Emerging Trends in the Indian

Commercial Road Vehicle Industry

A project submitted in the partial fulfillment of required for award of the degree
in Master of Business Administration

Under the guidance of:

PROF. VIVEK SUNEJA

Submitted by:

ARJUN PAUL
F-082, MBA (FT)
Batch of 2013-15

Area Code: SBM

FACULTY OF MANAGEMENT STUDIES
UNIVERSITY OF DELHI

March 2015

FINAL YEAR DISSERTATION

 CERTIFICATE

This is to certify that the project titled “Emerging trends in the Indian Commercial Road
Vehicle Industry” submitted in partial fulfillment of the requirements for the Degree of
Master of Business Administration by Arjun Paul at the Faculty of Management Studies,
University of Delhi is a record of original research work carried out by him under my
guidance. Any material borrowed or referred to have been duly acknowledged.

Student

Arjun Paul

Roll Number: F-082

MBA (FT), 2015

This is to certify that the above mentioned project titled “Emerging trends in the Indian
Commercial Road Vehicle Industry” submitted by Arjun Paul, MBA (FT) Batch 2015,
Roll No 082 has been carried out under my supervision.

Project Guide

Faculty of Management
Studies

University of
Delhi
 PREFACE

Master of Business Administration is a course, which combines both theory and its
applications as its contents of study in the field of management. As part and parcel of this
course, every aspirant has to prepare Dissertation report on a particular Industry. The purpose
of this report is to get the in depth knowledge regarding the Industry and identify emerging
trends.

By studying Indian commercial vehicle industry from a management perspective I would be

able analysis potential opportunity as well as threats of the commercial vehicle industry.
Also, attractiveness of new entrant would be analysis with the help of Michael Porters five-
force model. Environmental scanning would be with the help of PEST analysis (Political,
Economic, Social and Technology).

The data for analysis is being collected through the Primary and Secondary sources like
Internet, Newspaper and published Journals
 EXECUTIVE SUMMARY

This report is the study of Indian commercial vehicles industry. Driven by the easy
availability of finance, rising income levels factors and globalization of market, the industry
is anticipated to grow at a compound annual growth rate (CAGR) of 16 per cent during 2013–
17. India is quietly becoming a production hub of high-end vehicles meant for export to
China.
While the fundamental drivers of the industry have not changed, key stakeholders will need
to re-calibrate their strategies to be in tune with a market that has shifted into a lower gear. To
prepare for the years ahead, participants in India’s CV industry should answer the following
questions to evaluate how well they are positioned to respond to the emerging opportunities
and challenges:
 How will the demand for trucks evolve?
 How will products need to adapt?
 How will business models need to adapt?
 What are the new market dynamics?
Two of the important trends that are emerging in the industry are “Blue Ocean strategy”
being adopted by major players in both LCV and HCV segments & increasing number of
Joint ventures. Blue Ocean is an analogy to describe the wider, deeper potential of market
space that is not yet explored. OEMs are offering Value Innovation – the simultaneous
pursuit of differentiation and low cost. Some features of strategy are:

 Create uncontested market space by reconstructing market boundaries

 Reaching beyond existing demand
 Getting the strategic sequence right

Two examples are taken in the Dissertation to establish the presence of Blue Ocean strategy
in the market: First is Tata Ace Zip and second is Daimler’s new range of BharatBenz trucks.
And finally a case analysis of Volvo-Eicher JV has been done to identify the implications and
motivations of the strategic alliance.
 ACKNOWLEDGEMENT

First and foremost, I’d like to thank my guide Prof. Vivek Suneja, for providing me with an
opportunity to work under him through the medium of this research project. He has been
instrumental in my being able to complete this project to the best of my capabilities.

I would also take this opportunity to express my gratitude and thank all other individuals who
have been kind enough to spare their precious time in sharing insights with me, which has
facilitated in making this project a more fruitful outcome. A special mention to acknowledge
the assistance provided by some of our esteemed faculty members, my friends, family and
industry professionals, for always being available to attend to all my doubts, inhibitions and
queries.

A word of thanks to the administrative staff at FMS too, for their perennial support in making
available all possible facilities, in turn aiding my research for this project.

Finally, I wish to thank all my colleagues at FMS for their constant support and motivation,
which has contributed in making this, project a better effort.

Arjun Paul

Roll No: F-082

MBA(FT), 2013-15
 TABLE OF CONTENT

Introduction ..................................................................................................................................... 7

Research Methodology ................................................................................................................. ..8

Literature Review.......................................................................................................................... 10

Indian CV market .......................................................................................................................... 19

SWOT of Indian CV market ......................................................................................................... 24

Critical Factors affecting Indian CV market ................................................................................. 27

Environment (PEST) analysis ....................................................................................................... 31

Porter’s Five Forces Analysis ....................................................................................................... 34

Findings......................................................................................................................................... 36
Finding 1 ................................................................................................................................... 36
Finding 2 ................................................................................................................................... 49
Finding 3 ................................................................................................................................... 53

Conclusions and Recommendation ............................................................................................... 57

Glossary ........................................................................................................................................ 58

Bibliography ................................................................................................................................. 59

Appendix ....................................................................................................................................... 60
 INTRODUCTION
Two decades back, India opened its entryways for multinational automobile organizations
permitting them to enter the business sector, modernize the Indian transportation picture and
make it valuable for the end-clients. From that point forward, a few organizations have built
their generation units in the nation, offering an extensive variety of vehicles to immeasurable
populace. As per our most recent report, the Indian commercial vehicle business has
developed quickly because of financial liberalization, and it has brilliant prospects as
production and dales are arriving at new statures.

The "India Commercial Vehicle Market Analysis" observed that the business vehicle
fragment of the Indian auto industry has demonstrated awesome recuperation in the wake of
withstanding the impacts of the worldwide monetary emergency. With financial restoration,
expanding open & private spending on framework and higher infiltration of financing offices,
we expect the development drift in every section of business vehicles to proceed in the
nearing years. According to our investigation, LCV products transporter is the quickest
developing section that is assessed to enroll a business development of around 20% amid FY
2012-FY 2015.

The report has concentrated on the Indian business vehicle market from different points of
view. It encourages data on generation; deals, fares and key players in every section
(M&HCV, LCV and three-wheelers) that has been further isolated passenger carrier and
goods carrier.

We watched that Hub & Spoke model and SCVs are among the real trends, which would
drive the Indian CV market in not so distant future. In addition, the development in the CV
business will support up interest for utilized business vehicles as a part of nearing years.

With a perspective to comprehend the businesses focused scene and introducing its adjusted
standpoint to customers, we have performed Industry attractiveness analysis, found out key
success factors and emerging trends and theories in the Indian CV industry.
 RESEARCH METHODOLOGY

Research Objective

1. The major objective of the project consists of comprehensive macro level study of
Indian Commercial vehicle Industry
2. Identification & analysis of Competitive forces of the industry on the basis of Michael
Porter’s five-force model
3. Identification of current scenario in the two companies in the Blue Ocean case: Tata
Zip and BharatBenz with the help of SWOT (Strength, Weakness, Opportunities,
Threat) analysis
4. In-depth analysis of factors affecting the business environment with the help of
Political, Economical, Social and Technological (PEST) analysis
5. Strategic analysis to know about Strategies to be followed by a new entrant
6. Identify the framework through which we could analyse the BOS viability

Sources of Data Collection

For this study we will use primary data, which will be collected from the managers and
customers of the company with the use of a questionnaire.

