MAYANK GOEL 12MBA0003 GAURAV SHARMA 12MBA0039

OVERVIEW ON THE INDIAN SMALL CAR INDUSTRY

One Market that is forcing the global auto majors to think small is Indian Market. There were as many as five players in the mid car segment and Just one - the Rs 7956cr Maruti Udyog ltd in the small car segment. Daewoo Motors India and Hyundai Motors India-are changing lanes midway, making the small car market as their marketing strategy in India. 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.

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.

Today 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 MercedesBenz'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). 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-airconditioned, manual transmission model priced at Rs 2.80 lakh, and the semiautomatic, 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.

-TELCO's positioning of its 1,400-cc Indica car-launched in November, 1998 and priced close to Marutis 800-cc model as a small car; and - Honda sneaking its 1,300-cc City into the segment vacated by the Cielo. 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) the high manufacturing costs.

MAURTI UDYOG Ltd.

Maruti Udyog Ltd. is a joint venture between Government of India and Suzuki motors of Japan. Maruti entered the Indian car market, it sought to provide high quality, fuel-efficient, low-cost vehicles with a motto of total customer satisfaction. Market share economy car segment =70% luxury car segment = 38% Maruti was highly publicized as the peoples car and a technologically advanced, fuel efficient car.

Pre-liberalization Scenario

With the Japanese production and design technology Maruti offered sleeker designed cars at affordable prices. Hindustan Motors, Premier Padmini, Standard Motors have formed alliances and forged partnerships in technology with many multinational firms. 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.

Post-Liberalization Scenario
Maruti also faceing stiff competition The new players like Daewoo, Hyundai, GM, Honda, Ford etc have started eating into Marutis market share. Maruti is not successful in capturing the increasing market base. MUL's share in passenger cars slipped from 84 % to 69 %. Sales and export grew by 14%. Its competitors are growing faster.

HYUNDAI MOTORS
Hyundai is one of the top most manufacturers of world class cars and a leading Korean giant. Hyundai acceptable as one of the leaders in replacement market of automotive parts. Hyundai is a leader in the technological front and to meet the challenges of the 21st century.

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. Santros target customer segment includes all those who believe in the value-for-money concept. Hyundai realized that unsettling the core Maruti 800 market may be difficult, without achieving the economies of scale.

Customer Care Centres

Its a big challenge to build a dealer and service network. the company wants to consider factors like convenient location. Hyundai is trying to build one-stopshops, calling it Hyundai Motor Plaza. looking at the possibility of companyowned dealer-cum service centres. So far Hyundai is starting with a spread of 70 dealers in 55 cities.

Daewoo Motors India

Daewoo Motors India commenced its operations in India with the production of Cielo in July1995. It started manufacturing in its state of the art plant at Surajpur, Uttar Pradesh. The company has invested Rs 4000 crores in setting up the stateof-the-art manufacturing plant and research & development facilities.

Daewoo has primarily 3 brands competing in the Indian market; Matiz, Cielo and Nexia. 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 percent localized, the Cielo Executive and Nexia have achieved the indigenisation level of 80 percent.

Reason for failure cielo

Daewoo misjudged the growth potential of the small segment that grew faster than the mid-size one. Also customers are price sensitive. It could not visualize the strengths of its potential competitors that would be entering the market like Honda City, Ford and Opel.

Matiz

Daewoo introduced Matiz, and it tried to create a new category between Maruti 800 and Zen. Declining profits, lower volumes, and lower realizations due to increasing discounts had made Daewoo's management more cautious about the pricing of the Matiz. It found that Indian customers are not only price sensitive but also valuesensitive.

Change of strategy
It learned and started understanding the Indian market and took efforts to deal with the competition. Daewoo began leveraging its strength in technology to increase its market share. To increase sales it started concentrated on a better pricing strategy, focus on exports and efforts to increase customer service,

A better Pricing Strategy

The company was forced to rework its strategy. It introduced 3 models: a strippeddown standard model (Rs 2.67 lakh), a deluxe model (Rs 3.04 lakh), & an executive model (Rs 3.48 lakh.) The new strategy started working and the demand for the brand has gone high.

Efforts to improve customer service

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. To increase its share in the competitive market, it has come up with warranty program from 2 to 4 years whereas competitors offer only 1 year warranty program.

TELCO-Tata Engineering and Locomotive Company

Telco is one of India's largest private sector companies, it is the country's leading commercial vehicle manufacturer and worlds sixth largest automobile company. TELCO was Incorporated in 1945 to manufacture steam locomotives and the company diversified into automobile manufacturing, through a collaboration with Daimler-Benz for the manufacture of commercial vehicles. They covered both HCVs and LCVs.

TELCO added machining, press and assembly capacities and virtually created the countrys automobile ancillary industry to sustain its growth. TELCO domestic market share MCV/HCV segment-68% LCV segment-64% Multi-utility segment-32%

Launch of Indica
Promotions-The Indica advertising made interest for the car go into overdrive Pre launch Campaign-Indica used the catch lines like More car per Car More dreams per car. Launch Campaign-Its first advertisement carried the following catch line 50cc moped, 100cc bike 800cc car. Time you asked for more. Post Launch Campaigns-post launch advertisements focused on the superior after sales service and longer warranty periods offered by Indica.

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