RESEARCH REPORT

On
“A PERSPECTIVE
ON
THE FUTURE OF SMALL CARS IN INDIA”

1
 ACKNOWLEDGEMENT

My first and foremost thanks to God Almighty who helped me to complete my

dissertation work. I take this opportunity to express my profound gratitude to my
faculty guide *************** whose support and suggestions were immense in
enabling the successful completion of this dissertation report.

Finally, my hearty thanks to my friends for their moral support, suggestions and
encouragement.

***************

2
 CONTENTS

Declaration

Certificate from Faculty guide

Acknowledgement

S. No. Chapter Name

1. Introduction
2. Literature Review
3 Industry Structure
4. Objective & Research Methodology
4.1-Objectives
4.2-Scope of the study
4.3-Research methodology
5. Result and Discussions
6. Conclusions and findings
7. Recommendations

References
Annexure

3
 CHAPTER - 1

INTRODUCTION

The main aim of the study is to analyze the strategies being adopted

in the Indian small passenger Car Industry. A strong car brand can

create significant value in the automotive industry. The price

consumers expect to pay for otherwise identical luxury vehicles can

vary as much as $ 41301 depending on the car's brand. For mass-

market cars, brand helps determine which products a consumer

considers buying. Furthermore, superior brands extend their halo

across every model of vehicle within the brand. It's no surprise that

most auto manufacturers make brand positioning and development a

key item on their marketing agenda.

Because of the prominent role that brand positioning and

development play in many auto manufacturers' business strategies,

we conducted extensive research and analysis to better understand

how consumers think about car brands. The study analyzes the set of

factors which provide valuable insights into consumer brand

perceptions.

The consumers have a simple yet sophisticated understanding of

what differentiates car brands. Notwithstanding automakers'

attempts to distinguish their brands on the basis of lifestyle or

emotional imagery, consumers evaluate brands in terms of their

4
earned reputation for product excellence relative to their total

ownership cost. Consumers' perceptions are based on their

accumulated direct and indirect experience with the products that

constitute those brands.

These perceptions are obviously not perfect. Some brands'

reputations exceed or fall short of their demonstrable product

attributes. But, as a rule, consumers' beliefs are accurate, stable, and

relatively immune to manipulation. In contrast to the situation with

other consumer goods, in which equity is created substantially

through advertising, automotive brand perceptions change primarily

through consistent and sustained changes in the underlying product

portfolio.

The race for India’s small car market has begun. But only those

among the Big Four who get all their strategies right will win this

unforgiving contest. The prize: not just the largest automobile

segment, but also survival in this market .Now they are lined up for

the last lap. With market India becoming a minefield for the world’s

largest auto-makers, the Formula 1 has become brighter than the red

lights that have stopped them in their tracks so far -only the small car

will enable endurance. Bumper-to-bumper, therefore, the combatants

are accelerating towards the small-car luxurious segment.

Though India’s small car rally puts it way ahead of Europe’s annual

compact car production of 5 lakhs units, it is still a distant second to

the 1.7-1.8 million mini cars cranked out per year by Japan. The

5
Indian unit now faces an onslaught from global competitors rushing

into the country with ambitious expansion plans. Honda, Toyota,

Hyundai, General Motors and others have announced plans to make

small cars in India.

Small cars (comprising models like Maruti 800, Alto, Santro, Indica,

WagonR, Swift, Getz etc.) have enjoyed faster growth this year than

the overall growth of just fewer than 22%. Small car exports have

clocked over 84,000 units till October 2008. Last year, small car

exports touched 93,844 units in April-November. As for domestic

sales, the compact car curve has not been evenly steep year-on-year.

It grew from 3, 97,682 units in April-November 2007-08 to 7, 32,700

units last fiscal, up just 11.6%.

The demand for cars is dependent on a number of factors. These

factors can be studied as under: - Per capita income, Price of cars,

Availability and cost of car financing schemes, Introduction of new

models, Incidence of duties and taxes, Depreciation norms, Fuel cost

and its subsidization, Public transport facilities.

Since 1998, there has not been the smallest lull in the Indian

automobile market. It has taken a giant leap in a last decade to

become the hottest automobile market in the world. Almost every car

manufacturer in the world wants to have an outlet here. It’s not just

the possibility of dumping, a large number of chassis that’s attracting

them here, but the “frugal engineering” that everyone wants to

exploit to reduce the costs and be competitive in price-sensitive

6
markets. India is already manufacturing close to 1.5 million cars

every year and new cars are being planned almost every day. The

Hyundai i10 became the first car to be sold worldwide but

manufactured exclusively in India. This is certainly going to establish

India as an “auto hub” in this part of the world. Pune was recently

tagged as “Detroit of India” when GM and Volkswagen drove down to

Chakan-Talegaon (near Pune); and also because of the existing large

footprint of auto majors and the ancillaries. On the dark side, the

infrastructure has been struggling to keep up with the pace of

automobile penetration.

(Source1:

http://www.businessweek.com/globalbiz/content/sep2006/gb2006092

6_662135.htm)

7
 CHAPTER – 2

LITERATURE REVIEW

India’s top-gear run in small cars this year has made it the second

biggest compact car producer in the world after Japan.

Says Jagdish Khattar, MD, Maruti Udyog: “The strict CO2 emission

rules due in Europe by 2010 is prompting global OEMs to look for

small car options from markets like India to offset the fuel efficiency

and other averages in their existing stable. That’s why more and

more companies are looking to build compact car manufacturing

facilities.”1

Suzuki has already announced plans to make a new small car in India

for domestic sales and exports for itself and Nissan. Renault has also

announced plans to set up a 5-lakh unit facility with M&M, in which

Nissan is expected to become a partner. Honda has announced that it

will set up another facility for a small car (the new Jazz) in India, while

Toyota is said to be thinking of a second facility dedicated to a

compact model.1

Hyundai is expanding its capacity, while GM is setting up a new plant

in Maharashtra for small car Spark. Ditto for Volkswagen, which is

setting up a compact car facility near Pune? The small car rush and

the build up of capacity may also have its impact on the global auto

8
pecking order, says Arindam Bhattacharya of Boston Consulting

Group. “The biggest growth segment in the next five to 10 years will

be the small car in developing markets where many global OEMs are

disadvantaged,” he says. That could lead to the ascent of players like

Tata Motors of India and Chery of China.1

Indian automobile industry had an action-packed year with big-ticket

announcements such as excise duty cut for small cars, entry of

German car major Volkswagen and Mahindra's tie-up with Renault,

besides snazzy car and bike launches keeping the sector in top gear

in 2006. The year also saw the release of Automotive Mission Plan

2006-2016, which aims at drawing a roadmap for the auto industry

and doubling the sector's contribution in GDP by taking the turnover

to $145 billion in 2016 with focus on export of small cars, MUVs, two-

wheelers and auto parts.2

But 2006 also had its share of differences, which literally began from

the word go. The much-awaited 8 per cent excise duty cut on small

cars, though cheered companies for a while, ended creating fissures

within the industry as most carmakers, except for leader Maruti,

terming it as a "market distorting measure".