We will also some other sources like different reports, journals, and newspaper articles to
collect other necessary data. This will help in developing better understanding of the
problem. Quality control techniques will also be used to avoid the non-sampling error that
can be from either respondents or interviewer
Research Design:

The research design followed is exploratory research, followed by Qualitative analysis. In

qualitative analysis Blue Ocean Strategy framework evaluation and implementation is done
in detail.

Exploratory and qualitative method is used because of the following advantages:

 It enables more complex aspects of a persons experience to be studied
 In the case questionnaire there are restriction over the response, but in the qualitative
there is no restriction over the respondent to give answer and we can have deeper
insight.
 It is not possible to quantify every thing (for example, individual experiences)
 Individuals can be studied in more depth
 Because fewer assumptions are placed on the thing being studied it is great for
exploratory research and hypothesis generation
 The participants are able to provide data in their own words and in their own way

The major geographical area for our research is New Delhi.

As a part of our research, I visited few Dealers of Commercial Vehicle OEM like Tata,
Mahindra, Ashok Leyland and BharatBenz.
In qualitative analysis, a thorough step-wise analysis of two cases have been done to find out
if they are really following a commercially viable Blue Ocean strategy.
Data was collected through structured questionnaire designed for the consumers. These
responses have been analyzed by various statistical methods.

Limitations of Study

Boundary surrounding the project is time and financial limits as well as we have to
rely more on secondary data.
 LITERATURE REVIEW
1. Harvard Business Review: Blue Ocean Strategy by W. Chan Kim and
Renée Mauborgne

“The first part presents key concepts of blue ocean strategy, including Value Innovation – the
simultaneous pursuit of differentiation and low cost – and key analytical tools and
frameworks such as the strategy canvas, the four actions framework and the eliminate-
reduce-raise-create grid.
The second part describes the four principles of blue ocean strategy formulation. These four
formulation principles address how an organization can create blue oceans by looking across
the six conventional boundaries of competition (Six Paths Framework), reduce their planning
risk by following the four steps of visualizing strategy, create new demand by unlocking the
three tiers of noncustomers and launch a commercially-viable blue ocean idea by aligning
unprecedented utility of an offering with strategic pricing and target costing and by
overcoming adoption hurdles. The book uses many examples across industries to demonstrate
how to break out of traditional competitive (structuralist) strategic thinking and to grow
demand and profits for the company and the industry by using blue ocean (reconstructionist)
strategic thinking.
The third and final part describes the two key implementation principles of blue ocean
strategy including tipping point leadership and fair process. These implementation principles
are essential for leaders to overcome the four key organizational hurdles that can prevent
even the best strategies from being executed. The four key hurdles comprise the cognitive,
resource, motivational and political hurdles that prevent people involved in strategy execution
from understanding the need to break from status quo, finding the resources to implement the
new strategic shift, keeping your people committed to implementing the new strategy, and
from overcoming the powerful vested interests that may block the change
In the book the authors draw the attention of their readers towards the correlation of success
stories across industries and the formulation of strategies that provide a solid base to create
unconventional success – a strategy termed as “Blue Ocean Strategy”. Unlike the “Red Ocean
Strategy”, the conventional approach to business of beating competition derived from the
military organization, the “Blue Ocean Strategy” tries to align innovation with utility, price
and cost positions. The book mocks at the phenomena of conventional choice between
product/service differentiation and lower cost, but rather suggests that both differentiation
and lower costs are achievable simultaneously.”1

1
http://en.wikipedia.org/wiki/Blue_Ocean_Strategy
 2. Joint Ventures: Theoretical and empirical perspectives – Bruce Kogut,
The Wharton School

“Conceptually, a joint venture is a selection among alternative modes by which two or more
firms can transact. Thus, theory of joint ventures must explain why this particular mode of
transacting is chosen over such alternatives as acquisition, supply contract, licensing, or spot
market purchases.
Three theoretical approaches are especially relevant in explaining the motivations and choice
of joint ventures. To be short, the transaction costs theory was referred as first one, and the
perspective of strategic behavior, and theory of organizational knowledge & learning are
cited on this paper.
On the perspective of transaction cost, venture has potential externalities such as through
diffusion of technology, the erosion of reputation, this aspect is very important. But, joint
venture address this issues by providing superior alignment of incentives through mutual
dedication of resources along with better monitoring capabilities through ownership control
rights. So, the critical dimension of joint venture is its resolution of high levels of uncertainty.
The view of strategic behavior, an alternative explanation for the use of joint ventures, stems
from theories on how strategic behavior influences the competitive positioning of the firm.
On this perspective, joint venture strategies are used for making strong network externalities,
improving quality in the final market, deterring entry of other rivals and so on. All of these
are on strategic behavior of establishing joint ventures.
On the third rational explanation for joint ventures, the organizational knowledge and
learning theory, views joint ventures as means by which firms learn or seek to retain their
capabilities. In this perspective a joint venture is encouraged if neither party owns each
other’s technology or underlying ‘comps’ nor understands each others’ routines.
Existing studies of joint ventures are examined in light of these theories. Data on the sectoral
distribution and stability of joint ventures are presented at the end of this paper.”2
First, this article is meaningful in that it explains why firms select joint venture strategy
instead of any other alternatives like acquisition, supply contract, licensing, or spot market

2
https://business.illinois.edu/josephm/BA545_Fall%202013/Kogut%20%281991%29.pdf
purchases. The author present the main motivations of joint venture are on transaction costs
theory, strategic behaviour, and theory of organizational knowledge & learning.
Second, this article gives reviews of empirical studies for checking motivation, international
issue and instabiliey, leading to digression of it, of joint venture. In comparing the theoretical
and empirical results, author show transaction cost and organizational knowledge
explanations as not only a cross-section of joint ventures but also micro analytic detail on one
firm.

