets:
Acquiring companies in overseas market gives a direct entry in that market to Indian companies.
For e.g. Bharat Forge acquired one of the largest forging companies in
Germany, Carl Dan Peddinghaus GmbH (CDP).
Moving up the value chain:
71

Automobiles companies are going for aggregate buying, hence company should try to acquire
tier I status and ultimately target OEM status.
Leveraging Software skills
Culture change:
Auto ancillary industry should adopt concepts like six sigma rather than continuing with post
Morton analysis.
R & D spending:
Industry should target at allocating at least 5 % of their revenues on R & D expenditures for
achieving cutting edge in technology.
GLOBAL SCENARIO
The passenger car segment has emerged as a major driving force for upstream industries
like steel, iron, aluminum, rubber, plastics, glass, and electronics and down stream industries like
advertising and marketing, transport and insurance. The car industry generates large amount of
employment opportunities in the economy. For example in the US, every sixth worker is
involved in the making of an automobile.
The global automotive car market is growing at a rate of only 2 percent per annum and is not
expected to pick up in the near term. Growth has dropped due to the increasing levels of
saturation in the larger car markets of the world. Worldwide the trend is towards ensuring that
one's products are superior in terms of quality. This will enhance the useful life of cars and,
hence, slow down growth in sales.The world car production has increased from 44.66 mn in
1996 to an estimated 48.3 mn cars in 1999. Japan, Canada and USA brought about the major
increases, which contribute to 53% of the world's car production. The largest car market - the US
market expects car sales to decline 8 to 9 per cent to 16 million cars in 2001, as compared to 17.4
million cars sold in 2000.
The USA and Japan are the leaders with around 42% of the total world market. However, since
the last two to three years, the international passenger car industry has been witnessing an over
capacity of more than 30%. The trend suggests that industry volumes may grow by just 2% or
around 10 mn vehicles per year. If this situation continues for the next few years the world car
market may witness shakeout in the near future. Already signs towards this are being observed as
the phenomenon of mergers catches on. The recent mergers in the international car market are
Ford-Volvo, Renault-Nissan, Daimler-Chrysler. A few more players are expected to join the fray
in the next few years so as to strengthen their hold in the world market. Among the top car
manufacturing companies General Motors and Ford Motors group of USA lead with a

72

contribution of 15.8% and 11.6%, of world car production, respectively. Volkswagen and Toyota
stand third and fourth with more than 9% contribution each to the world car production.

