chapter 32 (passenger car)

7/29/2019 Chapter 32 (Passenger Car)

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Passenger Cars


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Profile of the Automotive IndustryVehicle sales in India in 2005 - 06

(in million)

1.14

0.35

7.05

0.36

0 2 4 6 8

Cars CVs Two wheelers Three Wheelers

Size of around USD 34

billion in 2006

The industry has grown at a CAGR of 14% p.a over the last 5 years, with total sales of vehicles

reaching around 9 million vehicles in 2005-06

The Indian auto industry has the potential to emerge as one of the largest in the world. Presently,India is

2nd largest two wheeler market in the world

4th largest commercial vehicle market in the world

11th largest passenger car in the world and is expected to be the 7th largest market

by 2016 The industry has emerged as a key contributor to the Indian economy


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Players in the Auto industry

Global

OEM

Domestic

OEM

Domestic

Suppliers

Global

Suppliers

Engineering

&

Development

Companies

Auto

Industry

GM

Toyota

Ford

Hyundai

Maruti Suzuki

HondaSkoda

Volvo

Mercedes

Tata Motors

Mahindra &

Mahindra

Bajaj Auto

TVS Motors

Hero HondaBajaj Tempo

Ashok Leyland

The auto industry is highly competitive with a number of

global and domestic auto companies present in the country.


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Current Scenario

5th largest commercial vehicle manufacturerin the world

4th largestcar market in Asia - crossed the 1 millionmark

Unlike the USA, the Indian passenger vehicle market isdominated by cars (79%)

India became the fastest growing car market in the worldin 2004, growth rate of 20%

India is the second-biggest market for small cars afterJapan


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Automobile Production Trends

Category 2001-02 2002-03 2003-04 2004-05 2005-06

Passenger Cars 500301 557410 782562 960487 1045881

Utility Vehicles 105667 114479 146325 182018 196371

MPVs 63751 51441 60673 67371 66661

Total Passenger Vehicels 669719 723330 989560 1209876 1308913


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Automobile Domestic Sales Trends

Category 2001-02 2002-03 2003-04 2004-05 2005-06

Passenger Cars 509088 541491 696153 820179 882094


MPVs 61775 52087 59555 65033 66366

Total PassengerVehicles 675116 707198 902096 1061572 1143037

Category 2001-02 2002-03 2003-04 2004-05 2005-06

Passenger Cars 49273 70263 125320 160670 170193


MPVs 815 565 922 1227 1093

Total Passenger Vehicles 53165 72005 129291 166402 175772

Automobile Exports Trends


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Key Players in the Indian Auto Industry -

Passenger Cars

The largest player in the Indian industry. Plans to launch new and

exciting products in the Indian markets, including the 1 lacs car

MUL is the largest passenger car manufacturer in India

The third largest passenger car manufacturer in India and one of the

largest exporters of vehicles. Has established India as one of itsmanufacturing bases in the world. Is planning to invest heavily to

boost exports from India.

Has vision of capturing 10% share of the Indian passenger car

market by 2010

One of the leading players in the Indian premium cars segment

One of the leading players in the Indian premium cars segment
http://www.toyotabharat.com/index.htmlhttp://www.toyotabharat.com/index.htmlhttp://www.india.ford.com/http://automobiles.honda.com/http://www.toyotabharat.com/index.htmlhttp://www.hyundai.co.in/index.asphttp://www.marutiudyog.com/index.asp


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Key Players in the Indian Auto Industry -

Passenger Cars

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 domestic players in the UV / MUV segment

Tata Motors manages the marketing and distribution of the Fiat

branded cars through selected Tata outlets throughout India

E, C and S Class passenger cars are assembled in India,

other models are imported as completely built units

(CBUs) and retailed in India.

One of the original three car manufacturers in India, founded in

1942, it was a leader in car sales until the 1980s, when the industrywas opened up from protection HM has a joint venture with

Mitsubishi, producing versions of the Lancer & Pajero.
http://www.gm.com/


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Passenger Vehicle Clusters in India

Mumbai-Pune-Nasik

Aurangabad

Pithampur

Rajkot-Halol

Chennai-Bangalore-Hosur

Hyderabad

Jamshedpur

Kolkata

Delhi-Gurgaon-Noida-Ghaziabad

Hindustan Motors

Honda SIEL

Maruti Suzuki

Tata Motors

North/Central

Daimler ChryslerFIAT

GM

M & M

Skoda

Tata Motors

West

Ford

Hindustan Motors

Hyundai

Mahindra & Mahindra

Toyota Kirloskar

Volvo

South

Tata Motors

Hindustan Motors

East


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Segmentation (based on car prices)

Under Rs. 3 Lakhs Maruti 800AltoOmniReva

Rs. 3-5 Lakhs Ambassador Fiat Palio Hyundai SantroGetzChevrolet Opel CorsaMaruti ZenWagon RVersa

