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A CASE STUDY ON THE INDIAN SMALL CAR INDUSTRY Prof. Tapan Panda

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Page 1: Indian Small Car Industry

A CASE STUDY ON THE INDIAN SMALL CAR INDUSTRY

Prof. Tapan Panda

Page 2: Indian Small Car Industry

A Case Study on the Indian Small Car Industry

2

A BRIEF OVERVIEW ON THE INDIAN SMALL CAR INDUSTRY

If there is one big market that is forcing the global auto majors to think small, it is India.

Until yesterday, all the world's auto-manufacturers expected to create success out of their mid-

size products. There were as many as five players in the mid car segment and just one--the

Rs 7,956-crore Maruti Udyog Ltd (MUL)--in the small car segment.

Suddenly Daewoo Motors India and Hyundai Motors India--are changing lanes mid-

way, making the small car market as the pivot of their marketing strategy in India. Couple that

with the fact that two domestic manufacturers--the Rs 10,074-crore Tata Engineering &

Locomotive Co. (TELCO) and the Rs 223-crore Kinetic Engineering--are ready with similar

indigenously-designed products to compete in this market The last two years has really been

the period of war in the small car market

The story Behind…. The auto majors read the market wrong. Since the small segment was dominated by MUL-

with a market share of 96 per cent and given that the Trans –national brands already had

tried-and-tested mid-size models in Indian market, this segment was more attractive than the

existing ones. This perceptual change was because of two reasons.

• The clutter in the large and midsize segment due to entry of many international players.

• The small segment grew faster than the mid-size one, driven by the price-sensitive

customer.

Both the above factors had an enormous impact on mid-size car manufacturers. Stung by

a sharp 80 per cent drop in sales between April and November 1997, over the corresponding

period in 1996, Daewoo Motors slashed the price of its mid-size car, Cielo, by an unbelievable

21 per cent. It was the fate of many players in the mid and large car segment in India.

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The Trans-nationals were also serious about developing vendors in India. India is

bound to become an important destination for the global auto industry. It took the financial

turmoil in South East Asia and the slowdown in the Chinese auto market to reinforce the

targeting to Indian Market. The new interest in the small car segment also reflects certain

amount of bullishness on the part of auto manufacturers about India !

Despite projected over capacities--and current losses, carmakers continued to queue

up their investments for small car segment. To day there are 10 global auto majors--including

the $13-billion Suzuki Motor (Japan), the $65-billion Daewoo (South Korea), the $147-billion

Ford (US), the $47-billion Fiat (Italy), and the $168-billion General Motors (US) operating in

Indian Market.

The Pre 1997 Car Market

As late as 1997, the auto market in India was clearly segmented. At the entry level

were MUL's 800-cc car--priced between Rs 2.10-lakh and Rs 2.45 lakh--and the Omni, at Rs

1.75 lakh. At the next level were the 993-cc Zen--priced at Rs 3.70 lakh--and the 999-cc Fiat

Uno (Rs 3.62 lakh). Then came the 1,300-cc Esteem models--priced between Rs 4.69 lakh

and Rs 5.95 lakh--the 1,498-cc Cielo (Rs 6.20 lakh), and the 1,598-cc Opel Astra (Rs 7.52

lakh), followed by premium cars like Mercedes-Benz's E-220 (Rs 22 lakh).

Changing Lanes

Two events have upset the equations in the price-segmented car market. Daewoo has

Changed the lanes with the Cielo, which is now priced at Rs 4.90 lakh, and competes with the

Zen's top-end model (Rs 4.40 lakh) and the Esteem's lower-end version (Rs 4.69 lakh). Ceilo

has created a new value segment, where the price is not proportionate to the size. Daewoo's

strategic response has very clearly redefined differentiation, from price or size to value.

Hyundai Motors India, a subsidiary of the $27-billion Hyundai of South Korea launched

its 999-cc Santro at the Auto Expo 1998 in Delhi. The model comes in five variants, with the

non-air-conditioned, manual transmission model priced at Rs 2.80 lakh, and the semi-

automatic, air-conditioned GLS model priced between Rs 3.15 lakh and Rs 4 lakh. Clearly,

Hyundai's strategy is aimed at taking on the market leader, Maruti Udyog Limited But by

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pricing the deluxe model at Rs 4 lakh, it is also bridging the gap between the small and the

middle car segments. At present Maruti’s Esteem LX is priced Rs 70,000 more than the

Santro GLS, while the Cielo is priced Rs 90,000 more.

The further entry of new players will only blur the segments. New entrants will be

involved in price war to find a foothold in the Indian market. Few of the examples include:

TELCO's positioning of its 1,400-cc Indica car--launched in November, 1998 and priced close

to Maruti’s 800-cc model as a small car;and Honda sneaking its 1,300-cc City into the

segment vacated by the Cielo although it is an accepted fact that pricing or positioning cannot

be done in isolation. In a crowded market, that must depend on the available strategic

opportunities."

By creating new segments, companies can broaden their market base, increase

capacity utilization levels, pre-empt competitors market entry moves and importantly lower

costs. While Maruti did that by launching three versions of the Esteem, TELCO accomplished

it by using a common platform for the Sumo, the Estate and the Sierra models; Hyundai is also

planning to come to the market with five variants in near future. At high volumes, costs can be

lowered by more than 20 per cent across variants due to experience curve effect.

Configuring the sticker price for a car in the market today is no more a functional

decision. It has become a strategic decision as it identifies the key segment’s response

elasticity to the market offer. The two key inhibiting factors for the poor response to the auto

war fare in Indian Car Market are basically the low per capita income at $350 (Rs 14,000 at

current prices) and the high manufacturing costs. A large part of the population expected to

graduate from two wheelers to four wheelers has not responded as they were supposed to

during this period of time. The domestic auto giant Maruti Udyog limited, still forces the new

players to benchmark themselves against its products which roll out from a depreciated, yet

high-volume plant. It enjoys the fast mover as well as the cost advantage with the higher

capacity utilisation that helps him to cut costs across as more cars you make, the cheaper they

get.

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The Protected Giant MUL MUL, which set up shop in 1984, had 10 long years of relative protection to emerge as

a formidable competitor with high volume and a strong brand image in the mind of Indian

customers. When the industry was deregulated in 1993, the cost barrier had become so high

that new companies could not dare to look at the small car segment. Instead, they settled for

the mid-size segment, where both volumes and margins were expected to be high. However, a

shakeout in the Indian mid-size car segment, the slowdown in international auto sales pushed

transnational auto majors into India which have now turned the tide against MUL..