The global domination of the larger automotive manufacturers is slowly on the wane and
the trend in sales is shifting towards more "regio-centric" products. Automakers that have been
enjoying a generally prosperous spell would have to rethink on the way vehicles are designed,
manufactured, distributed or sold. Already, players like General Motors Volkswagen and Toyota
have begun to re-examine their dealer relationships and pricing strategies. Car makers would
now have to think in terms of a new customer focus and provide better financing and servicing.
Strategic tie-ups, mergers and acquisitions have become the talk of the day. A few instances are
Daimler Benz's tie-up with Chrysler of the US, Ford's acquiring of Daewoo and tie up with
Volvo Car Corporation and Renault acquiring a stake in Nissan. Such deals will certainly lead to
economy in terms of costs but it remains to be seen whether they will also create significant new
opportunities for growth.
With global consolidation in the car industry, it is expected that more international players will
work closely to bring about operational efficiencies. By nature, the car industry is highly capitalintensive and vast amounts of money are being spent on R&D. With the players getting together
to produce more technologically superior cars, they can derive greater benefits from their R&D
efforts. Profits, which are under pressure due to wafer thin margins will be boosted due to greater
economies of scale. Moreover, bigger capacities among players means lesser fixed costs per car
produced. Even if mergers are not on the cards in the near future (one can see that the DaimlerChrysler merger has not brought about synergies as expected by automobile experts),
technology-sharing and the offering of equity stakes is inevitable.
In India, the car market has become extremely competitive and come April 2001, India's
automobile market will be thrown open to imports of completely built up vehicles, which
hitherto was prohibited. With the international acquisitions and alliances, one can expect to see a
dramatic change in the auto market. If GM were to acquire Daewoo in Korea, then GM would be
in a commanding position in India with its alliance with FIAT and Suzuki motors as well.
Already Daimler Chrysler and Ford are contemplating introducing new models in India from
their various associate companies through their local subsidiaries. The situation could become
very difficult for the purely Indian automakers such as Telco, Mahindra and Hindustan Motors
unless they rethink their strategy. It can easily be seen why TELCO has been in the news on
rumors that it wants to hive off its car division and bring in an overseas partner. Reports suggest
that HM is thinking of exporting parts from its manufacturing units and also assembling and
distributing other makes of vehicles who may wish to enter into India, but cannot enter full scale
manufacture due to the small market sizes.
Clearly exports will be the big opportunity for Indian automobile companies if they can control
costs and deliver good quality output. Already Maruti, Hyundai and Ford as well as Mercedes
Benz have started exports in a small way and this can grow. Majors like TELCO and Ashok
Leyland are already exporting their products in reasonable volumes.
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:
DIFFERENT PLAYERS IN AUTOMOBILE INDUSTRY
Jagdish Khattar. Y.S. Kim. Ratan Tata. S.G. Awasthi. The four men are peers. Each has
unequivocally established himself as one of the winners in the first round of the car wars.
Between them, they control almost 80% of the Rs 30,500-crore Indian automobile market.
The battle royale in the Indian car market has entered the next phase. As the dust and excitement
of the dozens of new models introduced in the past one year settles down, the winners have
pulled way ahead of the also-rans. One old assumption has been vindicated -- that over 80% of
the Indian car market is still confined to the small, sub-Rs 4 lakh models. And those mid-size and
bigger models can only provide the icing on the cake, not the cake itself to any manufacturer.
Maruti found out that price is no longer the most important factor in winning car battles.
Daewoo's Awasthi admits candidly that he learnt precisely the opposite lesson -- that price does
matter. Kim of Hyundai found out the hard way that you could get your pricing and value
equation just right and still land up with egg on your face if you tried to cut corners in the
technology game. Ratan Tata learnt that providing an internationally designed car with a great
value proposition didn't get you far if you couldn't provide global quality standards. Both the
Indica and the Matiz had to upgrade their engines in less than one year after launch, the Honda
City had to bring in both a new body and a more powerful engine, and Hyundai had to start
offering a new variant with the power steering option barely a year after it hit the market.
From now on, the battle is expected to get more vicious. In 1999-2000, the car market bounced
back from the recession by showing a 55.83% growth! But now, no one expects the market to
grow by more than 10-15% per annum. The really big volume gains will come from wresting
market share away from rivals rather than because the market itself is growing exponentially.

MARUTI UDYOG LTD.

December 1983 heralded a revolution in the Indian car industry. Maruti collaborated with
Suzuki of Japan to produce the first affordable car for the average Indian. At this time, the Indian
car market had stagnated at a volume of 30,000 to 40,000 cars for the decade ending 1983. This
was from where Maruti took over.

74

Nineteen years back Maruti introduced the first small car in the Indian auto market. They
started with their model Maruti 800 which was very popular at that time and still its major cash
cow. The models, which were available at that time, were Premier Padmini and Ambassador.
Customers were interested in having some different types of models with some fashionable
looks. That was the perfect time to enter into market and Maruti took right step to introduce its
different models.
Maruti established its monopoly over Indian auto market India's largest automobile
company, Maruti entered the Indian car market with the avowed aim to provide high quality, fuel
- efficient, low - cost vehicles. Its cars operate on Japanese technology, adapted to Indian
conditions and Indian car users. Maruti comes in a variety of models in the small segment.
The sales figure for the year 1993 reached up to 1,96,820. The company reached a total
production of one million vehicles in March 1994 becoming the first Indian Company to cross
this milestone. It crossed the two million mark in 1997.
To fend off growing competition, Maruti has recently completed a Rs. 4 billion expansion
project at the current site, which has increased the total production capacity to over 3,20,000
vehicles per annum. It has further plans to modernize the existing facilities and to expand its
capacity by 1,00,000 units in the year 1998-99. The total production of the company will exceed
4,00,000 vehicles per year.
Maruti registered sales of 39,838 units in April 2004, up 38.4% yoy from 28,793 vehicle units in
April 2003. This includes 2,910 units of exports compared to 3,150 in April 2003, decreasing by
7.6%.
HYUNDAI: CAN THE DREAM RUN CONTINUE?
Hyundai has become the undisputed number two in the Indian auto market, and the only one -even rivals admit -- with the capability of giving leader Maruti a run for its money in the total
volume stakes though Hyundai in India currently sells just about a quarter of the numbers that
Maruti does.
Hyundai got everything right because it got the value-price-technology equation almost perfectly
right from day one. The Santro was an instant winner from the day it was introduced in the
Indian market because it offered the optimum mix of space and technology in the small car
market, at a highly competitive price. And with easy consumer financing available in the market,
Hyundai did not have to work too hard to persuade even entry-level car buyers to go for the
Santro instead of the Maruti 800. And when it launched mid-size Accent some time later,
Hyundai proved that it could get its value-price equation consistently right across different
segments.
But despite its great start, Hyundai made two mistakes. The two miscalculations that Hyundai
made? First, while Hyundai Santro was harping on the fact that it was a new generation car, it
hadn't brought its latest engine technology to India. It was a mistake that rival Matiz capitalised
on once Euro-II pollution norms were announced for the metros. Daewoo made most of the fact
that every Matiz was Euro-II complaint -- while Hyundai could offer an Euro-II version only at a
higher price. Though the latter moved quickly in a damage-control exercise, the Santro did lose a
bit of its sheen. it miscalculated demand for its cars. The result: when demand peaked for the