This article gives us helpful implications, but there are something more be worth to develop
more for additional research.
The author present the joint venture strategy as just alternative to other choice like
acquisition, supply contract, licensing, or spot market purchases. Then, I think if we can
make the level system of these selections and develop lank system as vertical investment
level, it would lead to a numerical assessment study for firm’s entering strategy. The attempt
will be a model develops, which suggest numerical and hierarchical understanding for
entering strategy.
 3. Analysis of the Use of the Blue Ocean Strategy; Case Study Analysis on
14 Different Agencies by Zainal Abidin Mohamed, Graduate School of
Management/ Faculty of Economics and Management Universiti Putra
Malaysia

Since this is all the more on connected examination and most likely the first of its kind in
attempting to take a look at the operationalization of BOS, writing on its application has yet
to be archived in the diaries. In any case a concise clarification in the matter of what BOS is
about may be in place. As in most other vital models, a definitive point of strategizing is that
by the activity, the organization would be at leeway over the contenders. Consequently the
two general models, for example, the Strength-Weaknesses-Opportunities and Threats
(SWOT), and Strategic Positioning and Action Evaluation (SPACE) are carried out uniquely
in contrast to the portfolio models of Boston Consulting Group (BCG) and SHELL/GE. Be
that as it may they all create methods for the organizations. Also what is normal to all, are
that they use and consider two arrangements of variables, specifically the outside and the
inside variables before the different vital decisions are produced. The SWOT model will have
an arrangement of outside variables (rundown of chances and dangers) being matched with
the interior variables (rundown of qualities and shortcomings) and from which elective
systems are created (David 2006). Additionally the SPACE model would match two
arrangements of inside variables (normal score of Financial Strengths and Competitive
Advantage) with the outer variables (normal score for the Industrial Attractiveness and
Environmental Stability) and the normal of all the four measurements would give a thought
of what vital decisions would best fit the organization concern (Mintzberg 2003). At that
point there are the portfolio models (BCG, Shell, GE) where different portfolios could be
seen in one outline and procedures would rely on upon the portfolios in their individual
quadrants (Star, Cash Cow, Dog and Question Mark quadrant).

“Here only one external and one internal factor are chosen. BCG chose relative market share
and the industrial growth rate as their dimensional variables (Grant 2005). Of course in its
application in different scenarios other variables could be used (especially for non-profit
organization, Drucker 1990). But in all the models prior to BOS, the variables used have
always been the pairings of external and internal factors. But when BOS model was
documented, it is the first time that direct pairing of external and internal variables was not
done. In its graph (authors call it the strategic canvas), the x-axis are made up of the
industry’s significant factors of competition (and are discrete in nature) whilst the y-axis are
its relative performance scores or values as perceived by the customers. As shown in the
graph, it is always a comparison between the company’s relative score against other players
in the same industry on every of the discrete factors considered.

Anyway there are other BOS principles and framework that can be researched into such as: a.

The six principles proposed namely:

i. Reconstruct market boundaries,
ii. Focus on the big picture,
iii. Reach beyond existing demand
iv. Get the strategic sequence right
v. Overcome organizational hurdles
vi. Build execution into strategy.

b. BOS Framework and Tools, which include:

i. Strategy Canvas: diagnostic & action framework
ii. Four Actions Framework: value innovation analysis
iii. Eliminate-Reduce-Raise-Create Grid
iv. Six Paths Framework: market reconstruction analysis
v. Four Steps Visual Strategies: big picture analysis
vi. 3-Tier Of Non customers: demand expansion framework
vii. BOS sequences
viii. Buyer Utility Map”3

3
http://econ.upm.edu.my/researchbulletin/artikel/Vol%204%20March%202009/28-34%20Zainal.pdf
 4. Research paper on Recent Trends in Indian Automobile Sector, Dr.
C. Gopalakrishnan, Associate Professor, Sakthi Institute of
Information and Management Studies

“This research investigates the Production, Domestic Sales and Export trends of the Indian
automobile sector using the two financial years data from 2012-13 and 2013-14, and employ
the findings to estimate the percentage changes in this sector. The study selected entire
segments – two-wheelers (mopeds, scooters, motorcycles, electric two-wheelers), passenger
vehicles (passenger cars, utility vehicles, multi-purpose vehicles), commercial vehicles (light
and medium-heavy vehicles), and three wheelers (passenger carriers and good carriers).
India represents one of the world’s largest automobile industries. Easy availability of finance
and rising income levels are encouraging the middle class population to upgrade their two
wheelers to a car. Driven by the above factors, the market is anticipated to grow at a
compound annual growth rate (CAGR) of 16 per cent during 2013–17.India is quietly
becoming a production hub of high-end vehicles meant for export to China. The US-based
motorbike makers Harley Davidson, Austrian motorcycle manufacturer KTM and Mahindra
& Mahindra have also preferred to set up manufacturing facilities in India than in the
relatively low-cost China and export the output.

The study made by (Sharma 2006) concluded that the partial factor productivity indices only
labor productivity has seen a significant improvement, while the productivity of other three
inputs (capital, energy and materials) haven’t shown any significant improvement and Labour
productivity has increased mainly due to the increase in the capital intensity, which has
grown-up at a rate of 0.14 per cent per annum from 1990-91 to 2003-04. (Nataraj.S 2012)
studied that the Internet is gradually hitting the core of every industry including the car
industry. It created a greater awareness of the vehicle and influences the buyer to purchase
and the Internet is believed to have a greater impact on the sales process and will definitely
give higher level of sales satisfaction. (Sachin Maheshwari 2012) studied the status of HR
department reporting structure in auto component industry in Haryana reviewed the
organization structure of various Indian and multinational auto component companies and
examined the significance of HR department in the organization.”4
Today’s global automotive industry is full of opportunities and risks, which are everywhere -
in emerging and mature markets alike. Companies require appropriate policies to be played
intelligently for managing the series of decisions. Moreover, within segment the nature of
competition sometimes is oligopolistic as the number of models under one segment may be
limited in a model year. At this moment, the study took into account the important items like
Production, Sales and Export trend of the Automobile sector in India.

 Rising incomes among Indian population will lead to increased affordability,

increasing domestic demand for vehicles.
 Fuel economy and demand for greater fuel efficiency is a major factor that affects
consumer purchase decision that will bring leading companies across two-wheeler and
four-wheeler segment to focus on delivering performance-oriented products.
 Product innovation and market segmentation will channelize growth.
 Focus on establishing India as auto-manufacturing hub is reigning in policy support in
form of Government’s technology modernization fund.
 Industry will seek to augment sales by tapping into rural markets, youth, women and
luxury segments.
 It is suggested that still there is a need for Indian automobile industry to adopt
producing and selling wide range of products, to adopt better market strategy, by
reducing cost and revising pricesto enhance the value of turnover so as to go ahead in
the era of competitions.
 The government should grant certain funds to leading Indian automobiles companies
for research and development so that Indian vehicles can really become world class in
five years time.

The percentage change in production is showing a fluctuating trend throughout the years but
the production is showing an increasing trend. Similarly the sale of vehicles is also showing

4
http://theglobaljournals.com/gra/file.php?val=April_2014_1397565162_76a32_32.pdf
an upward trend. This study has shown that Indian automobile industry has been able to
achieve high scores on the various components and this has positive impact. Automobiles led
to strong demand due to signs of revival in economy and increasing trend in hiring especially
Organizations decisions will describe how the companies are placed within the industry and
how they track new opportunities and innovations; ups and downs in growing markets,
universal economic trends, and varying customer demand will confront companies to react in
novel ways.
 Indian CV Industry

The commercial vehicle (CV) Industry in India, as is the trend internationally, is cyclical,
with periods of volume growth leading to investments in fleet capacity and subsequently to
periods of correction. In spite of the inherent cyclical nature, the long-term growth prospects
for the industry remain closely linked to the development of road infrastructure, growth in
gross domestic product (GDP) and industrial production. The Indian CV industry is
currently going through demand correction following one of the longest up-cycles in its
history.