The present generation small cars launched recently are more contemporary in terms

of both design and technology while Maruti's small-car technology is at least a decade old.

Keeping the future growth potential of Indian market in mind, the auto majors are prepared to

bear losses for the next 10 years .This will help them to gain a good market share the long run

and provide breathing space to counter the strategic moves of the leader. Hence, the

narrowing price differential between the old and the new small cars is the first call of the auto

majors against Maruti in Indian Market. If Maruti has to try and match the features of new

generation small cars, it would mean additional costs. On the contrary, if Maruti decides to

hold its price line and add new features, it could translate into losses or at least low profits. But

MUL can still bank on at least two Suzuki models: the proposed 657-cc Cervo C and the

current 996-cc Wagon R to battle its rivals in the future.

The Advent of the Auto Majors

Besides bracing up for losses in the initial years, auto majors like Hyundai and Daewoo

are banking on exports too. At the moment export may look unattractive because of the South

Asian meltdown but in the long run, low production costs and component-manufacturing skills

will make India- made cars competitive at global market place. Hence they are looking India as

a production base to cater to the growing Asian market by way of outsourcing from Indian

manufacturing base. However many a hurdles they have to cross on the journey to profitability.

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The investments necessary for a large plant are simply huge. Daewoo has, so far, sunk Rs

2,700 crore in a 1.20-lakh-unit-a-year plant. Unlike China, which has restricted the number of

companies India has followed an open door policy for car manufacturers, which has resulted in

emergence of fragmented markets with distributed capacity.

An Original Equipment Manufacturer (OEM) needs a minimum economic size of 1.50

lakh cars a year to attract vendor interest. Daewoo was able to slash the Cielo's price as it is

cheaper to import components because of the devaluation of the South Asian currencies. The

auto majors are lobbying with the government to ease the strict indigenisation norms in the

new automobile policy, so that they can import the components from other countries. This will

help them to cut the prices and to go head on the market leader particularly in a price

responsive market like that of small car segment.

The other argument is that with the given import duty of 103 per cent on Completely

Knocked-Down Kits (CKDs) , which is the same as that on Completely Built-up Units (CBUs)

and 68 per cent on components the imports will become costlier and compel companies to

localize their manufacture. The exposure to currency fluctuations, which crippled the four

Japanese light commercial vehicle projects in the late 1980s, is also minimal when a company

localizes component manufacture.

Besides lean manufacturing techniques like Just-In-Time (JIT) are possible only when

the supplier is located close to the manufacturing unit. If Maruti is a success story, it is only

because it indigenised 85 per cent of its components within five years of going on-stream.

Then, there's the question of servicing the replacement market for spares. Customers,

typically, expect components to be available locally, and at competitive prices. Imports cannot

guarantee that but it' is a tremendous job to localize components at the right quality and price

given the supplier problems in prevalent in India.

An Original Equipment Manufacturer’s competitive advantage lies in its marketing

skills. Having achieved price and technology parity, it can easily woo the consumer with

attractive financing schemes and superior after-sales service. Nudged by the competition,

most auto players have a clutch of schemes to offer: Daewoo Motors India provides interest-

free car finance, Ford Motor and General Motors have slashed interest rates. MUL's joint

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venture finance company, Maruti Countrywide, is offering loans at 13.50 per cent when the

prevailing lending rate is 17 per cent and above.

The After Sales Service Scenario

After sales service for cars is as critical as showroom deals. Maruti services its 2

million customers through an army of 174 dealers spread across the country. It will be

impossible for a company to duplicate such infrastructure, particularly with investments in a

metro-based showroom going up to Rs 4 crore. Margins in retailing are moving from actual

sales to after sales service."

The problem of price war is evident with Auto majors as much as with dealers. In a bid

to woo the customers, dealers, particularly in non-prime locations, are cutting their margins. It

will not be surprising if single-brand dealers eventually turn into multi-brand sellers in future.

Doing so will benefit all the three constituents in the marketing chain: the OEM, the dealer, and

the buyer. The carmaker can expand his reach without expensive investment; the dealer can

increase his revenue; and the customer gets a variety of models and brands under one roof in

future.

The local partner will be the loser in this fierce battle. Without the means to make either

matching equity or technological investment, the Indian collaborator will be driven off the road.

It has already happened to the Rs 166-crore DCM, which tied up with Daewoo Motors, and

can happen to both the Rs 1,258-crore Hindustan Motors (Partner:: General Motors) and the

Rs 3,606.57 crore Mahindra & Mahindra (Partner :Ford Motor).

So they are reconciled to adopting a minority role or becoming auto component

vendors. This list includes Siddharth Shriram's Rs 430-crore Siel (Partner: Honda), the

Kirloskars (Partner :Toyota) and the Munjals of the Rs 2,000-crore Hero Group (Partner

:BMW). And the evidence is compelling e.g. Hindusthan Motors has a passive role in its joint

venture with General Motors although the Opel Astra is manufactured at HM's Halol plant in

Gujarat. The same can be forecasted about Mahindra and Mahindra’s joint venture with Ford

Motor. What can prolong the life of the joint venture is distribution muscle, as it will take at

least five years for a transnational auto major to build a strong distribution channel in this

country.

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By all accounts, the auto industry is headed for a glut. With an estimated demand for

cars to touch 9 lakhs in 2001-2002, the installed capacity will rise to 16 lakhs. So the current

growth rate in Indian market is not sustainable. There will be at least two years of stagnant or

declining demand before the resumption of the growth trend.

There is a projected demand of 1-lakh cars in the mid-segment alone by 2001-2002.

And the car numbers will add up to around 6 lakh a year. That will engender a shakeout, which

is already afoot in the other Asian markets. For instance, poor off -take and a consequent

build-up of car inventories has led to a fierce price-war in China.

Market Potential of Small Car Segment

The demand for the small car will continue to drive growth for the next five years. Of

the total sales of Maruti in 2000-2001around 85 per cent were small cars. The Esteem's sales

dropped in the same period, where as the small cars drove MUL's sales. So demand for small

cars will leap only if certain conditions are fulfilled:

Rise in the Income Levels

In the US, auto demand rises by 4 per cent for every 1 per cent increase in the real Gross

Domestic Product but this is irrelevant for India as only the top 1.50 per cent of the population

can afford a car. The demand can shoot up if the income levels of the top 5 per cent continue

to rise in future.

Level Of Motorization

It is stagnant at 1.70 cars per 1,000 people for decades. However, in the post-liberalization

period, the motorization level has leaped to 3.70 cars per 1,000. Although it is still lower than

the levels in the developed markets, motorization is bound to rise further in the coming years.