75

Santro, it was in no position to offer the car off-the-shelf like its rivals. Buyers had to wait for
three months to get a Santro after booking it.
Hyundai is moving fast to sort out its capacity problem. Work will soon start on the second phase
of its Sriperumbudur car project, one year ahead of what was initially planned. An additional
investment of $400 million will help expand capacity from 1.2 lakh cars to 2 lakh cars per
annum. This expansion is likely to be completed by December, 2001, ahead of schedule. But
even that could be a bit too late as it gives rivals that much time to grab sales that would
otherwise have gone to Hyundai.
That apart, the big worry for Hyundai is that other than the Santro (the Atos in Korea), it doesn't
have any other small car in its armoury. Unlike Suzuki, which is primarily a small car specialist,
Hyundai can only introduce bigger cars in the Indian market either from its own product range,
or those of Kia Motors, which it took over last year.
Hyundai is looking a bit vulnerable now because globally it is a minnow in the car market. It
lacks the sheer money power and product muscle to keep fighting the Fords and GMs in any
market. And if Ford does take over Daewoo Motors, Hyundai's number two position in India
could be seriously under threat.

TATA MOTORS LTD.

"leading the future"

76

Tata Motors is India's largest automobile company. It is the largest commercial vehicle
manufacturer in India and 2nd largest passenger car manufacturer. It is the 5th largest medium
and heavy commercial vehicle manufacturer in the world. The popular brands of the company
are Tata Indica, Tata Indigo, Tata Sumo and Tata Safari.
QUICK FACTS:

Founder
Year of Establishment
Industry
Business Group
Listings & its codes

Jamshedji Tata
1945
Automotive
The Tata Group
BSE - Code: 500570
NSE - Code: TELCO & TATAMOTORS

Corporate Office

NYSE - Code: TTM

Bombay House
24, Homi Mody Street
Mumbai 400 001, India

Works
E-mail

Tel.: +(91)-(22)-56561676
Jamshedpur, Pune, Lucknow and Dharwad
am@tatamotors.com

Website

rbc@telco.co.in (for international inquiries)

www.tatamotors.com
www.tata.com/tata_motors

INDUSTRY ASSESMENT:
COMParitive ANALYSIS (Maruti Suzuki & TATA Motors):
The company analysis shows the longterm strenght of the company that what is the
financial Position of the company in the market where it stand among its competitors and who
are the key drivers of the company, what is the future plans of the company, what are the policies
of government towards the company and how the stake of the company divested among different
groups of people.
77

Following is the financial and Non-Financial analysis of Maruti Suzuki & TATA Motors.

Financial Analysis
1. Financial Statements
RATIO ANALYSIS OF TATA MOTORS AND MARUTI SUZUKI

EARNING PER SHARE

60
40
RS.

