Académique Documents
Professionnel Documents
Culture Documents
On
“A PERSPECTIVE
ON
THE FUTURE OF SMALL CARS IN INDIA”
1
ACKNOWLEDGEMENT
Finally, my hearty thanks to my friends for their moral support, suggestions and
encouragement.
***************
2
CONTENTS
Declaration
Acknowledgement
1. Introduction
2. Literature Review
3 Industry Structure
4. Objective & Research Methodology
4.1-Objectives
4.2-Scope of the study
4.3-Research methodology
5. Result and Discussions
6. Conclusions and findings
7. Recommendations
References
Annexure
3
CHAPTER - 1
INTRODUCTION
The main aim of the study is to analyze the strategies being adopted
in the Indian small passenger Car Industry. A strong car brand can
across every model of vehicle within the brand. It's no surprise that
how consumers think about car brands. The study analyzes the set of
perceptions.
4
earned reputation for product excellence relative to their total
portfolio.
The race for India’s small car market has begun. But only those
among the Big Four who get all their strategies right will win this
segment, but also survival in this market .Now they are lined up for
the last lap. With market India becoming a minefield for the world’s
largest auto-makers, the Formula 1 has become brighter than the red
lights that have stopped them in their tracks so far -only the small car
Though India’s small car rally puts it way ahead of Europe’s annual
the 1.7-1.8 million mini cars cranked out per year by Japan. The
5
Indian unit now faces an onslaught from global competitors rushing
Small cars (comprising models like Maruti 800, Alto, Santro, Indica,
WagonR, Swift, Getz etc.) have enjoyed faster growth this year than
the overall growth of just fewer than 22%. Small car exports have
clocked over 84,000 units till October 2008. Last year, small car
sales, the compact car curve has not been evenly steep year-on-year.
Since 1998, there has not been the smallest lull in the Indian
become the hottest automobile market in the world. Almost every car
manufacturer in the world wants to have an outlet here. It’s not just
6
markets. India is already manufacturing close to 1.5 million cars
every year and new cars are being planned almost every day. The
India as an “auto hub” in this part of the world. Pune was recently
footprint of auto majors and the ancillaries. On the dark side, the
automobile penetration.
(Source1:
http://www.businessweek.com/globalbiz/content/sep2006/gb2006092
6_662135.htm)
7
CHAPTER – 2
LITERATURE REVIEW
India’s top-gear run in small cars this year has made it the second
Says Jagdish Khattar, MD, Maruti Udyog: “The strict CO2 emission
small car options from markets like India to offset the fuel efficiency
and other averages in their existing stable. That’s why more and
facilities.”1
Suzuki has already announced plans to make a new small car in India
for domestic sales and exports for itself and Nissan. Renault has also
will set up another facility for a small car (the new Jazz) in India, while
compact model.1
setting up a compact car facility near Pune? The small car rush and
the build up of capacity may also have its impact on the global auto
8
pecking order, says Arindam Bhattacharya of Boston Consulting
Group. “The biggest growth segment in the next five to 10 years will
be the small car in developing markets where many global OEMs are
besides snazzy car and bike launches keeping the sector in top gear
in 2006. The year also saw the release of Automotive Mission Plan
to $145 billion in 2016 with focus on export of small cars, MUVs, two-
But 2006 also had its share of differences, which literally began from
the word go. The much-awaited 8 per cent excise duty cut on small
Differential excise duty and a more favourable regime for small cars
9
Hyundai, General Motors, Honda and Toyota cried foul, demanding
such as Hyundai and Honda and local ones such as Tata Motors and
forward with plans to launch small car models they hope will click
While India is the fabled "back office of the world," Prime Minister
huge priority. The sector received a big boost in late February when
investment.