Vehicle Prices.

Falling imports and excise duties coupled with competition will continue to boost demand and

the prices are likely to fall further at least in the short run.

Consumer Finance.

Over 60 per cent of customers opt for consumer finance. That figure could go up if interest

rates continue to fall.

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Infrastructure

Traffic congestion and bad roads could deter potential buyers from going for small cars

particularly in small cities of India. The future is not very heartening in this aspect.

Product Availability

As manufacturers shift their attention to the small car, more and more people will be able to

afford it and demand will only rise in the future period of time.

The Future

There is a sharp contrast in the buying behavior of Indian Consumer compared to their

western counter parts, yet there is no doubt that Indian car market is going to increasingly

resemble the latter. In the West, the industry is likely to be dominated by three or four major

players. With a likely demand of 11 lakh cars by 2006, there will be a few niche players like

BMW, Mercedes-Benz, and Audi with luxury cars to offer. Unless car manufacturers have a

large range of vehicle to offer, they will be unable to subsidize their costlier models.

The market will consolidate to few segments. The carmaker has to make diverse

models based on diverse and flexible platforms. Products like the stripped-down economy car,

the sports utility vehicle or the van should be built on the same platform. For the price-sensitive

customers, there can be a no-frills version; a loaded version for the middle customer and

luxury car manufacturers can target the high-end customers.

The fortunes of the automobile industry will continue to hinge on the large, price-

sensitive customers, who will graduate to the higher end of the market over a period of time.

Until then, the small car will continue to drive demand and most of the car-manufacturers are

gearing up for this eventuality.

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MAURTI UDYOG Ltd. Evolution

Maruti Udyog Ltd. is a joint venture between Government of India and Suzuki motors of Japan.

Maruti Udyog is India's largest automobile company. When Maruti entered the Indian car

market, it sought to provide high quality, fuel-efficient, low-cost vehicles with a motto of total

customer satisfaction. These objectives shaped the company's policies and approach to

quality level in its products over period of time. The first cars rolled out for sale on 14th

December 1983 (the company went into production in a record 13 months) marking the

beginning of a revolution in the Indian automobile industry.

The Indian car market had stagnated at a volume of 30,000 to 40,000 cars a year for the

decade ending 1983. In 1993, this figure reached a number of 1,96,820. Maruti reached a total

production of one million vehicles in March 1994, becoming the first Indian company to cross

this milestone. Maruti crossed the two million marks in 1997.Through the years Maruti has

provided contemporary Japanese technology, suitably adapted to Indian road conditions and

Indian car users. Maruti has also provided users with a range of cars to suit different needs.

Maruti's market share figures show the response of customers: In 1997-98, Maruti’s market

share of vehicles was over 70%. In addition to leading in the economy car segment, Maruti is

also the leader in the luxury car segment with a market share of 38%.

The success of the joint venture led Suzuki to increase its equity from 26% to 40% in 1987 and

further to 50% in 1992, thus transforming Maruti from a government company to a non-

government company. This helped the company to bring in technology and expertise transfer

from the Joint Venture partner and also respond faster to the increasing competition and ever

changing consumer needs.

Pre-liberalization Scenario

Maruti has raised the bars of automobiles in Indian Market. Prior to it there was no choice

available to the consumer and the models were also not sleek and fuel-efficient. With the

Japanese production and design technology Maruti offered sleeker designed cars at affordable

prices. Initially the consumer had neither any choice with respect to the models nor to the

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company or the price range. The first model of Maruti came in December 1983Maruti Gypsy

was introduced only in December 1985. Subsequent models followed the successful brands in

the following years.

Arrival of Maruti and its tie up with the Japanese partner has made lot of other Indian

automobile manufacturers to follow its path. Hindustan Motors, Premier Padmini, Standard

Motors have formed alliances and forged partnerships in technology with many multinational

firms. Maruti with the support of the Government of India grew faster. Government of India had

passed a special bill giving duty concessions for the import of engines with less than 1000cc,

for which only Maruti was eligible. This preferential treatment given to Maruti gave it a

competitive advantage initially over the other existing players in the market.

Maruti was highly publicized as the peoples car and a technologically advanced, fuel efficient

car, which is available at a price less than that of the existing cars. Even though it had to face

the initial criticism and sarcastic comments of the press, it survived on the huge demand for

the new sleek, small car. Its initial booking list, which had a down payment of Rs.10, 000/ was

overly subscribed and there was a long waiting list of the consumers. Its time phased

indegenisation program has helped MUL to cut down costs and decrease the dependence on

Suzuki for the critical parts. This made it achieve truly the label of “Made in India”.

Post-Liberalization Scenario

This scenario continued till the government embarked on the liberalization path. This allowed

lots of foreign companies to set up manufacturing facilities and also many more to enter into

Joint Venture with their Indian counterparts. This increased the competition for the existing

Indian players in the passenger car segment.

Maruti also faces stiff competition because of the developments after the liberalization of the

economy. The new players like Daewoo, Hyundai, GM, Honda, Ford etc have started eating

into Maruti’s market share. Maruti claimed that even though the market share in percentage

terms was decreasing it saw no problems as the market base itself has increased. This is true

but the fact is that Maruti is not successful in capturing the increasing market base. More and

more consumers are being lured to other companies and models. Maruti’s technological and

the new players were challenging market leadership.

During 1998-99 the company showed a 20% drop in post-tax earnings. Sales of Maruti-800

model that accounted for nearly 58% of Maruti’s domestic sales fell from 1,84,893 units to

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1,62,129 units. Between April-June 1998 and April-June 1999, MUL's share in passenger cars

slipped from 84 per cent to 69 per cent, even though its sales, including exports, grew by 14

per cent during the period.It is an indicator that its competitors are growing faster. For

instance, Hyundai's small car Santro, which was launched only in October 1998, sold 12,684

cars during April-June 1999. Telco, which introduced Indica in December 1998, has put 7,617

cars on the road in the same period. Even Daewoo, which got off to a slow start because its

small car Matiz was priced much higher than expected, had a long list of buyers. The

increased competition was one of the reasons why MUL's net profit slid from Rs 652 crore in

1997-98 to Rs 522 crore in 1990-2000. Hyundai is aiming to sell 55,000 cars in 2001-2002

while Telco has set 60,000 cars as its target. If the two manufacturers achieve their numbers,

their sales would be equal to almost half the total number of Maruti 800s and Zen’s soldin

2000-2001. Maruti’s strategy of cutting down prices and giving finance facilities to the buyers

did not help. At the same time there was a huge upward surge in the second hand car market

and the prices of second hand cars were very low. This made lot of first time buyers to go in

for the second hand cars rather than new ones. There was also a change in the consumer

mind set, they were demanding more value for money.

