49869032 report on automobile sector

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ResearchMethodology

Report On

Automobile Sector

Submitted On

11-FEB-2011

Submitted To

Prof.T.J.Joseph

Submitted By

Group-8

Sithara

ShriHari

Thilak Babu

Meghana Bhagavan

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Naveen Kumar Reddy

Faraz Mohammed Ismail

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Acknowledgement

We are thankful to Prof.T.J.Joseph for providing us the task of preparing the report on Automobile Sector in India. We believe in

taking challenges and the report provided us the opportunity to tackle

a practical challenge in the subject of Research Methodology

(Industrial Analysis). This report tested our patience at every step of

preparation but the courage provided by our teachers helped us to

swim against the tide and move against the wind.

We are also thankful to our friends and parents for providing us help

at every step of preparation of the report.

With Regards

Naveen Kumar Reddy

Meghana Bhagavan

Thilak Babu

ShriHari

Sithara

Faraz Mohammed Ismail

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Objectives of the Report

- Study of the Indian automobile industry structure.

- Analysis of performance of industry sub-segments and their future outlook.

- Understanding the Indian auto component market and its growth aspects.

- Evaluation of factors fuelling growth in the Indian automobile market.

- Discussion of the forces countering the market growth.

- Identification of future prospects for the Indian automobile industry

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Contents

Introduction----------------------------------------------------------------------------------------6

Features of Automobile industry---------------------------------------------------------------- 7

Industry Environment

PEST Analysis--------------------------------------------------------------------------------------8

Domestic Automobile Sales Trends------------------------------------------------------------10

Global Comparison of industry-----------------------------------------------------------------12

Industry Structure-------------------------------------------------------------------------------12

Market share of each segment-------------------------------------------------------------------13

Differentiation Practised by various Players--------------------------------------------------15

Barriers in automobile industry-----------------------------------------------------------------18

Industry Concentration --------------------------------------------------------------------------19

Conduct and Practises--------------------------------------------------------------------------20

Industry Conduct----------------------------------------------------------------------------------21

Industry & Firm level Practises------------------------------------------------------------------22

Advertising Intensity------------------------------------------------------------------------------29

Technology Intensity-----------------------------------------------------------------------------30

Foreign Exposure----------------------------------------------------------------------------------33

Leverage of the firm------------------------------------------------------------------------------35

Working Capital Ratio----------------------------------------------------------------------------38

Performance Analysis---------------------------------------------------------------------------38

Analysis of Competition-------------------------------------------------------------------------39

SWOT Analysis-----------------------------------------------------------------------------------40

Conclusion ----------------------------------------------------------------------------------------41

References-----------------------------------------------------------------------------------------42

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A bstract: The automobile industry in India is one of the fastest growing sectors along with

IT, infrastructure, Telecommunications in the country this growth is due to liberalization in

1991 by Prime Minister P.V Narasimharao this liberalization which allows foreign players to

operate in India leads to increase in investment in automobile sector thus provides more jobs

in India .The liberalization also allows foreign players to invest in various sectors which lead

to increase in jobs thus disposable income increases which in turn increases purchasing

power parity that leads to increase in sales of automobiles year-on-year

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Introduction:

Indian automobile industry is one of the giant industries in Indian market since

1898, when the cars touched the Indian streets for the first time The automobile industry

in India is the 7th largest in the world with an annual production of over 36 million units

in 2010.India holds a 10th position in the entire world with being no.1 in two wheelers and

no.4 in commercial vehicles. Automobile sector in India increases because of easy

availability of finance at relatively low rate of interest and price discounts offered by the

dealers and manufacturers all have stirred the demand for vehicles and a strong growth of the Indian automobile industry and also with new and fuel efficient models. De-licensing

in 1991 has put the Indian automobile industry on a new growth track, attracting foreign

auto giants to set up their production facilities in the country to take advantage of various

benefits it offers. This took the Indian automobile production from 5.3 Million Units in

2001-02 to 10.8 Million Units in 2007-08. The other reasons attracting global auto

manufacturers to India are the country’s large middle class population, growing earning

power, strong technological capability and availability of trained manpower at

competitive prices

The Indian automobile market is currently dominated by two-wheeler segment but in future, the demand for passenger cars and commercial vehicles will increase withindustrial development. Also, as India has low vehicle presence (with passenger car stock of only around 11 per 1,000 population in 2008), it possesses substantial potential for growth.

In 2006-07, the Indian automotive industry provided direct employment to more than300,000 people, exported auto component worth around US$ 2.87 Billion, and contributed5% to the GDP. Due to this large contribution of the industry in the national economy, theIndian government lifted the requirement of forging joint ventures for foreign companies,which attracted global to the Indian market to establish their plants, resulting in heightenedautomobile production. In 2009-2010 the automobile contribution to G.D.P is 8.4% which isone of the sectors to provide more employment

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Features of Automobile Industry:

The Indian automobile industry is going through a technological changewhere each firm is engaged in changing its processes and technologies to maintain thecompetitive advantage and provide customers with the optimized products and services.Starting from the two wheelers, trucks, and tractors to the multi utility vehicles, commercialvehicles and the luxury vehicles, the Indian automobile industry has achieved splendidachievement in the recent years.

