Indian Small Car Industry

A CASE STUDY ON
THE INDIAN SMALL CAR INDUSTRY
Prof. Tapan Panda

A Case Study on the Indian Small Car Industry
A BRIEF OVERVIEW ON THE INDIAN SMALL CAR INDUSTRY
If there is one big market that is forcing the global auto majors to think small, it is India.
Until yesterday, all the world's auto-manufacturers expected to create success out of their mid-
size products. There were as many as five players in the mid car segment and just one--the
Rs 7,956-crore Maruti Udyog Ltd (MUL)--in the small car segment.
Suddenly Daewoo Motors India and Hyundai Motors India--are changing lanes mid-
way, making the small car market as the pivot of their marketing strategy in India. Couple that
with the fact that two domestic manufacturers--the Rs 10,074-crore Tata Engineering &
Locomotive Co. (TELCO) and the Rs 223-crore Kinetic Engineering--are ready with similar
indigenously-designed products to compete in this market The last two years has really been
the period of war in the small car market
The story Behind….
The auto majors read the market wrong. Since the small segment was dominated by MUL-
with a market share of 96 per cent and given that the Trans –national brands already had
tried-and-tested mid-size models in Indian market, this segment was more attractive than the
existing ones. This perceptual change was because of two reasons.
• The clutter in the large and midsize segment due to entry of many international players.
• The small segment grew faster than the mid-size one, driven by the price-sensitive
customer.
Both the above factors had an enormous impact on mid-size car manufacturers. Stung by
a sharp 80 per cent drop in sales between April and November 1997, over the corresponding
period in 1996, Daewoo Motors slashed the price of its mid-size car, Cielo, by an unbelievable
21 per cent. It was the fate of many players in the mid and large car segment in India.
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The Trans-nationals were also serious about developing vendors in India. India is
bound to become an important destination for the global auto industry. It took the financial
turmoil in South East Asia and the slowdown in the Chinese auto market to reinforce the
targeting to Indian Market. The new interest in the small car segment also reflects certain
amount of bullishness on the part of auto manufacturers about India !
Despite projected over capacities--and current losses, carmakers continued to queue

up their investments for small car segment. To day there are 10 global auto majors--including
the $13-billion Suzuki Motor (Japan), the $65-billion Daewoo (South Korea), the $147-billion
Ford (US), the $47-billion Fiat (Italy), and the $168-billion General Motors (US) operating in
Indian Market.
The Pre 1997 Car Market
As late as 1997, the auto market in India was clearly segmented. At the entry level
were MUL's 800-cc car--priced between Rs 2.10-lakh and Rs 2.45 lakh--and the Omni, at Rs
1.75 lakh. At the next level were the 993-cc Zen--priced at Rs 3.70 lakh--and the 999-cc Fiat
Uno (Rs 3.62 lakh). Then came the 1,300-cc Esteem models--priced between Rs 4.69 lakh
and Rs 5.95 lakh--the 1,498-cc Cielo (Rs 6.20 lakh), and the 1,598-cc Opel Astra (Rs 7.52
lakh), followed by premium cars like Mercedes-Benz's E-220 (Rs 22 lakh).
Changing Lanes
Two events have upset the equations in the price-segmented car market. Daewoo has
Changed the lanes with the Cielo, which is now priced at Rs 4.90 lakh, and competes with the
Zen's top-end model (Rs 4.40 lakh) and the Esteem's lower-end version (Rs 4.69 lakh). Ceilo
has created a new value segment, where the price is not proportionate to the size. Daewoo's
strategic response has very clearly redefined differentiation, from price or size to value.
Hyundai Motors India, a subsidiary of the $27-billion Hyundai of South Korea launched
its 999-cc Santro at the Auto Expo 1998 in Delhi. The model comes in five variants, with the
non-air-conditioned, manual transmission model priced at Rs 2.80 lakh, and the semi-
automatic, air-conditioned GLS model priced between Rs 3.15 lakh and Rs 4 lakh. Clearly,
Hyundai's strategy is aimed at taking on the market leader, Maruti Udyog Limited But by
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pricing the deluxe model at Rs 4 lakh, it is also bridging the gap between the small and the
middle car segments. At present Maruti’s Esteem LX is priced Rs 70,000 more than the
Santro GLS, while the Cielo is priced Rs 90,000 more.
The further entry of new players will only blur the segments. New entrants will be
involved in price war to find a foothold in the Indian market. Few of the examples include:
TELCO's positioning of its 1,400-cc Indica car--launched in November, 1998 and priced close
to Maruti’s 800-cc model as a small car;and Honda sneaking its 1,300-cc City into the
segment vacated by the Cielo although it is an accepted fact that pricing or positioning cannot
be done in isolation. In a crowded market, that must depend on the available strategic
opportunities."
By creating new segments, companies can broaden their market base, increase
capacity utilization levels, pre-empt competitors market entry moves and importantly lower
costs. While Maruti did that by launching three versions of the Esteem, TELCO accomplished
it by using a common platform for the Sumo, the Estate and the Sierra models; Hyundai is also
planning to come to the market with five variants in near future. At high volumes, costs can be
lowered by more than 20 per cent across variants due to experience curve effect.
Configuring the sticker price for a car in the market today is no more a functional
decision. It has become a strategic decision as it identifies the key segment’s response
elasticity to the market offer. The two key inhibiting factors for the poor response to the auto
war fare in Indian Car Market are basically the low per capita income at $350 (Rs 14,000 at
current prices) and the high manufacturing costs. A large part of the population expected to
graduate from two wheelers to four wheelers has not responded as they were supposed to
during this period of time. The domestic auto giant Maruti Udyog limited, still forces the new
players to benchmark themselves against its products which roll out from a depreciated, yet
high-volume plant. It enjoys the fast mover as well as the cost advantage with the higher
capacity utilisation that helps him to cut costs across as more cars you make, the cheaper they
get.