The new models introduced by Maruti which were competing with models from Daewoo,

Hyundai, Honda etc did not meet the value for money criteria of the consumer. They were

either too costly or with very less features with respect to the comparable models from the

competitors.

Maruti had launched new models, WagonR and Baleno to fight the competition. It reduced the

prices, increased the after sales service, availability of service stations etc., to make a

difference and capture the market. But for this it had to cut down costs at the operational

levels. It had achieved the operational efficiency with Maruti-800 and Maruti Esteem models in

12 and 7 years of time respectively. With the new models introduced it intends to achieve them

by one to one and half years time. Also, with more focus on compliance to Euro-I and Euro-II

emission norms Maruti faces a formidable task.

Maruti has introduced new models with a focus on:

» Launch new models to be present in different segments of the market.

» Reduce production costs by achieving a 85-90 per cent indigenisation for new models within

12 months.

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» Revamp marketing by increasing the dealer network from 150 to 300 and focusing on bulk

institutional sales.

» Bring down number of vendors and introduce competitive bidding by suppliers.

MUL has launched the Baleno and Wagon R in Indian market. Baleno, a mid-sized saloon

with a 1,600-cc engine, will mark Maruti's entry into the luxury segment. The Wagon R will take

on the Santro and the other cars in the segment. The New Alto has also joined the MUL

family. This is a clear indicator that Suzuki's interest in MUL, which had waned in the past

three years, has revived. These models will definitely give MUL a shot in the arm.

Apart from launching new models, MUL plans to push its cars aggressively. Institutional sales,

which currently contribute only 7-8 per cent of its sales, will be a focus area. It is also eyeing

the taxi market in urban centers for its Omni’s. Besides, MUL is hawking its cars on the

Internet and hopes to significantly increase the current 50-80 cyber-bookings per month. To

improve market reach, it may even sell through its network of 1,200-odd service stations

spread over 530 cities.

The company is betting on an increased market presence to consolidate its leadership. But up-

gradation of technology will be crucial. After all, it was the right mix of new technology and low

pricing that helped MUL race past Premier Automobiles and Hindustan Motors in the '80s.

Disinvestment proposal

There were new developments in the Indian political scenario. The government had decided to

dis -invest wholly or partly its holdings in few PSU’s, to realize their full potential and also to

gain maximum returns on them. Maruti is one of the hottest PSU’s which is in high demand

because of its market presence and technical strength.

The Department of Disinvestment (DoD) has prepared a Cabinet note-recommending sale of

the government's stake in Maruti Udyog Ltd. to an international auto company. The

government holds a little less than 50 per cent stake in the car major. The ministry has stated

that the sell-off decision will be subject to Suzuki's approval.

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Suzuki's approval is necessary, as the agreement between Suzuki and the government lays

down that Suzuki will have the first right of refusal if the government decides to sell its share in

MUL. Of the three options considered for divesting the government's stake in the automobile

major, the DoD has stated that selling the governments share via international competitive

bidding is the best option as it would ensure maximum returns to the government.

The other options considered include selling the stake to Suzuki or to General Motors or

selling some shares preferentially to employees and the remaining to small investors and to

financial institutions via a book building exercise. However, selling shares to small investors

has been ruled out on the grounds that such a move would not get in the much-needed

technology for the PSU. Selling the stake to Indian auto companies has also been ruled out,

as they would not have the required technology to offer to the company.

International giants like Ford, General Motors are showing keen interest in acquiring a stake in

Maruti for many competitive and strategic reasons. They are planning to capitalize on Maruti’s

presence in various segments and also the brand equity.

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HYUNDAI MOTORS

Evolution This group incorporated in 1974, is well established in the market of auto components for the

past 25 years. Constant strives for quality and excellence has made Hyundai acceptable as

one of the leaders in replacement market of automotive parts. This was possible by virtue of

precision rendered by talented engineers and technicians, constant innovation and

commitment to total quality at all levels in the company.

To be a leader in the technological front and to meet the challenges of the 21st century this

group has diversified into the marketing of Hyundai range of passenger cars. Hyundai is one of

the top most manufacturers of world class cars and a leading Korean giant.

The Santro is the modified version of the Atos, the company's 800-cc car for the Korean

market. The company says it has adapted the Santro for Indian conditions. Complying with the

European Commission's Euro II emission standards, its Epsilon engine is a light compact and

quiet power plant. To maximize combustion efficiency, the Epsilon engine features a pen-proof

port that ensures a high swirl effect. Priced at about Rs 300,000, it is positioned to compete

with the Maruti Zen.

Birth of Santro The Hyundai Santro was born to meet the typical Indian environment including road condition,

extremely high temperature, tough weather, heavy traffic and difficult driving conditions. So it

was not a surprise when Santro had successfully done 1,00,000 kilometers durability test on

Indian roads, twice. It is claimed that the Santro would require less preventive maintenance

which means saving of cost, time and efforts to Indian customers. In order to complement the

hi - technology Santro, Hyundai has in place a rapidly expanding and well structured after sale

network across the country.

Santro and Matiz are willing to put their money where their mouth is; this is an ample proof of

the business opportunity that both spot in the burgeoning small car market. Daewoo has

committed a whopping Rs 45 crore in direct marketing, sales training and advertising, while

Santro’s ad blitz will be backed by a war chest of Rs 20 crore.

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Santro’s target customer segment includes all those who believe in the ‘value-for-money’

concept. Santro offers a range of safety and convenience features in a price range that suits a

variety of customer needs and driving aspirations.

Most of the major players coming with their launch pad cars in India left the first two segments

and concentrated on the low volume, expensive mid-size automobiles for which they took a

beating from the price-sensitive market. Daewoo on the other hand did a ‘price-correction’ job

and offered value for money in the small car segment.

Hyundai realized that unsettling the core Maruti 800 market may be difficult, without achieving

the economies of scale. So instead, it is trying to take the Zen head on, while trying to target at

the top end of the 800cc segment i.e. with the air conditioned, Maruti 800 DX. Santro’s basic

variant with its technological superiority will give enough reason to potential Maruti 800 DX

buyers to consider upgrading at additional Rs 49,000. Its higher-end variants with a central

locking system and power steering feature at a price almost at par with Zen will give Zen a

tough time. Santro is aiming to become the family car of choice by demonstrating its suitability

for Indian roads. After the entry of Santro , segmentation will not be based on price alone. The

small car market will now be driven by value perceptions.also.