Differential excise duty and a more favourable regime for small cars

were seen to be directly benefiting Maruti, which has the largest

stable of high-demand compact cars. Other companies such as

9
Hyundai, General Motors, Honda and Toyota cried foul, demanding

that excise duty be made uniform.2

India: Small Cars Are on a Roll

Fueled by huge investment—and cuts in excise tax—the

subcontinent's small-vehicle market is expected to

double in the next four years

Small is beautiful when it comes to India's car market. Though India's

auto industry is nowhere near as developed as China's, investment is

starting to pour into the small-car segment. Global auto companies

such as Hyundai and Honda and local ones such as Tata Motors and

Maruti Udyog, a subsidiary of Japan's Suzuki Motor, are rushing

forward with plans to launch small car models they hope will click

with India's emerging middle class.

While India is the fabled "back office of the world," Prime Minister

Manmohan Singh's government has big aspirations to build up the

country's manufacturing sector, and small-car manufacturing is a

huge priority. The sector received a big boost in late February when

Finance Minister Palaniappan Chidambaram announced plans to

reduce excise duties on small cars from 24% to 16% to spur

investment.

Small cars already account for 70% of India's total one-million-car

yearly market—a figure that is expected to double in the next four

10
years. Around a dozen new small and compact cars, with engine

capacities ranging from 1,000 cc to 1,500 cc, are expected to hit the

market in the next two years in gasoline, diesel, and hybrid-engine

models. India's long-range potential could be impressive. A study by

consulting firms Booz-Allen Hamilton and McKinsey predicts that

India's domestic car market will cross 3.5 million by 2015.

Maruti Udyog, in which Suzuki has more than a 50% stake, is said to

be working at lowering the cost of its base model Maruti 800—

currently selling at $4,130—to compete with Tata. The company

boasts a portfolio of about 11 brands including the Omni, the Esteem,

and the premium small car Zen; plus Suzuki brands such as the Alto,

WagonR, and Versa, the off-road vehicle Gypsy, and the luxury sport-

utility vehicle Grand Vitara.

Big Japanese automakers such as Toyota and Honda are also looking

at major expansion plans in India. Honda, which established a

motorcycle joint venture in India back in 1984, is aiming to double

auto-production capacity at its local unit, Honda Siel Cars, to 100,000

by the end of 2007.3

Toyota and its subsidiary Daihatsu will together invest $86 million to

make 100,000 vehicles a year at a facility in Bangalore. The capacity

will be doubled by 2010. The company has said it wants to grab a

10% share by the end of the decade. However, it has a long way to

go to catch up with Suzuki Maruti, which controls over 50% of the

11
Indian passenger-car market. Automakers of all stripes are attracted

to India, thanks to its galloping economy, increasing disposable

income, and young population. In addition, the small-vehicle segment

is a great avenue into India's sizable rural market.3

P. Balendran, vice-president of General Motors India, points out that

"in terms of volumes, the mini segment remains the largest

opportunity area for manufacturers." General Motors has four

vehicles—Chevrolet's Optra, the multi-utility vehicle Tavera, the Aveo,

and the Chevy SRV, a premium "sportsback"—available in India. And

the company will launch the hatchback Chevrolet Spark, a refined

version of Daewoo Motors' small car, the Matiz, by next April. General

Motors is investing $300 million in a new plant with annual capacity of

140,000 vehicles.

Volkswagen, which has a huge manufacturing footprint in China, is

also getting serious about India. It has announced plans to invest

$540 million to build a plant to make 100,000 small cars a year for

the Indian market. While not official, there's talk of the western India

state of Maharashtra as the location for the new plant. Its current

assembly operation in that state already produces 25,000 Skoda

Octavias annually.

India car-market leader Suzuki hopes to extend its lead by investing

$650 million to expand, make diesel cars, and set up a new plant in

12
Manesar in the northern state of Haryana. The new facility will make a

compact car with global partner Nissan. It plans to double capacity to

1 million vehicles a year by 2010.

Some of that new capacity will be exported to other markets such as

Europe, and Suzuki will see its production costs go lower over time. "If

you have a large production base, any incremental production comes

cheaper," says ABN Amro auto analyst Pramod Amte.

What could spoil this upbeat picture? One big threat would be an

unexpected slowdown in India's economy that would stretch the

pocketbook limits of Indian consumers, who tend to borrow to finance

their car purchases. Also, if India's road infrastructure doesn't

improve fast, that could break growth. But right now, India's economy

is on a strong growth track. Until that outlook changes, automakers in

India will continue to bet big on the small-car segment.3

Reference Sources:

1
http://economictimes.indiatimes.com/articleshow/589352.cms

2
http://ia.rediff.com/money/2006/dec/20auto.htm

http://www.businessweek.com/globalbiz/content/sep2006/gb2006092

6_662135.htm

13
Summary of the review:

(February 2, 2009 – February 18, 2009).

The present study on small segment car is also trying to find out the

Consumer Perception about different features of cars and how Price,

Design/Style, Quality, Fuel Efficient, Easy Availability and Variety are

affecting the sale of cars.

The present automobile business scenario is extremely complex and

some highlights of it are as under:

• Ever increasing intensity of competition

• More aggressive competitors emerging with greater frequency

• Changing bases of competition

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• Geographic sources of competition are becoming wider

• Niche attacks are becoming frequent

• Pace of innovation is rapid

• Price competition becoming more aggressive

• Product differentiation is declining

• Still untapped target market

The marketing strategies are today shifting from the mass marketing

concept to individual marketing concept. Each consumer is different

than the other. This is so because the likes and dislikes of individuals,

demographic characteristics like economic and educational

background, geographical factors etc are different. To effectively

implement this new strategy, companies need to be in constant touch

with their customers and their behaviour patterns. Depending upon

the above said factors, the needs of individuals also change. For

example air travel may be a luxury for the common man but is a

necessity for professionals since it saves time and time is money for

them because of continuously increasing small car segment.

15
 CHAPTER - 3

INDUSTRY STRUCTURE

In a routine response purchase advertisements and endorsements

play a major role. To change the consumer's behavior in routine

purchase there is a need to give them information and spread

awareness. Of the one million, around 70% of India’s total one million

car market is expected to manifold to double in the next four years.

And with a dozen new models of Mid size cars with engine capacities

between 1,000 cc to 1,500 cc expected to arrive at the market the

long term potential would be fasinating. India’s domestic car market

is expected to cross 3.5 million units by 2015 says a study by firms

like Booz-Allen Hamiltion and McKinsey.