TATA

20

MARUTI

year

EPS measures the profit available to the

equity shareholders per share, that is, the amount that they can get on every share held. Till
2008 both the companies had a rising EPS but in 2009 both of them fall and the effect more
on Tata motors as they bought two brands Ford Motors and fall in sales results in low EPS.
But as trend shows TATA motors have potential so an shareholder expect better in future.
EPS = Net income- Dividends on Preferred stock
Average Outstanding shares

NET PROFIT
15
10
5
%
0

TATA
MARUTI

year

The trend shows that Tatas net profit margin is quite stable until it falls to 3.77 in 2009. While
the net profit of Indias no.1 car manufacturer Maruti Suzuki shows a negative trend from 2007

78

onwards. But the future prospect for both the companys profit is higher. Profit margins come
down as recession hits economy badly hence sales get reduced and cost get increased very much.
Net profit Ratio = (Net profit) 100
(Net sales)

SALES
40,000.00
30,000.00
20,000.00
Rs in crores 10,000.00
0.00

TATA
MARUTI

year

Both giants of Automobile

industry shows positive trend in Sales Revenue over the past 5year. However recession
brought hurdles but both companies have potential to grow in future as lots of products
are still to add in their portfolio. Moreover increased demand in foreign market also
seems to be a positive signal for better future.

The quick ratio is a very stringent measure of

solvency. A general rule of thumb suggests that
the quick ratio should be around 1. Maruti is
always showing a positive trend as its ratio is
always greater than 1 except in 2008, while
TATA motors was doing good till 2007, but the
performance decreased from 2008 onwards as
shortage of cash was there and current
liabilities and provision increased by Rs800Cr.

79

DEBT-EQUITY RATIO
0.6
0.4
0.2
Rs
0

TATA
MARUTI

year

A high debt to equity ratio

suggests that a company has financed its growth mostly via debt. We see that the debt
equity ratio of TATA motors is very high compared to that of Maruti. It means that a lot
of debt is used by TATAs to finance its increased operations. Sometimes the cost of the
debt financing may outweigh the return that the company generates on the debt through
investment and business activities and can lead to bankruptcy. Maruti is going very
swiftly in this field.

Debt-Equity Ratio= Total Debt

Total Equity

CURRENT RATIO
2
1.5
1
Rs. 0.5
0

TATA
MARUTI

year

The current ratio is a convenient and

reliable tool for measuring a company's level of liquidity. The ratio acts as an indication that the
firm is able to generate funds to make all needed payments in the future; thus, the ratio indicates
whether the firm is likely to be a going concern. Both the companies possess a good ratio but the
ratio which is close to 2 is desirable, so we see in graph that Maruti has more strong liquidity
than TATA Motors as its current ratio is always greater than 1. Maruti is more successful in
80

paying off its liabilities. Expansion plans of TATA brought down its cash & Bank Balance and
increase of outside liabilities.

DIVIDEND PER SHARE

15
TATA

10

MARUTI

5
0

mar'09 mar'08 mar'07 mar'06 mar'05

Tata motors and Maruti Suzuki both the companies showed a positive trend in paying dividends
till 2008, but the scenario changed in 2009 as both the companys dividend per share fell.
According to graph TATAs dividend was much higher than that of Maruti, it always provided
dividend of above 10 per share to its shareholders while maruti stick to below 5 per share, even
though the fall in dividend in 2009, still both the companies are earning good profit.
Dividend Per Share= Total amount of Dividend
Share Outstanding

BALANCE SHEET

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Sources Of Funds
Total Share Capital
Equity Share Capital
Share Application Money
Preference Share Capital
Reserves
Revaluation Reserves
Networth
Secured Loans
Unsecured Loans
Total Debt
Total Liabilities
Application Of Funds
Gross Block
Less: Accum. Depreciation
Net Block
Capital Work in Progress
Investments
Inventories
Sundry Debtors
Cash and Bank Balance
Total Current Assets
Loans and Advances
Fixed Deposits
Total CA, Loans & Advances
Deffered Credit
Current Liabilities
Provisions
Total CL & Provisions
Net Current Assets
Miscellaneous Expenses
Total Assets
Contingent Liabilities
Book Value (Rs)

Maruti Suzuki

Tata Motors

Hind Motors

Mar '09

Mar '09

Mar '09

144.50
144.50
0.00
0.00
9,200.40
0.00
9,344.90
0.10
698.80
698.90
10,043.80
Maruti Suzuki
Mar '09

272.62
272.62
0.00
0.00
4,959.26
12.09
5,243.97
981.00
3,071.76
4,052.76
9,296.73
Tata Motors
Mar '09