“The opportunity is staring in your face. It comes only once. If you miss it, you will not get itagain”

On the canvas of the Indian economy, auto industry maintains a high-flying place. Due to itsdeep frontward and rearward linkages with several key segments of the economy, automobileindustry has a strong multiplier effect and is capable of being the driver of economic growth.A sound transportation system plays an essential role in the country’s rapid economic andindustrial development. The well-developed Indian automotive industry skilfully fulfils thiscatalytic role by producing a wide variety of vehicles: passenger cars, light, medium andheavy commercial vehicles, multi-utility vehicles such as jeeps, scooters, motorcycles,mopeds, three wheelers, tractors etc.

The automotive sector is one of the core industries of the Indian economy, whose prospect isreflective of the economic resilience of the country. Continuous economic liberalization over the years by the government of India has resulted in making India as one of the prime

business destination for many global automotive players. The automotive sector in India isgrowing at around 20 per cent per annum.

“The auto industry is just a multiplier, a driver for employment, for investment, for technology” The Indian automotive industry started its new journey from 1991 withdelicensing of the sector and subsequent opening up for 100 per cent FDI through automaticroute. Since then almost all the global majors have set up their facilities in India taking the

production of vehicle from 2 million in 1991 to 9.7 million in 2006 (nearly 7 per cent of global automobiles production and 2.4 per cent of four wheeler production).

The cumulative annual growth rate of production of the automotive industry from the year

2000-2001 to 2005-2006 was 17 per cent. The cumulative annual growth rate of exports

during the period 2000-01 to 2005-06 was 32.92 per cent.

- Passenger car production in India is projected to cross three million units in 2014-15.- Sales of passenger cars during 2008-09 to 2015-16 are expected to grow at a CAGR of around 10%.- Export of passenger cars is anticipated to rise more than the domestic sales during 2008-09to 2015-16.- Motorcycle sales will perform positively in future, exceeding 10 Million units by 2012-13.

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- Value of auto component exports is likely to attain a double digit figure in 2012-13.- Turnover of the Indian auto component industry is forecasted to surpass US$ 50 Billion in2014-15.

Industry Environment :

The following tells about the automobile industry environment in which growth is

affected

PEST ANALYSIS:

This analysis shows how the automobile industry is effected by political, economic,

social, technological factors

Political Factor:

Indian government auto policy aimed at promoting an integrated, phased

and conducive growth of the Indian automotive industry. Allowing automatic approval

for foreign equity investment up to 100 per cent. Establish an international hub

for manufacturing small, affordable passenger cars as well as tractors and two

wheelers. Ensure a balanced transition to open trade at minimal risk to the Indian

economy and local industry. Laying emphasis on R&D activities carried out by

companies in India by giving a weighted tax deduction of up to 150 per cent for in-house

research and R&D activity. Promoting multi-modal transportation and theimplementation of mass rapid transport systems. Andhra Pradesh government

reduces vat tax to 50% on tractors, 2-wheeler plants which is expected to

generate 20,000 employees & investment of 25,000 cr. The Government is in the

final stage of notifying the fuel efficiency standards for automobile sector in the

country which will be enforced from 2011.Government initiatives regarding tax rebates

has led to global players setting up their R&D centres in India.

Economical Factors :

The Indian economy has grown at 8.5 per cent per annum. The manufacturing sector has grown at 8–10 per cent per annum in the last few years. Finance availability toCV buyers has grown in scope during the last few years. Several Indian firms have

partnered with global players. While some have formed joint ventures with equity participation, others have entered into technology tie ups .Establishment of India as aManufacturing hub, for mini, compact cars, OEMs, and for auto components. Theaverage per capita income rises to 6.1% in 2009-2010 i.e.,39,900 to 45,500 rupeesThe fiscal deficit is reducing year-on-year which leads to government spending moreon welfare schemes that leads to increase in income with people. The rise in inflation,oil prices now a day’s leads to reduce in sales of automobile’s

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Social Factor:

Growth in urbanization, 5th largest economy by PPP index. Upward migration of

household income levels. Increase in PPP , led to the increase in market share of compact

cars. 85% of Cars are financed in India (15% in China). Cars priced below USD 12000

account for nearly 80% of the market. Vehicles priced between USD 7000 –12000 form

the largest segment in the passenger car market. Indian customers are highly discerning,

educated and well informed. They are price sensitive and put a lot of emphasis on value

for money. Preference for small and compact cars. They are socially acceptable, even

amongst the well-off. Preference for fuel efficient cars with low running costs. The Tata

Indica has the lowest running cost at US 8.5 cents per mile. The younger generation is

buying more automobiles than for elder or older generation i.e., Gen Y is purchasing

more than any other generation in India it is because of boom in IT sector.

Technological Factor:

With the entry of global companies into the Indian market, advanced technologies ,both in

product and production processes have developed. With the development or evolution of

alternate fuels, hybrid cars have made entry into the market. Few global companies have

setup their R&D centres in India. Major global players like Audi, BMW, Hyundai etc have

setup their manufacturing units in India. Government giving tax incentives to environment

friendly automobiles There is no tax for electric automobiles.