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The Protected Giant MUL

MUL, which set up shop in 1984, had 10 long years of relative protection to emerge as
a formidable competitor with high volume and a strong brand image in the mind of Indian
customers. When the industry was deregulated in 1993, the cost barrier had become so high
that new companies could not dare to look at the small car segment. Instead, they settled for
the mid-size segment, where both volumes and margins were expected to be high. However, a
shakeout in the Indian mid-size car segment, the slowdown in international auto sales pushed
transnational auto majors into India which have now turned the tide against MUL..
The present generation small cars launched recently are more contemporary in terms
of both design and technology while Maruti's small-car technology is at least a decade old.
Keeping the future growth potential of Indian market in mind, the auto majors are prepared to
bear losses for the next 10 years .This will help them to gain a good market share the long run
and provide breathing space to counter the strategic moves of the leader. Hence, the
narrowing price differential between the old and the new small cars is the first call of the auto
majors against Maruti in Indian Market. If Maruti has to try and match the features of new
generation small cars, it would mean additional costs. On the contrary, if Maruti decides to
hold its price line and add new features, it could translate into losses or at least low profits. But
MUL can still bank on at least two Suzuki models: the proposed 657-cc Cervo C and the
current 996-cc Wagon R to battle its rivals in the future.
The Advent of the Auto Majors
Besides bracing up for losses in the initial years, auto majors like Hyundai and Daewoo
are banking on exports too. At the moment export may look unattractive because of the South
Asian meltdown but in the long run, low production costs and component-manufacturing skills
will make India- made cars competitive at global market place. Hence they are looking India as
a production base to cater to the growing Asian market by way of outsourcing from Indian
manufacturing base. However many a hurdles they have to cross on the journey to profitability.
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The investments necessary for a large plant are simply huge. Daewoo has, so far, sunk Rs
2,700 crore in a 1.20-lakh-unit-a-year plant. Unlike China, which has restricted the number of
companies India has followed an open door policy for car manufacturers, which has resulted in
emergence of fragmented markets with distributed capacity.
An Original Equipment Manufacturer (OEM) needs a minimum economic size of 1.50

lakh cars a year to attract vendor interest. Daewoo was able to slash the Cielo's price as it is
cheaper to import components because of the devaluation of the South Asian currencies. The
auto majors are lobbying with the government to ease the strict indigenisation norms in the
new automobile policy, so that they can import the components from other countries. This will
help them to cut the prices and to go head on the market leader particularly in a price
responsive market like that of small car segment.
The other argument is that with the given import duty of 103 per cent on Completely
Knocked-Down Kits (CKDs) , which is the same as that on Completely Built-up Units (CBUs)
and 68 per cent on components the imports will become costlier and compel companies to
localize their manufacture. The exposure to currency fluctuations, which crippled the four
Japanese light commercial vehicle projects in the late 1980s, is also minimal when a company
localizes component manufacture.
Besides lean manufacturing techniques like Just-In-Time (JIT) are possible only when
the supplier is located close to the manufacturing unit. If Maruti is a success story, it is only
because it indigenised 85 per cent of its components within five years of going on-stream.
Then, there's the question of servicing the replacement market for spares. Customers,
typically, expect components to be available locally, and at competitive prices. Imports cannot
guarantee that but it' is a tremendous job to localize components at the right quality and price
given the supplier problems in prevalent in India.
An Original Equipment Manufacturer’s competitive advantage lies in its marketing

skills. Having achieved price and technology parity, it can easily woo the consumer with
attractive financing schemes and superior after-sales service. Nudged by the competition,
most auto players have a clutch of schemes to offer: Daewoo Motors India provides interest-
free car finance, Ford Motor and General Motors have slashed interest rates. MUL's joint
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venture finance company, Maruti Countrywide, is offering loans at 13.50 per cent when the
prevailing lending rate is 17 per cent and above.
The After Sales Service Scenario
After sales service for cars is as critical as showroom deals. Maruti services its 2
million customers through an army of 174 dealers spread across the country. It will be
impossible for a company to duplicate such infrastructure, particularly with investments in a
metro-based showroom going up to Rs 4 crore. Margins in retailing are moving from actual
sales to after sales service."
The problem of price war is evident with Auto majors as much as with dealers. In a bid
to woo the customers, dealers, particularly in non-prime locations, are cutting their margins. It
will not be surprising if single-brand dealers eventually turn into multi-brand sellers in future.
Doing so will benefit all the three constituents in the marketing chain: the OEM, the dealer, and
the buyer. The carmaker can expand his reach without expensive investment; the dealer can
increase his revenue; and the customer gets a variety of models and brands under one roof in
future.
The local partner will be the loser in this fierce battle. Without the means to make either
matching equity or technological investment, the Indian collaborator will be driven off the road.
It has already happened to the Rs 166-crore DCM, which tied up with Daewoo Motors, and
can happen to both the Rs 1,258-crore Hindustan Motors (Partner:: General Motors) and the
Rs 3,606.57 crore Mahindra & Mahindra (Partner :Ford Motor).
So they are reconciled to adopting a minority role or becoming auto component

vendors. This list includes Siddharth Shriram's Rs 430-crore Siel (Partner: Honda), the
Kirloskars (Partner :Toyota) and the Munjals of the Rs 2,000-crore Hero Group (Partner
:BMW). And the evidence is compelling e.g. Hindusthan Motors has a passive role in its joint
venture with General Motors although the Opel Astra is manufactured at HM's Halol plant in
Gujarat. The same can be forecasted about Mahindra and Mahindra’s joint venture with Ford
Motor. What can prolong the life of the joint venture is distribution muscle, as it will take at
least five years for a transnational auto major to build a strong distribution channel in this
country.
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By all accounts, the auto industry is headed for a glut. With an estimated demand for
cars to touch 9 lakhs in 2001-2002, the installed capacity will rise to 16 lakhs. So the current
growth rate in Indian market is not sustainable. There will be at least two years of stagnant or
declining demand before the resumption of the growth trend.
