Dissertation Report

Buying your First Hatchback Car: Target areas

for Marketing.

Alkesh Dinesh Mody Institute of Financial and Management studies

1
 A PROJECT REPORT ON

“D issertation R eport-Buying your First H atchback Car”

Under the guidance of

Mr. Sen Gupta

BY
Rohit Sopori
Master of Management Studies (SY-MMS)
Roll No: 45
Alkesh Dinesh Mody Institute for Financial and Management
Studies
(2009 – 11)

2
 DECLARATION

I hereby declare that the work presented in this Project entitled “Dissertation Report-
Buying Your First hatchback car” submitted to Prof. Sen Gupta (visiting Faculty) at Alkesh
Dinesh Mody’s Institute for Financial and Management Studies, Mumbai University is an
authentic record of my original work.

Signature of Mentor Signature of Candidate

Date:

3
 CERTIFICATE

TO WHOMSOEVER IT MAY CONCERN

This is to certify that Mr. Rohit Sopori, student of Master of Management Studies,
Alkesh Dinesh Mody Institue for Financial & Management Studies, Mumbai, has
successfully completed his Project titled “Dissertation Report-Buying your First
Hatchback Car” under the guidance of Prof. Sen Gupta, Visiting Faculty
The student has demonstrated considerable acumen & skills to complete the project
assigned to him.
I wish him all the best for his future career endeavors.

Prof. Sen Gupta

4
 ACKNOWLEDGEMENT

I would like to confer my heartiest thanks to my Project Guide, Prof. Sen Gupta for giving me the
opportunity to work in the field of Automotive Analysis, especially its practical applications. While
preparing my project I got to have an in depth knowledge of practical applications of the theoretical
concepts and definitely the things which I have learned will undoubtedly help me in future, to analyze
many processes going on in our economy.
I am greatly indebted to Prof. Sen Gupta (Visiting Faculty at ADMI), my Project Guide and Mentor for
devoting his valuable time and efforts towards my project. I thank him for being a constant source of
knowledge, inspiration and help during this period of making project
I would also like to thank all those people who directly or indirectly helped us in accomplishing this
project.

5
 Index

Serial Number Subject Page Number

1 Executive Summary 7
2 Global Automotive Industry 8
3 BIRC Nations 11
4 Indian Automotive Industry 12
5 Literature Review 13
6 Introduction 14
7 Overview Indian Automotive 15
8 Auto Component Industry 16
9 Four Wheeler Industry-CV Segment 18
10 Demand Drivers for CV Segment 21
11 Passenger Car Segment 23
12 Key Success factors 26
13 Porter’s Five Force Model 27
14 Growth & Demographics Of Indian Customer 31
15 Research Methodology 33
16 Limitations 34
17 Survey with Analysis & Conclusion 36
18 Bibliography 44

6
Executive Summary

Buying your First Hatchback Car: Target areas for Marketing.

When it comes, for a middle class family/individual, to make a decision to buy his/her very first
hatchback car, the subject embarks a journey of gathering information from various sources, at times
repositions his budget, select models, select dealers, makes a purchase and finally wait for his Car to
get delivered.

Its just not other impulsive purchase for the subject, he wants to make the best out of his hard
earned money, or rather TO BE hard earned money, share of which flows out in form of EMI`s. Also
the subject wants to make an impression among friends, relatives, and declare that he has finally
arrived in life, driving his very first hatchback Car.

Here in this study, we have considered a Hatchback car (2 box car with tail gate. For instance:
Maruti swift, Hyundai i10, Volkswagen POLO), as we have assumed that the subject has set initial
budget of 3-5 lakhs for himself. Within this price range, Indian automotive market is offering range of
Regular to Premium hatchbacks (Competition is driving, both best of quality and more features
available to customer).

The decision making process is quite long in this purchase, usually 15 days to a month, and subject
follows a series of steps. It indeed starts with need realization, followed by information gathering,
followed by test drive experiences, followed by processing of documents ( in many cases for Loan
amount ), followed by actual delivery of the car.

Both knowingly and unknowingly, the subject gets influenced by range of people around,
suggestions and ideas, published views and reviews, , at times even, just the sight of most driven
car on road or seen in parking lots, subject`s own swinging desire among brands and designs, that
synchronize with his personality and many more.

That there are so many steps involved and that subject`s decision is influenced by so many touch
points, there appears to be a huge untapped opportunity for automotive marketing professionals
to first study the whole decision making process, and secondly look for the soft areas within this,
where it can improve its offer and communication to the customer so well, that customer ends up
buying company`s offer, and finally retain and even make customer become a loyalist to the brand,
company and to its product.

With this premise, I have conducted this study. I started with interviewing individuals who had
recently purchased a hatchback car; from their inputs survey was created, in which the
questions were arranged in the sequence of steps, the individual goes through decision making. The
survey also tries to capture, intangible influences on subject and his decision making. The survey
received a good response, with more than 100 entries. Taking this number as an indicative
sample of the entire population of customers (Customer demographics: Age, Education,
Employment, Income, Expenditure, and Family is defined in survey), Findings and recommendations
over the area of improvement are discussed.

7
 2. Global Automotive Industry.
Global vehicle production has more than doubled since 1975, from 33 to nearly 73 million in
2007. The opening of new markets in China and India has helped to drive the pace of growth. While
seven countries accounted for about 80% of world production in 1975, 11 countries accounted for
the same share in 2005.

Notes: Includes cars and trucks but not large trucks and buses as in Table 1.
Source: Automotive News Market Data Books

Much of this global growth in the industry was result of growth in the emerging markets in Asia (mainly
China, the Republic of Korea and India), Latin America (mainly Mexico and Brazil) and Eastern Europe
(mainly the Russian Federation). Although the share of the Triad (USA and Canada, Japan, European
Union) of global vehicle production decreased over the period 1997-2007, from 77% to 50%, it still
accounted for the lion’s share of global vehicle production in 2007.

Source : Globalisation of the Automotive Industry : Main features and Trends.

8
Several leading global OEMs are sourcing auto components from India.

Global OEMs Sourcing from India (Illustrative, not Exhaustive), Source:ARAI-DATA Till 2007

Manufacturer Component value Comments

Volvo Machine and painted castings, forgings, US$ 90 million India is the single sourcing unit
gearbox and engine components FM12 (8 X 4) model sold in South Korea.
& others

Fiat Engines, gearboxes, others US$ 4 million To source components for the Grande Punto as
well as Linea Models. To invest US$ 1 billion.

Ford Motors Castings and forgings, crankshafts, US$ 150 million Expects the volume to grow to
exhaust manifold, leaf springs, horns, US$ 400 - US$700 million.
dashboard, door trims

Renault-Nissan Has firmed up plans to source US$ 125 million in next First phase to source low end tech for low end
components and aggregates 2 years models. High-end in second phase.