EsteemGypsyFord Icon & FiestaTata IndicaIndigoMahindra Bolero

Rs. 5-10 Lakhs Chevrolet SwingOptraTavera Hyundai Accent Elantra

Mahindra ScorpioMaruti BalenoToyota CorollaInnova

Tata Safari Mitsubishi Lancer Lancer CediaHonda City

Rs. 10-15 Lakhs Ford Mondeo & Endeavour Chevrolet Forester Skoda Octavia Classic & CombiHonda Civic &CR-V

Rs. 15-30 Lakh Maruti Suzuki Grand VitaraHyundai Sonata EmberaTerracan & Tucson Mitsubishi PajeroAudiA4 Opel Vectra Honda AccordMercedes C ClassToyota Camry

Rs. 30-90 Lakhs Audi A6 A8 & TT BMW X5 5 Series & 7 SeriesMercedes E Class, S Class, SLK, SL & CLS-Class

Porsche Boxster Cayenne 911 Toyota Prado

Above Rs. 1 Crore Bentley ArnageContinental GT & Flying Spur

Rolls Royce Phantom Maybach


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Regulations - Auto Policy

In 2002, the Central Government formulated an auto policy that

aimed at promoting an integrated, phased, enduring and self-sustained growth of the Indian automotive industry.

The Auto Policy allows automatic approval for foreign equityinvestment upto 100% in the automotive sector and does not laydown any minimum investment criteria.

The auto policy lays emphasis on R & D activities carried out bycompanies in India.

Weighted tax deduction of upto 150% for in-house research and R & Dactivities.

Formulation of an appropriate auto fuel policy to ensure availabilityof adequate amount of appropriate fuel to meet emission norms.

The auto policy confirms the governments intention on harmonizingthe regulatory standards with the rest of the world.


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Automotive Regulations Indian automotive regulations are closely aligned to the ECE regulations.

The table below shows the level of alignment of the Indian regulations withthe ECE regulations.

Status of Indian Regulation Number of regulations

Fully / Partially aligned 43

In process of being aligned 32

Items / Regulations to be covered 39

Total 114

The key regulations that are likely to impact the auto industry in the future are:

Crash-related regulations

Introduction of Bharat Stage IV norms

Source: IMaCS Analysis


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Future Regulations

Regulation Road Map Targets

Industry challenges to developmentBetter vehicles: more safer and

environmental friendly

Approach

Harmonization with ECE

standards

Homologation and

certification testing

agencies and centres

Crash requirements aligned with EUMandatory airbags

Emission standards: Bharat Stage IV

in Metros and Bharat Stage III in rest of

the country

2009

Presently, Bharat Stage III ( Equivalent to Euro III) is mandated in Metro and otherlarge cities and Bharat Stage II ( Equivalent to Euro II) is mandated for rest of the

country

Bharat Stage IV ( equivalent to Euro IV) is expected to be introduced in the large

Metros around 2009 and Bharat Stage III in the rest of the country


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Demand Drivers

The growth in domestic demand is driven by a number of

factors including: Overall economic growth

Rising income levels

Low cost of finance and easy availability of finance

Increased consumer awareness

Closer linkages with global auto trend leading to introduction of

contemporary models

Governments specific policy initiatives such as lower excise duties on

smaller cars

Increased job demands Growth of satellite towns

Onset of consumerism and travelling culture

Completion of Golden Quadrilateral project


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Key Success Factors Market Leaders Presence across segments - Manufacturers with presence across

various segments can ensure higher volumes and better capacity

utilization by using common manufacturing facilities.

Cost-competitive operations - Higher localization, reduction in the

vendor base, use of common components, manufacturing a larger

number of models on a single platform have helped bring down prices.

Wide dealer network- After sales service and access to original spareparts act as distinct advantages in the marketing of a model.

Easy availability of finance - MUL tied up with State Bank of India

(SBI) in June 2003 to offer finance to its rural and semi-urban

customers through the latter's 13,000 plus strong branch network.

Strong support from parent companies:

Strong brand

Strong financial and technological support

Access to latest technology for launching new models, enhanced export capability


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Customer Segmentation (by car ownership and use)

Individual customer

segment

Self employed persons Corporate Commercial

Common people who don't

fall under any specific

category/not covered by any

corporate scheme.

Car is purchased in the

name of the company -use

could be personal, official

or both.

Car is registered in the

name of the company at

the time of purchase.

Includes taxi and tourist

(TT) segment and the lease

rental segment.

Share

Around 55% in the overall

car demand - being thehighest in the mini and

compact segments.

Around 15% in the

overall car market sales -

relatively large share inthe executive and

premium segment.