Total Sales in 2009-2010 :

•

Automobiles - Scooters and 3-Wheelers -------------11996.84 cr

• Automobiles - Tractors -------24080.45 cr

• Automobiles - passenger cars ---------55785.89 cr

• Automobiles - Motorcycles / Mopeds --------20301.3 cr

• Automobiles - LCVs/HCVs ---------- 45155.81 cr

• Total sales of automobile industry is -----------157,320.29 cr

~31.46 billion USD

This is the trend in automobile sector, the sales from 2001-2010 is increasing year-on-year

growth at around 20% annually

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Automobile Domestic Sales Trends (Numberof

Vehicles)

Category2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

PassengerVehicles

9,02,096

10,61,572

11,43,076

13,79,979

15,49,882

15,52,703

19,49,776

CommercialVehicles

2,60,114

3,18,430

3,51,041

4,67,765

4,90,494

3,84,194

5,31,395

ThreeWheelers

2,84,078

3,07,862

3,59,920

4,03,910

3,64,781

3,49,727

4,40,368

TwoWheelers

53,64,249

62,09,765

70,52,391

78,72,334

72,49,278

74,37,619

93,71,231

Grand Total

68,10,537

78,97,629

89,06,428

93,45,534

96,54,435

97,24,243

123,2550

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Automobile Production growth trends & Environment:

Category

2003-

04

2004-

05

2005-

06

2006-

07

2007-

08

2008-

09

2009-

10

Passenger Vehicles

9,89,560

12,09,876

13,09,300

15,45,223

17,77,583

18,38,593

23,51,240

CommercialVehicles

2,75,040

3,53,703

3,91,083

5,19,982

5,49,006

4,16,870

5,66,608

ThreeWheelers

3,56,223

3,74,445

4,34,423

5,56,126

5,00,660

4,97,020

6,19,093

Two

Wheelers

56,22,7

41

65,29,8

29

76,08,6

97

84,66,6

66

80,26,6

81

84,19,7

92

93,23,1

45

Marketing environment consists of the actors and forces outside marketing that affect

marketing management’s ability to build and maintain successful relationships with target

customers. The marketing environment offers both opportunities and threats. The

environment continues to change rapidly. The marketing environment is made up of Micro-environment and Macro-environment.

The Micro environment consists of the actors close to the company that affect its ability to

serve its customers. These actors are: the company, suppliers, marketing intermediaries,

customer markets, competitors and publics.

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The Macro environment consists of the larger societal forces that affect the

microenvironment. These forces are: demographic, economic, natural, technological, political

and cultural forces which we saw above.

Global Comparison of the industry:

China is second only to United States in automobiles. Chinese own close to 22 million at

the end of 2006, which makes China the second largest auto market in the world. At

present, there are 30 cars for every thousand people in China, which is far below the

world average of 120 cars. India is projected to have the largest number of cars in the

world − 611 million to be precise − by 2050. According to Goldman Sachs, this means

every sixth car produced in the world will be sold in India. Tata Motors, India's largest

four-wheel automaker, launches Nano for Rupees One Lakh. Its sticker price of about

$2,500 would make it the world's cheapest car. Only eight Indians out of every thousandown a car. Germany is the world’s largest exporter of automobiles in the world followed

by U.S, China and India.

U.S Europe China India

No of cars/1000 100 87 30 10

Export 2nd 1st 3rd 4th

Industry Attractiveness’s:

Government Policies, high disposable income of consumers, less Labor costs ,

availability of raw materials like steel, high skilled auto parts manufacturers, more middle

class society around 50m in 1990 to 500m in 2008.

Industry Structure:

Manufacturer Segments

Ashok Leyland LCVs, M&HCVs, BusesAsian Motor Works M&HCVsAtul Auto Three wheelersBajaj Auto Two and Three WheelersBMW India Cars and MUVsDaimler Chrysler India(Benz) CarsEicher Motors LCVs, M&HCVs, BusesElectrotherm India Electric Two WheelersFiat India Cars

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Force Motors Three Wheelers, MUVs and LCVsFord India Cars and MUVsGeneral Motors India Cars & MUVsHero Honda Motors Two WheelersHindustan Motors Cars, MUVs and LCVs

Honda Two Wheelers, Cars and MUVsHyundai Motors Cars and MUVsKinetic Motor Two WheelersMahindra & Mahindra Three Wheelers, Cars, MUVs, LCVsMajestic Auto Three WheelersMaruthi Suzuki Cars, MUVsPiaggio Three Wheelers, LCVsReva Electric Car Co. Electric CarsRoyal Enfield Motors Two WheelersScooters India Three WheelersSkoda Auto India Cars

Suzuki Motorcycles Two WheelersSwaraj Mazda Ltd. LCVs, M&HCVSs, BusesTata Motors Cars, MUVs, LCVs, M&HCVs, BusesTatra Vectra Motors M&HCVsToyota Kirloskar Cars, MUVsTVS Motor Co. Two WheelersVolvo India M&HCVs, BusesYamaha Motor India Two Wheelers

This shows the number of firms in each segment i.e., 2-wheelers, 3-wheelers, passenger cars,

Commercial vehicles which is due to liberalization in 1991.