DaimlerChrysler Auto components and IT services US$ 125 million Growing at 20% CAGR

Toyota R-type manual transmission – gear 140,000 gear boxes Expected to go up by 5 - 10 per cent.
boxes – global supply, propeller shafts
etc

Global AUTO COMPONENT COMPANIES

SOURCING FROM India
Global Tier-1s Sourcing from India (Illustrative, not Exhaustive)

Manufacturer Component value Comments

Delphi Catalytic convertors, steering systems, piston US$ 250 million Planning further investments
rods, drive shafts etc. (2007 Plan) in the software wing

Visteon AC systems, alternators, panel instrument US$ 56 million NA

assembly in 2002

Bosch FIPs, Common Rail Systems US$100 million Planning for further investments
of US$430 million

Cummins Engines and components US$ 150 million Plans to increase it to

US$ 500 million by 2010

Tenneco Automotive Forgings US$ 60 million NA

Deutz Engine components US$ 70 million Plans to procure US$ 1,000 million worth of
components from Low Cost Countries including
India

9
Most of the leading global auto component companies have also formed a sourcing base in
India, to leverage India’s high skill, competitive cost advantage and improve their competitiveness in
the global markets

10
Shifting focus towards BRIC Nations.

For the Next Decade, the future of automotive industry lies in the BRIC countries. Together,
Brazil, Russia, India and China will account for some 30 percent of world auto sales in 2014—
while also offering significant opportunities for cost effective R and D, sourcing and
Manufacturing.

Auto sales in the most developed markets will grow only moderately from year end 2009
through 2014, at an average rate of some 2 percent per year, sales in the BRIC countries will
grow at rates ranging from 3 to 15 percent per year, to end up accounting for some 30 percent of
the global auto market by 2014.

Brazil, China and India are the BRIC countries safe bets. In contrast, Russia is BRIC countries
roller coaster. In Russia, sales dropped by an estimated 50 percent in 2009, but stabilized in
2010. It is further expected to achieve growth of some 15 percent per year through 2014.

China will remain by far the largest of the four automotive markets, expanding its share of total
BRIC sales volume from 53 percent in 2008, to some 60 percent in 2014.

Brazil is the most mature and stable of the BRIC Markets and is likely to remain the second
largest of the four through 2014.

India will outpace both china and Brazil in growth through out the forecast period, occupying
the third place in terms of market size until 2014.

Companies should take a note of the fact, that there is no standard BRIC car. Brazilian
consumers favor sporty hatchbacks, Russians prefer western sedans and sport utility vehicles
without visible local adaptations, Indians seek ultra low cost minicars, and Chinese enjoy
affordable luxury style sedans with flair.

Source : BCG Report-- Winning the BRIC auto markets .

11
Indian Automotive Industry.

India Becoming Global Hub for Small cars.

India's passenger car industry is evolving in a unique way – driven by economic growth, rising
incomes and a large number of mid income households aspiring to own a car.

The notable feature about domestic car sales in India is that over three fourths are hatchbacks.
This is driven by tax breaks for small cars (defined by engine size and length) and the purchasing
power of customers.

With India likely to cross 8% GDP growth from 2010-11 onwards, domestic car sales are
expected to grow at 10 to 12% per year reaching about 2.5 Mn in 2015. Exports too are likely to
grow to about 1 Mn as Europe and other countries develop a liking for fuel efficient, low cost
cars that comply with all regulations.

The preponderance of hatchbacks is likely to continue in future for several reasons. First, the
ramping up of Tata Nano will increase volumes at the entry level. Second, the higher tax rate
for larger cars and sedans will continue. Third, larger cars may have to use hybrid or electric
propulsion technologies thereby further increasing the price differential from hatchbacks. Thus,
over the next ten years, India is likely to evolve into possibly the world’s largest single market
for hatchbacks. It will certainly be the biggest car market focused on hatchbacks. Even as this
happens, the vehicles will grow increasingly sophisticated in terms of features eg. safety,
comfort, fuel efficiency and emissions.

The car market in India is dominated by three major players (Maruti Suzuki, Hyundai and Tata
Motors) who hold about 80% share collectively. The remaining 20% of the market is accounted by
most other international brands — Ford, GM, Toyota, Honda, Fiat, Skoda and now VW.

Source : TSMG Report—India Becoming Global hub for Small Cars.

12
 Literature Review

Competitiveness of manufacturing sector is a very broad multi-dimensional concept that embraces

numerous aspects such as price, quality, productivity, efficiency and macro-economic environment.
The OECD definition of competitiveness, which is most widely quoted, also considers employment and
sustainability, while being exposed to international competition, as features pertaining to
competitiveness. There are numerous studies on auto industry in India, published by industry
associations, consultancy organizations, research bodies and peer-reviewed journals. In this section,
various studies on the Indian auto industry are reviewed, under different heads pertaining to
competitiveness, namely, global comparisons, policy environment and evolution of the Indian auto
industry, productivity, aspects related to supply-chain and industrial structure and technology and
other aspects.
Also as a part of my academic curriculum I have under-take research project under the guidance of Mr.
Sen Gupta,to understand what value does a brand, a specific dealer location or the excitement to buy
his/her first car holds for consumer

13
Introduction
The Indian automotive component industry is dominated by around 500 players which account for
more than 85% of the production. The turnover of this industry has been growing at a mammoth
28.05% per annum from 2002-03 onwards as illustrated in Fig.1 which clarifies its emergence as one of
India's fastest growing manufacturing sectors.

During 1990s, the auto components market in India used to be dominated by supplies to the
aftermarket with only 35% exports sourced by global Tier 1 OEMs (Original equipment
Manufacturers). The industry made a sustained shift to the global Tier 1 market and today, the
component manufacturers supply 75% of their exports to global Tier 1 OEMs and the remaining to the
aftermarket. This is largely due to the growing capability of the Indian component suppliers in
understanding technical drawings, conversance with global automotive standards, economically
attractive costs (manufacturing costs are 25%-30% lower than its western counterparts), flexibility in
small batch production and growing information technology application for design, development and
simulation.
Besides the burgeoning demand of auto components from global majors, the domestic automobile
industry has been showing a sparkling growth caused by increasing customer base and affordable
loans. Based on this, the turnover of the Indian auto component industry is expected to touch US$
18.7 billion by 2009 and estimated to reach US$ 40 billion by 2014.