Price Wars

The obstacle in India always is producing low priced cars hence

making it competent and affordable to the gigantic market. Two years

ago Mr. Ratan Tata, Chairman of Tata Motors announced the launch

of a $2,200 priced small car by 2008. This would mean the price war

would get even more aggressive. Also extensive research is

continuously being done by Tata Motors for smaller car production

with its joint venture partner, Fiat. To compete with Tata’s 1 lakh car

Maruti Udyog is re-engineering with its base model Maruti 800 to

lower its cost. Maruti 800 is currently selling at $4,130. The company

pride themselves on the 11 brands they produce. Some of their most

16
popular produce is Omni, Esteem, among the premium small car,

Zen, Suzuki brands which include Alto, Wagon R, Versa, Gypsy, the

off-road vehicle and the Sports Utility Vehicle Grand Vitara. Honda

and Toyota the two big automakers of Japan are also on its way to a

major expansion strategy in India.

17
Attractive Market

The Indian version of the Civic was rolled out by Honda in July of 2006

and by 2010 it is expected that they would have sold 150,000 units.

Because of India’s high growth potential it is a very important market

for Honda.

Toyota and its subsidiary Daihatsu will make 100,000 vechicles a year

at a plant in Bangalore investing $86 million. Further it is said that the

capacity would double by 2010 so that their expected share of 10%

by the end of this decade would be achieved. However with the

presence of the indian automobile giant which has a market share

over 50% in the indian passener car market this seems a rather

difficult task.

With the indian economy galloping, coupled with increasing

disposable income,young population and a large rural market,global

automakers are all in the look out to bite a share of the vast high

potential growth market.

70 % of the Indian population live in the rural sector earning less than

their urban counterparts. This is a vast market to tap and with the cut

on excise duty for the first time small segment cars could be

affordable for these potential buyers. It is also estimated by the

capital, New Delhi, that sales of automobile would rise from $34

billion this year to $145 billion in 2016, if one was to follow these

estimations then auto sales would be 10% of India’s gross domestic

product(GDP).

18
The biggest oppurtunity for car manufacturers would be in the small

segment car segment. General Motors who have four premium cars in

India and is launching the hatchback Chevrolet Spark by April 2007.

the Chevrolet Spark would be a refined version of the Daewoo Motors’

,Matiz. Also with its $300 million investment in a new plant they plan

to roll out 140,000 unit vehicles annually. Volkswagen which saw

great oppurtunity in China had establshed a huge manufacturing

plant but now they seem to be getting serious about India. Its plan in

India is the invest $540 million to build a plant producing 100,000

units of small cars. Currently they have a assembly operation facility

in Maharashtra which produces 25,000 Skoda Octavias annually.

Doubling Capacity

Hyundai Motors which sells Santo and Getz in the small passenger car

segment is planning on investing $700 million in a new facility

coupled with a engineering and transmission facility in Madras.

Speculation has it that Ford and its Japanese partner Mazda will have

a small car rolled out by the end of the decade for the indian

market. . The Indian auto market is growing rapidly, and we continue

to explore all opportunities for growth. Suzuki the Indian small car

19
market leader also plans to extend its reach by investing $650 million

to set up a new plant nearby New Delhi at a place called Manesar to

expand and make diesel cars. And through this facility they plan to

roll out a new small car along with global partner Nissan. Maruti is on

a mission to double capacity to 1 million unit vehicles per year by

2010.

Besides the lucrative small passenger market in India the only

setback would be to see the slowdown in the Indian economy and this

would hit hard on the Indian consumers who stretch their pocket

limits and borrow to finance their car. But until this high growth

scenario changes automobile makers in India will continue to battle it

out in the small car segment.

Market Segmentation

Some key market segments and the dominant market behaviour of

buyer’s n those segments. Status buyers are - Car is bought primarily

as a status symbol; Brand image associated with the car is very

important; Quality of engineering and attention to finish are very

important, in general, looks and styling are important; Multiple car

owners and light users; usually chauffeur driven; Economy of

operation and costs of maintenance are irrelevant to the purchase

decision. The Mercedes is the absolute top of the line model in this

segment. Till a few years ago the Honda and the Maruti Esteem were

slotted in this segment. Other models that might make a dent in this

segment are GM Opel Astra, and Toyota.

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 Classic Premium
Mercedes
Benz, BMW

Upper Premium Mtisubhish Lancer,

Ford Fiesta, Honda
Accord, Hyundai
Sonata

Lower Premium
Daewoo Cielo, Maruti Esteem, Tata
Sumo, Tata Estate
Upper
Opel Astra, Tata Indigo, Hyundai Getz,
Maruti Swift, Ford Ikon, Maruti Versa

Extended
Maruti Zen Estiol, Wagon R, Fiat Palieo, Tata Indigo

Compact

Maruti 800, Maruti Alto, Hyundai Santo, Tata Indica

INDUSTRY ANALYSIS USING PORTER'S FIVE FORCES

Porter's "Five Forces of Competition” model views the profitability of

an industry as determined by the five sources of competitive

pressure. These five forces of competition include three sources of

"horizontal" competition - competition from substitutes, the threat of

competition from entrants, and competition from established

producers - and two sources of "vertical" competition - the bargaining

power of suppliers and buyers. The view of the Indian passenger car

21
industry from these five angles leading to the expected changes in

the coming years in the structure.

Competition from Substitutes  LOW

Inadequate Public Transportation System: The public

transportation system in India is not only extremely inadequate; it is

notably poor in quality. This scenario is not expected to change

drastically in the next ten years.

Developmental Stage of Electric Cars: Though the major car

manufacturers in the world are currently developing electric cars or

hybrid cars to reduce pollution in the coming years, these

technologies will require considerable length of time to become

commercially feasible in developing nations as the “REVA” car

experience has demonstrated.

Threat of New Entrants  LOW

Economies of Scale: Being a capital intensive industry, economies

of scale acts as a significant entry barrier. Since, in India, the

economy segment cars are expected to drive volume growth in India

in the coming years, it is extremely important for a manufacturer to

have a model in this segment to reduce his per unit cost.

General Economic Conditions: The recent pull-out of Peugeot is an

example that even a global automobile company could find it

22
extremely difficult to operate in India if it faces labour trouble and

problems with its joint venture partner.

Rivalry between Established Competitors  HIGH

Highly Concentrated Industry: The Indian car industry is highly

concentrated with Maruti itself accounting for about 49 per cent in

April-June 2006 of all sales.

Diversity of Competitors: The entry of Maruti in 1984 and the

deregulation of the sector in 1993 have been landmark years for the

Indian car industry. India has gradually become the latest battlefield

for global auto majors. The last few years have seen the industry

integrate with the global automobile industry and evolve into being

extremely competitive.

Product Differentiation: One of the key trends observed in the car

industry during the last decade is that the products of different

companies have become increasingly similar especially in the

economy and mid-size segment.

Excess Capacity and Exit Barriers: The entry of numerous players

in the car industry can lead to significant over-capacity. This is likely

to lead to significant price cuts, as companies will need to generate

volumes to cover their fixed costs. The car industry faces high exit

barriers in India due to various government laws, which make it

difficult for a company to shutdown and fire all its employees. Also,

the heavy investments in plants and development of ancillaries have

resulted in high exit barriers.