Market Share of each segment:

The following pie chart shows the share of each segment , 2-wheelers has more share

compared to other segments followed by passenger cars, followed by commercial vehicles

and 3-wheelers.

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Market Share of individual firms in passenger vehicle segment :

Market Share of individual firms in commercial vehicle segment:

Market Share of 2-wheele rs firm wise:

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Market share of 2-wheelers as segment:

Nature of Competition:

The nature of competition is oligopoly i.e., there are less firms than the potential market. In

passenger car segment Maruthi Suzuki is the market leader because all other firms won’t

increase the prices unless increased by Maruthi Suzuki. In 2-wheeler segment Hero-Honda is

the market leader but now the joint venture between Honda& Hero is broken down. In 3-

wheeler i.e., in auto rickshaw segment Bajaj is leader & in tractor segment M&M is the

leader. In commercial vehicles Tata is the market leader.

Differentiation practised by various players:

Marketers see to produce products for different segments one cannot create segments

but one should identify segments to cater to their needs so that to be competitive in the world

which a company wants to be innovative, to be profitable to attract new investors. So

company must fix up a price by keeping segment in mind accordingly they can design ads,

promotional campaigns etc.

Differentiation can be any of the following:

THE PRICE OF THE CAR

THE LENGTH OF THE CAR

THE USER SEGMENT

BASED ON THE PRICE OF THE CAR

On the basis of price of car we can segment the car in following ways-:

Economy Segment

○ The economy segment of car ranges up to Rs. 2.5 Lakh. The products in this

segment are Maruthi 800, Alto and the newly launched product of TATA

motors i.e. NANO.

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Mid- Size Segment

○ The mid-size segment of car ranges from 2.5 Lakh to 4.5 Lakh. It includes the

products like Hyundai Santro, Maruthi Zen and Tata Indica etc.

Luxury car segment

○ The luxury segment of car ranges from 4.5 Lakh to 10 Lakh. It includes the

products like Honda city, Hyundai Verna, Mahindra Scorpio etc.

Super luxury car segment

○ The super luxury segment of car ranges above 10 Lakh. This segment satisfies

the elite class of the society. It includes the products like Skoda Laura, Honda

Accord, BMW, Mercedes and Audi etc.

BASED ON THE LENGTH OF THE CAR

A segment- Cars that are less than 3.5 meters long (800, Omni)

B segment- Cars between 3.5 meters to 4 meters long( Zen, SX4, Santro)

C Segment- Cars between 4 meters to 4.5 meters long (Verna, Honda city, ford fiesta)

D segment- Cars that are more than 4.5 meters long( Mercedes, Sonata, Accord,

Skoda)

BASED ON THE USER

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Segmentation of automotive sector is also based on the user of the products. Like the

example of TATA Motors, when it observed that their product ‘INDICA’ is used extensively

by the taxi operators, it came up with a new model of the car having Round Tail Lights to

distinguish it from the car having vertical tail lights used by the individual buyers. The buyers

are:

Individual Buyers

Taxi operators -:

Government /non-government institutions

VOLVO MOTORS

Volvo Motors develops its cars for buyer to whom automobile safety is a

major concern. Volvo therefore positions it’s as a safest a customer can buy.

HYUNDAI MOTORS

Hyundai marketing strategy is differentiated marketing. Its primary consumer target is

middle to upper income professionals who need true value for their money and comfortable

ride in city conditions. Its secondary consumer target is college students who need style and

speed. Its primary business target is midsized to large sized corporate that want to help their

managers and employees by providing them a car for ease of transport. Its secondary business

target is entrepreneurs and small business owners who want to provide discounts to managers

buying a new car.

Hyundai Santro is targeting middle professionals

Accent was launched to target corporate clients

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NICHE MARKET

A niche is a more narrowly defined group seeking a distinctive mix of benefits.

Marketers usually identify niches by dividing a segment into sub segments.

BMW is targeting high class people but it is mainly targeting the young people

who earn a lot of money up to the age of 35-40 years

Mercedes is also targeting high class people but it is mainly targeting the

CEO’s, chairmen, etc of age group of 50-60 years.

Maruthi Suzuki targeting the upper middle class people who are earning 6 Lakh per

annum

Barriers in the automobile industry:

The above graph shows the conditions of post liberalization and pre-liberalization. The other barriers are:

Entry Barrier:

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Non-Tariff Barriers (NTBs) are extensively used to restrict trade and investmentopportunities in the automotive industry today. They include an extensive range of measures to protect domestic auto industries and restrict market access.

Exit Barrier:

As more investment is needed to start but it is easy to exit but with losses, if mergers &acquisitions are not possible .

Industry Concentration:

Herfindahl Index

Herfindahl Index is a measure of the size of firms in relationship to the industry and an

indicator of the amount of competition among them. It is defined as the sum of thesquares of the market shares of each individual firm in the industry.

H=∑i=1n (Si

)2

Where,

H = Herfindahl Index.

Si = Contribution of each individual firm to Industry sales.

n = Number of firms.