161.26
161.26
0.00
0.00
-77.82
8.85
92.29
57.63
71.39
129.02
221.31
Hind Motors
Mar '09

8,720.60
4,649.80
4,070.80
861.30
3,173.30
902.30
918.90
239.00
2,060.20
1,809.80
1,700.00
5,570.00
0.00
3,250.90
380.70
3,631.60
1,938.40
0.00
10,043.80
1,901.70
323.45

4,893.89
2,326.29
2,567.60
646.73
5,786.41
1,060.67
1,043.65
635.61
2,739.93
1,402.45
938.82
5,081.20
0.00
3,520.20
1,277.56
4,797.76
283.44
12.55
9,296.73
1,220.39
191.91

481.25
327.25
154.00
5.56
70.17
74.93
16.04
6.62
97.59
45.28
1.00
143.87
0.00
160.57
4.73
165.30
-21.43
13.03
221.33
154.60
5.18

Non-Financial Analysis

1. Share Holding Pattern for Quarter Ended 30-June-09

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Above is the updated share holding

pattern of TATA motors which shows that
Indian promoter share in the company is
41% that means if they are not in the
position to raise further money from
general public, Company already raised
huge money by selling their large stake
to institutional investors about 27%.
General Public also have quite large stake

2. Board of Director
TATA Motors

Being a venture of Japanese company

Suzuki big stake of the company is held
by foreign promoters which shows that
they can divest their part(small part) to
raise
money
in
future.
However
institutional investors also held 39%
major stake in the company but general
public have very small part which shows
that less presence of share in the
secondary market hence low volume

Maruti Suzuki

Mr. R. C. Bhargava
Mr. Shinzo Hakanishi
Mr. Manvinder Singh Banga
Mr. Amal Ganguli
Mr. D. S. Brar
Mr. Keiichi Asai
Mr. Osamu Suzuki
Mr. Shuji Oishi
Ms. Pallavi Shroff
Mr. Kenichi Ayukawa
Mr. Tsuneo Shashi

Mr. Ratan Tata

Chairman
Mr. N.A. Soonawala
Director
Mr. R. Gopalakrishnan
Director
Mr. S.M. Palia
Director
Mr. S. Bhargava
Director
Mr. V. K. Jairath
Director
Mr. Ravi Kant
Vice Chairman
Mr. J. J. Irani
Director
Mr. N. N. Wadia
Director
Mr. R.A. Mashelkar
Director
Mr. n Munjee
Director
Mr. Prakash M Telang
Director
3. Upcoming Ventures & Products

Chairman
MD and CEO
Director
Director
Director
Director
Director
Director
Director
Director
Director &
Managing
Executive
Office (Production)

TATA MOTORS:
Tata Motors is try to be in a position to dominate the Indian Auto industry, at least in
four-wheeler segment. Tata Motors have announced that they are interested in the idea of
designing electric cars. To take it a step further Tata has also initialized plans for the manufacture
of a hybrid car which it will market with Chryster in the U.S.
83

After the launch of Nano, Tata also apparently has its eye on the European and U.S. markets. The
company hopes to have a version for Europe by 2011 and one for the U.S perhaps by 2012. Tata
Motors, is now aiming to launch its cars in Indonesia and is also planning to sell Nano in South
America with the help of Fiat. After launching the worlds cheapest car, Nano, Tata Motors is
looking east, towards neighboring Myanmar to boost its sales by setting up a truck
manufacturing plant. As part of its expansion plans in Southeast Asia, Tata Motors had inked a
joint venture with Thailands Thonburi Auto Assemblys to manufacture up to 35,000 one tone
pickup trucks a year over the next 3-5 years. Tata Motors, is searching options to pump
approximately Rs. 8,000 cr. During the next 3-4 years on capital expenditure and product
development.
MARUTI SUZUKI:
Maruti Suzuki has expanded the capacity at its Manesar plant to 1.7 lakhs unit per annum
from January 2009. By the year 2010, Suzuki Motors plan to increase their dealership in India.
This is a step to increase their sales to one million units as well as for a better position in the
Indian auto market. The expansion is estimated to cost $ 3.5 billion, out of which a quarter will
be assigned for amplifying leadership network to 1000 in number.
As Maruti Suzuki eyes one million sales by 2010, they have firmed up a massive
expansion plan of its service network and plans to expand it to 1700 towns and cities from the
current of about 1200. The company plans to increase the number of service stations and
workshops to over 3800 from about 2800 currently. They have also been coming with specific
sales promotion programmes targeted at interior regions, among them is the Mera Sapna Meri
Maruti: New Panchayati Scheme. The Haryana government has allotted 700 acres of land to
Maruti Suzuki for hi tech Research & Development complex at Rohtak. The upcoming facility,
will see an investment in the range of Rs. 1,000 cr. to 1,500 cr. And will introduce world class
R&D facilities into India. While the development of the allotted land and construction of the test
tracks will be completed in the first phase by 2012, the overall R&D facilities will be
progressively completed by 2015.
In a move ahead, Maruti Suzuki India limited launched the Estilo with all new overall
looks and advanced technological features.