23
Increase in Working Capital Needs: The intense rivalry between

the automobiles companies is resulting in longer credit periods to its

dealers. The substantial over-capacity is resulting in increased

inventory holding. These two factors point towards an increase in

working capital needs of car companies.

Bargaining Power of Buyers  HIGH

Buyers' Price Sensitivity: Car buyers in India are extremely price-

sensitive especially in the economy segment and are more willing to

switch brands while intense competition among the companies

requires them to generate volumes.

Relative Bargaining Power: The entry of global players has re-

defined the dealer-customer relationship in India. The present-day

global Indian consumer wants the best value money can buy plus

more.

Availability of Easy Financing: The availability of cheap finance for

the Indian consumer has led to fierce competition among the car

companies and has even led to free gifts being doled out to buyers to

lure buyers’.

Used Car Market: The used car market is still in the nascent stage

in India as compared to the developed nations like United States that

has a thriving used car market. A thriving used car market reduces

the ownership period of cars and helps in increasing demand for new

cars. Recently, Mercedes Benz in India was offering discounts of 30-

35% for sparingly used E220s as it had decided to phase out this

model.

24
Bargaining Power of Suppliers - LOW

Diminishing Supplier Power: The development of the auto

ancillary industry has brought in the phenomenon of outsourcing of

car parts. However, the large number of competitors for supplying

each part implies that in the coming years, supplier power will

diminish to a large extent except for suppliers who have almost

monopolistic powers like Mico-Bosch. Also, there is an increasing shift

towards reduction in vendor base for a car company, which means

that the chosen suppliers also have to make substantial financial

investments to enhance the quality of their products. Moreover, the

lowering of tariffs will expose the Indian automobile ancillary industry

to fierce competition from better-quality imports. All these factors will

lead to a situation where the automobile manufacturer will have

substantial bargaining power with the suppliers in terms of quality

and pricing of the product.

GENERIC STRATEGIES ADOPTED BY COMPANIES IN SMALL

PASSENGER CAR SEGMENT

Strategic Advantage

25
 DIFFERENTIATION OVERALL
S
t COST LEADERSHIP
r
a SANTRO INDICA
t
e M800
g
i ALTO
c
T FOCUS
a
r
g ZEN ESTILO
e
t

Zen Estilo

• The market leader MUL is trying to adopt a Focus strategy to

protect Zen from existing competitors.

• They are focusing on the customer’s loyalty aspect towards the

brand.

• They are encashing the goodwill which MUL has builds in 20 years

of its existence as a best available and dependable name in Indian

car market.

• The entire focus strategy of Zen is build around serving a

particular target (the Maruti Loyal Customers) very well, and each

functional policy is developed keeping this aspect in mind.

Santro

• Hyundai has adopted Differentiation strategy by putting Santro

in a frame of technically most advanced and spacious car.

26
• They feel that this strategy would provide insulation against

competitive rivalry because target audiences have lower

sensitivity to price than to quality.

• The differentiation strategy would yield higher margins with which

to deal with supplier power and will mitigate, buyer’s power, as

buyers will lack comparable alternatives in terms of technology

and will be fewer prices sensitive.

• They are also trying to differentiate their product by providing an

extra advance Customer Care Centers (CCCs).

Alto

• MUL is also adopting the differentiation strategy by

differentiating Alto as the most beautiful and technically advanced

car with more space than other cars.

• They are promising more value to customers.

Indica

• Telco is following cost leadership by launching Indica at the

lowest price in its segment

• Low cost position defends Indica against powerful buyers because

buyers can exert power only to drive down price to the level of the

next most efficient competitor.

• Leadership strategy also provides defence against suppliers by

providing more flexibility to cope with increase in input cost.

• Low cost position usually also provides substantial entry barriers in

terms of scale of economies or cost advantages.

27
• It also favours the firm vis-à-vis substitutes relative to its

competitors in the industry.

Maruti 800

• M800 has adopted both differentiation and cost leadership

strategies to penetrate the car market.

• It is looking to have a position of cost leader in the industry by

pricing its product a bit lower than other small cars

• At the same time, they are differentiating their product by

claiming to be advanced and tough car with different style.

COMPETITOR ANALYSIS

PRODUCT, POSITIONING, STRATEGY & PROSPECT

SANTRO

PRODUCT

Nicknamed as tall boy because of overall height (1590 mm). A

perfect urban run about mobile whose 1086 cc engine with unique

28
combination of 4 valve per cylinder gives a comfortable power of

55 BHP and yielding a mileage of 16 km/l with assistance of its

multi point fuel injection system. The design of car is tailor made to

the Indian requirements. Santo’s durability and engine smoothness

is by far superior to its competitors. Technology is superior and

very much contemporary. It is ergonomic as well as. The power to

wt. Ratio for this car is .0692 giving it a zip while accelerating.

The gearing drawback is of its design and styling with bulging

headlamps and vehicle slats on the grille makes it look rather

grumpy.

THE POSITIONING

From the day Hyundai made a mid-course correction, dumping the

1086 cc car in favor of smaller car, it was certainty that its offering

had to be a complete family car. Yet, given its relative obscurity in

the Indian Market, it had to offer tangible differentiates. That

philosophy has been translated into a superior engine and a spacious

interior while air-conditioning has become a standard feature in all

the 3 versions of the Santro.

The Tall Boy up its creator’s differentiating strategy; but hold the

price line down. Priced between Rs. 2.99 lakhs (the basic variant

which comes with air-conditioning) and 3.36 lakhs (the loaded model,

which sports a power steering, central-locking, and a defogger), the

Santro is targeted at the Maruti 800-user who desires to graduate to a

superior vehicle. So, it is competes directly with the Zen, whose 3

29
models are priced between Rs. 3.66lacs and Rs. 5.19 lakhs. Although

the Zen accounts for 25 per cent of the small cars sold, it is present in

a segment that is growing at 45 per cent per annum. India is in the

initial stages of motorization, and this juncture in its evolution favors

the small car.

THE STRATEGY

Hyundai does not have the advantage of experience but that is not

tempering its aggression. At present, the South Korean manufacturer

has set up a network of 80 dealers besides the exclusive Hyundai

Plazas in Chennai, Delhi, and Mumbai. To preempt breakaways,

should sales betray expectation, Hyundai is not forcing its dealers to

make huge investments: it is lowering their capital burden by

centralizing equipment purchases, leading to cost savings of Rs.22

lakhs per dealer. What might prove more helpful, however, is

Hyundai’s unique telescoping finance scheme, where annual

repayments will increase the level of affordability by targeting that

section of consumers whose members expect their income-and by

extension, their repayment capacity-to increase as they move up the

career ladder or boost their business.