15% to the overall car sales

- 28% of the sales in the

mid-size segment with agreater presence in the

HMS.

12% share in the overall car

sales with a greater share in

the compact and mid-sizesegment.

Demand Driver

Cost of ownership-price,

taxation, running cost,finance cost (highest

sensitivity)

Promotional efforts -

discounts, advertising

New model launches

Running cost instead of

financing cost

New models andvariants with improved

technology (improved

diesel technologies

CRDi & TDi)

Business expansion or

stagnation

Changes in depreciationand tax rules

Marketing schemes

Brand image of the car

manufacturer

Fuel cost per km, driven

by fuel efficiency (km per

litre) and cost of fuel (Rsper litre) drives demand, as

well as model preference


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Changing Dynamics of Segmental

Demand


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Player-wise Market Share


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Cars: Sales Trend and Market Share

(key segments)

A1:Mini A2:Compact A3:Midsize A4 Executive A5:Premium A6:Luxury


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Comparison Tests:

Differences in Marketing


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Hot Hatch Face-OffSuzuki Swift versus Hyundai Getz


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Background

Suzuki Swift

Esteem in India: known

overseas as Swift earlier

Now Suzukis Global Car

All new car launched at

Paris Auto show 04

Well appreciated in Europe.

Hyundai Getz

Not a very well-known

model

Few awards won here and

there. For example, Budget

car of the year by What

Car? (UK, 2003)


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Marketing: Swift

Buzz in the industry: Marutis first new car in two

decades!

Differentiating factor: Hot shot looks and also awards

in India (Car of the Year awards) USP: Killer Price!

OTL: TVCs that communicate hardly anything

BTL: Separate sections at showrooms

Personnel trained specially for Swift selling


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Marketing: Getz

Initially marketed as feature packed: failed

Now being marketed as a big, spacious car

USP: Space

Price about Rs. 50,000 more than the Swift

Not as successful as the Swift so far


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C

Segment Cars Competition


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Marketing: City

Fairly advanced stage of the product lifecycle:Growth/Maturity

Undergone a full makeover since its launch: all new citylaunched 4 years back

USP: Honda brand name

Advertising

Hi tech car: Honda name (esp. VTEC)

Rising diesel costs in India relative to petrol (so cost savingdue to diesel is unsustainable)

Quality (good scores on JD Power surveys): lowermaintenance costs overall in comparison


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Marketing: Fiesta

Newest in the line of made for India Ford cars

Exists as a hatchback in Europe, suitably modified for

India

Abhishek Bacchan (movie star in India) was hired as

brand ambassador Go fida campaign: a car that will bowl you over

this was the message communicated

Mileage: 31 kilometers/litre record (published

recently in an auto magazine)


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Marketing: Verna

Latest car from Hyundai, India.

(Originally) Intended as replacement for the Accent

sandwiched on both sides

Good features: Diesel economy with high technology

(VGT) and power (110 bhp / 24kgm).

Market responsetime will tell!


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D

Segment Cars


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Marketing: Octavia

Skodas first car in India: need to build the Skoda

brand first

Quality differentiator: Obsessed with quality, since1895 this was the tagline used

Built on the golf platformSkoda is part of the VWgroup

USP: Diesel economy (users have reported 19 km perlitre mileage)

Replacement of the Octavia (Skoda Laura) falls in thenext segment, i.e. competes with Honda Accord


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Marketing: Corolla

Best selling car in the world (over the years)

Not as successful as Toyota would like

Marketing changed over time

Initial: Successful people use Corolla

Now: Trying to cash in on its worldwide acceptance

Quality niggles (on a Toyota!) in the interior have

been a cause for complaint among owners


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Marketing: Civic

One of Hondas best selling brands worldwide:

eagerly awaited before its launch in India

Currently outsells the Corollain markets abroad,

too.

Brand communication: Pure Exhilaration taglineused to communicate sporty nature

Scores on the styling frontespecially the interior

Aggressive salespeople

Already the leading seller in the segment


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Future Trends Individual buyers, lease rental-based bulk buyers for high volume growth

More importance to fuel efficiency, adaptability with road condition, heavy traffic

Not many crave a status symbol small car is the choice of the hour

Government regulations favouring manufacturing of small cars

The development of a vibrant used car market will drive the growth of new car and

UV sales by

Helping owners: Dispose old car; Upgrade to a new car

Creating potential customers for new cars: Used car owners upgrade to new models

Demand from two-wheeler owners who want to upgrade to used cars

All major players to launch diesel variants and models with increasing frequency.

However, the following player initiatives will have a significant impact on diesel

share:

Maruti setting up an initial 100,000 diesel engine capacity by the end of 2006, which iteventually plans to expand to 300,000 units

Tata Motors' Rs 100,000 car, targeted for launch by mid-2008

chapter 32 (passenger car)

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