10
years. Around a dozen new small and compact cars, with engine
capacities ranging from 1,000 cc to 1,500 cc, are expected to hit the
Maruti Udyog, in which Suzuki has more than a 50% stake, is said to
and the premium small car Zen; plus Suzuki brands such as the Alto,
WagonR, and Versa, the off-road vehicle Gypsy, and the luxury sport-
Big Japanese automakers such as Toyota and Honda are also looking
Toyota and its subsidiary Daihatsu will together invest $86 million to
10% share by the end of the decade. However, it has a long way to
11
Indian passenger-car market. Automakers of all stripes are attracted
version of Daewoo Motors' small car, the Matiz, by next April. General
140,000 vehicles.
$540 million to build a plant to make 100,000 small cars a year for
the Indian market. While not official, there's talk of the western India
state of Maharashtra as the location for the new plant. Its current
Octavias annually.
$650 million to expand, make diesel cars, and set up a new plant in
12
Manesar in the northern state of Haryana. The new facility will make a
Europe, and Suzuki will see its production costs go lower over time. "If
What could spoil this upbeat picture? One big threat would be an
improve fast, that could break growth. But right now, India's economy
Reference Sources:
1
http://economictimes.indiatimes.com/articleshow/589352.cms
2
http://ia.rediff.com/money/2006/dec/20auto.htm
http://www.businessweek.com/globalbiz/content/sep2006/gb2006092
6_662135.htm
13
Summary of the review:
The present study on small segment car is also trying to find out the
14
• Geographic sources of competition are becoming wider
The marketing strategies are today shifting from the mass marketing
than the other. This is so because the likes and dislikes of individuals,
the above said factors, the needs of individuals also change. For
example air travel may be a luxury for the common man but is a
necessity for professionals since it saves time and time is money for
15
CHAPTER - 3
INDUSTRY STRUCTURE
awareness. Of the one million, around 70% of India’s total one million
And with a dozen new models of Mid size cars with engine capacities
Price Wars
ago Mr. Ratan Tata, Chairman of Tata Motors announced the launch
of a $2,200 priced small car by 2008. This would mean the price war
with its joint venture partner, Fiat. To compete with Tata’s 1 lakh car
lower its cost. Maruti 800 is currently selling at $4,130. The company
16
popular produce is Omni, Esteem, among the premium small car,
Zen, Suzuki brands which include Alto, Wagon R, Versa, Gypsy, the
off-road vehicle and the Sports Utility Vehicle Grand Vitara. Honda
and Toyota the two big automakers of Japan are also on its way to a
17
Attractive Market
The Indian version of the Civic was rolled out by Honda in July of 2006
and by 2010 it is expected that they would have sold 150,000 units.
for Honda.
Toyota and its subsidiary Daihatsu will make 100,000 vechicles a year
over 50% in the indian passener car market this seems a rather
difficult task.
automakers are all in the look out to bite a share of the vast high
70 % of the Indian population live in the rural sector earning less than
their urban counterparts. This is a vast market to tap and with the cut
on excise duty for the first time small segment cars could be
capital, New Delhi, that sales of automobile would rise from $34
billion this year to $145 billion in 2016, if one was to follow these
product(GDP).
18
The biggest oppurtunity for car manufacturers would be in the small
segment car segment. General Motors who have four premium cars in
,Matiz. Also with its $300 million investment in a new plant they plan
plant but now they seem to be getting serious about India. Its plan in
Doubling Capacity
Hyundai Motors which sells Santo and Getz in the small passenger car
Speculation has it that Ford and its Japanese partner Mazda will have
a small car rolled out by the end of the decade for the indian
to explore all opportunities for growth. Suzuki the Indian small car
19
market leader also plans to extend its reach by investing $650 million
expand and make diesel cars. And through this facility they plan to
roll out a new small car along with global partner Nissan. Maruti is on
2010.