Its Rs. 2,300-Crore 1.20 lakhs unit-capacity manufacturing facility at

Sriperambudur in Tamil Nadu is Hyundai’s largest integrated unit

30
outside South Korea. India is going to be their sourcing-base for

engine components Since Hyundai makes its own engines and

transmissions, its costs are more controllable than those of say,

Daewoo, which will be importing Semi-Knocked Down (SKD) kits for

its Matiz. With an army of 60 vendors, Hyundai has already achieved

a localization level of 70 per cent compared to Daewoo’s 45 per cent.

Even Maruti Udyog had a localization level of 25 per cent when it

launched the 800 in 1983. Localization is critical for cost

competitiveness and long-term strategy.

THE PROSPECTS

Despite its clear-cut vision, Hyundai’s energies are focused on tactical

breakthroughs: sales of 10,000, 65,000, 1.10 and 2 lakhs units

respectively, in 2002-03, 2004-05 and 2006-2007. A lot will depend

on how (Hyundai’s) competitors price their products. Given an

average price-realization per car of Rs. 3 lakhs, and sales of 35,000 in

year 2- which is less than the company’s projections- Hyundai’s

revenues would be Rs. 1,050 crore.

Assuming an operating margin of Rs. 50,000 per car, the company’s

operating profits should top up to Rs.175 crore. Given Hyundai’s

debt-equity ratio of 1.19:1 on its Rs. 2,300-Crore investment, the

interest cost for year should work out to at least Rs.125 crore, and

depreciation to another Rs. 230 crore. The pay-out, then, will be

Rs.180 crore more than the operating profits. But that’s something

31
the company has factored in. Nobody has come to India expecting

profits from year one.

Neither will exports butter sales in the initial two years, since the

focus will be solely on the domestic market. But, eventually, Hyundai

is targeting 30 per cent of its sales from exports. Given the low

volumes, will it be able to justify its investment? Hyundai needs a

sales level of 71,000 units to break even. And that’s the number it is

expecting in year two. By the year three, the cash profits are

expected to turn into net profits.

INDICA

PRODUCT

It is one of the best looking cars around with an excellent point

quality. The next slashes smiling grille and tall rear headlamps

gives to it one of the best lookers but its interiors are a big

disappointment, with large gaps between shut lines and plastic

looks. Inside derives console and is uncomplicated and the car is

spacious. The 1405cc 75 BHP MPFI petrol engine is good. Also

1405cc diesel engine giving sufficient power of 54 BHP is rather

noisy and unrefined. Without assistance from MDFI system it gives

a satisfactory 15 km/l. One more drawback is 5 speed gear boxes in

standard options of both engine options affecting its engines

smoothness.

POSITIONING

32
When Project Indica was launched, Telco’s Chief Ratan Tata’s brief to

his designers and engineers was simple; make a car that has the

spaciousness of an Ambassador and the price of a Maruti 800,

economy of Fiat. The product was priced below Rs.3 lakhs when it

was launched in December, 1998, so it will compete with almost

every car in the market. TELCO has strong engineering skills in diesel

technology which it can use to offer a different product to consumers.

STRATEGY

If there is one thing that the Indica can rely on, it is parenting Telco’s

distribution muscle. With 90 sales-and 290 service-points around the

country, the Light Commercial Vehicle (LCV) and Heavy commercial

Vehicle (HCV) manufacturer has already erected an entry barrier for

new entrants. TELCO reaches even the villages. A new entrant

cannot duplicate such a network and be viable. Only by piggy

banking on Telco’s sales infrastructure Indica cannot hope to gain the

cost advantage in the small car segment. That is critical since TELCO

priced the Indica as close to the Zen as possible.

With an investment of Rs. 1,700 crore, the year one ,a huge Rs 85

crore of interest payments (assuming debt-equity ratio of 1:1 and an

interest charge of 10 per cent), and a depreciation charge of Rs 170

crore (at a rate of 10 per cent) and assuming a material cost per car

of Rs.1,25 lakhs, conversion cost of Rs.30,000, depreciation and

interest charges of 30,000, excise duty (40 per cent), and a sales tax

33
of Rs. 28,800 (10%), the cost of the Indica would work out to Rs.3,17

lakhs.

PROSPECTS

To break even, Indica must sell 60,000 cars a year. To achieve that,

TELCO is imitating GM’s Saturn strategy-creating a company within a

company-and has kept the Indica project independent of the parent’s

operations, even creating a new distribution channel. It has tied up

with the Hong Kong-based car dealership, Concord, a member of the

Jardine Matheson Group, to set up world-class distribution outlets

across the country. Still, distribution could prove to be Telco’s

biggest hurdle.

Already, the company has picked up a 26% stake in Concorde; but

with just 7 Concorde outlets operational, and only 11 more on the

anvil, TELCO, obviously, has to bank on its own dealer network. While

exclusive channels would truly differentiate Indica, they would slim

Telco’s margins. A showroom today could cost anything between Rs.

50 lakhs and Rs 5 crore. The returns are always long-term.

MARUTI 800

PRODUCT

A 14 year old national car is now showing its age. It loses very

badly when compared to like of Santro and Matiz. But it is the

cheapest 4 wheeler with nippy performance, effortless steering,

34
and top speed of 120 kph and manages to return a mileage of

16km/l. Its 796 cc 3 cylinder engines manage only 45 BHP.

Zen: It was the most happening cars around till recently. An all

carbon 993 cc engine which is close cousin of Esteem’s engine

gives a spirited performance at 60 BHP and mileage of 15 km/l. The

handling is good along with good acceleration with power to wt.

Ratio of .0625. Even without power assistance Zen is breeze to

drive. Zen automobile gives an excellent 4 speed gear box with

very good durability’s in even dense metro traffic at the cost of

slightly higher fuel consumption figures.

POSITIONING

To counter competition, Maruti Udyog aims to straddle the small car

price spectrum, from Rs. 2.29 lakhs (the price of the Maruti 800) to

Rs.3.66 lakhs (the price of the loaded Zen D). Apart from the 600-to

1,000-cc range Wagon R, launched in 2000, Maruti Udyog will

introduce 2 models between the Maruti 800 and the Zen to price out

rival labels. The company’s future offerings will be differentiated

along price-lines, not just on engine capacity. The splitting up of the

small-car spectrum is inevitable. And car-manufacturers are realizing

that.

STRATEGY

During the last 14 years, Maruti Udyog has systematically built a 154-

dealer-strong distribution and service network, which sells 7 products-

35
the Maruti 800, the Omni, the Zen, the Gypsy, the Esteem, the Alto

and the Wagon R. The company’s marketing structure has almost

become a one-stop car shop. Undoubtedly, Maruti Udyog offers the

widest choice to customers today. The manufacturer has bolstered

the enviable infrastructure by setting up car-financing facilities-

through tie-ups with Citibank and countrywide finance, to spur sales.

Indeed, half the cars sold by Maruti Udyog in 2005-06 were financed.