14
Overview of Indian Automobile Industry

The liberalized policies of the Indian Government paved towards steady evolution of India as a stable
and market driven economy with the real Gross Domestic Product growth in excess of 8%, foreign
exchange reserves crossing the $150 billion mark, growing value of Indian Rupee compared to US
dollar and reducing inflation rate. 100% Foreign Direct Investment, absence of local content
regulation, manufacturing and imports free from licensing & approvals in the automobile sector
coupled with customs tariff or auto components reducing to 12.5% resulted in increased number of
multinationals establishing their bases in India and with export markets looking up, the Indian
automobile industry is poised for a phenomenal growth. The automobile production in the sub-
continent has been growing steadily @ 18.53% per annum from 2002-03 onwards with total vehicle
production standing at a mammoth 1, 00, 31,296 nos. in 2005-06 as is shown in Fig.

2007

2006

2005

2004 CAGR
15.5%
2003
2002

0 2 4 6 8 10 12
Million Units

Automotive Sales (Domestic and Export)

The Indian automotive industry has the potential to emerge as one of the largest in the world. The
country already ranks number two globally in the two-wheeler segment, and is next only to China.
It ranks 11th in car production and 13th in commercial vehicle production globally. With growing
industrial production and increasing spending p o w e r of the Indian middle class households, the
country is expected to make it to the top five markets in cars and commercial vehicles by 2020.
In the year 2006-07 sales of the I n d i a n automotive industry crossed the 10 million units mark.
Sales (domestic as well as exports) of the industry have grown from 5.51 million units in 2001-02
to 11.12 million units in 2006-07, at an impressive Compound Annual Growth Rate (CAGR) of 15.5 per
cent. This, extraordinary growth has been driven by a buoyant economy, increasing purchasing
power of the Indian middle class, new product launches and attractive finance schemes from
automobile manufacturers and financial institutions. Of the total sales, roughly 10 per cent is
contributed by exports to various countries.
In terms of volume, the two-wheeler segment with its sales of 8.48 million units in 2006-07
has the highest share of more than 76 per cent in the industry, followed by passenger
vehicles, three wheelers and commercial vehicles. The maximum growth however has come in
the commercial vehicles segment, which grew at a CAGR of 26.6 per cent in the last five years to
15
reach a sales figure of roughly 518,000 units in 2006-07. The next highest growth was witnessed in
the three-wheeler segment, which grew to roughly 548,000 units.

Category Sales in Share in CAGR

2006-07 Total Sales (FY 02-
07)
Two wheelers 8,476,686 76.2% 14.5%

Passenger cars 1,578,176 14.2% 16.7%

Three wheelers 547,805 4.9% 20.5%

Commercial vehicles 517,648 4.7% 26.7%

Source: Society of Indian Automobile Manufacturers (SIAM)

AUTO COMPONENT INDUSTRY

The Indian automotive industry has witnessed a strong growth and riding high on this growth,
the Indian auto component industry has reached a turnover size of US$ 15 billion in 2006–07. The
auto parts industry has emerged as one of India’s fastest growing manufacturing sectors,
growing at a compound annual growth rate (CAGR) of 28.9 per cent in value terms between 2002-03
and 2006-07. The industry has adopted a three pronged strategy of product portfolio
enhancement, market e x pa ns ion and efficiency improvement to achieve this status. Enhanced
capacities and higher capacity utilization have contributed significantly to this growth.
In volume terms, nearly 34 per cent of the market is contributed by auto components for two/three
wheelers. Passenger cars contributed nearly 33 per cent of the total component market, driven
b y the buoyant car market in India. Commercial vehicle (CV) components currently account for
around 24 per cent of the market, emerging as the most lucrative segment. CV sales have recorded
the highest growth in the Indian automobile market. CV sales grew at a CAGR of 26 per cent
between 2001-02. During 2006-07 CV sales led at a CAGR 26 per cent and the CV sales grew at a CAGR
of 26 per cent between 2001-02 and 2006-07 and the CV components industry has registered the
same growth rate. The CAGR achieved by components for two wheelers and cars were 14 per cent
and 15.6 per cent respectively during the same period.
The auto component industry in India is highly fragmented and has around 500 organized players
and more than 600 unorganized players. It is estimated that, the organized players account for
around 77 per cent of the production. Geographically m o s t o f the players i n the Indian auto
component manufacturers have their operations in the three major auto hubs namely, Chennai (Tamil
Nadu), Pune-Mumbai (Maharashtra) and the National Capital Region (NCR).

16
The industry also has deep forward and backward linkages, with almost every other
engineering related manufacturing sector of the economy. It supports industries like
automobiles, machine tools, steel, aluminum, rubber, plastics, electrical, electronics, forgings
and machining. The industry is characterized by the presence of companies that are technically
capable in areas of manufacturing, design, and testing and product development. The
competition offered by the presence of the global automotive players in India and the
acquisitions made overseas by Indian companies has helped Indian firms to hone their
skills, to a higher extent.
Market Structure of Indian Component Industry
Component Market Profile

15%

50%

35%

n OE Components n Replacement Market n Exports

17
Four-Wheeler Industry
Commercial Vehicle Industry

The commercial vehicle (CV) Industry in India, as is the trend internationally, is cyclical, with periods
of volume growth leading to investments in fleet capacity and subsequently to periods of
correction. In spite of the inherent cyclical nature, the long-term growth prospects for the industry
remain closely linked to the development of road infrastructure, growth in gross domestic
product (GDP) and industrial production. The Indian CV industry is currently going through
demand correction following one of the longest up-cycles in its history. The Industry which grew at
a rate of above 25% over 2001-07 has grown by just 5% in FY08. The long up-cycle was driven by
strong economic growth and investments in road infrastructure, besides favorable regulatory
changes and a benign financing environment. The industry, on its part, has used its period of
growth and the resulting financial surplus to invest in product development and improvement in
operating efficiencies. These efforts have resulted in industry extending its presence into newer
geographies and exports have increased at a CAGR of almost 40% over the last five years. Going
forward this could help in mitigating the effect of down cycle to an extent.

Industry growth

Over the last five years light commercial vehicles (LCV) and medium/ heavy commercial vehicle
(M/HCV) segment have grown at a CAGR of 27% and 17% respectively. Although growth of these
segments has shown similar trend, volume growth in the M/HCV segment has been more volatile.
The demand for M/HCV goods carrier segment mainly depends on higher capacity addition at the
fleet operator level and also prone to severe demand shocks. The LCV segment, though cyclical,
usually exhibits steadier demand patterns on account of wide usage range.