CV Market in recent years

800
685.59
700
581.01
600
492.38
S 500
a 387.61
l 400 355.61
326.25 M&HCV (Trucks)
e
s 300 LCV

200

100

0
2012-13 2013-14 2014-15
Financial Year

Expected Growth rates for M&HCV is 9.2% and for LCV- 18%

The demand for M/HCV goods carrier segment mainly depends on higher capacity addition
at the fleet operator level and also prone to severe demand shocks. The LCV segment, though
cyclical, usually exhibits steadier demand patterns on account of wide usage range.
LCV & HCV Market Trend

Light Commercial Vehicles

600000 50.0%
10%
500000 27.40% 40.0%
25.70%
400000 30.0%
Volume
43.40%
300000 20.0% Growth
-7.00%
12.3%
200000 10.0%

100000 0.0%

0 -10.0%
FY08 FY09 FY10 FY11 FY12 FY13E

Medium & Heavy Commercial Vehicles

400000 50.00%
2.4%
350000
7.9% 40.00%
31.9%
30.00%
300000 0.4%
20.00%
250000 33.5%
10.00% Volume
200000 -33.2%
0.00% Growth
150000
-10.00%
100000
-20.00%
50000 -30.00%

0 -40.00%
FY08 FY09 FY10 FY11 FY12 FY13E
Structure of Indian CV segment

CV Industry

LCV HCV
SCV MCV
= 3.5T – 7.5T >= 16T – 49T &
<= 3.5T GVW 8T – 16T
GVW More GVW

CV Market Share

Commercial Vehicle Market Share

Force Motors Ltd,
Piaggio Vehicles (P) 3.04% Asia Motor Works
Ltd, 1.70% Ltd, 1.35%
SML Isuzu Ltd,
1.76% Mahindra Navistar, JCBL, 0.00%
1.71% Mahindra & Daimler India
VECV-Volvo, 0.07% Commercial
Mahindra,
15.62% Vehicles (P) Ltd,
VECV-Eicher, 0.01%
Hindustan
5.89% Motors Ltd,
0.03%
Ashok Leyland Ltd,
9.69%

Volvo Buses (P) Ltd,

0.11%

Tata Motors Ltd,

59.02%
Major domestic players of Indian CV industry

Mahindra & Mahindra

“Mahindra & Mahindra (M&M): M&M is the ascendant player in multi utility conveyance
segment. In UV market The Company has around 51% market share in FY08. M&M has a
market portion of 11.2% in C-segment cars during FY08. M&M is second most sizably
voluminous player in the Indian LCV segment. The company has recently promulgated an
investment of Rs 15 billion in the upcoming Greenfield Chakan facility in Pune. It plans to
utilize the capacity for the engenderment of LCV, M&HCV and UV at this plant with the
initial capacity of around 2.5 lakh units.

Ashok Leyland
Ashok Leyland (ALL): ALL is the second-most immensely colossal commercial conveyances
manufacturer in India. The company plans to increment the installed capacity from 84,000
conveyances in FY08 to 184,000 conveyances by FY10 with a capital expenditure of Rs 30
billion over the next three years. Nissan Motor and ALL have stepped up orchestrated
investment in their three incipient joint venture companies to $575 million. The JV will
establish manufacturing capacity of one-lakh conveyances in the first phase which would be
scaled up subsequently. The plant is expected to commence engenderment by FY10-11.

Tata Motors
Tata Motors (TML): TML is the world’s fifth most sizably voluminous and India’s most
sizably voluminous medium and cumbersomely hefty commercial conveyance manufacturer.
The company has plants in Jamshedpur, Pune, Lucknow, and Dharwad and R&D centers in
Pune, Jamshedpur, and Lucknow in India and in South Korea, Spain and the UK. The
company markets its products in Europe, Africa, Middle East, South Asia, South East Asia
and Australia.
Tata Motors has orchestrated a capacity of 2.25 lakh units for Ace, the sub-one-tonne truck,
while the subsisting capacity in Pune is just around 60,000 units a year. Recently, TML has
acquired Jaguar and Land Rover from Ford Motors for $2.3 billion.
In above table we can visually perceive that in all the segment of commercial conveyance
Tata motors market share is going down compare to FY 2007 but still we can optically
discern that in all segment Tata motor’s market share is above 50% so there is doubt that
Tata is No 1 Company in commercial conveyance Industry.

Eicher Motors
Eicher Motors (EML): EML engenders commercial conveyances including trucks, buses,
motorcycles, automotive gears and components.
Eicher motor is another leading company in commercial conveyance Industry albeit we
cannot compare it with Tata Motors as EML’s market share is not more than 10% in any
segment of Indian commercial conveyance industry. Eicher motor’s highest market share in
medium and heftily ponderous commercial conveyance segment it has 9 % market share in
multi and heftily ponderous goods carrier.
 SWOT of Indian CV Industry

Strength

 Cost advantage
 Ability to enhance and vary product mix: A diverse and broad product mix enables a
manufacturer to serve a wide variety of transportation solutions across different load
levels. It also helps in building strong brand loyalty among customers. In addition the
presence in business such as auto spares, buses, exports and defence helps companies
to weather the cyclicity in CV sales

 Sales and distribution service network: A widespread sales and distribution setup
enables the company to ensure a geographically diversified client profile

 Access to new technologies: In addition to matching competitor’s new products and

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

 Balance between outsourcing and in-house production: Companies with high

integration level have higher fixed costs which results in higher profitability in robust
growth scenario. More over company’s proximity to their raw material and
component suppliers help them in reducing procurement costs.

 Strong engineering skill in design of vehicle: In India every year five lakh new skilled
engineer come out so Indian automotive Industry can design more model so the
human recourse is the one of the major strength of Indian CV industry
Weakness

 Problem is to have quality workforce

 Low Investment in R &D
 Infrastructure Bottle neck
 Scarcity of Quality workforce

“Opportunity

 Supreme court make ban on overloading so for Indian CV industry it is the

opportunity because of the supreme rule the demand of truck will rise.

 Government has heavy trust on manufacturing sector because it provide highest

employment so by the time govt give some tax benefit and other non financial benefit
too. Recently govt allot sez for promoting manufacturing sector.

 Government cut down excise duty up to 8% from 40 % in 2001 so this step of

government is the leading motivational factor for automotive industry.

 Government’s plan to develop Infrastructure facility. As we know government many

time announce to invest more in Infrastructure facility so it will be beneficial to CV
industry.

Threat

 Higher steel prices have been a key concern over the last two years. The CV industry
has tackled this both by passing part of the costs through price hikes and also by
optimizing their selling, advertising costs and treasury efficiencies.
  Another concern is a slowdown in the Indian economy. This would lead to lower
investment in infrastructure which in turn will affect the CV demand

 Higher domestic inflation and increase in fuel prices are other major concerns.
Without a concomitant increase in freight rates increase in fuel price will have a
negative impact on demand for CVs.

