Indian Automobile Industry Essay Example for Free

Indian Automobile Industry EssayThese include passenger motor railcars which atomic number 18 divided into side by side(p) 6 categories depending upon length 1. Mini Car length upto 3400 mm Maruti 800 and REVA 2. Compact Length betwixt 3401 and 4000 mm Maruti Alto, Tata Indica, Hyundai Santro 3. Midsize Length between 4001 and 4500 mm Maruti Esteem, Tata Indigo, Hyundai Accent 4. Executive Length between 4501 and 4700 mm Toyota Corolla, Honda Civic 5. allowance Length between 4701 and 5000 mm Honda Accord, Hyundai Sonata 6. Luxury Length senior higher up 5000 mm Mercedes S-class 2. Utility Vehicles Tata Sumo and Safari, Toyota Qualis.3. Multi Utility Vehicles Maruti Omni and Versa 4. bullionmaking(prenominal) Vehicles These argon divided into 2 categories according to the loads they can carry 4. 1. Light Commercial Vehicles make vehicle weight limit is 7. 5 tonnes Cargo, Tempo, Mini Buses, and Mini Trucks etc.tera Major players ar Tata Motors Ltd. , S waraj Mazda Ltd. , Mahindra and Mahindra Ltd. 2. strong suit Heavy Commercial Vehicles Gross vehicle weight limit is above 7. 5 tonnes Cargo, Trucks, Buses, Trailers. Tata Motors Ltd. and Ashok Leyland Ltd are study players. Scope of Study and Methodology.We begin with an overview of the automobile labor followed by a competitive analysis of the rider Cars part of the industry on the following criteria Product Brand Pricing Distribution Marketing converse In to each unmatched of these contexts, we try to compare the strategies used by players in unalike parts from instauration direct A segment, to most-competitive B-segment to niche SUVs. We cite examples from cars that exact been sincerely successful in any parameter as well as the debacles. Finally, we segment the consumer base on our primary research and discuss their distinctive characteristics.On the basis of our study, we understand the critical factors for success in market and derive insights come for th of the study. To carry out the above study, we carried out Secondary research We scoured the internet including industry data from SIAM and IBEF. We referred to elderly theme and magazine articles as required. This was primarily our basis for competitive analysis. Primary Research To understand the consumer mindset, we carried out a appraise. This gaze was conducted on origination as well as in 14-sector market, Gurgaon. The survey had 94 respondents as belowpic We supplemented the survey with interviews Customer Relations Man come alongr at Orion Hyundai and Apra-Motors Maruti showroom. Overview of Indian Passenger Vehicles Industry Indian parsimoniousness has grown at an average rate of above 8% in the put up 5 old age and run followed by industrial drudgery have make excellent contributions to this growth. Auto industry has contributed to the gross domestic harvest-feast to the tune of 5%. The Passenger Vehicles (PV) market grew 14% YoY to 1. 76 jillion units as aga inst 1. 54 million units sold in last financial year(FY 06-07).It is mainly on account of the impressive growth in the passenger car segment which contributed 80% to the total Passenger Vehicle gross revenue in financial year 2007-08. It (PV) was backed by healthy growth in its domestic gross revenue and exports. Domestic sales grew 12% YoY to 1. 54 million units in financial year 2007-08, whereas the exports increased by 9. 4% YoY to 2. 1 lakhs units in the comparable time. Over the last five years total PV produceion has increased at a CAGR of 19. 5%, from 7. 2 lakhs units in 2002-03 to 1. 76 million units in 2007-08. The growth was mainly do possible due to 2 major factors1. The continuous improvement in the living threadbares of the middle class, and ensuant increase in their disposable incomes. 2. the liberalization steps taken by the Indian Government such as relaxation of the foreign exchange and equity regulations, reduction of import tariffs, and refining the banki ng policies have compete an equally central role in bringing the Indian Automobile industry to present direct. loan to this the easy accessibility of components and competence the global auto companies are looking at India as the manufacturing hub for the close generation exercises.India is poised to become small car hub, not all in terms of production but withal product development. Global car majors like Nissan, Hyundai, General Motors, Mercedes Benz and Renault have made huge investments owing to the positive sentiment in the market. Major Manufacturers in Passenger Cars Industry in India are Maruti Udyog Ltd. (45% market share) Hyundai Motor India Ltd. (16%) Honda Motors Tata Motors Ltd. (14%) Overall, there is still just 1 car per 100 mountain in India as against 74 cars per 100 in US. Thus, Indian market has a huge dominance in future. Competitive Analysis Product level Analysis.Here, we study the product strategy of automobile industry from a marketing point of view. We begin with a study of customer-value hierarchy, of which the marketer needs to address each of the five levels while planning product offering. Then in product differentiation we study different factors on which car is differentiated. Customer-Value Hierarchy (Product levels) Core acquire It is the service or benefit the customer is really debaseing. In case of automobiles those benefits are convenience, transportation, speed. Basic product At second level the core benefit is turned into basic product. In the case the product is car.It typically includes an IC engine, mechanism to provide cause and steering, chassis. Expected product At the third level, an expected product is prepared which includes a set of attributes and conditions buyers ordinarily expect when they purchase a product. All car buyers expect comfort, safety