Herfindahl Index – Decision Criteria

As 2-wheeeler share is 76.23%, commercial vehicles 4.32%,

3-wheelers is 3.58%, passenger vehicle is 15.86% so ‘H’ is as …

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H= (0.7623)2+(0.0432)2+(0.0358)2+(0.1586)2

=0.6124

=61.24%

So here to withstand investment should be more

Concentration level is between 50% to 80% i.e., index is between 1000 to 1800

Conduct & Practises:

The following shows the imports & exports of the automobile sector

Exports of automobile sector :

Imports of Automobile sector

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Industry Conduct:

Vehicle Production in India

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Industry & Firm level Practises:

Pricing of Automobiles:

MARUTHI

SWIFT

After launching cars for the masses since so many years, India’s largest automobile

manufacturer is now targeting the premium segment with their latest model from the Suzuki’s

stable. Pricing of this premium hatchback is start from Rs.4 Lakh. This price range would

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practically rip apart Hyundai’s offering in Getz, which is priced at a much higher tag of Rs.

4.5 Lakh. Both the companies are known for their value based offerings and Maruthi with

their extensive service network and brand reputation for making reliable cars should get the

customer’s nod over their competition.

Maruthi Kazashi:

It is the new version of luxury sedan car from Maruthi they are now concentrating on this

luxury car segment it costs around 18 Lakh targeting business class people

TATA INDICA

Tata Motors adopted a competitive pricing strategy for Indica in the global market. Prices

were fixed on the basis of the norms prevailing in the international market. Also the prices

offered by their competitors like Toyota, Ford, Fiat, were kept in mind while deciding the

prices.

SCORPIO

Pricing Strategy: to be a premium brand yet

having universal appeal .Scorpio was to compete with the midsize

cars like Hyundai Accent, Ford Icon, Opel Corse, Maruthi Suzuki Esteem on the one side and

UVs like Toyota Quails, Tata Safari and the Tata Sumo on the other. Scorpio adopted the

penetrative pricing strategy positioned in the psychological price barrier of Rs. 5 -7 Lakh.

Pricing in 2-wheelers:

Faced with an uncomfortable scenario of Bajaj Auto closing in on Hero Honda Motors in

monthly unit sales, managing director Munjal said the company has put in place a strategy to

retain its leadership in the Rs 33,000 cr two-wheeler markets. That includes developing new

high-performance engines in 100cc, expanding capacity to beyond 5 million units and

reducing the price of 100cc bikes, if needed.

“As confident as they are of upstaging us, we are confident of retaining our leadership and

growing our lead,” Munjal told FE in an exclusive interview.

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Reiterating that unlike Bajaj, which is exiting the 100cc segment, Munjal said Hero Honda

intends to strengthen its offerings in the segment. He said the company is developing new

engines that will deliver superior performance in the 100cc bikes in future.

To counter Bajaj’s move to offer 125cc bikes at the price of 100cc bikes, Munjal said HeroHonda could reduce prices of its 100cc bikes to nullify Bajaj’s strategy.

“We have dominated the 100cc segment for many years and will continue to dominate.

Possibly it may be the reason for Bajaj Auto leaving the segment,” Munjal told FE.

The gap between Hero Honda and Bajaj Auto has narrowed from 92,206 in September, 2005

to 37,833 in September, 2010

Distribution:

For 2-wheelers :

At Hero essentially they have a completely customer-driven approach. A nation-wide dealer

network comprising of over 3,500 bicycle dealers, 350 dealers for mopeds and 225 franchise

holders for motorcycles, ensures convenient access to the Group's products across the

country.

Strong dealer company relationship with a deep sense of belonging to the Hero fraternity, the

Group's dealer network has catalyzed growth and acted as a strong bridge between the

customers and the Group.

There are more than 1000 committed dealers & service outlets spread across the country. The

authorized workshop have well laid out standards for motorcycle servicing supported by fully

equipped infrastructure in terms of quality precision instruments, pneumatic tools & a team

of highly trained service technicians. Having your motorcycle serviced at an authorized

workshop ensures highest standards of service quality and reliability

For Cars:

SCORPIO

Since the Scorpio was targeted at an urban The Scorpio was launched in a phased manner -

first in Metros Mumbai, Delhi, Bangalore, Chennai. Twenty cities were included over a

period of 4 months and within a year 50 cities were covered. This ensured attention to main

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markets and to ensure that initial production of the vehicle could match demand.

DISTRIBUTION CHANNEL OF HYUNDAI

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Manufacturer-TKM India,

Bangalore

Toyota Flagship Dealer Consumer



DEALERS

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STOCKISTSUB DEALERSBOOKING AGENTS



variant carrying a retail tag of Rs 3.85 Lakh , ex-showroom, New Delhi, and this aggressive

pricing only reinforced this feeling.

Event Organized By Maruthi to Promote Swift

ch 24, 2009

In a co-operative marketing initiative, Fever FM and Maruthi Suzuki Swift came together to

organize a Night Rally in Delhi. The Swift Night Life Rally was organized for the Swift Life

Club. The brand tied up with the station to extend the experience to the people who were

unable to participate in the activity.

Honda

Road Shows

The company plans to stage road shows, to display vehicles in the pavilions during various

college festivals and exhibition.

Hyundai

Television advertisements

Advertisements to promote and market our product are shown on leading television

channels. Major music and sports channels promote and they reach out to the youth will be

promoted through Star, Zee, Sony and doordarshan etc as it has more viewers.