CV Production and Sales Trend

600000

500000

400000
Exports
300000 Domestic Sales

200000 Total Production

100000

-
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

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 Structure of Indian CV segment

The CV industry in India is split between the LCV and M/HCV segments, with the classification
being based on gross vehicle weight (GVW). According to Industry norms, vehicles with GVW less
than 7.5 tonnes are classified as LCVs while the ones heavier than these are termed M/HCVs. In
terms of usage, CVs may be categorized as goods carriers and passenger carriers. Among the
passenger carriers in the less than 7.5 tonne GVW segment, those with sitting capacity up to 13
are categorized as utility vehicles (UVs, and not part of LCVs) while those with capacity over 13
passengers are grouped as LCVs. According to Crisil statistics, the overall CV industry is split
between the LCV and M/HCV segments roughly in the ratio of 45:55.The Indian four-wheeler
industry is duopolistic in nature with Mahindra and Mahindra (M&M) and Tata Motors holding a
major share in LCV segment (90.8%) and Ashok Leyland (ALL) and Tata Motors holding a major share
in M&HCV segment (88.6%).

M&HCV – Passenger Carrier

Domestic Sales (Nos.) Market Share (%)

Manufacturers FY07 FY08 YoY (%) FY07 FY08
Tata Motors Ltd. 13,751 16,939 23 47.92 43.82
Ashok Leyland Ltd. 11,674 17,582 51 40.69 45.48
Eicher Motors Ltd. 1,609 1,804 12 5.61 4.67
Swaraj Mazda Ltd. 1,422 2,090 47 4.96 5.41
Total 28,693 38,655 35 100 100
Source: SIAM

M&HCV – Goods Carrier

Domestic Sales (Nos.) Market Share (%)

Manufacturers FY07 FY08 YoY (%) FY07 FY08
Tata Motors Ltd. 159,630 149,099 -7 64.66 64.17
Ashok Leyland Ltd. 65,069 57,846 -11 26.36 24.9
Eicher Motors Ltd. 17,149 20,666 21 6.95 8.89
Swaraj Mazda Ltd. 4,300 3,663 -15 1.74 1.58
Total 246,863 232,339 -6 100 100
Source: SIAM

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LCV – Passenger Carrier

Domestic Sales (Nos.) Market Share (%)

Manufacturers FY07 FY08 YoY (%) FY07 FY08
Tata Motors Ltd. 11,892 13,317 12 50.09 48.11
Mahindra & Mahindra Ltd. 3,535 5,284 49 14.89 19.09
Force Motors Ltd. 3,698 4,330 17 15.58 15.64
Swaraj Mazda Ltd. 2,492 2,234 -10 10.5 8.07
Eicher Motors Ltd. 1,637 1,853 13 6.89 6.69
Ashok Leyland Ltd. 332 616 86 1.4 2.23
Total 23,742 27,683 17 100 100
Source: SIAM

LCV – Goods Carrier

Domestic Sales (Nos.) Market Share (%)

Manufacturers FY07 FY08 YoY (%) FY07 FY08
Tata Motors Ltd. 113,900 120,856 6 67.61 64.24
Mahindra & Mahindra Ltd. 43,186 49,860 15 25.63 26.5
Eicher Motors Ltd. 5,677 3,288 -42 3.37 1.75
Force Motors Ltd. 3,583 6,572 83 2.13 3.49
Swaraj Mazda Ltd. 2,047 2,610 28 1.22 1.39
Total 168,467 188,140 12 100 100
Source- SIAM

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Demand Drivers

GDP/IIP- CV industry has high degree of correlation with the GDP and IIP (Index of Industrial
production) of the country. The Industry follows the path by which these two goes and good
performance of GDP and IIP results in higher demand for CVs.
Growth in IIP
Growth in BTKM of road freight movement
Growth in GDP
18
16
14
12
10
(%)

8
6
4
2
0
96 97 98 99 2000 2001 2002 2003 2004 2005 2006 2007

Source- CRISIL Research

Freight outlook- CV sales have a direct correlation with the state of the freight industry, with growth
in CV sales (MHCV trucks) closely tracking increase in freight movements. Strong economic activity in
the country, especially in sectors like cement, mining, steel production, automobiles, consumer
durables, food processing and food grain production, leads to increased demand for freight
movement by road.

Freight rates and fuel price- Truck operators’ profitability is most sensitive to freight rates and fuel
prices (60-65%
of the total cost). With other things remaining constant, operator profit before depreciation and tax
rises 6.5% with a
1% rise in freight rates and 3.5% for a 1% decline in fuel
prices

Policy initiatives- The CV industry has benefited from regulations like discouraging the use of old,
polluting and uneconomical vehicles. The Supreme Court ban on overloading has also been very
positive, leading to incremental volumes in the last two years. Further any government’s likely policy
initiatives like scrapping vehicles more than 15 years old can potentially unleash a huge replacement
demand. Further the industry is also expected to benefit from the proposed phase-out of Central sales
Tax by 2010.

Replacement cycle- Replacement cycle for trucks has been shrinking, declining from about 12 years to
nearly seven years now. The proportion of trucks under five years of age rose from about 34% in FY02
to nearly 45% in FY06.

Competition from Indian Railways- Road transport competes with the Indian Railways (IR) for
transportation of all major commodities, with roads having an edge in transportation of non-bulk
commodities owing to point to point delivery with railways commanding a higher share in
transportation of bulk commodities. Over the years, roads have gained an increasing preference vis-
à-vis the railways and the share of road transport currently stands at about 65%.

21
And supply scenario- The significant part of the demand for new trucks comes from capacity
additions by small fleet operators and first-time users. This along with policy changes like ban on
overloading has led to significant addition in the truck population. Also with easy availability of
finance at low interest rate helped in increase of capacity in the past five years. But as interest rates
are set to increase it might lead to slight dampening in demand for M&HCV in near future. However,
demand is likely to remain healthy for LCV owing to the rise in demand for small commercial
vehicle for providing the last mile connectivity and the creation of hub and spoke models.

22
Overview of the Passenger Vehicles Market
Market Size and Segment-wise Growth

The total sales of the Indian passenger vehicles industry has grown to reach 1.58 million units in
2006-07, of which domestic sales were 1.38 million units and the remaining
Domestic Passenger Vehicles Industry 2007

