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SUBMISSION
HYUNDAI VERNA
INDIAN INSTITUTE OF MANAGEMENT KOZHIKODE
Date: 20/08/2018
Indian Automobile industry is one of the largest in the world as far as automobile sales are
concerned. It is divided into four segments:
· Passenger vehicles
· Commercial vehicles
· Three wheelers
· Two wheelers
According to the report shared by Society of Indian Automotive Manufacturers (SIAM), the
passenger vehicle market observed growth of 7.89%, selling 3.28 million units during FY 2018.
The majority of the units sold were utility vehicles, the sales of which independently surged by
20.97%. The sale of passenger cars and vans also recorded a growth of 3.33% and 5.78%
respectively during the same timeframe. As far as commercial vehicles are concerned, the total
sales saw a growth of 19.94% during the last financial year. The segment of Medium & Heavy
Commercial Vehicles (M&HCVs) grew by 12.48% while the Light Commercial Vehicles (LCV)
segment observed growth of 25.42%. The sale of three-wheelers also grew by 24.19% between
April 2017 and March 2018.
Company overview
Supply and demand have an important relationship that determines the prices of most goods and
services. Looking at various factors that will probably affect the supply and demand on the year 2019-
20 and beyond compared to last year, we have realized that there is no single factor that will play a
role but a combination of factors.
1. Toyota Yaris is the latest entrant in the sedan category. Currently the market leaders in this
segment are Hyundai Verna, Maruti Suzuki Ciaz and Honda City. Yaris, launched in 2018 has
already occupied a 20.5% market share. Its novelty factor of a new model launch is set to
decrease sales numbers of Verna.
2. Hyundai has 2 production plants in Irungattukottai and Sriperumbudur. Both located close to
Chennai, Tamil Nadu. The plants have advanced production, quality and testing capabilities.
The company plans to reuse knocked down cars for manufacturing rather than building them
for scratch. This might help in reducing manufacturing cost increasing supply.
3. The company plans to increase efficiency by 99% this year increasing sales from 713,000 to
763,000. Sales in 2017 were 678,221. This shows a 7% increase in production compared to
5% in the previous year
4. Reduction in tax rate for manufacturers to 25% will reduce production cost for the companies
having turnover of more than 250 crores and above. This will lead to an increase in supply for
the manufacturing company which directly affects sales.
5. Further decrease in tax rate for the consumers who are in the 2.5-5 Lakh bracket increases
their purchasing capacity and willingness to buy. Further, a growing economy results in
higher residual income, encouraging people to spend more which will also boost demand of
cars.
Analysis of: Identify key factors Comment – on how these factors may impact the
– that may affect the demand/supply as well as the extent of impact.
demand and supply of
the selected brand in
2019-20 and beyond
compared to the
previous year
Company 1. Production Plants 1. Using knockdown cars for production reduces the
2. Efficiency time of production. This will increase the supply of
3. Profits cars.
2. Moreover, increase in efficiency of production to
99% will help increase the supply even though there
is no plan to set up a new plant
3. Hyundai’s market share in India has shown
continuous improvement. Currently its profits stand
at 6% in India compared to 20% losses worldwide
Customers 1. Youngsters 1. Hyundai is improving Verna to target youngsters
along with the upper middle-class categories. The
effort can be seen in its new variant “Fluidic Verna”
which appeals to the youth through its style and
technology (hydraulics, integrated Google
Assistant)
Competition 1. Toyota Yaris 1. Toyota Yaris is being positioned to eat into Verna’s
2. Maruti Ciaz sales numbers. Yaris has occupied a 20.5% market
3. Honda City share in just a few months of launch. This will
decrease the demand drastically.
Context/Macro 1. Political – Tax 1. Tax rate has been reduced to 25% for companies with
Environment rate, Budget, a turnover of 250 crore and above. Most auto companies
Excise Duty, lie in this bracket.
Election year
In the budget, Mr. Jaitley announced that 9000 kms of
2. Economic –
highways will be built this year, thus boosting the auto
Rising incomes
economy.
3. Social – Growing
Middle Class Reduction in prices of unbranded diesel and petrol due
4. Technology – to reduction in excise duty by Rs. 2/ litre.
Move towards
Election year may lead to better roads in 2019-20 giving
electric vehicles
5. Legal – Laws a boost in sales
enforced by
2. Growing economy of India has increased the
Union Road
purchasing capability of middle class Indians. This
Transport
could lead to a rise in sales
Ministry
3. Improving middle class aspiring for better social
class and status are moving from hatchbacks to sedans.
Brand history
Hyundai Verna was first launched in 2000 in South Korea. It replaced the old Hyundai Accent which
was released in 1994. The car is now known with different names in different countries. For example,
it is known as Solaris in Russia, Accent in USA, North America and China and Verna in India, South
Korea and some other markets.
Verna was launched in India in May 2011 as a first-generation car in both variants – petrol and diesel.