 Rise in interest rates may prove to be a dampener on the CV demand, especially given
the fact that around 60-70% of vehicles purchased are financed.”5

5
https://www.scribd.com/doc/54109717/A-Comprehensive-Study-of-Indian-Commercial-Road-
Vehicle-Industry
 Critical Factors affecting Indian CV Market

1. Freight Outlook

CV sales have a direct correlation with the state of the freight industry, with magnification in
CV sales (MHCV trucks) proximately tracking increase in freight forms of movements.
Vigorous economic activity in the country, especially in sectors like cement, mining, steel
engenderment, automobiles, consumer durables, aliment processing and aliment grain
engenderment, leads to incremented demand for freight movement by road.

2. Freight Rates and Fuel Price

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

3. Policy Initiatives

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

4. Replacement Cycle

Supersession cycle for trucks has been shrinking, declining from about 12 years to
proximately seven years now. The proportion of trucks under five years of age rose from
about 34% in FY02 to proximately 45% in FY06.
 5. Competition from Indian Railways

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

6. Demand Supply Scenario

The demand for new trucks emanates from capacity integrations by small fleet operators and
FTUs. This along with policy changes like ban on overloading has led to consequential
addition in the truck population. Withal with facile availability of finance at low interest rate
availed in increase of capacity in the past five years. But as interest rates are set to increment
it might lead to remote dampening in demand for M&HCV in near future. However, demand
is liable to remain decent for LCV owing to the elevate in demand for minute commercial
conveyance for providing the last mile connectivity and the engenderment of hub and
verbalized models

Key Success Factors

 Ability to enhance and vary product mix- A diverse and broad product commix
enables a manufacturer to accommodate a wide variety of conveyance solutions
across different load levels. It additionally avails in building vigorous brand adhesion
among customers. In additament the presence in business such as auto spares, buses,
exports and defence avails companies to weather the cyclicity in CV sales.
 Sales and distribution distribution network - A widespread sales and distribution setup
enables the company to ascertain a geographically diversified client profile.
 Access to incipient technologies – In integration to matching competitor’s incipient
products and upgraded machinery, technology is additionally going to be critical with
 emission norms are going to be more rigorous going forward. The requisite of updated
technologies has driven domestic players into acquisition/collaborations/JVs with
ecumenical majors.
 Balance between outsourcing and in-house engenderment - Companies with high
integration level have higher fine-tuned costs which results in higher profitability in
robust magnification scenario. However it withal results in sharp drop in performance
as they would be affected by lower sales volume backed by Industry cyclical nature.
More over company’s proximity to their raw material and component suppliers avail
them in reducing procurement costs

Key Issues

 Higher steel prices have been a key concern over the last two years. The CV industry
has tackled this both by passing part of the costs through price hikes and additionally
by optimizing their selling, advertising costs and treasury efficiencies.
 Another concern is a slowdown in the Indian economy. This would lead to lower
investment in infrastructure which in turn will affect the CV demand
 Higher domestic inflation and increment in fuel prices are other major concerns.
Without a concomitant increase in freight rates increase in fuel price will have a
negative impact on demand for CVs.
 Rise in interest rates may prove to be a dampener on the CV demand, especially given
the fact that around 60-70% of conveyances purchased are financed.

Outlook

Albeit elevation in interest rates and fuel price may dampen the magnification of the sector in
short run, the long-term perspective for the domestic CV industry remains vigorous. The
expected continuance of economic magnification and investments in infrastructure will avail
the sector report robust magnification going forward. The ingression of incipient players in
the industry and the paramount capacity integrations expected are however liable to keep the
competitive pressures high. On the ordinant dictation side, a coalescence of tightening
regulatory norms (on emissions and conveyance scrapping) and incrementing customer
selectivity is expected to drive a shift towards high tonnage quality products. The top players
in the domestic CV industry have robust financials, fortified by vigorous cash accruals and a
comfortable capital structure. These players are capable of funding their consequential
investment plans over the medium term without resorting to any immensely colossal
borrowings. Moreover, the perpetual capacity expansions are predicated largely on
outsourcing models, which aim at better sharing of perils with component suppliers and lower
the break-even levels. The consequential export drives being made by the leading CV players
are liable to lower the perils arising from concentration on the domestic market and mitigate
the impact of cyclical downturns to an extent.
 Environmental (PEST) Analysis

PEST analysis stands for "Political, Economic, Social, and Technological analysis" and
describes a framework of macro environmental factors used in environmental scanning.

PEST analysis is a useful strategic tool for understanding market growth or decline,
business position, potential and direction for operations.

Political factors include areas such as tax policy, employment laws, environmental
regulations, trade restrictions and tariffs and political stability.

Economic factors include the economic growth, interest rates, exchange rates and inflation
rate.

Social factors often look at the cultural aspects and include health consciousness,
population growth rate, age distribution, career attitudes and emphasis on safety.

Technological factors include ecological and environmental aspects and can determine
barriers to entry, minimum efficient production level and influence outsourcing decisions. It
looks at elements such as R&D activity, automation, technology incentives and the rate of
technological change.

“Political Environment

 Indian government auto policy aimed at promoting an integrated, phased and

Conducive growth of the Indian automotive industry.
 Automatic approval allowed for FDI up to 100 per cent, with no minimun investment
criteria
 Make in India vision of Indian government
  Ensure a balanced transition to open trade at minimal risk to the Indian economy and
local industry
 Assist development of vehicles propelled by alternate energy sources
 Laying emphasis on R&D activities carried out by companies in India by giving a
weighted tax deduction for in-house research and R&D activities
 Plan to have a terminal life policy for CV along with incentives for replacement for
such vehicles
 Promoting multi-modal transportation and the implementation of mass rapid transport
systems

Economic Environment

 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
 More than 90 per cent of the CV purchase is on credit
 Availability of finance to CV buyers has grown in scope during the last few years
 The increased enforcement of overloading restrictions has also contributed to an
increase in the number of CVs plying on Indian roads
 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 a Manufacturing hub, for mini, compact cars, OEMs, and
for auto components
 India’s huge geographic spread- Mass transport system.
 Increasing new development of road system
 Higher GDP growth
 Buying power of the consumers increased due to Increasing Per Capita income
 Cheaper (decline interest rates) and easier finance scheme
Social Environment

 Growth in urbanization and standard of living

 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)
 Indian customers are educated and well informed and are price sensitive
 and put a lot of emphasis on value for money the well-off
 Preference for fuel efficient cars with low running costs
 Environment friendly vehicles are in demand

Technological environment

 With the entry of global companies into the Indian market, advanced technologies,
both in product and production processes have developed
 Few global companies have setup their R&D centers in India
 Government initiatives regarding tax rebates have led to global players setting up their
R&D centers in India”6

6
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 Porter Five Force Model Analysis

Michael Porter identified five forces that influence an industry. These forces are: (1) degree

of rivalry; (2) threat of substitutes; (3) barriers to entry; (4) buyer power; and (5) supplier

power. Like other industries operating under free market, capitalistic systems, viewing the

automotive industry through the lens of Porter’s Five Forces can be helpful in understanding

the forces at play.