Radio

Radio is the medium with the widest coverage. Studies have recently shown high levels of

exposure to radio broadcasting both within urban and rural areas, whether or not listeners

actually own a set. Many people listen to other people's radios or hear them in public places.

So radio announcements are made and advertisements are announced on the radio about the

product features and price, qualities, etc.

Print Ads

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Daily advertisements in leading newspapers and magazines are used to promote the product.

Leaflets at the initial stage are distributed at railway stations, malls, college areas and various

other locations.

Workshops and Seminars

Workshops and seminars are held in colleges and big corporate to make people aware about

the companies past performance and product features, its affordability and usage, vast

distribution network.

Banners, neon signs

Hoardings, banners, neon signs are displayed at clubs, discs, outside theatres, highways and

shops to promote its brand car.

Booklets and pamphlets

Booklets are kept at car showrooms, retail battery outlets, etc for the customer to read. These

booklets provide information about its company; the products offered which suits the

customers need accordingly.

TOYOTA COROLLA

The Promotion for Toyota Corolla consists of a blend of activities making its Promotion Mix.

Its Promotion Mix consists of almost all the possible techniques of Promotion used for anyother product. Some of the major elements of Promotion Mix of Toyota Corolla are listed as

under:

One of the major sources of Sales Promotion is Trade Fairs like AUTO EXPO, MOTOR

SHOW etc. The company used to take part in these types of fairs and used it for its Sales

Promotion. But now the trend is shifting because the company thinks that if they want to

launch a product on a National Level, then there is no need for such kind of shows as now

there are various other powerful sources of media available to them. Moreover the cost spenton these kinds of fairs was not justified. So therefore the company is now keeping away from

fairs. In 1999 Toyota last time participant at the RAC rally in Britain. Some other Sales

Promotion technique used by the company is the Festival Season Offers it introduces in the

market at the time of Diwali, New Year, Christmas, Navratri etc to boost short term sales.

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Public Relations and Community Building Exercise

• Contribution to Tsunami

•Toyota Kirloskar Motor wins Best Ornamental Garden award for its landscape

• Toyota Kirloskar signs MoU with Bangalore University for promotion of Japanese

Language

• Toyota observes earth day by supporting local schools

• Organizing Drawing/Painting Competition on ‘Me and my Environment’ for kids

from Govt. Schools.

PERSONAL SELLING

Personal Selling largely takes place at the Dealers’ End. The way the customer is attended

depends mainly on the Dealer as he acts as an interface between the company and the

Consumer.

The various cases in which Personal Selling takes place is Individual Sales, Corporate Sales,

Sales Presentations, Fair and trade Shows. Mostly in case of Individual Sales the Customer

goes to the showroom and takes a look at the product. There he is attended to by the Sales

Personnel of the Dealership. Sometimes the Senior Sales Executive has to make SalesPresentation to Corporate Buyers. Personal Selling is also practiced at Trade Fairs and Auto

Shows wherein the Company appointed Sales Personnel attend prospective customers and

also book their orders.

DIRECT MARKETING

In the case of Direct Marketing the Company Officials directly contact the Prospective

buyers with the information available through various sources. For example in case of Road

Shows, Trade Fairs, Auto shows etc. Sometimes the existing customers also provide

references of prospective buyers such as their friends or relatives.

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GM STUXX

GMI has launched several industry first programs such as Opel Club Card facility, Opel

Carnivals, Opel Autobahn newsletter, chauffeur training programmes, mobile road-show

caravan, car exchange programme for Opel customers, OK 5-Star used car programme,

There is two-year and four-year warranty schemes, 2 year service holiday etc. Such

programmes have helped GM in building its brand equity and developing a loyal customer

base.

SCORPIO

Brand Promise: ‘Luxury of a car. Thrill of an SUV’

this brand positioning addresses the key consumer Insight and the product delivers the

promise. The position is also a unique proposition, which will help the brand have a distinct

image in the consumers’ mind. The baseline captures the essence of the brand, which is

superiority and uncompromising attitude. It also summarises the spirit behind the making of

the Scorpio.

Media Strategy

*Dramatic and high impact launch

* High visibility

* Push brand image even by the media vehicle

Building impact through multiple-media

* PR, Mass Media, Direct Marketing, Events

Public Relations

Pre-launch excitement and buzz was created by a full blown PR program. Media coverage on

the IDAM process, the people behind the Scorpio, the obsession, the world class technology,

etc set the tone for the hyped up launch. PR was also the first tool used for launching the

Scorpio. The coverage of the launch was massive. It got four cover stories

Mass Media

‘While the media targets would be achieved through the right selection of the media mix, the

Scorpio media posture was to ensure that Scorpio was present on the decided media but ‘with

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a difference.’ Scorpio would use media innovations to create differentiation on the traditional

media and do things in a ‘bigger and better’ manner.

Customer Relationship Management (CRM )

CRM as a tool was used to create positive word-of-mouth, to monitor customer experiencesand generate referrals. A series of CRM activities were implemented with regular direct

communication, events and customer research. The CRM plan included a welcome Pack on

filling up Scorpio Club (Top Gear) form, satisfaction surveys, Events, Festive offers,

Rewards Program, etc.