Standing at top a fully-depreciated plant, churning out 3.5 lakhs cars

a year, Maruti Udyog has the potential to make mincemeat of the

competition. The reason is Costs. There’s simply no other car-

manufacturer in India today which can match Maruti Udyog’s

economies across the value-chain. It has 365 vendors, 154dealers,

and 1,114workshops in 530 cities. New models, then, can be rolled

out quickly and cost-effectively.

PROSPECTS

Maruti Udyog’s success hinges on its ability to upset its competitor’s

sub-compact strategies. Its plant has tremendous cost-cutting

capability, a critical attribute in the tough Japanese market, and one

that will ensure that rivals cannot out price Maruti Udyog. For

instance, the cost of components for the Matiz could workout to

Rs.1.50 lakhs per car, thanks to imports of Rs. 80,000 and locally-

sourced materials worth Rs.70, 000. Factor in a depreciation charges

of another Rs. 20,000, excise duty of 40 per cent (Rs 78,000), and a

36
sales tax of 10 per cent (Rs 27,300), and the sticker-price works out

to nearly Rs. 3 lakhs without a margin. Telco’s plight is similar,

although the company will have a local content of nearly 95 per cent

to begin with.

If the global economic situation worsens, Maruti Udyog will find

exports which account for 7.88 per cent of the manufacturers sales-

difficult, and, consequently, throw all its weight behind domestic

sales. That will spell bad news for its competitors, who may not be

able to endure in a price war. For, their cost of capital per car is

substantially higher. Hyundai’s, for instance, is Rs 48,994. The

market leader will leverage everyconceivable strength that it has to

elbow the competition out of the market.

37
 CHAPTER - 4

OBJECTIVE & RESEARCH METHODOLOGY

4.1 OBJECTIVES OF THE STUDY

The objectives of this research would be to understand:

1. Analyze current trends in Indian car industry.

2. Analyze impact of Small Affordable family car option.

3. Future prospects of small passenger car in India.

4.2 SCOPE OF THE STUDY

• To understand the current need of the customers with regard to

countless number of models of small cars in the Indian market.

• A well researched analysis showing in-depth about the

customer perception, buying behavior of the Indian small

passenger car customers.

• The current and the future scenario of the small passenger car

industry in India.

38
4.3 RESEARCH METHODOLOGY

The main aim of the study is to find out the consumer buying

behavior, purchase drivers and implication of price war in the mid

size car industry. Along with this the likely strategies of key Indian

players to tackle the competition is also evaluated. The purpose of

the methodology is to describe the research procedure. This includes

overall research design, the sampling procedure, the data collection

method, and the analysis procedure.

A proper methodology has to be carried in order to reach the

objective of the research. All the valuable information and data

required to make this project was collected through personal visit to

primary sources and secondary sources.

After having defined the marketing research problem and developed

a suitable approach, attention must be given to the formulation of a

detailed research design, which will provide pertinent information.

According to (Cooper & Schindler, 2003) when defining research

design, he presents it simply as the framework for a study used in

order to guide the collection and analysis of data.

The study on small segment car industry was both exploratory and

descriptive. Data for the purpose of research has been collected from

both primary and secondary sources.

The study attempted to explore and examine the perception towards

B-segment car industry in light of the changing environment. It also

39
attempted to describe what are the expectations of the consumers

for the passenger car manufacturers.

40
STUDY METHODOLOGY

Preliminary Investigation
Secondary data analysis
Qualitative research

Collection of Quantitative data

Measurement and Scaling Procedures
Questionnaire Design
Survey

Sampling Process
Target population
Sample Size
Sampling technique

Field Work

Analysis of Data

DATA COLLECTION

Data collection may range from a simple observation at one location

to a grandiose survey of multinational corporations at sites in

different parts of the world. The method selected will largely

determine how the data are collected. Questionnaires, standardized

tests, observational forms, laboratory notes, and instrument

calibration logs are among the devices used to record raw data.
41
Primary data was collected by the researcher himself by visiting to

various places located in Noida and New Delhi.

Secondary data will be collected from various books, journals,

magazines and the websites of different companies were also

browsed to gain information regarding their strategies.

Sampling Framework for the Survey

Convenience sampling technique was used to collect the data needed

for the study. Tools used for data collection for the research purpose

was a self-developed questionnaire.

Sampling Method - Distributed Random Sampling

Convenience sampling - Small Car Users

Sampling Area - New Delhi/Noida

Sample Size - 200

Sampling Technique - Personal Interview of car owners

Sampling Tool - Questionnaire

Questionnaire

Questionnaires are an inexpensive way to gather data from a

potentially large number of respondents. The questionnaire

containing questions regarding purchasing behaviour of passenger

cars.

42
Often they are the only feasible way to reach a number of reviewers

large enough to allow statistically analysis of the results. A well-

designed questionnaire that is used effectively can gather information

on both the overall performances of the test system as well as

information on specific components of the system. If the

questionnaire includes demographic questions on the participants,

they can be used to correlate performance and satisfaction with the

test system among different groups of users.

It is important to remember that a questionnaire should be viewed as

a multi-stage process beginning with definition of the aspects to be

examined and ending with interpretation of the results. Every step

needs to be designed carefully because the final results are only as

good as the weakest link in the questionnaire process. Although

questionnaires may be cheap to administer compared to other data

collection methods, they are every bit as expensive in terms of

design time and interpretation.

43
 CHAPTER – 5

DATA ANALYSIS

The study was done on the sample size of 200. The study was done

on the demographic profile aged between 21-60 years. The response

was taken and then analysed so as to find out results. The sample

size had both single and family people.

Which car do you have?

Cumulative

Frequency Percent Valid Percent Percent

Valid Maruti Alto 72 36.0 36.0 36.0
Hyundai Santro 28 14.0 14.0 50.0
Tata Indica 44 22.0 22.0 72.0
i10 28 14.0 14.0 86.0
Zen Estilo 16 8.0 8.0 94.0
Other 12 6.0 6.0 100.0
Total 200 100.0 100.0

From the above graph, it is clear that 36% of the sample size is

having Maruti alto as their first preference, & santro, indica, i10, zen

44
estilo having 14%, 22%, 14%, 8% & 6% respectively. This shows that

still people are more inclined towards brand maruti’s best seller car

alto.

Do you relate "Social Recognition" factor with usage of car?

Cumulative

Frequency Percent Valid Percent Percent

Valid Yes 112 56.0 56.0 56.0
No 88 44.0 44.0 100.0
Total 200 100.0 100.0

From the graph & frequency table, it can be easily judged that 112

people out of 200 are thinking that the car shows their social
45
recognition. Other 44% of sample size thinks in the opposite way, i. e.

they do not relate car with social recognition. In India, people still

relate car with the social status.