Customer Care Centers Building a dealer and service network may prove challenging for Hyundai. Instead of plumbing

for distribution width, the company wants to consider factors like convenient location. So each

dealer is able to reach critical mass before a New Dealer is appointed in an adjoining market.

This is especially important since dealers are unlikely to make much money on spares in the

early stages of market development.

So far Hyundai is starting with a spread of 70 dealers in 55 cities. Hyundai is trying to build

one-stop-shops, calling it ‘customer care centers’. It is also looking at the possibility of

company-owned dealer-cum-service centers. Three are already operational, named Hyundai

Motor Plaza.

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Santro is a close contender for the top slot in the small car segment, which has been occupied by Maruti's Zen.

Hyundai has sold 72,283 Santro vehicles since its launch in October 1998.

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Daewoo India Ltd. The Company

Daewoo Motors India commenced its operations in India with the production of Cielo in July

1995 and since then has expanded its product range to Matiz in small segment, Cielo

Executive and Nexia in mid-size segment and Royale & Caravan buses in the light commercial

vehicle segment. Daewoo Motors India limited started manufacturing in its state of the art plant

at Surajpur, Uttar Pradesh. The company has invested Rs 4000 crores in setting up the state-

of-the-art manufacturing plant and research & development facilities. In addition to this, the

Commercial Vehicle Division at Surajpur plant has got a separate facility to manufacture

15,000 Commercial Vehicles (both buses & LCVs) per annum. Daewoo Motors’ endeavor is to

introduce a product in every segment of the Indian passenger car market.

Daewoo has primarily 3 brands competing in the Indian market; Matiz, Cielo and Nexia. The

Matiz is available in four models: Standard (SS), Deluxe (SD), Executive (SE) and Premium

(SP).

Daewoo cars have achieved a very high level of localization. While Matiz is more than 70 per

cent localized, the Cielo Executive and Nexia have achieved the indigenisation level of 80 per

cent.

Distribution and Service Network

Since the launch of CIELO, Daewoo has undertaken a major expansion drive by increasing its

present strength of 110 dealers and over 100 Authorized Service Centers to cover the entire

country. The company also has more than 200 vendors (component suppliers) across the

country.

In addition to this, the Company has appointed 14 exclusive LCV dealers across the country to

take care of sales and service requirements of Daewoo Commercial vehicles.

Within 24 months after the launch, Daewoo found the ride into the Indian automobiles

market difficult. Its flagship product, the 1,498-cc Cielo, was hit hard by the recession in the

luxury segment. Cielo's market-share had slumped from 35 per cent to just about 16 per cent.

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The auto major read the market wrong. Since the small segment in the initial years

was dominated by MUL with a market-share of 96 per cent, Daewoo could not visualize that

the small sized segment would grow at a faster pace than the segment it decided to enter in. It

did not consider it worth while to challenge Maruti in small car segment. With tried-and-tested

mid-size models in its boots, Daewoo found the mid size market more alluring. Daewoo

misjudged the growth potential of the small segment that grew faster than the mid-size one,

driven by the price-sensitive customer.

Since there were not enough players in the mid-size segment, Daewoo thought that it

would stand a fair chance in capturing this segment. It could not visualize the strengths of its

potential competitors that would be entering the market like Honda City, Ford and Opel. It

underestimated the market leader Maruti in the small segment. The mid-sized segment got

crowded with players like Opel, Maruti, Honda and Daewoo itself. Lack of understanding of the

customer motivations in the Indian market also caused embarrassment to many a major player

in the mid size segment. Daewoo failed to realize that given the economic conditions existing

in the country in the mid- nineties, the Indian consumer was very price sensitive and always

looked for value for money proposition. So the mid-size segment of the market did not grow

fast enough to accommodate the increasing number of players.

Why did Cielo fail?

Positioning Problems. Internationally, Daewoo occupies the lower end of the mid-size

segment. However, it tried to tap the premium segment in India initially. In 1995, the vacant

mid-size segment-occupied by the Maruti Esteem and the Contessa-was virgin enough for a

new player to make a mark. Daewoo also hoped its positioning, as a manufacturer of quality

cars would help while launching small car models in the future. So, the Cielo was launched,

and, by the second quarter of 1996, Daewoo was selling 1,600-2,200 Cielos a month.

But then, top-bracket competition was just around the corner. And, expectedly, Daewoo's

premium positioning was hit by the launch of General Motors' Opel Astra and the Ford Escort.

To outwit them, Daewoo's dealers began offering discounts on the Cielo: between Rs 30,000

and Rs 1.10 lakh per car. In January 1998, Daewoo formalized the discounts by slashing its

price by Rs 1-1.30 lakh. The base-price of the Cielo came down to Rs 4.90 lakh. And,

overnight, from a premium car, the Cielo became a discount brand. In fact, the Cielo's market-

share in the mid-size segment has come down from a high of 29 per cent in 1996-97 to 13 per

cent in 1998-99.

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In March 1999, Daewoo managed to sell just 255 cars while newcomer Honda sold 1,359

Cities and Maruti sold 1,616 Esteems. And even though the Cielo Executive (the only variant)

is competitively priced at Rs 5.38 lakh, Daewoo's misadventures had created a “perception

problem”. Daewoo's tinkering with pricing and products had not only confused the consumer,

its 110 distributors too are unable to tell what the company will do next. But that was

synonymous with the Daewoo culture. For, in other countries, Daewoo's marketing is a

learning curve, which keeps changing ever so regularly. In other words, the Koreans thought

only about “today”-not “what will happen tomorrow”. While that has proved to be a boon in

developed and mature markets, where price-cuts and repositioning models are facts of life, the

Indian consumer reacted unfavorably. This again is a reflection on Daewoo’s part for not

having done the market and customer analysis properly. It couldn’t establish the fact that the

Indian market and consumer mindset were driven by different forces and ideologies.

Daewoo committed a fundamental error by opting for a discount-based promotional strategy,

which is more relevant in markets abroad, where cars like the Cielo are the entry-level

vehicles, which have high volumes. Theses high volumes more or less negate the discount

effect on the revenues. But the Indian market was not generating enough volumes in the mid-

size segment to justify the discount.

Daewoo realized that selling around 20,000 Cielos per annum does not make sense and,

hence, the company had to broaden the product range to manufacture another up-market

model and, significantly, a small car considering the price sensitive Indian market.