Threat of
New
Entrants –
Low to
Moderate

Bargaining Rivalry Bargaining

Power of Among Power of
Buyers- Low Firms- Suppliers –
to Moderate Moderate Low

Threat of
Substitute
Products-
Low
Threat of New Entrants
 Simple import regulations, low customs duties and the absence of local content
regulations substantially ease market entry for foreign manufacturers
 Its relatively easier to enterLCV market as compared to M&HCV market

Bargaining Power of Suppliers

• More number of suppliers.
• Threat of Chinese suppliers

Bargaining Power of Buyers

 As companies working in duopoly in most segments

Threat of Substitute products

 No substitute product for commercial vehicles for road transport
 Railways are a major concern if prices become competitive

Rivalry among competitor

 Lot of global and domestic players competing in the same space
 FINDING 1:
Blue Ocean Strategy Viability

Case in Point 1: Tata Ace Zip

Value innovation

“Value innovation is created in the region where a

company’s actions favorably affect both its cost
structure and its value proposition to buyers.
Eliminating and reducing the factors an industry
competes on make cost savings. Buyer value is
lifted by raising and creating elements the industry
has never offered. Over time, costs are reduced
further as scale economies kick in due to the high
sales volumes that superior value generates”1

Noncustomers of Tata Ace Zip

  1st tier: Existing customers of 0.75T 4W segment who are dissatisfied with their
current vehicle due to high maintenance costs, low mileage, low manuverability etc.
 2nd tier: Existing and prospective customers of 0.5T 3W segment who cannot afford
the Tata Ace Zip and also prefer the low operating cost and drivability of 3W
 3rd tier: The greater masses of Indian people who are thinking of entering in goods
carrying business or are presently employed as drivers only

Sequence of Blue Ocean Strategy

“An important part of blue ocean strategy is to “get the strategic sequence right.” This
sequence fleshes out and validates blue ocean ideas to ensure their commercial viability.
This can then reduce business model risk. In this model, potential blue ocean ideas must pass
through a sequence of buyer utility, price, cost, and adoption. At each step there are only two
options: a “yes” answer, in which case the idea may pass to the next step, or “no”. If an idea
receives a no at any point, the company can either park the idea or rethink it until you get a
yes.”2

Buyer Utility Map  YES

“Uncovering blocks to buyer utility can identify the most compelling hot spots to unlock
exceptional utility. By locating your proposed offering on the thirty-six space of the buyer
utility map, you can clearly see how, and whether the new idea not only creates a different
utility proposition from existing offerings but also removes the biggest blocks to utility that
stand in the way of converting noncustomers into customers.”3

Six Paths Framework

“This figure highlights that out of the six principles driving the successful formulation and
execution of blue ocean strategy and the risks that these principles attenuate, Alternative
Industries is the best way forward i.e. Tata Zip taps the potential of both 3W and 4W
industry.”4
 Alternative Industries
Strategic Groups
Red Ocean Strategy Chain of Buyers Blue Ocean Strategy
Complimentary offering
Functional/Emotional
Appeal
Time

Tata Ace 0.75T

0.5T 3W
Zip 4W

Four Actions Framework

Reduce
High cost of acquisition
and difficult financing
High maintenance cost

Eliminate
Create
Manuverability - Power A New
need paradox Value Pride and status
Perception that operating Curve
Easy access to purchase
cost of 4W is always high

Raise
Space and comfort
Fuel economy
Manuverability
Easy financing
Strategy Canvas of Tata Ace Zip

10

Tata Ace
4 Zip
0.5T 3W
2
0.75T 4W

Strategic Pricing against Alternatives: YES

Profit Model & Cost Strategy of BOS incase of Tata Ace Zip: YES
The profit model of blue ocean strategy shows how value innovation typically maximizes
profit by using the three levers of strategic price, target cost, and pricing innovation

Tata Zip Low cost manufacturing: A Competitive advantage

Tata Ace Zip was made on a very low cost budget on similar lines to its predecessor Tata
Ace. Following were the key strategies that brought the cost of production low and made it
the competitors drop the idea of imitation/challenging:

 The vehicle's engine costs a third of its competitors, offers optimum performance,
including the fuel efficiency of a three-wheeler, while meeting BS II and BS III norms
 around 90 per cent of the car’s components will be outsourced, with some 75percent
coming from single-source suppliers that have received long-term contracts and high-
volume commitments in exchange for even lower component prices
  The team also - for the first time in Tata Motors's history - adopted a systematic new
product introduction process designed by Warwick Manufacturing Group. This
process helped us to reduce wastage and save time," points out Wagh. The vehicle
was ready on time in early 2005 and it met cost targets indexed to inflation.
 Labour costs are much lower in India
 Great care has been taken to minimise tooling and production costs
 In addition, Tata empowered and encouraged everyone in the company to contribute
ideas and suggestions, on the basis that collective thinking – and a vast pool of
common sense – would benefit the design and engineering, as well as helping to save
costs7

Adoption: YES
Major hurdles to adoption that can be tackled by proper marketing efforts and Prduct
attributes are:
 Convincing customers about the value proposition and lucrativeness against current
alternatives
 Finding financing partners and creating distribution and service network
 Upgrading 3W to Tata Zip and downgrading 4W owners to Tata Zip would not be
easy
 The TG generally go for tried and tested vehicles and brands

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Aligning the 3 Propositions of BOS

Overcome Key Organizational Hurdle

Conclusion: From the above comprehensive analysis, it is clear that Tata Ace Zip is a
befitting example of Blue Ocean Strategy in action in the Indian CV industry.
Case in Point 2: Daimler India “BharatBenz”

Similarly applying the BOS framework of identifying and execution of strategy, we conclude
that BharatBenz is also an apt example of BOS in nascent stage.

Alternative Industries
Strategic Groups
Red Ocean Strategy Chain of Buyers Blue Ocean Strategy
Complimentary offering
Functional/Emotional
Appeal
Time

Two strategic Groups:

1. Basic CV Market
2. Premium CV Market

The New Midmarket Vehicle: BharatBenz

Strategy Canvas of BharatBenz

10

New Middle
Market
6

Basic CV
Market
4
Premium CV
Market
2

Buyer Utility Map

SWOT Analysis of Bharat Benz

Strengths
 Aggressive pricing may allow it to compete
 Lack of strong and established sales and service meaningfully with entrenched players
network
 Backed by global technology
 Changing paradigm – with customers willing to no readily available global blueprint
for help experiment may support its entry in the Indian market
 Leverage the export potential along with domestic volumes

Weaknesses:
 Lack of Indian market experience and knowledge Indian market – make Bharat Benz
easy to establish
 Unproven products given that they are tweaked for itself the Indian market

Opportunities:
 Upgrading the Indian CV operators by creating the new-middle market through
provision of global technology at a marginally premium priced products
 Participation in one of the world’s largest CV market
 Daimler can get a strong foothold in the rapidly growing Indian CV market
 Export to various countries