and functional characteristics (fuel economy, handling, repair frequency etc). Other expectations differ from one segment of buyers to an otherwise(prenominal). For a middle class buyer value for money is important for e. g. Maruti 800 but for an upper class buyer where money is not an issue, prestige is the criteria for e.g. Hyundai Tucson, Jaguar etc. Other expectations include good sound system, leather upholstery, more seating capacity, more index number etc. Augmented product It is a product that exceeds consumer expectations. It is created by inclusion of additional features, benefits, attributes or related services that serve to differentiate the product from its competitors. For automobile industry these features include insurance service, test drive, attractive offers, aft(prenominal) sales service, availability of service centres, easy financing options such as EMIs, wide dealer engagement etc. Potential product It encompasses all the possible augmentations and transformations the product or offering might bear up under in the future. These include latest technology, design changes e tc for e. g. Design of Maruti 800 has changed consistently over the years. Product Differentiation Features Cars are often offered with varying features that supplement their basic function. For e. g. Hyundai i10 (a bosom car) boasts of features similar to a sedan. blend inment quality Performance is becoming an increasingly important dimension for differentiation.Car companies invest hugely on RD to come up with refreshful improved engines so that performance can be improved. For e. g. Santro Xing considers its eRLX engine as a differentiator. dependableness It is a measure of the probability that a product will not malfunction or get going within a specified time period. Maruti Omni is one such car it is differentiated as a faithful workhorse. Style It describes the products look and feel to the buyer. It is very important because even forrader performance people judge a car by its look.Swift DZire from Maruti stable claims itself as the midpoint car with s triking looks. Design Apart from look and feel, this factor takes into account the function of the product as well. Maruti SX4 claims of revolutionary European design. Brand Maruti 800, the entry level car in the Indian market, has long been positioned as the family car. While it competes against bigger B-segment cars, its sales have been cannibalized recently by Alto whose basic model is termsd jus Rs. 30,000 above the basic M800. Through the Alto, Maruti is trying to move the consumer up the value chain.M800 has excessively been targeting the semi-urban and rural areas where it is positioned as an selection to two-wheeler. To see how to manage an automobile marker with its product life cycle, we look at Santro Xing and Tata Indica. both were launched around 10 years ago, and have evolved and repositioned themselves successfully. Santro was launched in 1998 as an upgrade for the entry-level car and positioned as a family car targeted at 35-40 year olds. In 2003, the produc t was refreshed as Santro Xing. The brand now aimed to orison to the first time car buyers rather than be an upgrade.To catch the young buyers in 25-30 year age group, the brand was positioned as the Sunshine car. Sunshine was communicating two intangibles Freshness and youthful attitude. The brand move to a Change your life positioning. Today, Santro is facing declining phase in maturity grade in its PLC. The sales have stagnated and damage war from Maruti and a slew of new launches in compact car segment have hurt the sales of Santro. Santro is banking on price cuts and sales promotions to stay afloat. Hyundai has recently launched a new brand i10 to take the place of Santro.Similarly, Tata Motors recently launched the new generation Indica Vista. This is an update on Indica V2s teaseinal variants. Over the years, Tata has invested heavily in product and brand development, yet the sales of Indica have recently declined. This is because the product has reached the declining maturity stage. And to counter this, Tatas have gone in for strategy of product modification. Indica Vista is Tatas entry into the luxury hatchback segment which is dominated by Maruti Swift and has new entrants like Hyundai i10. The original Indica has also been retained in the product line.These two product lines together offer a wide quality to the customers from price points of Rs 2. 80 lakhs to Rs 5 Lakhs. The Indica Vista has a new tagline of Changes Everything is used to give out that the brand has changed. The ads are also more tuned to attract the new generation. However, the core competency of the brand remains its value proposition. In the C and D segment, the cars are positioned on distinct personalities rather than benefits or attributes. For example, when GM launched Optra against heavy-weights such as Honda City and Sonata, it aimed at an emotional positioning platform.The brand, which was targeted at executives in age 30-45, tried to communicate Love, interest an d Warmth as its core values. To convey this, Optra used an apt tagline, For a special journey called life. street corner cars use their own unique appeals e. g. SUVs such as Scorpio position on their size and sense of adventure. Thus, we have seen that while brands manage to differentiate from each other through a unique proposition, there is nigh commonality in how cars are positioned within each segment. Pricing Pricing decisions are management decisions most what to charge for the products and services that the companies deliver.In car industry, the price decisions vary from segment to segment. In entry level cars, the companies price the cars low and give all basic features a car would offer. This segment had a monopoly in