There is a projected demand of 1-lakh cars in the mid-segment alone by 2001-2002.
And the car numbers will add up to around 6 lakh a year. That will engender a shakeout, which
is already afoot in the other Asian markets. For instance, poor off -take and a consequent
build-up of car inventories has led to a fierce price-war in China.
Market Potential of Small Car Segment
The demand for the small car will continue to drive growth for the next five years. Of
the total sales of Maruti in 2000-2001around 85 per cent were small cars. The Esteem's sales
dropped in the same period, where as the small cars drove MUL's sales. So demand for small
cars will leap only if certain conditions are fulfilled:
Rise in the Income Levels

In the US, auto demand rises by 4 per cent for every 1 per cent increase in the real Gross
Domestic Product but this is irrelevant for India as only the top 1.50 per cent of the population
can afford a car. The demand can shoot up if the income levels of the top 5 per cent continue
to rise in future.
Level Of Motorization
It is stagnant at 1.70 cars per 1,000 people for decades. However, in the post-liberalization
period, the motorization level has leaped to 3.70 cars per 1,000. Although it is still lower than
the levels in the developed markets, motorization is bound to rise further in the coming years.
Vehicle Prices.
Falling imports and excise duties coupled with competition will continue to boost demand and
the prices are likely to fall further at least in the short run.
Consumer Finance.
Over 60 per cent of customers opt for consumer finance. That figure could go up if interest
rates continue to fall.
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Infrastructure
Traffic congestion and bad roads could deter potential buyers from going for small cars
particularly in small cities of India. The future is not very heartening in this aspect.
Product Availability
As manufacturers shift their attention to the small car, more and more people will be able to
afford it and demand will only rise in the future period of time.
The Future
There is a sharp contrast in the buying behavior of Indian Consumer compared to their
western counter parts, yet there is no doubt that Indian car market is going to increasingly
resemble the latter. In the West, the industry is likely to be dominated by three or four major
players. With a likely demand of 11 lakh cars by 2006, there will be a few niche players like
BMW, Mercedes-Benz, and Audi with luxury cars to offer. Unless car manufacturers have a
large range of vehicle to offer, they will be unable to subsidize their costlier models.
The market will consolidate to few segments. The carmaker has to make diverse
models based on diverse and flexible platforms. Products like the stripped-down economy car,
the sports utility vehicle or the van should be built on the same platform. For the price-sensitive
customers, there can be a no-frills version; a loaded version for the middle customer and
luxury car manufacturers can target the high-end customers.
The fortunes of the automobile industry will continue to hinge on the large, price-
sensitive customers, who will graduate to the higher end of the market over a period of time.
Until then, the small car will continue to drive demand and most of the car-manufacturers are
gearing up for this eventuality.
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MAURTI UDYOG Ltd.
Evolution
Maruti Udyog Ltd. is a joint venture between Government of India and Suzuki motors of Japan.
Maruti Udyog is India's largest automobile company. When Maruti entered the Indian car
market, it sought to provide high quality, fuel-efficient, low-cost vehicles with a motto of total
customer satisfaction. These objectives shaped the company's policies and approach to
quality level in its products over period of time. The first cars rolled out for sale on 14th
December 1983 (the company went into production in a record 13 months) marking the
beginning of a revolution in the Indian automobile industry.
The Indian car market had stagnated at a volume of 30,000 to 40,000 cars a year for the
decade ending 1983. In 1993, this figure reached a number of 1,96,820. Maruti reached a total
production of one million vehicles in March 1994, becoming the first Indian company to cross
this milestone. Maruti crossed the two million marks in 1997.Through the years Maruti has
provided contemporary Japanese technology, suitably adapted to Indian road conditions and
Indian car users. Maruti has also provided users with a range of cars to suit different needs.
Maruti's market share figures show the response of customers: In 1997-98, Maruti’s market
share of vehicles was over 70%. In addition to leading in the economy car segment, Maruti is
also the leader in the luxury car segment with a market share of 38%.
The success of the joint venture led Suzuki to increase its equity from 26% to 40% in 1987 and
further to 50% in 1992, thus transforming Maruti from a government company to a non-
government company. This helped the company to bring in technology and expertise transfer
from the Joint Venture partner and also respond faster to the increasing competition and ever
changing consumer needs.
Pre-liberalization Scenario
Maruti has raised the bars of automobiles in Indian Market. Prior to it there was no choice
available to the consumer and the models were also not sleek and fuel-efficient. With the
Japanese production and design technology Maruti offered sleeker designed cars at affordable
prices. Initially the consumer had neither any choice with respect to the models nor to the
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company or the price range. The first model of Maruti came in December 1983Maruti Gypsy
was introduced only in December 1985. Subsequent models followed the successful brands in
the following years.
Arrival of Maruti and its tie up with the Japanese partner has made lot of other Indian
automobile manufacturers to follow its path. Hindustan Motors, Premier Padmini, Standard
Motors have formed alliances and forged partnerships in technology with many multinational
firms. Maruti with the support of the Government of India grew faster. Government of India had
passed a special bill giving duty concessions for the import of engines with less than 1000cc,
for which only Maruti was eligible. This preferential treatment given to Maruti gave it a
competitive advantage initially over the other existing players in the market.
Maruti was highly publicized as the peoples car and a technologically advanced, fuel efficient
car, which is available at a price less than that of the existing cars. Even though it had to face
the initial criticism and sarcastic comments of the press, it survived on the huge demand for
the new sleek, small car. Its initial booking list, which had a down payment of Rs.10, 000/ was
overly subscribed and there was a long waiting list of the consumers. Its time phased
indegenisation program has helped MUL to cut down costs and decrease the dependence on
Suzuki for the critical parts. This made it achieve truly the label of “Made in India”.
Post-Liberalization Scenario
This scenario continued till the government embarked on the liberalization path. This allowed
lots of foreign companies to set up manufacturing facilities and also many more to enter into
Joint Venture with their Indian counterparts. This increased the competition for the existing
Indian players in the passenger car segment.