setback would be to see the slowdown in the Indian economy and this
would hit hard on the Indian consumers who stretch their pocket
limits and borrow to finance their car. But until this high growth
Market Segmentation
decision. The Mercedes is the absolute top of the line model in this
segment. Till a few years ago the Honda and the Maruti Esteem were
slotted in this segment. Other models that might make a dent in this
20
Classic Premium
Mercedes
Benz, BMW
Lower Premium
Daewoo Cielo, Maruti Esteem, Tata
Sumo, Tata Estate
Upper
Opel Astra, Tata Indigo, Hyundai Getz,
Maruti Swift, Ford Ikon, Maruti Versa
Extended
Maruti Zen Estiol, Wagon R, Fiat Palieo, Tata Indigo
Compact
power of suppliers and buyers. The view of the Indian passenger car
21
industry from these five angles leading to the expected changes in
22
extremely difficult to operate in India if it faces labour trouble and
deregulation of the sector in 1993 have been landmark years for the
Indian car industry. India has gradually become the latest battlefield
for global auto majors. The last few years have seen the industry
integrate with the global automobile industry and evolve into being
extremely competitive.
volumes to cover their fixed costs. The car industry faces high exit
difficult for a company to shutdown and fire all its employees. Also,
23
Increase in Working Capital Needs: The intense rivalry between
global Indian consumer wants the best value money can buy plus
more.
the Indian consumer has led to fierce competition among the car
companies and has even led to free gifts being doled out to buyers to
lure buyers’.
Used Car Market: The used car market is still in the nascent stage
has a thriving used car market. A thriving used car market reduces
the ownership period of cars and helps in increasing demand for new
35% for sparingly used E220s as it had decided to phase out this
model.
24
Bargaining Power of Suppliers - LOW
each part implies that in the coming years, supplier power will
Strategic Advantage
25
DIFFERENTIATION OVERALL
S
t COST LEADERSHIP
r
a SANTRO INDICA
t
e M800
g
i ALTO
c
T FOCUS
a
r
g ZEN ESTILO
e
t
Zen Estilo
brand.
• They are encashing the goodwill which MUL has builds in 20 years
car market.
particular target (the Maruti Loyal Customers) very well, and each
Santro
26
• They feel that this strategy would provide insulation against
Alto
Indica
buyers can exert power only to drive down price to the level of the
27
• It also favours the firm vis-à-vis substitutes relative to its
Maruti 800
COMPETITOR ANALYSIS
SANTRO
PRODUCT
perfect urban run about mobile whose 1086 cc engine with unique
28
combination of 4 valve per cylinder gives a comfortable power of
multi point fuel injection system. The design of car is tailor made to
wt. Ratio for this car is .0692 giving it a zip while accelerating.
grumpy.
THE POSITIONING
1086 cc car in favor of smaller car, it was certainty that its offering
The Tall Boy up its creator’s differentiating strategy; but hold the
price line down. Priced between Rs. 2.99 lakhs (the basic variant
which comes with air-conditioning) and 3.36 lakhs (the loaded model,
29
models are priced between Rs. 3.66lacs and Rs. 5.19 lakhs. Although
the Zen accounts for 25 per cent of the small cars sold, it is present in
THE STRATEGY
Hyundai does not have the advantage of experience but that is not
30
outside South Korea. India is going to be their sourcing-base for
THE PROSPECTS
interest cost for year should work out to at least Rs.125 crore, and
Rs.180 crore more than the operating profits. But that’s something
31
the company has factored in. Nobody has come to India expecting
Neither will exports butter sales in the initial two years, since the
is targeting 30 per cent of its sales from exports. Given the low
sales level of 71,000 units to break even. And that’s the number it is
expecting in year two. By the year three, the cash profits are
INDICA
PRODUCT
quality. The next slashes smiling grille and tall rear headlamps
gives to it one of the best lookers but its interiors are a big
smoothness.
POSITIONING
32
When Project Indica was launched, Telco’s Chief Ratan Tata’s brief to
his designers and engineers was simple; make a car that has the
economy of Fiat. The product was priced below Rs.3 lakhs when it
every car in the market. TELCO has strong engineering skills in diesel
STRATEGY
If there is one thing that the Indica can rely on, it is parenting Telco’s
cost advantage in the small car segment. That is critical since TELCO
crore (at a rate of 10 per cent) and assuming a material cost per car
interest charges of 30,000, excise duty (40 per cent), and a sales tax
33
of Rs. 28,800 (10%), the cost of the Indica would work out to Rs.3,17
lakhs.
