Case Study

Case Title

The Electric Car Dream

Authors Name

Sandeep Bhasin
Assistant Professor (Marketing)

Organization

Amity International Business School, Amity University,

NOIDA, NCR of Delhi

Contact details

sbhasin@amity.edu, s_bhasin@yahoo.com
(+91) 99589 55151

Disclaimer

Although due care has been taken by the author to scan

through various publicly available information including
interviews on the topic by CXOs of leading automobile
companies, the case in intended to be used only for the
purpose of class discussion. Past data in the case is
validated. However, validity of projected data cant be
taken on the face value as it is spread over next eight years
and is broadly based on the understanding and expectation
of the industry leaders.

Case Abstract

Mr. Awasthi, CEO of Rave Automobiles, looks worried as he comes back from a test drive of his
to-be-launched sedan. He is worried of how the market would share up in future when the
government decides to delink the fuel prices completely by stopping subsidies. He expects the
fuel to touch INR 100 in next 2 years. He ponders on alternate technologies and shortlist electric
car as a viable option.
He calls for a meeting and hands over the project to Krishna Kumar, a manager with proven
track record. While handing over project, he give the research report on the Electric Car segment
to Krishna to help him get a better understanding of the dynamics involved. This will not be an
easy decision for Rave Automobiles, even though they have a majority market share in the car
2012, Sandeep Bhasin, Amity International Business School, Amity University, NOIDA, NCR of Delhi,
India

market. Krishna now knows that there are over 25 car manufactures in the process of launching
electric cars. If Rave Automobiles has to create a market, it has to be in sub-10,000 USD
segment. What would Rave Automobile do now? Will they go ahead with their electric car
dream?
The Electric Car Dream
Driving down the highway at a high speed, Mr. Awasthi wondered till how long the government
would control and subsidize the fuel prices in India. The subsidies were coming in handy to
control the fuel prices. Government has been keener on controlling the inflation with fuel price
having a direct impact on inflation. But the government was bleeding. Change in fuel prices now
was no longer a Budget special. In the last 18 months, the fuel price went at least five times. The
oil majors were registering losses and the center was pushing them to a corner expecting a
backlash from the citizens. But it was only a matter of time, Mr. Awasthi thought, before the
government decides to completely deregulate the fuel prices. And when this happens, the fuel
price would shoot up even more. This would have a direct impact on the sale of the cars. Even as
he wondered about the real cost of fuel, his cars fuel gauge was fast approaching the empty
mark. He parked his car at petrol pump to refuel his tank and noticed a young couple conversing
on the high cost of maintenance of their recently bought hatchback. He understood that the major
cost for a new car is always the fuel because the rest is taken care by the manufacturers. His
thoughts were now taking shape.
He had a long day ahead of him. He was the Chief Executive Officer with Rave Automobiles,
countrys most respected car manufacturers with manufacturing facilities in the three continents.
Rave Auto was a true Indian Multinational.

2012, Sandeep Bhasin, Amity International Business School, Amity University, NOIDA, NCR of Delhi,
India

As Mr. Awasthi entered the factory after a long test drive, which he always did with any new
design, he wondered what would change the future of cars the world over. He quickly went to his
chamber and started scanning through research that he had commissioned a couple of months
back. He wondered why even as the golden population of the country, described as audience
between the age group of 18 and 65 years, was growing, the penetration of cars was not up to the
mark. India has 15 cars per 1000 residents. A developed market such as UK, which has 560 cars
per 1000 residents, gave him an indication of demands that he could expect with an increase in
disposable income of his target segment. His study projected a combined production of over 100
million cars worldwide in 2020 by the global automotive industry. In 2010, the industry
produced 75 million cars. The expected growth looked promising. But fuel prices were playing a
spoil-sport for the expected part, he thought.
Mr. Awasthi has called an urgent meeting of engineers. All are requested to see him in his
chambers at 1400 hours, announced his office. This was to be the famous fortnightly
brainstorming session to predict the future.
Mr. Awasthi took the sheet and started addressing his team. In 2010, the automobile industry
produced only 20,000 electric cars as compared to 75 million petrol and diesel cars, he said. His
engineers looked at him with a bit of nervousness. They could gauge what was coming. Mr.
Awasthi wanted his team to start work on designing worlds cheapest electric car that would be
positioned as the new peoples car, especially when the fuel prices would touch a new high
with the government working on withdrawing all the subsidiaries. Petrol and Diesel would be
dearer and my expectation is that the price for petrol would cross INR 100 per liter by the end of
2014, announced Mr. Awasthi, and there would be a direct impact of the rising fuel costs on

2012, Sandeep Bhasin, Amity International Business School, Amity University, NOIDA, NCR of Delhi,
India

the sales of our cars in the long run. We need a future proof strategy to redefine the car industry
and we are running short on time.
What would be the expected market of electric cars in 2020, Sir? asked one of the senior-most
engineers. He was right in asking a relevant question, a question that would define the future of
the automobile industry.
My research report states that 10% of the global car market will be electric by 2020, said Mr.
Awasthi confidently. He was not sure of the Indian market. He was aware of a failed electric car
that was finally taken over by an established automobile manufacturer. He also knew that he
would face some competition from newer players who would do anything to make a difference
in the automotive industry. One of the competitors already had a product ready. Their engineers
were now working on redesigning the product to make it more customer oriented with better
design, comfort and efficiency. Thats a nice beginning into the future.. 10% of the global cars
, he concluded. Who is ready to take this challenge? he asked. All eyes were on Krishna
Kumar, the product manager who launched Rave Elegance, the largest selling car in the history
of Rave Automobiles.
Mr. Krishna went straight to the drawing board after the meeting was concluded, to understand
the global electric car market. Mr. Awasthi had given him the global research report to go
through. It was not an easy decision to take. He found out that there were as many as 29 electric
car makers, almost all of them backed by the large brands including BMW, Nissan, Toyota,
Honda, and GM, working on an electric car all in the bracket of USD 10,000 to USD 29,000.
They had an up-start over Rave. Time was the most crucial element now. The challenge was to

2012, Sandeep Bhasin, Amity International Business School, Amity University, NOIDA, NCR of Delhi,
India

design a car cheaper than USD 10,000 to compete with already available hatchbacks. He started
jotting down his views:
1. Initial cost of manufacturing was higher than conventional cars but he was aware that the
manufacturing cost was a directly related to the volumes the market was ready to absorb.
2. The monthly recurring cost of the rechargeable battery would be anywhere between INR
3,000 to INR 6,300 depending on the usage.
3. The life of the battery is expected to be around 3 years and the replacement cost of the
same is expected to be at INR 50,000. Technologies were being developed and he could
expect the cost of these batteries to come down in the future.
4. Infrastructure will be a major spoilsport for electric cars, especially getting the battery
rechargers available around the cities and highways. Will it be feasible for having a tie-up
with the fuel pumps to have car battery chargers installed?
5. It would take a minimum of 4 years to perfect the design of the electric car.
Mr. Krishna had to now take a decision on the next strategic move. Should he become a roadblock for a dream project that would change the face of automotive industry or should he take an
informative, futuristic decision on going ahead with an electric car from the stable to complete
with the leaders who are betting big on the electric cars as a viable alternative to petrol/ diesel
cars.
Based on the above facts, what would your recommendation be? Should Rave Automobiles take
a strategic call and initiate designing the electric car? Or should they concentrate their resources
on the traditional market? Please give reasons for your recommendations.

2012, Sandeep Bhasin, Amity International Business School, Amity University, NOIDA, NCR of Delhi,
India