Maruti also faces stiff competition because of the developments after the liberalization of the
economy. The new players like Daewoo, Hyundai, GM, Honda, Ford etc have started eating
into Maruti’s market share. Maruti claimed that even though the market share in percentage
terms was decreasing it saw no problems as the market base itself has increased. This is true
but the fact is that Maruti is not successful in capturing the increasing market base. More and
more consumers are being lured to other companies and models. Maruti’s technological and
the new players were challenging market leadership.
During 1998-99 the company showed a 20% drop in post-tax earnings. Sales of Maruti-800
model that accounted for nearly 58% of Maruti’s domestic sales fell from 1,84,893 units to
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1,62,129 units. Between April-June 1998 and April-June 1999, MUL's share in passenger cars
slipped from 84 per cent to 69 per cent, even though its sales, including exports, grew by 14
per cent during the period.It is an indicator that its competitors are growing faster. For
instance, Hyundai's small car Santro, which was launched only in October 1998, sold 12,684
cars during April-June 1999. Telco, which introduced Indica in December 1998, has put 7,617
cars on the road in the same period. Even Daewoo, which got off to a slow start because its
small car Matiz was priced much higher than expected, had a long list of buyers. The
increased competition was one of the reasons why MUL's net profit slid from Rs 652 crore in
1997-98 to Rs 522 crore in 1990-2000. Hyundai is aiming to sell 55,000 cars in 2001-2002
while Telco has set 60,000 cars as its target. If the two manufacturers achieve their numbers,
their sales would be equal to almost half the total number of Maruti 800s and Zen’s soldin
2000-2001. Maruti’s strategy of cutting down prices and giving finance facilities to the buyers
did not help. At the same time there was a huge upward surge in the second hand car market
and the prices of second hand cars were very low. This made lot of first time buyers to go in
for the second hand cars rather than new ones. There was also a change in the consumer
mind set, they were demanding more value for money.
The new models introduced by Maruti which were competing with models from Daewoo,
Hyundai, Honda etc did not meet the value for money criteria of the consumer. They were
either too costly or with very less features with respect to the comparable models from the
competitors.
Maruti had launched new models, WagonR and Baleno to fight the competition. It reduced the
prices, increased the after sales service, availability of service stations etc., to make a
difference and capture the market. But for this it had to cut down costs at the operational
levels. It had achieved the operational efficiency with Maruti-800 and Maruti Esteem models in
12 and 7 years of time respectively. With the new models introduced it intends to achieve them
by one to one and half years time. Also, with more focus on compliance to Euro-I and Euro-II
emission norms Maruti faces a formidable task.
Maruti has introduced new models with a focus on:

» Launch new models to be present in different segments of the market.
» Reduce production costs by achieving a 85-90 per cent indigenisation for new models within
12 months.
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» Revamp marketing by increasing the dealer network from 150 to 300 and focusing on bulk
institutional sales.
» Bring down number of vendors and introduce competitive bidding by suppliers.
MUL has launched the Baleno and Wagon R in Indian market. Baleno, a mid-sized saloon
with a 1,600-cc engine, will mark Maruti's entry into the luxury segment. The Wagon R will take
on the Santro and the other cars in the segment. The New Alto has also joined the MUL
family. This is a clear indicator that Suzuki's interest in MUL, which had waned in the past
three years, has revived. These models will definitely give MUL a shot in the arm.
Apart from launching new models, MUL plans to push its cars aggressively. Institutional sales,
which currently contribute only 7-8 per cent of its sales, will be a focus area. It is also eyeing
the taxi market in urban centers for its Omni’s. Besides, MUL is hawking its cars on the
Internet and hopes to significantly increase the current 50-80 cyber-bookings per month. To
improve market reach, it may even sell through its network of 1,200-odd service stations
spread over 530 cities.
The company is betting on an increased market presence to consolidate its leadership. But up-
gradation of technology will be crucial. After all, it was the right mix of new technology and low
pricing that helped MUL race past Premier Automobiles and Hindustan Motors in the '80s.
Disinvestment proposal
There were new developments in the Indian political scenario. The government had decided to
dis -invest wholly or partly its holdings in few PSU’s, to realize their full potential and also to
gain maximum returns on them. Maruti is one of the hottest PSU’s which is in high demand
because of its market presence and technical strength.
The Department of Disinvestment (DoD) has prepared a Cabinet note-recommending sale of

the government's stake in Maruti Udyog Ltd. to an international auto company. The
government holds a little less than 50 per cent stake in the car major. The ministry has stated
that the sell-off decision will be subject to Suzuki's approval.
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Suzuki's approval is necessary, as the agreement between Suzuki and the government lays
down that Suzuki will have the first right of refusal if the government decides to sell its share in
MUL. Of the three options considered for divesting the government's stake in the automobile
major, the DoD has stated that selling the governments share via international competitive
bidding is the best option as it would ensure maximum returns to the government.
The other options considered include selling the stake to Suzuki or to General Motors or
selling some shares preferentially to employees and the remaining to small investors and to
financial institutions via a book building exercise. However, selling shares to small investors
has been ruled out on the grounds that such a move would not get in the much-needed
technology for the PSU. Selling the stake to Indian auto companies has also been ruled out,
as they would not have the required technology to offer to the company.
International giants like Ford, General Motors are showing keen interest in acquiring a stake in
Maruti for many competitive and strategic reasons. They are planning to capitalize on Maruti’s
presence in various segments and also the brand equity.
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HYUNDAI MOTORS
Evolution
This group incorporated in 1974, is well established in the market of auto components for the
past 25 years. Constant strives for quality and excellence has made Hyundai acceptable as
one of the leaders in replacement market of automotive parts. This was possible by virtue of
precision rendered by talented engineers and technicians, constant innovation and
commitment to total quality at all levels in the company.