2007 1,379.7

2006 1,143.1

2005 1,061.3

2004 902.1
CAGR
707.2 15.4%
2003

2002 675.1
200 400 600 800 1000 1200 1400
‘000 Units (Source SAIM)

were exports. Domestic sales grew at a CAGR of 15.4 per cent between 2001-02 and 2006-07.
It is significant that the mini car segment, which had triggered the growth of the Indian car
industry in the past, has been shrinking in size. Its share in the total car market has fallen from 28
per cent in 2001-02 to 7 per cent in 2006-07. On the other hand, the compact car segment has
grown at a CAGR of 22 per cent, to garner 70 per cent of the share of the car market. The major
reason for this trend is that compact cars have been priced marginally above the mini cars by
most manufacturers. Also this segment has seen a number of new product launches.
The Indian market, however, is once again witnessing high levels of activity in the mini car
segment with several players are announcing their plans to enter this segment since Tata Motors’
announcement of its US$ 2,500 car. In the future the mini car segment is expected to be revived
by the launch of low cost cars by other players as well. The executive segment (D) has grown at an
impressive CAGR of 112 per cent between 2001-02 and 2006-07, a clear indication of the
increasing disposable incomes of Indian businessmen and senior executives.
An interesting aspect of the Indian passenger vehicles market is the fact that around 40 per cent
of the market comprises of consumers, who already own one car and are buying their second car.
Those replacing their current car comprise 28 per cent of the market. Buyers, who replace their
cars, usually upgrade to a higher segment.
Indian consumers are value conscious and cost of ownership is more important as
compared to image, performance and power. This is supported by the fact that 80 per cent

23
of the cars sold in India are priced below US$ 12,000. More than 25 per cent of the cars on Indian
roads are chauffeur driven, and this factor makes rear passenger comfort a critical
influence in purchasing decisions, especially in the mid sized cars.
The Indian passenger vehicle industry is undergoing significant dispersion of the market. Today
the top 20 cities account for around 50 per cent of the cars sold. Till a few years back, the metros
alone accounted for 60-70 per cent of the passenger vehicles sold.

Market Shares of Key Players in the Passenger vehicles Market

The market for passenger vehicles in India is highly competitive with more than a dozen
manufacturers in the industry. Most of the leading global players have a presence in India in the
form of joint ventures or subsidiaries.
Market Shares of Key Players in 2006-07
Maruti Udyog Ltd. 46%
Tata Motors Ltd. 16%
Hyundai Motor India Ltd. 14%
Mahindra & Mahindra 7%
Toyota 4%
Others 13%
Source: SAIM

The industry leader is Maruti Udyog with 46 per cent market share, followed by Tata Motors
and Hyundai Motors. India is considered as a strategic market by Suzuki, Japan, a co-
promoter of Maruti Udyog. Tata Motors, the largest automotive player in India is launching
the US$ 2,500 car. Hyundai Motors, the third largest passenger vehicle manufacturer in
India, has established its global manufacturing base for small cars in India and is a leading exporter
of small cars from the country. Mahindra & Mahindra is amongst the largest players in the
Capacities of Major Players in Indian Passenger vehicles Segment
Player Capacity (in thousand units)
Maruti Suzuki 700
Tata Motors 290
Hyundai Motors 400
Mahindra & Mahindra 170
Toyota Kirloskar 60
BMW India 1.7
Honda Motors 50
General Motors India 85
Ford India 100
Hindustan Motors 35
Skoda Auto India 17
Force Motors 24
DaimlerChrysler India 2.5
Source: SIAM,IMaCS Analysis

24
Multi Utility Vehicles (MUV) segment. It has tied up with Renault for manufacturing and marketing
of ‘Logan’ brand of cars in India. Other major players are Toyota, Honda Motors and Ford, all of
these are operating in the premium cars segment.
SegmentKey Key
brands in Passenger
brands vehicles
and Companies to Market
which they belong
A Maruti 800 (Maruti Suzuki)
B Alto, Wagon-R, Swift (Maruti Suzuki), Indica ( Tata
Motors), Santro, Getz (Hyundai Motors), Palio (Fiat
India)
C Esteem, SX4, (Maruti Suzuki), Indigo ( Tata Motors),
Verna, Elantra (Hyundai Motors), Honda City
(Honda Motors), Astra, Aveo, Optra (General Motors),
Logan (M&M), Icon, Fiesta (Ford India), Cedia
(Hindustan Motors), Petra (Fiat India)
D Civic (Honda), Opel Vectra (General Motors), Contessa
(Hindustan Motors),Skoda Octavia (Skoda Auto),
Mercedes C-class (Daimler Chrysler India)
E Sonata (Hyundai Motors), Accord (Honda), Corolla,
Camry ( Toyota Kirloskar), Mondeo (Ford India), Superb
(Skoda Auto), Mercedes E-class (DaimlerChrysler
India), 5 series (BMW India)
F Mercedes S-class, Maybach (DaimlerChrysler India),
7 Series(BMW India)
SUV Grand Vitara (Maruti Suzuki),Safari ( Tata Motors),
Tucsan (Hyundai Motors), CRV (Honda),
Scorpio (M&M Ltd), cFusion, Endeavour (Ford India),
Pajero (Hindustan Motors), Challenger, Toofan
(Force Motors)
MUV Omni, Versa (Maruti Suzuki), Sumo, Indigo Marina
( Tata Motors), Innova ( Toyota Kirloskar), Tavera
(General Motors India), Bolero (M&M)

Used Car Market

The Indian used car market has increased significantly, growing at a CAGR of around 28% between
2001-02 and 2006-07 driven by reduction in the holding period of vehicles, increase in variety of
models and the development efforts taken by organized players like Maruti True value, Mahindra
First Choice, Honda Auto Terrace, and Ford Assured etc. Entry of manufacturers in the used car
market has resulted in increase of share of organized players in a predominantly unorganized
market. Moreover entry of these players is also set to help the market which was otherwise
suffering through the issues of valuation, ownership, documentation and quality of car.

According to Crisil data, the size of used car market in India is estimated to be equal to that of new
car market with registered volume of 12-13 lakh cars in 2006-07 with the total sales in value terms of
around Rs 250-260 billion. In India, the mini and compact segment accounts for around 60% of the
total used car volumes. Mid sized cars form around 30% of the used car sales

25
Key Success factors

• Ability to enhance and vary product mix - A diverse and broad product mix enables a
manufacturer to serve a wide variety of transportation solutions across different load
levels. It also helps in building strong brand loyalty among customers. In addition the
presence in business such as auto spares, buses, exports and defence helps companies to
weather the cyclicity in passenger car sales.
• Sales and distribution service network - A widespread sales and distribution setup
enables the company to ensure a geographically diversified client profile.

• Access to new technologies – In addition to matching competitor’s new products

and upgraded machinery, technology is also going to be critical with emission
norms are going to be stricter going forward. The requirement of updated
technologies has driven domestic players into
acquisition/collaborations/JVs with global majors.

• Balance between outsourcing and in-house production - Companies with high integration
level have higher fixed costs which results in higher profitability in robust growth
scenario. However it also results in sharp drop in performance as they would be
affected by lower sales volume backed by Industry cyclical nature. More over
company’s proximity to their raw material and component suppliers help them in
reducing procurement costs.