After realizing the initial blunder it had committed in judging the Indian market, Daewoo then

decided to venture into other segments, primarily the lucrative small size segment. Although

the company planed to tap all the segments of the Indian car market with its three models, it

was banking on the small car to boost volumes. But it was not going to be easy to enter and

survive in the Rs 4,032-crore small car market, monopolized by the Rs 7,956.48-crore Maruti

Udyog Ltd. (MUL).

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The Matiz

By introducing Matiz, Daewoo tried to create a new category between Maruti 800 and Zen. It

hoped to gain market-share from both ends. Daewoo had an assumption that, while a

technology-conscious customer would easily prefer the Santro to the Matiz, Daewoo expected

that the customer may pick the Matiz over the Maruti 800 as pricing was crucial in the small

car segment. Declining profits, lower volumes, and lower realizations due to increasing

discounts had made Daewoo's management more cautious about the pricing of the Matiz.

But, while pricing was to be more strategic at the launch stage, the level of indigenisation was

what would matter in the long run. While MUL reached 27 per cent indigenisation within a

year, Daewoo planned to launch its small car with around 50-55 per cent indigenisation. While

MUL could capitalize on its fully depreciated plants, a strong dealer network, and low price

positioning , Daewoo had to depend solely on its technological strength.

Daewoo was also banking on the premise that the Indian customer, while being price-

sensitive, was also value-sensitive. It assumed the Indian customer to be waiting for a better

car with a better technology than what the Maruti 800 offered in the market .

It used technology as a differentiation in a market where the basic model of the Maruti 800 had

not changed in terms of its engine and gearbox. The top management thought that this

strategy could help Daewoo sell at a higher price, especially if it could market the product with

attractive financing schemes by stretching the repayment period. Daewoo's Test Drive

Scheme--which has helped the South Korean automobile major to develop an envious

database of potential customers, revealed a huge demand potential provided customers have

access to easy finance.

Although Daewoo had matched Maruti's dealer and service network, it still had to overcome

the Maruti 800's price barrier, and compete with a host of automobile majors planning to

launch small cars.

The Matiz was launched in October 1998, with low indigenisation levels of 25 per cent which

pushed up the sticker-price of the Matiz to Rs 3.67 lakh. Daewoo found it difficult to source

completely knocked-down units from South Korea for which it had to launch only a single

variant. This offer was a very expensive proposition for a car positioned in the small size

segment. While the Matiz had managed to sell only 10,488 cars since its launch in November

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1998, the Hyundai Santro (price: Rs 2.93 lakh-Rs 3.62 lakh for 3 variants) has sold 30,300

cars in the same quarter.

The Matiz's initial pricing was found to be unrealistic. Daewoo should have first factored in the

price and then the features not the vice versa. It lay too much emphasis on the features of the

Matiz and too less on the price. This strategy was definitely doomed especially considering

how price sensitive the Indian consumer is. Daewoo would, probably, have been more

successful if it had first entered the small-car segment and then resorted to aggressive pricing

to outwit the market-leader Maruti

A change of strategy

Having learned the hard way, since April 99,there has been a complete transformation of

Daewoo India. It seemed to be determined to undo the previous errors it had committed. With

time it began understanding the Indian market and took efforts to deal with the competition.

Daewoo began leveraging its strength in technology to increase its market share. Given below

are some of the steps taken by Daewoo to improve its sales.

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A better pricing strategy

In April, 1999, the company was forced to rework its strategy.It introduced three models :- a

stripped-down standard model (Rs 2.67 lakh), a deluxe model (Rs 3.04 lakh), and an

executive model (Rs 3.48 lakh.)

The new strategy started working and the demand for the brand has gone high. Encouraged by

the higher demand, Daewoo has gone into double shifts to rev up production. Gradually

Daewoo started making its mark in the Indian market which can be seen by the fact that for the

year ended March 2000, Daewoo Motors has sold 40,217 cars, comprising of Matiz (domestic

35,863 units and exports 1,196 units).

Apart from export of cars to Italy, Egypt and Sri Lanka, the company also exported 30,000

engines and gearboxes to Korea last year.

Focus on exports

In 1999 Daewoo Motors India Ltd. bagged an export order of 2500 cars to the European

market. Daewoo Motors India Ltd. (DMIL) exported cars and components worth $109 millions

in fiscal 1999-2000.The company has exported 1,170 units of Matiz, 31,488 engines, 25,056

trans -axles, 3,436 cylinder heads and 28,943 other parts between April 1999 and March

2000. DMIL started exporting engine components in 1997 and exported over 40,000 cylinder

heads by March 2000.

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Efforts to improve Customer Service:

In its efforts to improve its position in the Indian market, Daewoo took a host of initiatives to

improve the after sales and pre sales services. Daewoo Motors India formed a dealer panel to

get market feedback and also suggestions for better customer service. The panel was

handpicked carefully from both urban and rural centers. It is changed quarterly. Daewoo's

initiative was not the first of its kind as other carmakers like General Motors India and Hyundai

had already got into the act of creating such committee. The idea was to conceive strategies

for boosting sales, which would involve vital inputs like aggressive advertising, financing and

so on.

The dealers believed that manufacturers like Maruti Udyog and Ford India had finance

schemes for their dealers but this was not the case with Daewoo Motors. Dealers believed that

once this is done, it would make a world of difference to the quantum of sales recorded each

month.

Interestingly, the committee was of the opinion that revival of the Cielo should be top priority

for Daewoo. Daewoo had, in its turn, planned to introduce company-owned dealerships in

select metros on the lines of contemporaries like Hyundai, which has its exclusive motor

plazas. These outlets would be manned by Daewoo personnel and offer a range of services

under one roof using international practices as a benchmark.

Realizing that selling in a crowded market would not be easy, Daewoo planned to rely on

direct marketing. It tied up with 6 non-banking finance companies for car finance schemes and

set up finance counters at each of its 110 dealerships. Daewoo Motors India Ltd. (DMIL) , in

collaboration with ICICI Personal Financial Services launched a new scheme for enabling car

buyers to purchase the company's small car , the Matiz at low interest rates as up to 10.2 per

cent. Besides ICICI PFS, the Matiz is also financed by leading auto financiers such as Kotak

Mahindra Primus Ltd., Countrywide Consumer Financial Services, Citibank, ABN-AMRO Bank,

Standard Chartered Bank, HSBC Ltd., Sundaram Finance Ltd. and Ashok Leyland Finance

Ltd. taking the current count of Financial Institutions providing loan facilities to 8.