To be a leader in the technological front and to meet the challenges of the 21st century this
group has diversified into the marketing of Hyundai range of passenger cars. Hyundai is one of
the top most manufacturers of world class cars and a leading Korean giant.
The Santro is the modified version of the Atos, the company's 800-cc car for the Korean
market. The company says it has adapted the Santro for Indian conditions. Complying with the
European Commission's Euro II emission standards, its Epsilon engine is a light compact and
quiet power plant. To maximize combustion efficiency, the Epsilon engine features a pen-proof
port that ensures a high swirl effect. Priced at about Rs 300,000, it is positioned to compete
with the Maruti Zen.
Birth of Santro
The Hyundai Santro was born to meet the typical Indian environment including road condition,
extremely high temperature, tough weather, heavy traffic and difficult driving conditions. So it
was not a surprise when Santro had successfully done 1,00,000 kilometers durability test on
Indian roads, twice. It is claimed that the Santro would require less preventive maintenance
which means saving of cost, time and efforts to Indian customers. In order to complement the
hi - technology Santro, Hyundai has in place a rapidly expanding and well structured after sale
network across the country.
Santro and Matiz are willing to put their money where their mouth is; this is an ample proof of
the business opportunity that both spot in the burgeoning small car market. Daewoo has
committed a whopping Rs 45 crore in direct marketing, sales training and advertising, while
Santro’s ad blitz will be backed by a war chest of Rs 20 crore.
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Santro’s target customer segment includes all those who believe in the ‘value-for-money’
concept. Santro offers a range of safety and convenience features in a price range that suits a
variety of customer needs and driving aspirations.
Most of the major players coming with their launch pad cars in India left the first two segments
and concentrated on the low volume, expensive mid-size automobiles for which they took a
beating from the price-sensitive market. Daewoo on the other hand did a ‘price-correction’ job
and offered value for money in the small car segment.
Hyundai realized that unsettling the core Maruti 800 market may be difficult, without achieving
the economies of scale. So instead, it is trying to take the Zen head on, while trying to target at
the top end of the 800cc segment i.e. with the air conditioned, Maruti 800 DX. Santro’s basic
variant with its technological superiority will give enough reason to potential Maruti 800 DX
buyers to consider upgrading at additional Rs 49,000. Its higher-end variants with a central
locking system and power steering feature at a price almost at par with Zen will give Zen a
tough time. Santro is aiming to become the family car of choice by demonstrating its suitability
for Indian roads. After the entry of Santro , segmentation will not be based on price alone. The
small car market will now be driven by value perceptions.also.
Customer Care Centers
Building a dealer and service network may prove challenging for Hyundai. Instead of plumbing
for distribution width, the company wants to consider factors like convenient location. So each
dealer is able to reach critical mass before a New Dealer is appointed in an adjoining market.
This is especially important since dealers are unlikely to make much money on spares in the
early stages of market development.
So far Hyundai is starting with a spread of 70 dealers in 55 cities. Hyundai is trying to build
one-stop-shops, calling it ‘customer care centers’. It is also looking at the possibility of
company-owned dealer-cum-service centers. Three are already operational, named Hyundai
Motor Plaza.
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Santro is a close contender for the top slot in the small car segment, which has been occupied by Maruti's Zen.
Hyundai has sold 72,283 Santro vehicles since its launch in October 1998.
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Daewoo India Ltd.
The Company
Daewoo Motors India commenced its operations in India with the production of Cielo in July
1995 and since then has expanded its product range to Matiz in small segment, Cielo
Executive and Nexia in mid-size segment and Royale & Caravan buses in the light commercial
vehicle segment. Daewoo Motors India limited started manufacturing in its state of the art plant
at Surajpur, Uttar Pradesh. The company has invested Rs 4000 crores in setting up the state-
of-the-art manufacturing plant and research & development facilities. In addition to this, the
Commercial Vehicle Division at Surajpur plant has got a separate facility to manufacture
15,000 Commercial Vehicles (both buses & LCVs) per annum. Daewoo Motors’ endeavor is to
introduce a product in every segment of the Indian passenger car market.
Daewoo has primarily 3 brands competing in the Indian market; Matiz, Cielo and Nexia. The
Matiz is available in four models: Standard (SS), Deluxe (SD), Executive (SE) and Premium
(SP).
Daewoo cars have achieved a very high level of localization. While Matiz is more than 70 per
cent localized, the Cielo Executive and Nexia have achieved the indigenisation level of 80 per
cent.
Distribution and Service Network
Since the launch of CIELO, Daewoo has undertaken a major expansion drive by increasing its
present strength of 110 dealers and over 100 Authorized Service Centers to cover the entire
country. The company also has more than 200 vendors (component suppliers) across the
country.
In addition to this, the Company has appointed 14 exclusive LCV dealers across the country to
take care of sales and service requirements of Daewoo Commercial vehicles.
Within 24 months after the launch, Daewoo found the ride into the Indian automobiles
market difficult. Its flagship product, the 1,498-cc Cielo, was hit hard by the recession in the
luxury segment. Cielo's market-share had slumped from 35 per cent to just about 16 per cent.
18
The auto major read the market wrong. Since the small segment in the initial years
was dominated by MUL with a market-share of 96 per cent, Daewoo could not visualize that
the small sized segment would grow at a faster pace than the segment it decided to enter in. It
did not consider it worth while to challenge Maruti in small car segment. With tried-and-tested
mid-size models in its boots, Daewoo found the mid size market more alluring. Daewoo
misjudged the growth potential of the small segment that grew faster than the mid-size one,
driven by the price-sensitive customer.
Since there were not enough players in the mid-size segment, Daewoo thought that it
would stand a fair chance in capturing this segment. It could not visualize the strengths of its
potential competitors that would be entering the market like Honda City, Ford and Opel. It
underestimated the market leader Maruti in the small segment. The mid-sized segment got
crowded with players like Opel, Maruti, Honda and Daewoo itself. Lack of understanding of the
customer motivations in the Indian market also caused embarrassment to many a major player
in the mid size segment. Daewoo failed to realize that given the economic conditions existing
in the country in the mid- nineties, the Indian consumer was very price sensitive and always
looked for value for money proposition. So the mid-size segment of the market did not grow
fast enough to accommodate the increasing number of players.