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Porter Five Force Model

Porter’s Five Forces of Competition framework

Competition from Substitutes

The price customers are willing to pay for a product depends, in part, on the availability of substitute
products. The absence of close substitutes for a product, as in the case of automobiles, means that
consumers are comparatively insensitive to price (i.e., demand is inelastic with respect to price). The
existence of close substitutes means that customers will switch to substitutes in response to price
increases for the product (i.e., demand is elastic with respect to price).

The extent to which substitutes limit prices and profits depends on the propensity of buyers to
substitute between alternatives. This, in turn, is dependent on their price performance characteristics.
The more complex the needs being fulfilled by the product and the more difficult it is to discern
performance differences, the lower the extent of substitution by customers on the basis of price
differences.

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 The structural determinants of the Five Forces of Competition

Rivalry between Established Competitors

For most industries, the major determinant of the overall state of competition and the general level of
profitability is competition among the firms within the industry. In some industries, firms compete
aggressively – sometimes to the extent that prices are pushed below the level of costs and industry-
wide losses are incurred. In others, price competition is muted and rivalry focuses on advertising,
innovation, and other non price dimensions. Six factors play an important role in determining the
nature and intensity of competition between established firms: concentration, the diversity of
competitors, product differentiation, excess capacity, exit barriers, and cost conditions.

Threat of Entry

If an industry earns a return on capital in excess of its cost of capital, that industry acts as a magnet to
firms outside the industry. Unless the entry of new firms is barred, the rate of profit will fall toward its
competitive level. The threat of entry rather than actual entry may be sufficient to ensure that
established firms constrain their prices to the competitive level.

28

Economies of Scale – Since Indian automobile market is of order $ 350 billion, the economies
of scale are very high. Thus, threat of new entrants is low.

Product Differences – Since there is hardly any difference in the offerings of the various
providers, so product differentiation is low. So threat of new entrants is high.

Brand Identity – Since there is no big Retailer like Amazon.com or Wal-Mart in India. So threat
of new entrants is high.

Government Policy – Since the Government Policy has been quite restrictive till now with
respect to the Retail market & FDI, so threat of new entrants is low.

Capital Requirements – The capital requirements for entering in the automobile sector are
substantially high( high fixed cost and cost of infrastructure), so only big names can think of
venturing into this area So, in that respect threat of new entrants is low.

Access to distribution – Since in India there is no well established distribution network. So

threat of new entrants is low.

Bargaining Power of Buyers

The firms in an industry operate in two types of markets: in the markets for inputs and the markets for
outputs. In input markets firms purchase raw materials, components, and financial and labor services.
In the markets for outputs firms sell their goods and services to customers (who may be distributors,
consumers, or other manufacturers). In both markets the transactions create value for both buyers
and sellers. How this value is shared between them in terms of profitability depends on their relative
economic power. The strength of buying power that firms face from their customers depends on two
sets of factors: buyers’ price sensitivity and relative bargaining power.

Product Differences – Since there is hardly any difference in the offerings of the various
providers, so product differentiation is low. So bargaining power of buyers is high.

Buyer Information – Today’s customers are well educated about the various product offerings
in the sector. So bargaining power of buyers is high.

Buyer Switching Costs – Since customers don’t have to pay a fat premium to be registered for
provision of services , so bargaining power of buyers is high.

Brand Identity – High Brand Identity and trustworthiness reduce the bargaining power of
buyers but, otherwise the bargaining power of buyers is high.

Buyer Profits – Since dealers offers discounts and various bundling services like 0% insurance,
old car sale, etc, on different items. Hence bargaining power of buyers is high.

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Bargaining Power of Suppliers

Analysis of the determinants of relative power between the producers in an industry and their
suppliers is precisely analogous to analysis of the relationship between producers and their buyers.
The only difference is that it is now the firms in the industry that are the buyers and the producers of
inputs that are the suppliers. The key issues are the ease with which the firms in the industry can
switch between different input suppliers and the relative bargaining power of each party.

Product Differences – Since there is hardly any difference in the offerings of the various
suppliers, so product differentiation is low. So bargaining power of Suppliers is low.

Supplier Information – Today’s automobile manufacturers are well educated about different
Suppliers. So bargaining power of Suppliers is low.

Supplier Switching Costs – Since different Suppliers hold resources as per buyer’s requirements
and a large inventory has to be maintained. So bargaining power of Suppliers is low as they
would have to incur a huge cost on switching. But if they get automobile manufacturers for
similar products who can pay higher Supplier switching cost is low. In such case, bargaining
power of Suppliers is high.

Brand Identity – High Brand Identity and Trustworthiness of a Supplier increases the bargaining power
of Suppliers. But, otherwise the bargaining power of suppliers is low

Concerns
• Higher steel prices have been a key concern over the last two years. The CV industry has
tackled this both by passing part of the costs through price hikes and also by optimizing their
selling, advertising costs and treasury efficiencies.
• Another concern is a slowdown in the Indian economy. This would lead to lower
investment in infrastructure which in turn will affect the CV demand
• Higher domestic inflation and increase in fuel prices are other major concerns. Without a
concomitant increase in freight rates increase in fuel price will have a negative impact on
demand for CVs.

• Rise in interest rates may prove to be a dampener on the CV demand, especially given the fact
that around 60-70% of vehicles purchased are financed.

30
Growth and Demographics of Indian Customers (Chosen for Survey).
If overall economic growth remains on a long-term path of 7 to 8 percent, as most economists
expect, then consumption will soar. It is estimate that real consumption will grow from 17
trillion Indian rupees today to 70 trillion Indian rupees by 2025, a fourfold increase. This will
vault India into the premier league among the world's consumer markets.

Today its consumer market ranks 12th. By 2015 it will be almost as large as Italy's market. By
2025, India's market will be the fifth largest in the world, surpassing Germany. In short, we
believe that India has now entered a virtuous long-term cycle in which rising incomes lead to
increasing consumption, which, in turn, creates more business opportunities and employment,
further fuelling GDP and income growth.

There are three major factors driving increased consumption,

1. Rising incomes, which as per estimates will account for 80 percent of total growth over
the next two decades.
2. The second driver will be population growth, which we find will account for a further 16
percent of the overall rise in consumption.
3. The third factor will be savings but developments on this front will play a relatively
minor role. India's household savings rate will decline from its current level of 28
percent of disposable income to 22 percent in 2025 as India's demographics become
more youthful.

In 2005, the Indian middle class was still relatively small with 50 million people or some 5
percent of the population. However, if India achieves the growth at assumed rate, its middle
class will swell to 583 million people or 41 percent of the population.

31
Three-quarters of India’s consumer market in 2025 doesn’t exist today—about 52.6 trillion
rupees a year in future purchases will be up for grabs. Also, India’s rapid upward mobility
means that many of India’s households will be new consumers, enjoying significant
discretionary consumption in the organized economy for the first time in their lives. Incumbents and
challengers alike face a sea change. India’s incumbents, mostly domestic companies, will start
with many advantages: existing relationships with customers, an understanding of their needs,
and recognized brands.