The upcoming cars in near future by both companies are:

TATA Motors

Maruti Suzuki
Products (CAR)
Expected
Launch
Maruti Grand Vitara Diesel December2009
84

Maruti 02
2009
Maruti SX4 Diesel
2009
Maruti Cervo
2009
Maruti Kizashi
2009
Maruti xl7
Maruti APV
Maruti Jimny

December
December
December
December
March 2010
June 2010
July 2010

Government Policies Towards Indian Automobile Industry:

Automobile industry in India also received an unintended boost from stringent government auto
emission regulations over the past few years. This ensured that vehicles produced in India
conformed to the standards of the developed world.

85

Though it has an advantage in India, thanks to low costs and government policies it soon faces
stiff competition from it multinational competitors all eyeing for a share in the ever growing
Indian auto sector. The policies adopted by Government will increase competition in domestic
market, motivate many foreign commercial vehicle manufactures to set up shops in India, whom
will make India as a production hub and export to nearest market.

Bring in a minimum foreign equity of US $ 50 Million if a joint venture involved

majority foreign equity ownership

Automatic approval for foreign equity investment upto 100% of manufacture of

automobiles and component is permitted

FIIs including overseas corporate bodies (OCBs) and NRIs are permitted to invest up to
49 per cent of the paid-up equity capital of the investee company, subject to approval of
the board of directors and of the members by way of a special resolution. .

Investments in making auto parts by a foreign vehicle maker will also be considered a
part of the minimum foreign investment made by it in an auto-making subsidiary in India.
The move is aimed at helping India emerge as a hub for global manufacturing and
sourcing for auto parts.

Specific component of excise duty applicable to large cars and utility vehicles will be
reduced to 15,000 rupees per vehicle from 20,000 rupees earlier.

The Proposal by the Govt. to set up an expert group to advise on a viable and sustainable
system of pricing petroleum products, as this will surely had an impact on the
Automobile Industry.

The announced reduction on the basic customs on bio-diesel is great news for all
companies working on environmental saving technologies.

86

FUTURE OUTLOOK
The passenger car segment has continued to report a strong 30%+ growth in the first month of
FY04, partly due to low base effect. The transporters strike had impacted volumes in April 2008.
The car segment is likely to grow by 20-22% during the current year. Commercial vehicle
segment is expected to grow at a higher pace on the low base of the previous year and
accelerated GDP growth in the current year.
Growth in the short term is likely to be higher following increased consumer spending (improved
economic performance) and launch of new models. The midsize segment is expected to record
the highest growth followed by the premium and economy segments.
In the economy and medium segments, it is estimated that total capacity is expected to more or
less match the expected demand by 2007-08. The premium segment of the industry is however
expected to witness acute over-capacity. The premium segment is likely to emerge as the largest
segment over the very long term as people graduate to more expensive models. In the meantime,
exports are also expected to increase because of over capacity in the domestic car industry and
the Government's policy to bring about a more liberal regime on the foreign exchange front. It is
worth mentioning that the car production capacity has increased significantly in the last three
years.
The industry will witness substantial over capacity in the next few years unless there is a
substantial spurt in sales. If not, Low capacity utilization will lead to an inevitable marketing war
between the car manufacturers which is most likely to lead to a stake out which will see some of
today's major players withdrawing from particular segments in the coming years. Consumer will
however continue to remain the KING. The prospective buyer will be the main beneficiary of the
marketing war in the industry not only in terms of prices but also better technology. There is
always a fear of the shakeout eating into your favourite brand you own, for example
discontinuation of a model.
India would have the largest young population of the world in next 20 years - If India is to
achieve a sustainable 7-8% GDP growth and 9-10% growth of industrial production, we should
have 50 million people every year moving up from middle class to upper middle class. This
defines the future vehicle owners of the country.