Who in your opinion, exerted greatest influence on your purchase

decision?
Cumulative

Frequency Percent Valid Percent Percent

Valid Family Members 112 56.0 56.0 56.0
Friends 36 18.0 18.0 74.0
Advertisements 20 10.0 10.0 84.0
Experts 16 8.0 8.0 92.0
Dealers 10 5.0 5.0 97.0
Others 6 3.0 3.0 100.0
Total 200 100.0 100.0

46
From the above graph, it is clear that 56% of the sample size

purchase decision still depends on the family members, rest 18%,

10%, 8%, 5% & 3% still influenced by friends, advertisements,

experts, dealers & others.

47
 Which of the following attribute is the most important in your buying

decision?
Cumulative

Frequency Percent Valid Percent Percent

Valid Economy with regard to
72 36.0 36.0 36.0
fuel efficiency
Quality with regard to
80 40.0 40.0 76.0
performance
Convenience with regard
32 16.0 16.0 92.0
to availability
Other 16 8.0 8.0 100.0
Total 200 100.0 100.0

From the above graph, it is clear that 80 out of 200 people prefer

quality with regard to performance in the buying decision. And 72, 32

48
& 16 people are still preferring economy, convenience & other

features.

What do you expect from "an economical car"?

Cumulative

Frequency Percent Valid Percent Percent

Valid High fuel efficiency 96 48.0 48.0 48.0
Less initial cost 36 18.0 18.0 66.0
Low maintenance cost 30 15.0 15.0 81.0
High resale value 30 15.0 15.0 96.0
Other 8 4.0 4.0 100.0
Total 200 100.0 100.0

49
From the pie chart, 48% people prefer high fuel efficiency, 18% prefer

low initial cost, and 15% prefer low maintenance cost & high resale

value from an economical car. This shows that still people in India are

more inclined towards high fuel efficiency.

Which aspect of "Quality" do you look in your car?

Cumulative

Frequency Percent Valid Percent Percent

Valid Mileage 72 36.0 36.0 36.0
Brand 40 20.0 20.0 56.0
Safety 22 11.0 11.0 67.0
Service 14 7.0 7.0 74.0
Design 40 20.0 20.0 94.0
Resale value 12 6.0 6.0 100.0
Total 200 100.0 100.0

50
From the bar chart it is clear that 72 people out of sample size prefer

mileage, while 40 each prefer brand & design from the quality

perspective. As every individual has his own perception about quality,

this graph mainly shows the various aspects of quality.

51
 While buying small car which aspect of "Convenience" influenced you the

most?
Cumulative

Frequency Percent Valid Percent Percent

Valid Good after sales service 98 49.0 49.0 49.0
Availability of car 18 9.0 9.0 58.0
Avalibilty of spare parts 44 22.0 22.0 80.0
Colour choice 30 15.0 15.0 95.0
Other 10 5.0 5.0 100.0
Total 200 100.0 100.0

Above graph shows, 98 out of 200 still think good after sales service

is necessary with respect to convenience, when it comes to buy a

52
small car. Also 44 out of 200 think that the availability of spare parts

is one of the crucial factors in buying. This indicates that people still

prefer good after sales service for their car.

If someone wants to purchase a car, what would be your suggestion?

Cumulative

Frequency Percent Valid Percent Percent

Valid Maruti Alto 56 28.0 28.0 28.0
Hyundai Santro 60 30.0 30.0 58.0
Tata Indica 24 12.0 12.0 70.0
i10 36 18.0 18.0 88.0
Zen Estilo 14 7.0 7.0 95.0
Other 10 5.0 5.0 100.0
Total 200 100.0 100.0

53
From the above pie graph, it is clearly understood that 30% of sample

size suggest hyundai santro to other people. Also 28% suggest maruti

alto, 18%, 12%, 7% & 5% for i10, tata indica, zen estilo & others

respectively.

What new feature would you expect in your present car?

Cumulative

Frequency Percent Valid Percent Percent

Valid Fuel Efficiency 52 26.0 26.0 26.0
Maintenance Cost 28 14.0 14.0 40.0
Safety 28 14.0 14.0 54.0
Power & Speed 46 23.0 23.0 77.0
Better after sales
12 6.0 6.0 83.0
service
Other 34 17.0 17.0 100.0
Total 200 100.0 100.0

54
From the above graph, it is clear that still 26 % people out of sample

size expect fuel efficiency. Also 23% people except power & speed in

their present car. This shows the changing trends in the mindsets of

the Indians as they expect power & speed in their present car, also

14% each expect safety & maintenance cost in the present car.

55
Which car do you have? * If someone wants to purchase a car, what would

be your suggestion? Crosstabulation

Count
If someone wants to purchase a car, what would be your

suggestion?
O

Hyundai e

Maruti Alto Santro Tata Indica i10 Zen Estilo r Total

Which Maruti
50 18 2 0 2 0 72
car do Alto
Hyundai
you 0 26 0 2 0 0 28
Santro
have?
Tata
6 4 22 8 4 0 44
Indica
i10 0 6 0 22 0 0 28
Zen Estilo 0 4 0 4 8 0 16
Other 0 2 0 0 0 10 12
Total 56 60 24 36 14 10 200

From the above crosstabulation, the maruti alto was owned by 72

people, out of which 50 people were suggesting the same to the other

people, 18 were suggesting hyundai santro. Also 28 santro car

owners were suggesting to 26 people to buy santro, 28 hyundai i10

car owners were suggesting to 22 people to buy i10.

This shows the perception of various car owners about their own car.

As maximum of them were suggesting the same brand they have,

this shows their satisfaction with the brand.

56
 CHAPTER - 6

CONCLUSIONS

The Indian car market currently appears to be at a crossroads, where

car marketers are attempting to change customer perceptions of

their brands and where specific buying motivations appear to be

replacing generalities.

The mindset of the Indian consumer is such that he is delighted if he

buys a pen a little cheaper than his neighbor. Things are, however

slowly changing and customers at the upper end of the market are

now ready to pay for more. I hope that this approach will soon enter

the B-segment car segment maybe not with the same intensity.

Success will largely be determined to the extent a company can

differentiate itself in term of intangibles that go with a car. Thus,

57
success could well hinge on the best of bundle of service that a

carmaker can provide.

Family needs reign supreme as a reason for car purchase.

Surprisingly, many car owners bought their car as it suited their

lifestyle and personality.

Family is the focal point of a car purchase. Family needs are exactly

what the B-segment size car should fulfill. The decision to buy a car is

a collective one made by the whole family. The car is bought not to

fulfill the needs of one particular family person but to cater to the

entire family's needs. Therefore the B-segment size car should be a

family car which can satisfy the needs of the B-segment family.

In order to attract these people to a new purchase, companies must

hit them at the above point. It should be projected to fit into the

lifestyle of these people or rather better their lifestyle.

People consulted by car owner/non car owner before car purchase.

Potential car buyers consult family the most. They tend to obtain

information from people already owning the car. The reason could be

that, they are a little apprehensive about the purchase and want to

quench their anxiety. Car owners also tend to consult these people

but their number is appreciably less than the non-car owners.

Although the family is the most consulted, before making a purchase

decision, none of the factors can be ignored.