The incumbents also have established distribution channels—very important in a country of vast
geography and limited infrastructure.

But growing incomes and consumption will pressure incumbents from two directions. First, such
companies must adjust to the pace and magnitude of change, for as consumers rise through
the income brackets, their needs, tastes, aspirations, and brand loyalties will evolve along with
their lifestyles. Second, India’s growing consumption will attract a raft of challengers, and
ongoing economic reform will significantly intensify competition in many markets. New
competition will come from multinationals entering the Indian market, from established Indian
companies looking for expansion opportunities, and from entrepreneurs. Indeed, if the
country’s policy makers create the conditions for India’s entrepreneurs to succeed, major new
companies could be built on the back of consumer growth.

Many incumbents haven’t prepared enough for this discontinuity. They will have to develop a
deep understanding of how the consumer’s needs and aspirations will change as incomes grow and
find ways of creating innovative products that meet those changing needs. In addition, they must
think about how they should introduce new consumers to their products, whether their brands
are appropriate for those consumers, and what prices and cost positions will help them compete
most effectively for a share of this new middle-class market. Nor is that all: incumbents
will have to keep a wary eye on the actions of their current competitors and on new market
entrants. That’s a full agenda, and companies that begin preparing today will be in the best
position to benefit from the changes.

Acknowledging the fact of immense potential of Indian market in the coming future, riding
heavily on the growth of middle class, rising incomes, and their global aspirations, companies will
not only be required to come up with products that meet the requirements of this segment of
society, but also carefully look into the buying patterns of these people. Does their exists
homogeneity in the trend and the way they interact with the information, or a particular
pattern is tough to decipher. In this study, the attempt has been made to first study the
process/ steps that a typical Indian Middle class individual goes through, when he plans to buy a
car, in second step, understand what that individual thinks at each of those stages, where lie his
preferences, and finally where all Marketing teams need to improve their communication and
make it so very effective, which improves both sales and customer satisfaction

32
Research Methodology

The research work is undertaken by narrowing down on potential car buyers. The survey has been
done on basic five questions which any buyer keeps in mind before buying a car. The methodology
used for the research is Primary study where in first hand information is collected and based on
the point system individual percentages are calculated.
The method used for calculating percentages is weighted Average

33
Limitations
• Due to Time constraint a sample size of 100 could only be take
• In some case’s the Questionnaire was filled by a non-decision maker
• Hesitation to give correct detail
• No background check could be done regarding respondents.

34
 Following are the Demographic details of this Young
Indian Middle Class Individual
Age: 21 to 40 Years

Education: Graduate/Post Graduate

Family: Single/ Married and No Kid/ Married with one Kid.

Employment: Employed/working with MNC/Entrepreneur Income:

500,000 and upwards

Expenditure: 60 % to 70 % of Income.

Hatchback segment or B/B + segment in India, has on the offer the

following cars:

1. Chevrolet U-VA
2. Chevrolet Beat
3. Fiat Punto
4. Ford Figo
5. Honda Compact Car (to be launched soon)
6. Hyundai i10
7. Hyundai i20
8. Maruti Estilo
9. Maruti Wagon R
10. Maruti Swift
11. Maruti Ritz
12. Nissan Micra
13. Skoda Fabia
14. Tata Indica
15. Toyota Etios (to be launched soon)
16. Volkswagen Polo

All these cars are 5 door family hatch back cars with in the price range of 3.0 to 5.0
lakhs, with higher variants of few models going beyond this range by few thousand
rupees. All the car makers claim bigger space, best performance, and fuel efficiency.
Customer will get exploit with choices in near future, hence forming the premise of
our survey and analysis, of looking into the customer buying process.

35
Survey Analysis.

1 Car/Brand Model Selection.

Conclusion
When an individual makes up his mind to purchase a car, (we have defined the
customer demographics at the start of this survey) it’s no less than a dream come
true for him. For an emerging Indian middle class customer, buying a car is a high
value purchase, and he wants the best value for his hard earned money. In our
survey, the customer has a budget, just good enough to buy a hatch back/premium
hatch back car. So now that the price range is set, from our survey of 100 individuals
it emerges out that the “Brand” plays the dominant role. Here we would like to make
the point clear, with “Brand” we mean the Company`s brand and not the individual
product/car brand. Preparing the initial shortlist, individual is most likely to consider
“Brands” that deliver quality, reliability and complete assurance of a good product

36
and service. This can be a home grown or a multi national brand. With home grown
brands like TATA`s and Mahindra`s competing with almost every International car
brand present here in India today, passing this first level of customer scrutiny is a
major challenge for every one of them. In the recent past we have seen some very
aggressive brand building/brand awareness exercises undertaken by legendary
German car maker “Volkswagen”. The trend will only accentuate, and we will witness
some serious brand building exercises, not only through advertising but through the
overall development of product and services in this industry. Here the overall
company needs to work across all its departments to constantly improve its product
and service levels such that it`s “brand” stays in the “preferred set” of the customer.

Just a notch next to brand comes “running economy” or “ownership cost”. Though the
trust in a particular brand of cars, delivers the promise of great design and
performance, Indian customer would still like to listen about the ownershi p cost
of the vehicle. Ownership cost includes mileage, cost of spares, parts and
accessories, and cost of periodic maintenance. As we can see the results of the
survey, this is the second level of scrutiny, and it’s very likely that a car brand is
dropped from the initial shortlist, in spite of a strong corporate brand. Reasons
can be a world renowned car manufacturer, new to the Indian market, with a good
product but lacking the spread of servicing network along the length and breath of
this vast country. Or else, a good corporate brand, a good product, enough
dealerships, but expensive spare parts and accessories due to lesser
localization content in cars. There can be other technical and commercial
reasons, but if our customer is not convinced of the “ownership cost”, he would
most likely drop that car/ brand from the initial shortlist. Marketing departments
should look for appropriate channels to communicate to the customer about the
“ownership cost”, should ensure right information going around in the market and
most importantly gauge the pulse of the customer; and if this emerges out to be the
potential reason of falling sales, should work along with R and D, Purchase and After
sales department to bring down the “ownership cost” and pass this second level of
customer scrutiny.

37
 2 Dealer Selection.

Conclusion
A good car/brand may need less of advertisements or noise making activities by the
marketing department, but the aspect where Marketing team cannot relax is making
the car available to the customer, when and where he wants. Though their can be
production capacity caps, supplier capacity constraints, other logistical issues, even
then it`s the responsibility of the marketing team to not only needs to gauge the
demand but also fulfill it with well located dealerships across India.