The fourth-generation car launched in 2014 got new alloy wheels and extra safety features. In 2015,
the shift in Verna’s consumer targeting was evident in the facelift it got in February. The car was
rebranded as Verna fluidic with heavy investments in design and appealing to the smooth running as
well as looks of the car. Its latest version is the next gen Verna launched in India on August 22, 2017
At the time of its initial launch Hyundai was already successful with i10 and i20 dominating the
hatchback segments and CRETA leading in the SUV segment. Hyundai identified a gap in the sedan
segment and started research and development to develop a mid-segment sedan in the 10-15 lakh
category. Thus, Verna was marketed across the country as an affordable, stylish, low cost sedan car.
Table II: Comparing the current marketing plan of the selected brand with competition
Brand performance
The mid sedan market in India is increasing at a rate of around 16% presenting a huge opportunity to
different automobile manufacturers. Honda city was the earliest entrant to this market positioning
itself as a high-end transportation medium and enjoyed great success. Encouraged by this, Maruti and
Hyundai introduced Ciaz and Verna respectively in the mid sedan range. Even with stiff competition
Hyundai Verna has gained a market share of 30.17% with a sales growth rate of 141.17% over last
year.
Opportunities and Challenges
As mentioned above the mid sedan market segment is rapidly increasing with rise in median
household income and growing interest of youngsters in the sedan segment. Keeping in mind the shift
in market tastes companies have started introducing versions with improved performance and trendy
designs.
Environmental concerns pose the greatest challenge with petrol versions being in more demand. This
is especially challenging for Verna as most of its sales are from diesel models while Honda city is
already focusing on petrol models.
Hyundai is projecting Verna as a value for money offering and focusing on very few varieties to
establish their brand first.
As an already established brand Honda City is trying to increase its socio-cultural influence by
sponsoring key sports events and associating with social initiatives.
As an indigenous brand Maruti is focusing on developing their engineering in house as they have
developed their own new high-performance engine and stopped outsourcing it to Fiat.
Marketing Objectives
Hyundai has launched a 360-degree campaign aimed at increasing impact across all social platforms.
Honda is looking to extend its brand image of reliability and trust. Maruti is trying to appeal to the
young customers.
Marketing Mix
Product
Hyundai Verna Facelift is coming in 6 Speed Automatic in both Petrol and Diesel and this may make
it the best car in Performance Output as against 4 speed Automatic of Ciaz or CVT of City. Hyundai
Verna Automatic has Diesel variant making it appealing for customers who prefer Power
performance. Diesel Engine remains the strength of Hyundai Verna with absolute refinement in NVH
Levels. It provides Top Notch Safety with 6 Airbags as what in Honda City with Top of Line Features
in Verna Sx Option. Hyundai Verna comes with Service Interval of 10000 Kms / 12 month and can
expect lower Service bills. Honda City has 6 month / 10000 Kms Service Interval.
Price
The diverse price range of Verna i.e. 7.9 L to 13.0 L gives the customer a wide range variety to look
for when they are buying a new car. Due to its low starting price among the competitors, it always has
an upper hand over others in the market. Their current marketing strategy which revolves around the
inclusion of younger generation towards the more stylish and innovative design.
Maruti Ciaz offers its product ranging from 8.16 to 11.85lac which on comparison found to be bit
higher in terms of offerings as compared to Verna but lower to Honda city which is offering in the
price bracket of 8.97 to 14.19lac. On the one hand Honda is offering the executive class feature cum
experience in this budget range. On the other hand, Maruti Ciaz considered to be jack of all trades in
terms of features provided.
Place
Hyundai India sells its cars through dealerships in India. Hyundai India has two manufacturing plants
in Sriperumbudur in Kanchipuram district in Tamil Nadu capable of producing 6,70,000 vehicles
annually. It also has R&D facility in Hyderabad which employs nearly 450 engineers to provide
engineering and technical support in development of vehicles. Maruti Suzuki sells Ciaz through its
own premium car showroom known as Nexa which targets mainly the sophisticated customers who
are looking for luxury more than necessity. Maruti Suzuki had 299 Nexa outlets spread across 171
cities as of January 31, 2018. Honda has 365 authorized dealers & showrooms across 238 cities in
India through which City is being sold. Among the three brands, Ciaz has the wider distribution
channel.
Promotion
Hyundai celebrated its 20 years Sales and Production in the Indian Market with the Brilliant Moments
Campaign. They also sponsored FIFA world cup. Also, they have highlighted “The Indian Car of The
Year 2018” award that was entitled to Hyundai Verna in their advertisements. Honda City
advertisements with the tag ‘New City 2017- world’s ahead’ was launched. Honda uses press release
and articles extensively along with other digital promotions in India. Maruti heavily used the online
platform for the promotion of its new Ciaz. The promotional campaign with hashtag
“#coolcatsintown” created a buzz in the social media whereby grabbing wide attention to Ciaz. All the
three brands widely use digital platform for promotional activities.
END