India with Maruti 800 being the sole player. Maruti has traditionally been employing promotional schemes to increase the sales of Maruti 800 rather than decreasing its price. In compact car segment, the cars cater to the affluent conservative people who w ish to graduate to cars which provide extra enrapture compared to entry level cars.Due to fierce competition in this segment price emerges as an important factor affecting the purchasing decision of consumers. Hence the pricing decision is not only qualified on the perceived value of the customer but also dependent on the competitors pricing strategies. Marutis aggressive price reduction of Alto has displaced Hyundais Santro from No. 1 choose in 2004. In Mid-size segment, as the customers aspirations are more inclined towards design, advanced features and luxury the car offers, pricing doesnt play as big a role as it does in compact segment.In fact, there is a tag of premiumness attached to the price in this segment. As an example, Hyundai Elantras sales dropped when its price had been reduced from Rs. 10lakh to Rs. 8 lakh. Distribution This section is explained through the study the supply chain at Maruti Udyog extra (MUL). Logistics goes beyond mere distribution management. It is improving the quality of the supply chain itself to achieve a efficient distribution mechanism. This is the philosophy which drives Maruti Udyog Ltd (MUL), the countrys biggest passenger car manufacturer.Dependent on over 300 suppliers for some 7,000 components that go into its 9 major models and their 200 variants, the company keeps control over costs at every stage to remain competitive. This is achieved only through close coordination with the vendors. The streamlined state of supply chain at Maruti is achieved through following measures It implements innovative material handling solutions which reduces wastage. It collaborates with its vendors to localize components supply. This not only increases productivity but also removes uncertainties in supply. The schedule for indenting components is precisely planned so that inventory holding process is optimized. The schedules issued every two weeks are further fine tuned by an online system for replenishment of inventory on an electronic card system. This avoids inventory build up or unanticipated deliveries by vendors as supplies are made only after receipt of the indent card from MUL. This brings inventory management down to the doorsteps of the vendors, who produce only what is indented The oral communication instruction are revised daily and location wise to exactly meet the assembly line requirements.This strategy is adopted to tackle the fluctuating market demand, accentuated by the intense competition in the automobile business now. Various steps are taken to improve the productivity of operator and machine and bring down and recycling waste. Marketing Communication Hyundai, a Korean car company launched its first car, SANTRO in 1998. They had galore(postnominal) challenges as Maruti had a strong hold over the car market, and people were not willing to take in the tall boy car. Moreover the customers were skeptical regarding after sales-service support and spares availability and had limited belief in the Korean car company.Hyundai came up with advertisements which focused on car quality. They had Shahrukh Khan as their brand ambassador. They started with tease ads but later promoted it as the Sunshine Car indicating freshness and youthful attitude Maruti, on the other hand, concentrated on its wide service network and spare parts availability, Hyundai gave a lot of straining on car features in its advertisement for e. g. Hyundai came up with Zip drive. In 2003 a new reduce was seen where in advertisements of Mahindra Bolero, Mahindra Scorpio and Hyundai Santro, women were seen driving the car.Thus targeting the fast growing workings women segment. Hyundai has come up with special schemes for working women. They are also offering loans to women at 0. 75% lower rate of interest than the market rate. MSIL and GM India have introduced special financing schemes to attract customers from semi urban and rural areas. In 2007 when Maruti launched SX4, they positioned it as a manly car through their ads. Xeta introduced by Tata was aimed at rendering better fuel efficiency at a competitive price and the ads highlighted it.They aimed to create a unique brand identity in gasoline segment and promoted it through ads, print media ads, internet and test drive. In 2002 Hyundai topped TV advertising in 2002 but from 2003 Maruti picked up and came to number one slot. About 50% of the advertisement is done during feature films and discussion bulletin. For the newly launched i10 Hyundai has aggressively advertised it by posters of i10 throughout the showroom and hanging banners. (see examples of print ads of cars in various(a) segments in Annexure 2) Consumer Segments and their Distinctive Characteristics.Instead of developing segment profiles based on secondary research, we categorised consumers based on our interviews with car dealers and the survey we conducted across various consumer categories. Through this primary data, we identified three enormous ki nd of customers based on their distinctive buying behaviours. Analytical customer One who buy car after researching internet and other sources. These customers are aware of the various options available in the market and whop what car they need to buy even in advance their first visit to the dealer. This is usually a middle-class price conscious consumer looking to obtain value for his money. Confused customer The biggest category of consumers those who dont know which car to buy because they have been the target of a lot of promotions and heard Word-of-Mouth from friends, family and other influencers. These customers have a fair amount of idea of the price and other attributes of the car they want to buy but cant decide on the actual model. These customers buy the car after a proper need analysis has been done at the car dealers showroom. Copy-cat Customer The last is the category of the customers who buy a car after seeing a similar car with their friends or neighbours.These p eople want some exact colour and model and cannot be classified as rational number consumers. This category is constituted of those customers who do impulse buying. Further, we look at the consumer for each segment. We observe that in the B-segment a customer usually goes for value-for-money proposition. 