A dealership may cater to number of cities, or there can be a few number of

dealerships in a single city, Marketing team needs to plan the location based on
the volume of cars each dealership p can handle. This isn’t just a one time activity,
the team need to continuously watch the number of cars each dealer is turning
viz a viz competitor cars, population density, population demographics and host of
other aspects.

From our survey, though model availability turned out to be the most important

38
criteria for dealer selection, even a suitably located dealer may lose out on sales.
Survey finding shows, Dealer’s servicing capability as the reason. Nearly 45 % of
people have laid emphasis on servicing set up of the dealer. Marketing team along
with after sales should ensure few things such as: Land size, financial capability
for maintaining inventories, availability of skilled manpower before issuing
dealership. Also the after sales should carefully monitor customer satisfaction levels,
of that dealer, as we can clearly see from the responses to this question of the
survey, reputation and word of mouth can both attract or offend the customer much
before he even thinks of a dealer visit.

Marketing team along with after sales should call for monthly customer satisfaction
reports, and in case of falling results should impart the required training to the
concerned dealer. Training department of the company should adequately train the
customer facing crew of the dealers, and should make them aware of the car
specifications, features, features viz a viz competitors and soft skills too.

For a company churning out thousands of cars, “the moment of truth” only happens
at the dealer end. Hence right from selecting and awarding dealership to
monitoring monthly customer satisfaction reports, Marketing should always be
proactive in plugging the loop holes, and passing yet another stage of customer scr
utiny, bringing him closer to his actual purchase.

3Extending Budget.

39
Conclusion
Now we have reached a stage closer to the final decision. Our customer who started
with initial shortlist, identified dealers, most likely had an over all pleasant
experience at the dealership, did take a few test drives, is now stuck with budgetary
constraints. The car brand/model of his choice wears a price tag that requires him to
extend his budget. Through our survey we tried to identify the amount to which a
customer would go beyond his actual budget. Nearly half of the customers (with initial
budget of 3 to 5 lakh) were ready to add another 10 % i.e. 50 thousand to their actual
amount. Marketing department should make a note here that the higher variants (with
more features and accessories) of the same model be spaced, both in terms of
features and price, such that it pulls the customer up to those variants. Base
variant (Engine, Body dimensions, paint and plastics quality, upholstery are same
across all variants) should act as an entry level to the customer. Also note worthy here
is the fact, that at the time of customer visit to the dealer, salesman should be able to
explain both functional and aesthetic benefits to the customer, hence the rational to
higher price tag. Marketing department should also be well aware of competitor
offering, and should train sales people enough to convince customers about the
company’s offer

40
4 Delivery Schedules.

Conclusion
Given the initial down payment, customer expects a quick delivery. But as we witness more
demand for the hatch back cars (of 1.5 million cars sold in India, 75 % have been hatch
backs), companies have been struggling to keep up the pace, adding more and more
capacity each year. Also in India we witness peak seasons in car sales in different parts of
the country. With different festivals celebrated across the length and breath of this multi
cultured country, customers prefer buying cars during these seasons. Waiting period for
few models has extended up to 6 months in the recent past. Through our survey, it has
come out that our customer is comfortable waiting from 15 days to a month, but not
beyond that. Every company would like to boast of a long order book, and would also like
to deliver the cars at the earliest, but combined effect of suppliers capacity, company`s
own production capacity, logistics and delivery makes it a tough target to meet. Sales
and Marketing department here, though tied up with delivery schedules from production,
can only engage customer all this while and make his waiting time a little more pleasant.
Regular update on customers order can make him more comfortable and aware of work in
progress. Also, company can ensure quicker processing of finance, insurance and

41
 registration activities once the car has reached showroom and is ready to be delivered to the
customer. During peak season rush company`s top management can issue press note of
honoring each order at the earliest. All or few of these measures can just let the customer
believe that his dream car is on his way.

5 Other Influences.

Conclusion
When buying a car, an individual gets most influenced by the cars owned by
friends and relatives. Our prospective customer gets a easy access to those cars, is able
to drive them or get a ride in them, discuss in detail with the owner and gets an
overall first hand experience and loads of advice, just free of cost. This influence is so
strong (the same has come out through our survey, nearly 67 % of customers feel
getting influenced by this factor) that it can either make or break decision for a
particular car/brand. Owner who is friend or a relative to customer, would almost
like to ensure that the prospective buyer is either as wise as him/her, eventually
buying the same car/brand, or just not make yet another mistake the way owner has
done. In most of the cases though, owner would deliver in detail the benefits,
features, power, mileage, and safety of the car. Marketing teams here can do a lot of
relationship building work. Once the car is sold, customer feed back can be collected,

42
at regular intervals, if customer is facing any problem (either with the car or with
service/dealership), marketing team should lend a careful ear to it, and assure
customer of the solution at the earliest. Marketing team among all these feed backs
can also seek references from the owner. The hit rate of these references may be
low, but in a matter of time it can swell into an enviable database, that the
company can explore. In case of a reference turning into a customer, marketing team
can reward the referee with rewards like one free service or fuel expenses (petro card)
for 2000kms (claiming a certain mileage). Every new and existing customer, if made feel
special, can be a magnet to bountiful of information and can positively influence host of
individuals, prospective buyers around him.

With the advent of web 2.0 technologies, where in a customer can interact with
many other customers over web, reviews have added another challenge for
marketers. Today there are number of blogging and micro blogging sites that give
every individual enough space to express himself, needless to say many are
automobile blogging sites, run and maintained by auto enthusiasts. From our
survey, Next to immediate friends and relatives, what influences the most in
decision making is the extended community spread over web. Our prospective
customer (Customer demographics assumes that this individual is an urban dweller,
and has access to internet), looks through numerous reviews posted on these
blogging sites. These reviews can be posted by any individual, a person may be
existing user of that car, or may have just taken a test drive, or may be some one else
(authenticity over web is still a issue). In case reviews seem to be forming a certain
trend, for instance an over all good will about the car/brand exists, barring a few
customers who think otherwise, our prospective customer would continue with the
choice and this may lead to final purchase. Today for marketers it is extremely
important to keep a constant watch over web space, and not let negative views
effect potential customers. In first place, any negative view should get addressed
by the dedicated marketing and service team, grievances over web space should be
authenticated and addressed making it a top priority for CMO`s.

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Bibliography

• DBS Cholamandalam Securities Limited Sector Journal

• Indian Brand Equity Foundation Quarterly Journals
• Booz: Allen & Hamilton
• SIAM (Society of Indian Automobile Manufacturers)
• ARAI (Auto Motive Research Association of India)
• BCG Report
• CRISIL Sector Reports
• Wekipedia

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