Why did Cielo fail?
Positioning Problems. Internationally, Daewoo occupies the lower end of the mid-size
segment. However, it tried to tap the premium segment in India initially. In 1995, the vacant
mid-size segment-occupied by the Maruti Esteem and the Contessa-was virgin enough for a
new player to make a mark. Daewoo also hoped its positioning, as a manufacturer of quality
cars would help while launching small car models in the future. So, the Cielo was launched,
and, by the second quarter of 1996, Daewoo was selling 1,600-2,200 Cielos a month.
But then, top-bracket competition was just around the corner. And, expectedly, Daewoo's
premium positioning was hit by the launch of General Motors' Opel Astra and the Ford Escort.
To outwit them, Daewoo's dealers began offering discounts on the Cielo: between Rs 30,000
and Rs 1.10 lakh per car. In January 1998, Daewoo formalized the discounts by slashing its
price by Rs 1-1.30 lakh. The base-price of the Cielo came down to Rs 4.90 lakh. And,
overnight, from a premium car, the Cielo became a discount brand. In fact, the Cielo's market-
share in the mid-size segment has come down from a high of 29 per cent in 1996-97 to 13 per
cent in 1998-99.
19
In March 1999, Daewoo managed to sell just 255 cars while newcomer Honda sold 1,359
Cities and Maruti sold 1,616 Esteems. And even though the Cielo Executive (the only variant)
is competitively priced at Rs 5.38 lakh, Daewoo's misadventures had created a “perception
problem”. Daewoo's tinkering with pricing and products had not only confused the consumer,
its 110 distributors too are unable to tell what the company will do next. But that was
synonymous with the Daewoo culture. For, in other countries, Daewoo's marketing is a
learning curve, which keeps changing ever so regularly. In other words, the Koreans thought
only about “today”-not “what will happen tomorrow”. While that has proved to be a boon in
developed and mature markets, where price-cuts and repositioning models are facts of life, the
Indian consumer reacted unfavorably. This again is a reflection on Daewoo’s part for not
having done the market and customer analysis properly. It couldn’t establish the fact that the
Indian market and consumer mindset were driven by different forces and ideologies.
Daewoo committed a fundamental error by opting for a discount-based promotional strategy,

which is more relevant in markets abroad, where cars like the Cielo are the entry-level
vehicles, which have high volumes. Theses high volumes more or less negate the discount
effect on the revenues. But the Indian market was not generating enough volumes in the mid-
size segment to justify the discount.
Daewoo realized that selling around 20,000 Cielos per annum does not make sense and,
hence, the company had to broaden the product range to manufacture another up-market
model and, significantly, a small car considering the price sensitive Indian market.
After realizing the initial blunder it had committed in judging the Indian market, Daewoo then
decided to venture into other segments, primarily the lucrative small size segment. Although
the company planed to tap all the segments of the Indian car market with its three models, it
was banking on the small car to boost volumes. But it was not going to be easy to enter and
survive in the Rs 4,032-crore small car market, monopolized by the Rs 7,956.48-crore Maruti
Udyog Ltd. (MUL).
20
The Matiz
By introducing Matiz, Daewoo tried to create a new category between Maruti 800 and Zen. It
hoped to gain market-share from both ends. Daewoo had an assumption that, while a
technology-conscious customer would easily prefer the Santro to the Matiz, Daewoo expected
that the customer may pick the Matiz over the Maruti 800 as pricing was crucial in the small
car segment. Declining profits, lower volumes, and lower realizations due to increasing
discounts had made Daewoo's management more cautious about the pricing of the Matiz.
But, while pricing was to be more strategic at the launch stage, the level of indigenisation was
what would matter in the long run. While MUL reached 27 per cent indigenisation within a
year, Daewoo planned to launch its small car with around 50-55 per cent indigenisation. While
MUL could capitalize on its fully depreciated plants, a strong dealer network, and low price
positioning , Daewoo had to depend solely on its technological strength.
Daewoo was also banking on the premise that the Indian customer, while being price-
sensitive, was also value-sensitive. It assumed the Indian customer to be waiting for a better
car with a better technology than what the Maruti 800 offered in the market .
It used technology as a differentiation in a market where the basic model of the Maruti 800 had
not changed in terms of its engine and gearbox. The top management thought that this
strategy could help Daewoo sell at a higher price, especially if it could market the product with
attractive financing schemes by stretching the repayment period. Daewoo's Test Drive
Scheme--which has helped the South Korean automobile major to develop an envious
database of potential customers, revealed a huge demand potential provided customers have
access to easy finance.
Although Daewoo had matched Maruti's dealer and service network, it still had to overcome
the Maruti 800's price barrier, and compete with a host of automobile majors planning to
launch small cars.
The Matiz was launched in October 1998, with low indigenisation levels of 25 per cent which
pushed up the sticker-price of the Matiz to Rs 3.67 lakh. Daewoo found it difficult to source
completely knocked-down units from South Korea for which it had to launch only a single
variant. This offer was a very expensive proposition for a car positioned in the small size
segment. While the Matiz had managed to sell only 10,488 cars since its launch in November
21
1998, the Hyundai Santro (price: Rs 2.93 lakh-Rs 3.62 lakh for 3 variants) has sold 30,300
cars in the same quarter.
The Matiz's initial pricing was found to be unrealistic. Daewoo should have first factored in the
price and then the features not the vice versa. It lay too much emphasis on the features of the
Matiz and too less on the price. This strategy was definitely doomed especially considering
how price sensitive the Indian consumer is. Daewoo would, probably, have been more
successful if it had first entered the small-car segment and then resorted to aggressive pricing
to outwit the market-leader Maruti
A change of strategy
Having learned the hard way, since April 99,there has been a complete transformation of
Daewoo India. It seemed to be determined to undo the previous errors it had committed. With
time it began understanding the Indian market and took efforts to deal with the competition.