Threats:
 Execution risk – Current Capacity: 70000, Investment: 700 Million Euros. Daimler
must ensure that all the elements of its strategy must get well executed. Else, its bold
attempt can prove to be a big setback which may floor Daimler for a long period of
time
  Timely aggression from the Indian CV players
Emerging Mid market Characteristics
Vehicles that offer a higher level of sophistication than current low-cost trucks characterize
the emerging midmarket segment. Most of the new midmarket vehicles offer attractive
improvements:

 Efficiency: Fuel consumption has been reduced by 20 to 30 percent, and engines

conform to Euro V emissions standards
 Performance: More powerful engines have from 220 to 400 horsepower and are
capable of covering longer distances each day
 Durability: Higher quality ensures fewer breakdowns and extends operational
lifetimes
 Safety: The new vehicles have ABS and air bags for drivers and passengers. Many
comply with Triad safety standards
 Comfort: Designed to enhance drivers’ ability to handle multiday trips, new vehicles
come with such features as cushioned seats and beds, GPS navigation, and
entertainment systems
 Pricing Strategy of BharatBenz: “Global trucks at local prices”

1. Trucks just about 5-10% expensive than the existing truck models in the
market of that of Tata and Ashok Leyland
2. Higher localization (85%) from the beginning – at local prices- In-house
manufacturing of frames, axles, sheet metal parts etc
3. Local procurement of most of the components – with a large vendor base: It
will also act a shield against currency fluctuations Huge tax benefits
 Full-fledged manufacturing in India helps in reducing taxes and
Customs duty for imported FBU
 Provide a no-frill products without features such as AC, power
windows etc.
Blue Ocean Idea Index
The blue ocean idea index is a simple but robust test demonstrating how the sequence of
utility, price, cost, and adoption form an integral whole to ensure commercial success through
blue ocean strategy.

Tata Ace Daimler

Zip BharatBenz

Utility Is there exceptional utility? Are there compelling

reasons to buy your offering?

Price Is your price easily accessible to the mass of

buyers?

Cost Does your cost structure meet the target cost?

Adoption Have you addressed adoption hurdles up front?

Conclusion: From the above comprehensive analysis, it is clear that both Tata Ace Zip and
BharatBenz are befitting example of Blue Ocean Strategy in action in the Indian CV industry
 FINDING 2:
Stakeholder wise Emerging Trends

Customer Group specific trends

 Rise of the progressive customer: Ambitious, high utilization, less overloading,

comfort seeking
 Total cost of ownership: Pre-buying emphasis on operating economy, Value-added
services around truck repair and maintenance; Used car market booming
 Value proposition fragmentation: There are various segments of customers who
need different sets of product attributes
 Deep penetration and all terrain usage customers increasing: Consumer goods
transport demand increasing and owners seek order from anywhere (door-to-door or
long haul)
 High share of owner-drivers narrows the potential for fleet management solutions in
India. The market in India is still quite fragmented, but more fleets are emerging in
the M&HCV sector and these larger customers will become the important ones

Expected trends v/s Key Emerging Questions

Key Questions to be asked Expected trends

Economic slowdown, delays in

How will the demand for trucks and infrastructure projects and evolving
buses evolve? regulations create demand uncertainty
and impact OEMs’ product strategies
 How will products need to adapt? Fleets increase focus on total cost of
ownership (TCO) and restructure
composition to include more LCVs

 Global OEMs design products for the

domestic market and look at
How will business models need to adapt? developing India as an export hub

 Suppliers increase localization,

improve quality standards and
diversify to related sectors

OEMs balancing the need to be flexible

What are the new market dynamics? while securing access to talent, supply
chain and technology OEM

OEMs to focus on raising aftersales

What are the supply/ value chain issues service standards, while dealers adopt
and implications? measures to improve operational
effeciency

Stakeholder wise Key Strategies for New Market Entrant

There are 3 main stakeholders:

1 CV manufacturers
2 Fleet operators and managers
3 Suppliers
 Key issues CV Manufacturers
 Focus value proposition on
optimizing the TCO of fleets
Evolving demand
for CVs  Invest in training and upgrading
skills of the workforce
 Educate truck and fleet owners
and create low-cost telematics
solution
 Focus on R&D to develop
products for the Indian market
and introduce 
 
Adapting
products  Partner with suppliers to develop
cost-competitive products 
 modularization
 Increase use of lightweight or
alternate materials that can reduce
insurance claim 
costs for fleet
 Develop a distribution channel to
offer value-added services
 product portfolio and
Adapting
business models  Consider offering an approved
used truck proposition for fleets
 Offer lease plans and
maintenance contracts to fleet
owners
 Invest in flexible manufacturing
Preparing for
Suppliers
 Partner with OEMs and
other suppliers to upgrade
manufacturing and technical
competence 

 Consider acquisitions in
Europe and North America
to gain access to
technologies, advanced
manufacturing skills and
customers in new markets
 Localize to cater to the cost-
competitive market 

Increase volumes of
common parts by


 Create an aftermarket
distribution channel 

 Explore other growth
markets and offerings in
allied sectors to mitigate
cyclicality risk 

 Develop offerings for
new market  Adopt process-oriented bus-body special-purpose trucks
dynamics
manufacturing 

 Leverage India’s potential as a
low-cost export hub 


Addressing  Expand distribution and service  Diversify customer and

supply/value
network to reduce turnaround supplier base to mitigate
chain issue
time of vehicle concentration risks
 Flexible production schedules
 FINDING 3:
Convergence of Local & Global OEMs in the Midmarket

As global and local OEMs converge on the midmarket, we see three broad strategies for
creating the trucks for this segment:
 Joint ventures and collaborations
 Greenfield projects, and
 Local upgrading initiatives

Joint Ventures and Collaborations: Over the past decade, the truck industry has seen more
than 40 new joint ventures and more than 100 collaborations formed through the acquisition
of minor stakes or full takeovers. Notable examples include the Volvo-Eicher joint venture in
India, Daimler’s purchase of a stake in the Russian OEM Kamaz, and MAN’s acquisition of
Volkswagen Truck & Bus in Brazil. Most aim to build trucks that combine greater
sophistication with lower price. The local OEMs bring access to the local market, expertise in
local requirements, and brands that are familiar to local customers.

Greenfield Projects: This strategy for global OEMs is exemplified by the localization of
European OEMs such as Volkswagen in Brazil and Daimler’s BharatBenz in India. Its
advantage is that the OEM can define its own strategy from scratch. However, this strategic
freedom comes at a high price—Volkswagen’s Consórcio Modular venture in Resende,
Brazil, cost $250 million in 1996, and Daimler is currently investing around €700 million in
BharatBenz.

Local Upgrading Initiatives: Using components from global suppliers has been the favored
strategy of local OEMs seeking the technical competence they need to build midmarket
trucks. This strategy is typified by the development of Tata’s Prima and Dongfeng’s Kinland
trucks. These OEMs gained rapid access to the advanced know-how and technology of global
tier-one suppliers while avoiding large R&D expenditures
Case in Point: Volvo Motors - Eicher Motors Joint Venture

There are various strategies being adopted by the business houses in order to enhance the
long-term success and face the competition. These strategies are diversification, integration
etc. but in order to face the competition at international level major strategies are being
undertaken such as mergers and acquisitions, strategic alliance or joint ventures, takeovers
etc.