People already owning a particular car is also consulted by a large

number of potential buyers. Companies should make sure that the

early buyers of the B-segment car are completely satisfied by the

58
car's performance. These early buyers act as information sources for

the followers. Any negative publicity on their part may turn away the

potential customers. Dealers are one of the most important sets of

people for companies. These are the people who directly

communicate with the customers. Therefore companies should make

sure that these people are highly motivated, knowledgeable, and

friendly and customer oriented.

The car owners as well as non-car owners are most influenced by

newspaper and magazine ads and reports. Word of mouth publicity

cannot be ignored.

Most of the respondents use personal resources to obtain funds for

the car purchase. Most of these people save money for a long to

collect the required amount. There is lot of emotional attachment

when a car is bought from personal funds and Companies should

duly, provide value for money for people in terms of low maintenance

costs, fuel efficiency etc. A lot of banks are financing for cars. This

concept is new but is catching fast in the big cities. Companies have

tied up with ICICI and Standard Chartered bank to come up with joint

schemes for car finances for the B-segment car.

Accessorized Indians also strongly consider factors such as resale

value, after sales service, and tend to be the only segment that will

buy a new car from a trusted dealership near where they live or work.

This group of consumers also like reading a great deal about the cars

that they are about to buy and are also most likely to pay the most

attention to what experts have to say about their choice of cars.

59
It can be seen that nearly half of the car owners want to replace their

existing cars with a B-segment size car. This attitude could be due to

additional features in the new cars, which may attract these people,

or the non-performance of their existing car may compel them to

replace the car.

The price of the B-segment car should be competitive. It should be

within the reach of the common man. Price is the first and major

hurdle, which a customer has to jump over before making a purchase

decision

Too high a price may discourage many potential car buyers and a

very low price may raise doubts about the car" performance

capabilities.

The main reason for popularity of the B-segment car is normal price;

companies should also make the car competitive in terms of price. It

should be easy to drive in traffic conditions and on empty roads,

should have low maintenance cost, should be fuel-efficient and fulfill

B-segment family needs.

CHAPTER - 7

RECOMMENDATIONS

• With private and public investments in infrastructure, further

reduction in customs and excise duties, cuts in interest rates

and new credit policies, the demand for automobiles is

60
 expected to increase exponentially. There is long term potential

to develop the Indian market for fuel efficient clean energy

products in line with the regulatory environment and emission

norms being put in place.

• The customer today is extremely discerning both in terms of

quality and performance. So car companies must concentrate

on this front to gain an edge over the competitors.

• After sales service is the buzzword in the consumer durable

market. These days every person wants to know about the

after sales service provided by the manufacturer. Car

manufacturers’ needs to develop such after sales service

centers in various parts of India and it should intelligently divide

the areas so that no area remains uncovered.

• In the auto business worldwide, the money comes in from

trucks and big vehicles like sports utilities. Cars - especially B-

segment cars - either lose money or just about earn. In India,

too, it is much the same story these days. Except for Maruti,

which had historical advantages, which helped it gain sufficient

volumes, no other car manufacturer is making any money. In B-

segment cars, because of the cutthroat competition, margins

are wafer thin.

• Third most important thing for the B-segment car

manufacturers are to keep in mind that India is a price sensitive

market. The car war in the market has led to a start of price

61
 wars in the market and has left customers with various options

to choose from. The majority of people are now straightaway

thinking of buying a new car as their first car purchase. About

61% of the people constitute of those who do not possess any

car and are going for B-segment car purchase. Now thinking

that this is the right time to go for it since the manufacturers

are offering maximum for the minimum price. So, it must

review its pricing strategy every now and then so that it does

not lose to competition.

REFERENCES

http://www.automotive-business-review.com/article_news.asp?

guid=9C9212C2-CF3A-4468-86B2-84B49CCF8795

Anand M., Ramanathan S.K. and Viswanath R., The New Laws of

Attraction, Business World, 22 January 2007

Kotler P., Keller K.L., Koshy A & Jha M. (2007), Marketing

Management, 12th edition, Prentice Hall.

Mitra, Kushan (2007, Auto’s Big Boom, Business Today, October 22,

2007

Loudon & Della Bitta (2006: Consumer Behaviour (Concepts &

Applications); McGraw Hill Inc., Singapore

62
Schiffman G. Leon & Kanuk Leslie Lazar (2006, Consumer Behaviour,

Pearson Education

Majumdar, R. (2006), Product Management in India, Second Edition,

Prentice Hall, pp. 257-267.

http://economictimes.indiatimes.com/articleshow/589352.cms

Bisht, Sudhir Why the Rs 1-lakh car is not good for India

http://inhome.rediff.com

http://www.businessweek.com/globalbiz/content/sep2006/gb2006092

6_662135.htm

Doval, Pankaj and Leishemba, Rajkumar (2006), Auto sector zooms

ahead in 2006http://ia.rediff.com/money/2006/dec/20auto.htm

Top Gear, Day of Diesels, Vol 2, Issue 8, April 2008.

http://business.mapsofindia.com/automobile/car-manufacturers/small-

market.html

63
 APPENDIX

QUESTIONNAIRE

Q1 Which car do you have?

1. Maruti Alto 2. Hyundai Santro 3. Tata Indica 4. i10 5.

Zen Estilo

6. Other.

Q2 Do you relate “Social Recognition” Factor with usage

of car?

1. Yes 2. No

Q3 Who in your opinion, exerted greatest influence on your

purchase decision?

1. Family Members 2. Friends 3. Advertisement 4. Experts

5. Dealers

6. Other.

Q4 Which of the following attributes had important bearing

in your Buying decision?

1. Economy with regard to fuel efficiency.

2. Quality with regard to Performance.

3. Convenience with regard to availability.

64
 4. Other.

Q5 What do you expect from an “Economical Car”?

1. High Fuel Efficiency.

2. Less Initial Cost.

3. Low Maintenance Cost.

4. High Resale Value.

5. Other.

Q6 Which aspect of “Quality” do you look in your Car?

1. Mileage 2. Brand 3. Safety 4. Service 5. Design

6. Resale value

Q7 While buying small Car which aspect of “Convenience”

influenced you most?

1. Good after Sales Service

2. Availability of Car

3. Easy Availability of Spare

4. Colour Choice

5. Other.

65
Q8 If someone wants to purchase a Car, what would be your

suggestion?

1. Maruti Alto 2. Hyundai Santro 3. Tata Indica 4. i10 5.

Zen Estilo

6. Other.

Q9 What new features would you expect in your present

brand of Car?

1. Fuel Efficiency

2. Maintenance Cost

3. Safety

4. Power & Speed

5. Better after Sales Service

6. Other.

PERSONAL DETAILS

1. OCCUPATION 1. Business 2. Government Service 3.

Pvt. Service

4. Student 5. Other.

2. MARITAL STATUS 1. Bachelor 2.

Married Couple

3. Family with Children 4. Other

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