PROSPECTS
To break even, Indica must sell 60,000 cars a year. To achieve that,
biggest hurdle.
anvil, TELCO, obviously, has to bank on its own dealer network. While
MARUTI 800
PRODUCT
A 14 year old national car is now showing its age. It loses very
34
and top speed of 120 kph and manages to return a mileage of
Zen: It was the most happening cars around till recently. An all
POSITIONING
price spectrum, from Rs. 2.29 lakhs (the price of the Maruti 800) to
Rs.3.66 lakhs (the price of the loaded Zen D). Apart from the 600-to
introduce 2 models between the Maruti 800 and the Zen to price out
that.
STRATEGY
During the last 14 years, Maruti Udyog has systematically built a 154-
35
the Maruti 800, the Omni, the Zen, the Gypsy, the Esteem, the Alto
Indeed, half the cars sold by Maruti Udyog in 2005-06 were financed.
PROSPECTS
that will ensure that rivals cannot out price Maruti Udyog. For
Rs.1.50 lakhs per car, thanks to imports of Rs. 80,000 and locally-
of another Rs. 20,000, excise duty of 40 per cent (Rs 78,000), and a
36
sales tax of 10 per cent (Rs 27,300), and the sticker-price works out
although the company will have a local content of nearly 95 per cent
to begin with.
exports which account for 7.88 per cent of the manufacturers sales-
sales. That will spell bad news for its competitors, who may not be
able to endure in a price war. For, their cost of capital per car is
37
CHAPTER - 4
• The current and the future scenario of the small passenger car
industry in India.
38
4.3 RESEARCH METHODOLOGY
The main aim of the study is to find out the consumer buying
size car industry. Along with this the likely strategies of key Indian
The study on small segment car industry was both exploratory and
descriptive. Data for the purpose of research has been collected from
39
attempted to describe what are the expectations of the consumers
40
STUDY METHODOLOGY
Preliminary Investigation
Secondary data analysis
Qualitative research
Sampling Process
Target population
Sample Size
Sampling technique
Field Work
Analysis of Data
DATA COLLECTION
calibration logs are among the devices used to record raw data.
41
Primary data was collected by the researcher himself by visiting to
for the study. Tools used for data collection for the research purpose
Questionnaire
cars.
42
Often they are the only feasible way to reach a number of reviewers
43
CHAPTER – 5
DATA ANALYSIS
The study was done on the sample size of 200. The study was done
was taken and then analysed so as to find out results. The sample
From the above graph, it is clear that 36% of the sample size is
having Maruti alto as their first preference, & santro, indica, i10, zen
44
estilo having 14%, 22%, 14%, 8% & 6% respectively. This shows that
still people are more inclined towards brand maruti’s best seller car
alto.
From the graph & frequency table, it can be easily judged that 112
people out of 200 are thinking that the car shows their social
45
recognition. Other 44% of sample size thinks in the opposite way, i. e.
they do not relate car with social recognition. In India, people still
decision?
Cumulative
46
From the above graph, it is clear that 56% of the sample size
47
Which of the following attribute is the most important in your buying
decision?
Cumulative
From the above graph, it is clear that 80 out of 200 people prefer
48
& 16 people are still preferring economy, convenience & other
features.
49
From the pie chart, 48% people prefer high fuel efficiency, 18% prefer
low initial cost, and 15% prefer low maintenance cost & high resale
value from an economical car. This shows that still people in India are
50
From the bar chart it is clear that 72 people out of sample size prefer
mileage, while 40 each prefer brand & design from the quality
51
While buying small car which aspect of "Convenience" influenced you the
most?
Cumulative
Above graph shows, 98 out of 200 still think good after sales service
52
small car. Also 44 out of 200 think that the availability of spare parts
is one of the crucial factors in buying. This indicates that people still
53
From the above pie graph, it is clearly understood that 30% of sample
size suggest hyundai santro to other people. Also 28% suggest maruti
alto, 18%, 12%, 7% & 5% for i10, tata indica, zen estilo & others
respectively.