TATA INDICA

‘More car per car’ is the famous tagline of this product. The Indica’s positioning has

remained consistent with the brand's offering in an increasingly competitive market. TheIndica is now synonymous with the word ‘More, by encapsulating the inherent product

strengths and marrying them with the customer trait of desiring ‘More’.

A promotion strategy for Indica v2 in international market is more or less same as that of the

Indian market. Media innovations have been a key to the success of the Indica.

MARKETING/ADVERTISING INTENSITY

The Marketing/Advertising Intensity analysis provides an insight regarding the focus of

the firm on the marketing and promotion activities.

Marketing/Advertising Intensity = Total Marketing Expenses / Net Sales

Advertising:

Promotion is a pushing strategy where as advertising is a selling strategy promotion is a shortterm where as advertising is a long term impact on the consumers to buy the product so

companies spend more on advertising than on promotional campaigns

There are many different techniques of Advertisement as a part of its Advertising Strategy.

Most of the Print Ads of Toyota Corolla are individually targeted at one of these factors such

as Comfort, Performance, Styling, Power, Leg Room, Design, and Driving Pleasure. One

most common feature of almost all the Ads is that in every Advertisement, the fact that it is

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the World’s Largest Selling Car and its presence across 160 countries is present. This is

done to because the company wants to differentiate the product in terms of its Reliability that

it is an entrusted brand of 30 Million people across the globe. The fact that it is present in 160

countries proves that it is a Global Car.

There are 3 TV Commercials of this Car in India. The Commercials show that this Car is

targeted mainly at the Indian youth and young Executive. It has been positioned as a little

sportier which is the main reason that it is for young people and is also like by them too.

The Brochures, Posters/Leaflets are such designed that shows that Corolla is a car for people

who demand Performance, Style, Power and Sheer Driving Pleasure. The car being a perfect

combination of these factors makes it a huge success across its segment.

The Other Sources of Advertisement include Bill Boards, Display Signs, POP, Displays,

Symbol/Logo. The company does the Advertising of Corolla by displaying Bill Boards and

Display Signs at various target places where it feels that prospective buyer will come across

it. At the showroom also, there are huge amount of Point Of Purchase Displays and also

Symbols/Logo which add to it.

Percentage of ads on T.V in 2005-2010:

Car/jeep—50%

Motor cycles—35%

Commercial vehicles—4%

Scooters—7%

Tractors—2%

Passenger Car segmentà Tata Motors

Commercial Vehiclesà Tata Motors

Motor Cycleà Hero Honda

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Technology Intensity/orientation:

In-house R&D:

The absence of competitive pressure and the perpetuation of sellers markets may lead to low

R & D activity in firms belonging to a developing country. Limited use of in-house efforts,

either for adaptation of imported technology or in locating technology imports could also

explain low R & D activity. With a more open policy environment, increasing competition

and higher costs of technology imports, firms may realise that to catch up with technological

frontier, they need to direct their efforts to build capabilities for technology generation, rather

than depend on imports. As a result expenditure on in-house R & D would increase in a

liberalized environment. on the basis of a survey of 32 R & D units of transnational

corporations in India, found evidence suggesting an increasing trend of investments on R &D seeking to develop new products and processes

Technology exchange : As stated earlier, firms operating in a restrictive regime directed their

in-house R & D efforts either to complement imported technology to facilitate technological

trajectory shifts or to locate their technology imports. Some firms in the process of diffusion

of imported technology, as a result, could have used the interaction between technological

imports and in- house efforts. With the entry of leading multinationals and transfer of design

and drawings, the technological search activity during the post Liberalisation period may

have resulted in bringing about cost reduction and technological up gradation of vehicles to

face global challenges

R & D for commercial vehicles:

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R & D for 2-wheelers

R & D for passenger vehicles:

R & D for whole automobile industry:

Technology Imports: Gives an insight into the company's interest to acquire and adopt newtechnology which it is not able to develop on its own

A firm use imported components and parts either as a part of a 'package' in the

transfer of technology or due to certain costs and quality advantages. In an era of domestic

Liberalisation, restricted trade and strict exchange rate control, imports of components were

used by some firms as a source of technological up gradation of their product. Higher imports

could also be because firms would choose the quicker option of importing the parts and

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components rather than encouraging parallel technology transfer to component manufacturers

as well. With an across the board change in trade policy, devaluation of the currency, move

towards tariff controls and more realistic exchange rate, however, dependency on imports of

components may actually decline. This is because of the choice between importing at a

higher price and domestic procurement. To stay put in competition, firms may use the latter

option.