Based on SIAM analysis, it is estimated that we should have a healthy growth of sales (including
exports) in the automobile sector in 2004-05. Segment wise growth expectations, provided the
Government takes necessary steps that promote growth are:

Passenger vehicles
Commercial vehicles

: 10 15%
: 12 15%
87

Two wheelers
Three wheelers

: 10 15%
: 10 15%

Ending the briefing on an optimistic note, Mr Khattar concluded that the passenger vehicle
manufacturers would easily cross a domestic sale of one million vehicles during the year
excluding exports. However, the real challenge before the Indian automobile industry is to catch
up with China which was at par with us till recently and currently aspiring to be the third largest
market in the world.
With current penetration level of six cars per thousand people, the potential for growth is
significant.
In view of a couple of positive measures such as the excise duty exemption on tractors and 150%
deduction on R&D expenditure, we remain positive on the future prospects of the industry. Also,
with government pressing for improvement in road infrastructure, the position of railways as the
main carriers of goods such as food grains and cement has come under significant threat. Since
most manufacturers have a technology tie-up with a foreign major, the incentive to do R&D with
the Indian counterpart has increased. Since operating margins of auto majors have increased over
the last three years, significant further improvement from the current level is limited and to that
extent, we remain cautious.
Firstly, the international car market is growing by around 2% pa and this set to continue for the
next few years. This slow down is due to the increasing level of saturation in the largest car
markets of the world. Analysts from EIU state that this saturation level may even translate into
negative growth, given the recent trend of carmakers to opt for quality components which will
increase the vehicles useful life.
Secondly, the South-East Asian crises has been a dampener to the collective fortunes of various
carmakers worldwide. According to EIU estimates, some countries in the region have witnessed
cumulative falls of 70% this year. In Indonesia record sales reported in 1997 are not expected to
be matched until 2005. In Malaysia it is expected to be 2003 before peak sales and production
volumes are repeated and in the Philippines the market will take seven years to recover. In
Thailand, the market for cars and commercial vehicles is expected to fall from almost 600,000
units per year to 125,000 this year.
Thirdly, the global domination by the large automotive players has slowly abated with local
manufacturers getting hold over the market. Japan, Western Europe and the North American
Free-Trade Agreement area comprising USA, Mexico and Canada are expected to account for
71% of the global park by 2005, down from almost 77% at the start of the 1990s. This has come
about, as the concept of "regio-centric" cars is becoming popular.

88

FINDINGS
MARKETING:
A study of international brand names was done and a classification of brand names of midsize
cars and SUVs was done into groups. International brand naming trends and strategies were
analyzed. New names were generated.
The car manufacturing company, called Maruti Suzuki Automobiles India Limited, is a joint
venture between Maruti Udyog and Suzuki Motor Corporation holding a 70 per cent and 30 per
cent stake respectively.
Personal Selling largely takes place at the Dealers End. The way the customer is attended
depends mainly on the Dealer as he acts as an interface between the company and the Consumer.
HRM:
Prepare MUL Strategic Business Plan-2000-2003; To achieve the Vision & Goal
Improve the performance Appraisal system - its process, skill & usage
Introduce a Potential Appraisal System
Improvements in internal & external Training & its effective utilisation. Training need
identification.
Systematic career planning ; Job Rotation ; Empowerment; Job enrichment
Periodic communication meeting at various level; Roll out of Vision

FINANCIALS:
The updated share holding pattern of TATA motors which shows that Indian promoter share in
the company is 41% that means if they are not in the position to raise further money from general
public, Company already raised huge money by selling their large stake to institutional investors
about 27%.
EPS measures the profit available to the equity shareholders per share, that is, the amount that
they can get on every share held. Till 2008 both the companies had a rising EPS but in 2009 both
of them fall and the effect more on Tata motors as they bought two brands Ford Motors and fall
in sales results in low EPS.
After the launch of Nano, Tata also apparently has its eye on the European and U.S. markets. The
company hopes to have a version for Europe by 2011 and one for the U.S perhaps by 2012.