Daewoo began leveraging its strength in technology to increase its market share. Given below
are some of the steps taken by Daewoo to improve its sales.
22
A better pricing strategy
In April, 1999, the company was forced to rework its strategy.It introduced three models :- a
stripped-down standard model (Rs 2.67 lakh), a deluxe model (Rs 3.04 lakh), and an
executive model (Rs 3.48 lakh.)
The new strategy started working and the demand for the brand has gone high. Encouraged by
the higher demand, Daewoo has gone into double shifts to rev up production. Gradually
Daewoo started making its mark in the Indian market which can be seen by the fact that for the
year ended March 2000, Daewoo Motors has sold 40,217 cars, comprising of Matiz (domestic
35,863 units and exports 1,196 units).
Apart from export of cars to Italy, Egypt and Sri Lanka, the company also exported 30,000
engines and gearboxes to Korea last year.
Focus on exports
In 1999 Daewoo Motors India Ltd. bagged an export order of 2500 cars to the European
market. Daewoo Motors India Ltd. (DMIL) exported cars and components worth $109 millions
in fiscal 1999-2000.The company has exported 1,170 units of Matiz, 31,488 engines, 25,056
trans -axles, 3,436 cylinder heads and 28,943 other parts between April 1999 and March
2000. DMIL started exporting engine components in 1997 and exported over 40,000 cylinder
heads by March 2000.
23
Efforts to improve Customer Service:
In its efforts to improve its position in the Indian market, Daewoo took a host of initiatives to
improve the after sales and pre sales services. Daewoo Motors India formed a dealer panel to
get market feedback and also suggestions for better customer service. The panel was
handpicked carefully from both urban and rural centers. It is changed quarterly. Daewoo's
initiative was not the first of its kind as other carmakers like General Motors India and Hyundai
had already got into the act of creating such committee. The idea was to conceive strategies
for boosting sales, which would involve vital inputs like aggressive advertising, financing and
so on.
The dealers believed that manufacturers like Maruti Udyog and Ford India had finance
schemes for their dealers but this was not the case with Daewoo Motors. Dealers believed that
once this is done, it would make a world of difference to the quantum of sales recorded each
month.
Interestingly, the committee was of the opinion that revival of the Cielo should be top priority
for Daewoo. Daewoo had, in its turn, planned to introduce company-owned dealerships in
select metros on the lines of contemporaries like Hyundai, which has its exclusive motor
plazas. These outlets would be manned by Daewoo personnel and offer a range of services
under one roof using international practices as a benchmark.
Realizing that selling in a crowded market would not be easy, Daewoo planned to rely on
direct marketing. It tied up with 6 non-banking finance companies for car finance schemes and
set up finance counters at each of its 110 dealerships. Daewoo Motors India Ltd. (DMIL) , in
collaboration with ICICI Personal Financial Services launched a new scheme for enabling car
buyers to purchase the company's small car , the Matiz at low interest rates as up to 10.2 per
cent. Besides ICICI PFS, the Matiz is also financed by leading auto financiers such as Kotak
Mahindra Primus Ltd., Countrywide Consumer Financial Services, Citibank, ABN-AMRO Bank,
Standard Chartered Bank, HSBC Ltd., Sundaram Finance Ltd. and Ashok Leyland Finance
Ltd. taking the current count of Financial Institutions providing loan facilities to 8.
24
Simultaneously, the South Korean manufacturer started building distribution muscle in smaller
cities and semi-urban areas, which, it believed, would drive growth in the future. Daewoo
Motors India Ltd. (DMIL) is in the process of doubling its service network for the company's
entire product range as a step towards increasing its customer base. DMIL is adding 100
additional authorized service centers (ASCs) in stages to take the total number to 200. This
apart, the company is also appointing 30 more exclusive dealers in various cities across the
country to take the total number of Daewoo dealerships to 140. The company's strategy is to
have the maximum number of satisfied customers before the launch of any new product. What
is of utmost concern to a customer is how much care his car will receive after the purchase.
The feel-good factor is very important, assuring customers of a long lasting relationship with
the company.
Daewoo Motors has also introduced the concept of Helpline. A Daewoo owner can dial the 24-
hour Help line number for assistance in case of breakdowns. The ‘Help line’ car is with him
within approx. 30 minutes (depending on the location of breakdowns) and specially trained
engineers and service personnel are available to rectify the problem. Through additional
services such as The Happy Call Center and Express Part Service (speedy delivery of any
part all over the country) the company hopes to provide its customers with the best possible
service network.
As a move to increase its share in the competitive market, Daewoo Motors has come up with
warranty program from two years to four years on a nominal payment for its range of small and
mid segment cars. Other competitors are offering only a one-year warranty program.
25
Technology and R&D
Daewoo has a sound technological and R&D base. After the first faltering steps that the Matiz
took in the Indian market, Daewoo took sufficient care to upgrade its models regularly. It was
the first company to introduce multi-point fuel ignition system in India, though it failed to use it
as a differentiating factor from other cars available in the market. Also Daewoo products were
conforming to the Euro II emission norms, the only company to have such products when the
law was passed. This helped it to have some price advantage over its competitors since the
competitors had to pass on the increase in costs to the customers because of this new
technology. The company introduced an all-new M-Tec (magic and maximum power
technology) engine in Matiz, which is more responsive, gives better acceleration, improves
power and performance in city driving conditions and provides better fuel efficiency. The
company has enhanced the compression ratio in the new Matiz engine from 8.5 to 9.3,
showing about 10 per cent improvement in the overall performance of the car. Besides this,
the engine has been spruced up with exhaust gas re-circulation for better emission, a heated
type 02 sensor for reduced response time and better emission control. The new Matiz engine
also has a knock sensor, which acts as a device for the engine by preventing it from internal
damage and also controls the quantity of fuel intake in the reduced face of the piston head.