Technology Imports (%) = Forex Spending on Technology Imports / Net Sales

=24.6%

Foreign/International Exposure:

For passenger cars:

a) Export Intensity

Export Intensity (%) = Total Forex Earnings / Net Sales

=4361.136/55785.89

=0.078=>7.8%

b) Import Intensity

Import Intensity (%) = Total Forex Spending / Net Sales

=6380.875/55785.89

=0.1143=>11.4%

For Motor Cycle:

a) Export Intensity

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Export Intensity (%)=422.838/20301.3

=0.0208

=2.08%

b)Import Intensity

Import Intensity (%) =859.9926/20301.3

=0.0423=>4.23%

For Commercial Vehicles :

Export Intensity


=0.0460=>4.6%

Import Intensity

Import Intensity (%)=1898.891/45155.81

=0.0420=>4.2%

For Automobile Sector:

Export Intensity


=0.0566

= 5.66%

Import Intensity

Import Intensity (%)=3046.5862/40414.34

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=0.0753=>7.53%

Leverage of the firm:

It is the ratio of debt to equity if it is more than one then the firm is not working properly if itis below one the firm is performing properly

The following debt-equity ratio shows the leverage of the firm and the industry as a whole

Debt-Equity Ratio of Commercial vehicles:

Debt-Equity of motor cycle:

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Debt-Equity ratio for passenger car:

Debt-Equity ratio for automobile sector:

Working capital Ratio:

This ratio indicates that firms ability to pay their borrowings if it is negative firm is unable to

pay borrowing if it is positive firm is able to pay lender money i.e. they have assets to pay if a

company have more positive working capital ratio it has huge inventory.

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Performance analysis:

PROFITABILITY TREND

Profitability gives us the earnings available to the investors and owners of the companyafter taking into account all the expenses incurred during the business operations.

Profitability is calculated as:

Profitability (%) = Profit after Tax (PAT) / Net Sales

=0.085

=8.5%

Accounting based measures:

R.O.A=PBIDT/Assets

9.886/11516.165

=0.45=>45%

R.O.S=PBIDT/Sales

9.886/55785.49

0.01=>10%

Analysis of Competition: Porter’s Model of Industry Structure Analysis

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Su lier Buyers

Potential

entrants

Industrydegree of

rivalryBargainin

g power

Bargainin

g power

Threat of

new



Degree of rivalry: despite the high concentration ration in the automotive sector the

Indian automotive sector is intense due to entry of foreign companies into the market

Threat of substitutes: 2-wheelers, sports bikes.

Barriers to entry: The barriers to enter automotive industry is substantial.

Suppliers power : the power axis is tipped in the industry favor. The industry has powerful

buyers who are able to dictate their terms to the suppliers.

Buyers power : the power axis is tipped in favor of the consumers favor. This is due to

standardization and low switching costs associated with selecting from competing brands.

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Substitu

Threat of

substitutes



SWOT Analysis:

Key terms:

Closed Market: This is a market where there is no potential buyers , no OEM manufacturers

no proper supply of materials etc and also no incentives to do a businesses

Liberalization: India liberalize on its policies towards entry of foreign players and in some

sectors government allowed 100% FDI like automobile, infrastructure, education etc

previously firms has to do according to government i.e. government is the monopoly but after

liberalization it changed.

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Fuel-emission standards: These standards include Bharat Stage IV, BS III, etc which

automobile manufacturers have to follow to reduce carbon emissions

Conclusion:

India’s expedition to become a global auto manufacturing hub could be seriously challenged

by its inability to uphold its low-cost production base. A survey conducted by the research,

KMPMG firm reveals that the Indian auto component manufacturers are increasingly

becoming sceptical about sustaining the low-cost base as overheads including labour costs

and complex tax regime are constantly rising.

The survey said many executives believe that India’s cost advantage is grinding down fast as

labour costs are constantly increasing and retaining employees is becoming more and more

difficult. Increased presence of global automotive companies in the country was cited as one

of the reasons for the high erosion rate.

Indian auto businesses will only flourish if they boost investments in automation. In the

longer term, cost advantage will only be retained if Indian capital can be used to develop low-

cost automation in manufacturing. This is the way to preserve our low cost.

Global auto majors are also cynical about India’s low cost manufacturing base. India taxation

remains a big disadvantage. This is not about tax rates it is just about unnecessary

complexity. But some companies also believe there is scope for reducing the cost of doing

business.

In spite of this there are opportunities to exploit lower costs right across the board. It’s true

that labour costs are definitely increasing but they are still five per cent of the total

operational costs. The labour costs can be further reduced if companies are successful in

bringing down other costs like reducing power costs. Low-cost base can never last long. The

company said Indian industry has till now relied on very labour intensive model but it would

have to switch to a more capital intensive model. The percentage of automobile sector

contributing to GDP is 2.5% in 2002-2003 to 5% in 2008-2009. This indicated that it is one

of the major contributing factor to employment etc.

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References:

http://www.acmainfo.com/

http://www.siamindia.com/

http://www.ibef.org/industry/automobiles.aspx

http://www.autoindiaforum.com/

http://living.oneindia.in/automobiles/auto-news/2010/2010-car-market-year-

211210.html

http://auto.indiamart.com/

http://www.indiancarsbikes.in/auto-news/auto-industry-india-car-motorcycle-

sales-report-month-april-9396/

http://www.indiancarsbikes.in/auto-news/auto-industry-india-car-motorcycle-

sales-report-month-april-9396/

http://automotivehorizon.sulekha.com/automotive-logistics-india-2010-

conference-held-in_newsitem_1048

http://www.automobileindustry.co.cc/automobile-industry/fast-track-automobile-

industry-of-india.html

49869032 report on automobile sector

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