89

RECOMMENDATIONS

By analyzing the industry on various parameters with the help of implementing

Fundamental and Technical tools we came to know that this industry has a lot of potential
to grow in future. So recommending to invest in Automobile Industry have no doubt is
going to be a good and smart option because this industry is booming like never before
not only in India but all around the world.

The returns which came out of this industry were very impressive recently, as if we take
an example of TATA motors it gives approx 90% return in a period of just 3 months while
Maruti Suzuki shows always a buy and hold position because there is possibility of
growth in future, same situation is in two wheeler segment with market leader HeroHonda a debt free company also have bright future ahead.

The numbers which came out in the end of financial year 2009 prove that even in the
period of recession the overall sales went up is sufficient to support to this fact. Through
Technical analysis of TATA Motors and Maruti it can be recommended that for now
Maruti share price shows that its a time to hold the position or buy more shares as there
is scope in further rise in share prices until and unless any negative reaction or sentiments
comes in the Economy.

Investing in Maruti Suzuki for long time could be a good option whereas in TATA motors
there is a chance of getting correction, as it already went on high side in a very short
period of time so holding the shares for long time could be a wrong step, so at this point
of time those who invested earlier can book their profit or new investors can buy now and
sell with in short period of time by earning profit in short period of time.

CONCLUSION

90

Indian Automobile Industry is in the growth phase and the expected growth rate is 910% for FY2009-10 compare to last year growth rate which was just 0.7% and the above facts
and figures in our study also support this truth.
Indian Automobile has a lot of scope for both two wheelers and four wheelers due to
development in infrastructure of the country and especially the rural sector in which demand of
two wheeler has increased even in recession. According to Indian Statistical Organization the per
capita income (Rs.38000) is increasing and national income at the rate of 14.4% which shows
potential to buy vehicle in auto industry. The growth rate of Indian Automobile is so fast that by
2016 Indian Industry will be world 7 largest manufacturer in all sections.
The Indian auto market is still untapped the majority of the people in country dont own a four
wheeler and all the major auto companies are trying to increase their sales by several moves.
Like TATA has launch NANO the peoples car and now TATA motors is also planning to come
out with an electric car as well as hybrid car, moreover in two wheeler segment many companies
like Mahindra and Mahindra grow even more than expectations.
From the Technical Analysis of both companies we come to know that the share price of Maruti
will move in the band of Rs.1275 to Rs.1425 and that of TATA Motors will move in the range of
Rs. 430 to Rs. 490 if certain correction made in the market.
We have also come to know that share price movement of TATA Motors is just according to the
movement of SENSEX, whenever there is a negative sentiment in the market regarding TATA
Motors there is a steep fall in the stock price of TATA Motors but we have seen quick recovery in
its share prices to regain its primary trend E.g as we seen in last 3-4 months TATA recovers
approx.90% after downfall.
By analyzing the current trend of Indian Economy and Automobile Industry we can say that
being a developing economy there is lot of scope for growth and this industry still have to cross
many levels so there is huge opportunities to invest in and this is proving as more and more
foreign Companies setting up there ventures in India.

BIBLIOGRAPHY
1. Ministry of Heavy Industries & Public Enterprises, Government of India, New Delhi

91

2.

The Economic Times. 2009-03-10. http://economictimes.indiatimes.com/News/NewsBy-Industry/Car-sales-rise-22-in-Feb/articleshow/4247812.cms. Retrieved 2009-03-16.

3. "Nissan upcoming Chennai plant to be its global small car hub - WheelsUnplugged
Automobile Industry News". Wheelsunplugged.com.
http://www.wheelsunplugged.com/ViewNews.aspx?newsid=3609. Retrieved 2009-07-09.
4. Jose, Darlington (2009-06-25). "GM to make India small car hub". mydigitalfc.com.
WORLD BUSINESS BRIEFING | ASIA - India: Ford Plans to Build Small Cars
5. Ford Set to Start Production of Small Car in India
6. Fiat Purchasing to source $1 bln parts from India
7. Ashok Leyland
8. Chinkara Motors
9. Force Motors
10. Hindustan Motors
11. Mahindra
12. Maruti Suzuki - Showroom
13. Premier Automobiles Limited
14. San Motors
15. Tata Motors - Products

www.moneycontrol.com
www.money rediff.com
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www.yahoofinance.com

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