67% respondents gave a rating of 4 or 5 to price as a critical factors while buying a car while 74. 4% respondents gave mileage same importance. about of these people preferred cars priced around 4-6 lakhs. The C and D segment cars sell because their various attributes communicate a certain image.Here, the customer looks for attributes like power, newest technology and exclusivity. Out of the 32 people who rated technology as 5 and 19 people who rated power as 5, majority of them considered buying a car in the price range of 6 lakhs and above. Resale value of the car and the number of service stations is crucial deal-maker. Most of the consumers and the company people also say tha t the ad campaigns and the endorsements dont play a major role in deciding which car to buy apart from creating awareness about the launch and availability of the new model. Only 6% of people rated endorsements as 5 as a deciding criteria.SUVs are normally the second or third car in the family. These consumers do not buy on the value proposition but rather on the image proposition. Seating capacity, premium image, innovative features and a need to portray an adventurous image are some of the benefits that a customer seeks from the SUV that he is buying. The survey results also depict that consumers are more inclined towards new models launched in the market including new variants of old cars. Maruti SX4, Hyundai i10 and Maruti Swift are the cars that appeal to most of the respondents. Factors Critical for Success.Selling a car is part delivering product and part providing service. So the car manufacturer has to ensure both quality of the product and the experience of apply it. Howe ver, we must understand that the typical customer for a B-segment car differs significantly from that of an SUV. His lifestyle, his car usage, and his expectations from his vehicle change. In the B segment, there are three factors critical for success Value for Money- This is a price-conscious consumer. For a car, price constitutes one time purchase price, as well as the petrol costs reflected in the mileage.In our survey as well as our talk we the Hyundai dealer After sales service network- When we asked the Hyundai dealer, what was the one thing a new player needed to provide to compete with them or Maruti, we met one article response service. In fact, the dealer provided the example of Ford saying, while their cars had great engine and quality, they couldnt compete across the country because of poor after sales service network. Ford has now made a tie-up with Tatas to touch on the same. Product Quality- Since, the car market works essentially through Word-of-Mouth, it is cru cial that you product meets the consumer expectation.Else, you run the happen of losing the customer not only from this car, but your company altogether, and taking additional potential customers with him. As we move into C-segment, value for money becomes lower in priority for the customer. He is looking for a status symbolism now. These critical factors come in Prestige- There must be a buzz around your brand and the brand should have a premium image. Power The cars in this category have more power giving a better pick-up and smoother drive. Latest technology- The sedans are known for newest innovative technology and the customers are seen to prefer product innovations. Safety Safety features have often been neglected in the Indian markets. however typically sedans come fitted with the state of the art safety features. Insights derived out of Study Buying a car is a family decision- this held true across the board in our survey, with majority of respondents owning one fam ily-per-car. However, the women are not more than of an influencer while buying a car- in fact, most hesitated to respond to the survey, pushing their accompanying male ahead. Hyundais strength is technology and product quality, while people look to Maruti for good after sales service and high resale value. Dealer-manufacturer relationship is crucial- car companies depend on the dealers to tap the nerve of the local consumers. So the relationship between the company and the dealer needs to be good. In most cases the companies allow the dealers to run local promotional schemes and take other such initiatives. Endorsements and advertisements have minimal influence on customer decision (the B-segment). From the survey, we infer that when a middle class customer is shelling Rs 4-6 Lakhs from his pocket, he normally does considerable research before buying a car. Safety provisions- Indian car manufacturers do not provide ABS and airbags as standard safety features in entry level and B segment cars, while they do so in models they export. The consumer is also not demanding these yet. Cars are still a prestige issue in the semi urban and rural areas. Many consumers in these areas buy those cars which their neighbours have bought. Car awards and launch of a new model boost up the sales overtime. But the real sales happen only because of the quality of the product and not because of promotion.