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Simultaneously, the South Korean manufacturer started building distribution muscle in smaller

cities and semi-urban areas, which, it believed, would drive growth in the future. Daewoo

Motors India Ltd. (DMIL) is in the process of doubling its service network for the company's

entire product range as a step towards increasing its customer base. DMIL is adding 100

additional authorized service centers (ASCs) in stages to take the total number to 200. This

apart, the company is also appointing 30 more exclusive dealers in various cities across the

country to take the total number of Daewoo dealerships to 140. The company's strategy is to

have the maximum number of satisfied customers before the launch of any new product. What

is of utmost concern to a customer is how much care his car will receive after the purchase.

The feel-good factor is very important, assuring customers of a long lasting relationship with

the company.

Daewoo Motors has also introduced the concept of Helpline. A Daewoo owner can dial the 24-

hour Help line number for assistance in case of breakdowns. The ‘Help line’ car is with him

within approx. 30 minutes (depending on the location of breakdowns) and specially trained

engineers and service personnel are available to rectify the problem. Through additional

services such as The Happy Call Center and Express Part Service (speedy delivery of any

part all over the country) the company hopes to provide its customers with the best possible

service network.

As a move to increase its share in the competitive market, Daewoo Motors has come up with

warranty program from two years to four years on a nominal payment for its range of small and

mid segment cars. Other competitors are offering only a one-year warranty program.

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Technology and R&D

Daewoo has a sound technological and R&D base. After the first faltering steps that the Matiz

took in the Indian market, Daewoo took sufficient care to upgrade its models regularly. It was

the first company to introduce multi-point fuel ignition system in India, though it failed to use it

as a differentiating factor from other cars available in the market. Also Daewoo products were

conforming to the Euro II emission norms, the only company to have such products when the

law was passed. This helped it to have some price advantage over its competitors since the

competitors had to pass on the increase in costs to the customers because of this new

technology. The company introduced an all-new M-Tec (magic and maximum power

technology) engine in Matiz, which is more responsive, gives better acceleration, improves

power and performance in city driving conditions and provides better fuel efficiency. The

company has enhanced the compression ratio in the new Matiz engine from 8.5 to 9.3,

showing about 10 per cent improvement in the overall performance of the car. Besides this,

the engine has been spruced up with exhaust gas re-circulation for better emission, a heated

type 02 sensor for reduced response time and better emission control. The new Matiz engine

also has a knock sensor, which acts as a device for the engine by preventing it from internal

damage and also controls the quantity of fuel intake in the reduced face of the piston head.

This results in maximum power output with better fuel efficiency. The company has also tried

to improve the a/c performance in Matiz by use of advanced a/c logic technique. Besides

Daewoo has introduced regular cosmetic changes to give its products an improved

performance, especially in the small car segment. The technological efficiency of the Matiz can

be judged by the fact that it has recently found a place in the Guinness Book of world record

for bring the most fuel efficient car on the road.

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Tata Engineering and Locomotive Company (TELCO)

History & Evolution

Tata Engineering and Locomotive Company Ltd, popularly known as Telco was incorporated

in 1945 to manufacture steam locomotives. In 1954, the company diversified into automobile

manufacturing, through a collaboration with Daimler-Benz for the manufacture of commercial

vehicles. By the time the collaboration ended in 1969, Telco had not only become an

independent producer of medium commercial vehicles (MCVs) with negligible import content,

but had developed the capability of designing and developing such vehicles. The Company

progressively widened its product range to cover heavy commercial vehicles (HCVs) and light

commercial vehicles (LCVs), implementing one expansion program after another.

To sustain the unrelenting pace of its growth, Telco added machining, press and assembly

capacities, set up its own forge and foundries, and virtually created the country’s automobile

ancillary industry. The Company even developed facilities for designing and manufacturing

state-of-the-art machine tools, material handling equipment, dies and fixtures. To

accommodate the Company’s growing activity base, a large, modern complex was set up at

Pune in western India and a new plant became operational at Lucknow, in the north of the

country.

To provide a business focus for the Company’s main activity areas, Telco has created two-

business units’ -Automobiles and Construction Equipment – both of which have notched up

record-breaking results.

Telco today has a domestic market share of 68% in the MCV/HCV segment, 64% in the LCV

segment and 32% in the multi-utility segment. Apart from commercial vehicles, which range

from 1 ton to 35 tons GVW, Telco’s automobile products also include passenger vehicles and

an extraordinarily popular multi-utility vehicle. All these products have been developed in-

house by the Company’s own R&D Center. This Center is equipped with the latest computer-

aided design hardware and software, enabling the company to respond quickly to changing

customer needs, both in India and abroad.

Telco has been exporting its products since 1969 and currently exports about a tenth of its

output. Export markets include the Middle East, Africa and Southeast Asia, as well as

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developed countries in Europe like France, UK and Spain. It is intended that exports should

account for 20% of the automobiles sold by the Company.

Telco’s second line of business, Construction Equipment, has also grown rapidly and the

Company currently commands a 61% share in the excavator market and 90% in the crawler

cranes market in India. The hydraulically operated construction equipment made by the

company is in collaboration with Hitachi Construction Machinery Limited of Japan. There are

ambitious plans for widening the range of excavators made by the company and for adding

new lines of construction equipment. A recent addition to the excavator range is Backhoe

Loader.

Telco is one of India's largest private sector companies. With a turnover of Rs 66.37 billion, it

is the country's leading commercial vehicle manufacturer and the world’s sixth largest

automobile company.

The widely successful Tata Indica, which is Euro 1 and 2 compliant, is the country’s first

indigenously designed, developed and manufactured passenger car. The company also

makes several other passengers vehicles, including the Safari, the Sumo, the Sierra, the Tata

Estate, and the Tatamobile pick-up.

The company’s products have received wide acceptance not only in India but also in markets

in the Middle East, Asia, Africa and Europe

Areas of business The company manufactures medium, heavy and light commercial vehicles, multi-utility

vehicles and passenger cars. It also makes general and special purpose machines for

automotive applications at its machine tool division. These include NC/CNC horizontal and

inline machining centers, flexible manufacturing systems, CNC cylindrical grinding machines,

and robots for welding, cutting, painting and other applications.

In 1999, the company’s revenues from its four manufacturing plants at three locations in India

were Rs 66.37 billion ($1,573.5 million). In 1998, they were Rs 70.26 billion ($1,893 million).

(The average exchange rate in 1999 was Rs 42.18 to one US dollar.)