SWOT Analysis of Eicher Company

“Strengths
 One of the leading manufacturers and established brand with extensive dealer network
 Sufficient Cash on balance sheet for funding capex
 Enjoys significant level of trust in terms of quality among its customers and has low
debt to equity ratio which meand low risk company
 Carryies out the production at considerable competitive cost. Thus giving it the
advantage and opportunity of maximizing the profitability by undertaking the
strategic alliance through joint venture

Weakness
 Its production capacity is comparatively less to Volvo and to manage such a large
business it is important to focus on the capacity management in order to leverage the
benefits of the venture
 Minimal presence in the fast growing LCV goods segment
 Having manufacturing presence in only one location
 Lack of captive financing
Opportunities
 Company will get access to the global market after incorporating this strategic
alliance activity through joint venture and also will give the opportunity to explore in
the market
 Use of Volvo overseas network to boost exports
 Increased sourcing by Volvo from VECV (e.g. engines)
 Increasing share of road in freight movement

Threats
 The prevalent fierce and aggressive competition in the automobile industry
 Intense competition from existing players
 Global players entering the market would further aggravate competition

SWOT analysis of Volvo Company

Strengths
Volvo it fully owned subsidiary of the ford motors company, which is the major and leading
automotive industry in the international market. This provides in grabbing the advantages of
technological and innovative advancements from its parent company that is ford. Due to its
strong research and development activities being undertaken is widely recognized in
providing the quality and safe products to its consumers. In its domestic market it has the
major market share where its sale is considerably high as compare to its competitors.

Weaknesses
It suffers from the optimum manufacturing facilities in US market. This led to increased
production costs. Also its bi fuel products sale is also been seen to decline over the years in
spite of undertaking the significant marketing activities and considerable reduction in costs
Opportunities
Volvo has the significant market share in the automotive industry and it has immense growth
potential also to strengthen its share in the market it has been adopting the strategic alliance
through incorporating the joint venture. Thus ultimately leading to enhancement in the sales
and thus yielding the competitive advantage over the other in the market place

Threats
There are various well recognized brands operating in the automotive sector such as Audi,
Benz providing the premium product range to its customers are expected o increase their
offering and making the competition level more stiff. Also increased production by various
other Japanese companies can also be the threat to the company.

Combined Strength/Synergy of the JV

 Eicher is the leading company in LD / MD segments with the Specialist skills and
experience in developing low cost, better performance products

 It also has the Wide dealer network along with the provision of after sales
infrastructure for LD / MD performing Cost effective operations. On the other hand
Volvo is the globally recognized company having expertise in the vehicle
manufacturing along with the Leadership in product technology
 The joint venture of the se two giants will lead to Most innovative products covering
entire range, will be able to build Comprehensive network, Poactive solution / service
provider, Best fuel economy, Reliable products, Superior service quality, Safety and
comfort setting industry standards, Culture incorporating best of Eicher values and
Volvo Way, Professionalism, honesty, people caring to attract best talents in
industry.”8

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 Conclusions & Recommendation

The research suggests that the Indian commercial vehicle industry is rapidly transforming

into a customer centric market where there is need for frequent need for innovation in buyer

value and reduced cost. There are also a lot of new categories and segments that have

emerged in recent years due to increased competition from local and global players. There

has been a shift in the buyer decision-making process and rise of new technologies like

Telematics in the Indian ecosystem.

A key conclusion has been the prevalence in the adoption of Blue ocean strategy by major

players like Tata Motors, Daimler etc. where they have come up with combined strategy of

differentiation and low cost along with a core competence that cannot be challenged in the

initial years. The globalization has led to the formation of lot of strategic alliances and India

becoming the future manufacturing and export hub.

It is recommended for CV manufacturers to continuously innovate in terms of product,

marketing and finding new niches. They have to stay close to the customers and achieve cost

efficiency.
GLOSSARY OF TERMS

SIAM - Society of Indian Automobile Manufacturers

CAGR - compound annual growth rate
CV - Commercial Vehicle
LCV - Light Commercial Vehicle
HCV - Heavy Commercial Vehicle
MCV - Medium Commercial Vehicle
GVW - Gross Vehicle Weight
UV - Utility Vehicle
ALL - Ashok Layland
M&M - Mahindra & Mahindra
TML - Tata Motors Ltd
EML - Eicher Motors Ltd
FY - Financial Year
JV - Joint Venture
 BIBLIOGRAPHY
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 http://stock-report.blogspot.com/2009/11/four-wheeler-industry-dbs-cholamandalam.html
accessed
 http://www.mse.ac.in/pub/Working%20Paper%2065%20-%20Web.pdf
 www.oppapers.com/.../marketing-strategy-of-ashok-leyland-page1.html
 www.scribd.com/.../Marketing-Mix-of-Automotive-Industry-in-india
 https://www.bcgperspectives.com/content/articles/automotive_globalization_winning_bric_tr
uck_battle_potential_midmarket_trucks/
 https://noppa.aalto.fi/noppa/kurssi/a26e00400/lisatty8402/A26E00400_kogut__bruce__1988
_.pdf
 http://www.ey.com/Publication/vwLUAssets/EY_Mega_trends_shaping_the_Indian_commer
cial_vehicle_industry/$FILE/EY-Mega-trends-shaping-the-Indian-commercial-vehicle-
industry.pdf
 http://www.kpmg.com/ID/en/IssuesAndInsights/ArticlesPublications/Documents/Competing-
in-the-Global-Truck-Industry.pdf
 1,2,3,4
Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition
Irrelevant Book by Renée Mauborgne and W. Chan Kim
 http://www.ibef.org/download/Automotive_250608.pdf
 APPENDIX

Checklist of areas to be covered & questions that were asked:

1. What is the interviewee’s current business model and to get into his revenues, usage
characteristics and costs associated with vehicle
2. What business specific needs are covered by his vehicle and what is the need gap?
Make him question himself the usage and choice of his vehicle by showing more
utilization and ROI in other segment. Ask him about other business models and their
choice of vehicles 111
3. To get information about his previous work experience and how and why he has
evolved from e.g. a driver/job to an owner of a 3W to a 4W to fleet owner
4. Why did he enter this segment? What are the critically important parameters that he
looked during purchase of this vehicle?
5. What were the needs and expectations from your current vehicle and is it delivering
properly/experience till now?
6. If a new vehicle is released now in a segment between these two, what would be your
decision making process? Make him visualize a vehicle with various permutations of
features in this segment and let him choose his preference and state reason for the
same in a detailed manner
7. Ask the interviewee about his/majority’s preferences regarding specifications like
door design, cabin features, etc.
8. To find out what competitor’s value proposition in detail and what is the prevailing
trends in each segment
9. To find out a rough operating cost structure of his business and try to question
insightfully. Find out if he does that before buying or only after buying or never
10. Finally find out that key insight or sweet spot that will make him or any other person
upgrade or downgrade when he buys a next vehicle