54
From the above graph, it is clear that still 26 % people out of sample
size expect fuel efficiency. Also 23% people except power & speed in
their present car. This shows the changing trends in the mindsets of
the Indians as they expect power & speed in their present car, also
14% each expect safety & maintenance cost in the present car.
55
Which car do you have? * If someone wants to purchase a car, what would
suggestion?
O
Hyundai e
people, out of which 50 people were suggesting the same to the other
This shows the perception of various car owners about their own car.
56
CHAPTER - 6
CONCLUSIONS
replacing generalities.
buys a pen a little cheaper than his neighbor. Things are, however
slowly changing and customers at the upper end of the market are
now ready to pay for more. I hope that this approach will soon enter
the B-segment car segment maybe not with the same intensity.
57
success could well hinge on the best of bundle of service that a
Family is the focal point of a car purchase. Family needs are exactly
what the B-segment size car should fulfill. The decision to buy a car is
a collective one made by the whole family. The car is bought not to
fulfill the needs of one particular family person but to cater to the
family car which can satisfy the needs of the B-segment family.
hit them at the above point. It should be projected to fit into the
Potential car buyers consult family the most. They tend to obtain
information from people already owning the car. The reason could be
that, they are a little apprehensive about the purchase and want to
quench their anxiety. Car owners also tend to consult these people
58
car's performance. These early buyers act as information sources for
the followers. Any negative publicity on their part may turn away the
cannot be ignored.
the car purchase. Most of these people save money for a long to
duly, provide value for money for people in terms of low maintenance
costs, fuel efficiency etc. A lot of banks are financing for cars. This
concept is new but is catching fast in the big cities. Companies have
tied up with ICICI and Standard Chartered bank to come up with joint
value, after sales service, and tend to be the only segment that will
buy a new car from a trusted dealership near where they live or work.
This group of consumers also like reading a great deal about the cars
that they are about to buy and are also most likely to pay the most
59
It can be seen that nearly half of the car owners want to replace their
existing cars with a B-segment size car. This attitude could be due to
additional features in the new cars, which may attract these people,
within the reach of the common man. Price is the first and major
decision
Too high a price may discourage many potential car buyers and a
very low price may raise doubts about the car" performance
capabilities.
The main reason for popularity of the B-segment car is normal price;
CHAPTER - 7
RECOMMENDATIONS
60
expected to increase exponentially. There is long term potential
too, it is much the same story these days. Except for Maruti,
market. The car war in the market has led to a start of price
61
wars in the market and has left customers with various options
car and are going for B-segment car purchase. Now thinking
review its pricing strategy every now and then so that it does
REFERENCES
http://www.automotive-business-review.com/article_news.asp?
guid=9C9212C2-CF3A-4468-86B2-84B49CCF8795
Anand M., Ramanathan S.K. and Viswanath R., The New Laws of
Mitra, Kushan (2007, Auto’s Big Boom, Business Today, October 22,
2007
62
Schiffman G. Leon & Kanuk Leslie Lazar (2006, Consumer Behaviour,
Pearson Education
http://economictimes.indiatimes.com/articleshow/589352.cms
Bisht, Sudhir Why the Rs 1-lakh car is not good for India
http://inhome.rediff.com
http://www.businessweek.com/globalbiz/content/sep2006/gb2006092
6_662135.htm
ahead in 2006http://ia.rediff.com/money/2006/dec/20auto.htm
http://business.mapsofindia.com/automobile/car-manufacturers/small-
market.html
63
APPENDIX
QUESTIONNAIRE
Zen Estilo
6. Other.
of car?
1. Yes 2. No
purchase decision?
5. Dealers
6. Other.
64
4. Other.
5. Other.
6. Resale value
2. Availability of Car
4. Colour Choice
5. Other.
65
Q8 If someone wants to purchase a Car, what would be your
suggestion?
Zen Estilo
6. Other.
brand of Car?
1. Fuel Efficiency
2. Maintenance Cost
3. Safety
6. Other.
PERSONAL DETAILS
Pvt. Service
4. Student 5. Other.
Married Couple
66
67