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In the year ended 31 March 2000, the company’s total exports were worth about Rs 505.53

crore, against about Rs 600.78 crore in the previous year.

Locations The company’s manufacturing plants in India are at Jamshedpur in Bihar, Pimpri and

Chinchwad near Pune in Maharashtra, and Lucknow in Uttar Pradesh. A fifth manufacturing

facility is being set up at Dharwad in Karnataka.

Collaborations The Company has technical tie-ups with:

• The Institute of Development in Automotive Engineering, S.P.A., Italy, for assistance in

small car body design and styling;

• Nachi Fujikoshi Corporation, Japan, for robots for welding, painting and other

automotive applications;

• Le Moteur Moderne, France, for the development of diesel and petrol engines for

passenger cars; and

• Robert Bausch GmbH, Germany, for application work on the engine management

system for 4 PL petrol engines

Launch of Indica

TELCO launched Indica when the TATA group was in red. Telco chairman Ratan Tata said

that the 1400 cc car Indica would drive the company out of the red.

Tata, while talking to reporters at the IETF '99 in a videoconference from Mumbai said that the

overwhelming response of over 1.25 lakh initial bookings for the Indica had come as a

surprise. "It seems we touched the national chord somewhere as people responded to the fact

that this is the first Indian car," said Tata. "Indica is not the end of the road for Telco when it

comes to passenger cars. It is just the beginning, as there are more to come", said Tata,

adding that the company was working on another mid-size car after Indica.

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Telco had to produce 60,000 cars a year to break-even. The group created two

organizations within Telco, one dealing with commercial vehicles and the other with passenger

cars. The company under took a major restructuring exercise whereby the passenger car and

commercial vehicles divisions would function as two separate business units. Telco had a

strategy to go for exports after addressing the initial requirements of the domestic market.

Awards and Recognition

In May 2000 ,Tata Engineering and Locomotive Company Ltd. (Telco) won a national award

for successful indigenous technology used in the Indica car project. The award titled 'National

award for successful commercialization of indigenous technology by an industrial concern' for

indigenous development and commercialization of Tata Indica car was presented by the

minister for human resource development, science and technology and ocean development,

Dr. Murli Manohar Joshi.

In November 1999 Telco was awarded the 'Department of scientific and industrial research

national award for indigenous design of the Tata Indica. It was the first company in India to

implement stringent emission norms well ahead of the mandate dates.

Promotions The Indica advertising made interest for the car go into overdrive. The campaign revolved

around the premise that the Indica would not just meet people's expectations, it would exceed

them. Every advertisement has a story to tell

Pre launch Campaign The Indica campaign began in the right earnest in December 1998. It was advertised as the

launch of a car that will spell doom for the small cars. It was directly aimed at Maruti 800. The

ad line used in the first campaign was “Car makers will suddenly remember all the things they

forgot to give you”. This hinted that Indica would have more features than any of the existing

small cars. Indica used the catch lines like “ More car per Car” “More dreams per car” to

suggest that Indica will be bigger in size to the existing small cars yet be in the small car

category. It competes with the mid size cars on size and give them a run for their money with

its cheaper price tag.

At the launch of the car TELCO claimed that the people would never have to suffer from a

small car again and that the n end of the year (1998) would be the end of the small cars.

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Launch Campaign The launch campaign of Indica focussed on the many advantages that it offered over other

cars in the same segment. It promised the customers more than the current offerings. Its first

advertisement carried the following catch line “50cc moped, 100cc bike 800cc car. Time you

asked for more.”

It then concentrated its efforts on criticizing the negative aspects of Maruti 800 and highlighted

how Indica has removed those very defects and presented a very sophisticated and modern

car to the Indian customer. It even pointed out that the shape of Maruti was very

unconventional and that people would prefer the shape of Indica to Maruti 800. The

advertisement read “ Box shaped, bubble shaped, wedge shaped. But then Gentlemen prefer

curves”

The launch campaign also focussed on the roomy interiors of Indica, a feature not offered by

Maruti at that point of time. Also the expertise of TATA in diesel engines and fuel efficiency of

these were the highlight of the launch campaign of Tata Indica.

Post Launch Campaigns While the Launch campaign focussed on the features of Indica the post launch advertisements

focussed on the superior after sales service and longer warranty periods offered by Indica.

Telco was the first company to offer an 18-month warranty period on engine parts. The most

famous line used during this campaign was “We could go on and on about service or give you

the one word summary. TATA.” While their main adversary was the Maruti 800 ,Telco felt that

it could also tap the mid size segment using the selling point of space given by Indica. They

carried a campaign, which said “Forget small cars, we even make big cars feel small”

It then went on to highlight the fact that Indica was Euro II compliant even before it was legally

binding upon car manufacturers to do so. It also highlighted the concrete wall safety test that

Indica withstands and tried to showcase the car as a safe and strong car.

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THE RACE HAS JUST BEGUN . . . With increasing disposable incomes and ever-growing burden on the public modes of

transport, the Indian passenger car industry is heading for a bright future provided car

manufacturers offer a world class cars that give value for money, use novel marketing

concepts to entice potential buyers and offer good after-sales service.

Demand for passenger cars in FY2002 is projected at approximately 970,755 units while

production is expected to reach 1,210,000 units. The year is likely to witness a spurt in exports

due to excess supply and liberalization of export policy by the government.

Some of the future strategies that need to be addressed while entering in to Indian small car

market include the redesign of the vehicle to suit the Indian road conditions and to develop

aggressive marketing strategy to counter the cost advantage enjoyed by dominant players like

Maruti due to high capacity utilization. With growing number of two wheeler owners opting for

used cars, vehicles with higher resale value and excellent service network are likely to account

for a major market share in the near future. Moreover, the introduction of Euro III and Euro IV

norms in the near future is likely to increase the scrapping rates of cars.

Exports are likely to increase in the near future with the entry of international car giants like

Daewoo, Hyundai, Honda Siel, GM and Ford that intend to use India as a manufacturing

production base..

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Reference web sites and books. Japan Enters Indian Industry by Raja Venkataramani, Radiant Publishers. www.bangalorebest.com/cityresources/Automotive/ www.economictimes.com http://www.autoindia.com/cardata/sangls1.html http://www.cybersteering.com http://www.orionhyundai.com/profile.html www.bsstrategist.com www.financialexpress.com www.indiaserver.com/thehindu/ www.domain-b.com/industry/automobiles/ www.marutiudyog.com www.telcoindia.com A&M Magazine (Sept 1999 – Dec 2000) India Today Business Today Business World