This results in maximum power output with better fuel efficiency. The company has also tried
to improve the a/c performance in Matiz by use of advanced a/c logic technique. Besides
Daewoo has introduced regular cosmetic changes to give its products an improved
performance, especially in the small car segment. The technological efficiency of the Matiz can
be judged by the fact that it has recently found a place in the Guinness Book of world record
for bring the most fuel efficient car on the road.
26
Tata Engineering and Locomotive Company (TELCO)
History & Evolution
Tata Engineering and Locomotive Company Ltd, popularly known as Telco was incorporated
in 1945 to manufacture steam locomotives. In 1954, the company diversified into automobile
manufacturing, through a collaboration with Daimler-Benz for the manufacture of commercial
vehicles. By the time the collaboration ended in 1969, Telco had not only become an
independent producer of medium commercial vehicles (MCVs) with negligible import content,
but had developed the capability of designing and developing such vehicles. The Company
progressively widened its product range to cover heavy commercial vehicles (HCVs) and light
commercial vehicles (LCVs), implementing one expansion program after another.
To sustain the unrelenting pace of its growth, Telco added machining, press and assembly
capacities, set up its own forge and foundries, and virtually created the country’s automobile
ancillary industry. The Company even developed facilities for designing and manufacturing
state-of-the-art machine tools, material handling equipment, dies and fixtures. To
accommodate the Company’s growing activity base, a large, modern complex was set up at
Pune in western India and a new plant became operational at Lucknow, in the north of the
country.
To provide a business focus for the Company’s main activity areas, Telco has created two-
business units’ -Automobiles and Construction Equipment – both of which have notched up
record-breaking results.
Telco today has a domestic market share of 68% in the MCV/HCV segment, 64% in the LCV
segment and 32% in the multi-utility segment. Apart from commercial vehicles, which range
from 1 ton to 35 tons GVW, Telco’s automobile products also include passenger vehicles and
an extraordinarily popular multi-utility vehicle. All these products have been developed in-
house by the Company’s own R&D Center. This Center is equipped with the latest computer-
aided design hardware and software, enabling the company to respond quickly to changing
customer needs, both in India and abroad.
Telco has been exporting its products since 1969 and currently exports about a tenth of its
output. Export markets include the Middle East, Africa and Southeast Asia, as well as
27
developed countries in Europe like France, UK and Spain. It is intended that exports should
account for 20% of the automobiles sold by the Company.
Telco’s second line of business, Construction Equipment, has also grown rapidly and the
Company currently commands a 61% share in the excavator market and 90% in the crawler
cranes market in India. The hydraulically operated construction equipment made by the
company is in collaboration with Hitachi Construction Machinery Limited of Japan. There are
ambitious plans for widening the range of excavators made by the company and for adding
new lines of construction equipment. A recent addition to the excavator range is Backhoe
Loader.
Telco is one of India's largest private sector companies. With a turnover of Rs 66.37 billion, it
is the country's leading commercial vehicle manufacturer and the world’s sixth largest
automobile company.
The widely successful Tata Indica, which is Euro 1 and 2 compliant, is the country’s first
indigenously designed, developed and manufactured passenger car. The company also
makes several other passengers vehicles, including the Safari, the Sumo, the Sierra, the Tata
Estate, and the Tatamobile pick-up.
The company’s products have received wide acceptance not only in India but also in markets
in the Middle East, Asia, Africa and Europe
Areas of business
The company manufactures medium, heavy and light commercial vehicles, multi-utility
vehicles and passenger cars. It also makes general and special purpose machines for
automotive applications at its machine tool division. These include NC/CNC horizontal and
inline machining centers, flexible manufacturing systems, CNC cylindrical grinding machines,
and robots for welding, cutting, painting and other applications.
In 1999, the company’s revenues from its four manufacturing plants at three locations in India
were Rs 66.37 billion ($1,573.5 million). In 1998, they were Rs 70.26 billion ($1,893 million).
(The average exchange rate in 1999 was Rs 42.18 to one US dollar.)
28
In the year ended 31 March 2000, the company’s total exports were worth about Rs 505.53
crore, against about Rs 600.78 crore in the previous year.
Locations
The company’s manufacturing plants in India are at Jamshedpur in Bihar, Pimpri and
Chinchwad near Pune in Maharashtra, and Lucknow in Uttar Pradesh. A fifth manufacturing
facility is being set up at Dharwad in Karnataka.
Collaborations
The Company has technical tie-ups with:
• The Institute of Development in Automotive Engineering, S.P.A., Italy, for assistance in
small car body design and styling;
• Nachi Fujikoshi Corporation, Japan, for robots for welding, painting and other
automotive applications;
• Le Moteur Moderne, France, for the development of diesel and petrol engines for
passenger cars; and
• Robert Bausch GmbH, Germany, for application work on the engine management
system for 4 PL petrol engines
Launch of Indica
TELCO launched Indica when the TATA group was in red. Telco chairman Ratan Tata said
that the 1400 cc car Indica would drive the company out of the red.
Tata, while talking to reporters at the IETF '99 in a videoconference from Mumbai said that the
overwhelming response of over 1.25 lakh initial bookings for the Indica had come as a
surprise. "It seems we touched the national chord somewhere as people responded to the fact
that this is the first Indian car," said Tata. "Indica is not the end of the road for Telco when it
comes to passenger cars. It is just the beginning, as there are more to come", said Tata,
adding that the company was working on another mid-size car after Indica.
29
Telco had to produce 60,000 cars a year to break-even. The group created two
organizations within Telco, one dealing with commercial vehicles and the other with passenger
cars. The company under took a major restructuring exercise whereby the passenger car and
commercial vehicles divisions would function as two separate business units. Telco had a
strategy to go for exports after addressing the initial requirements of the domestic market.
Awards and Recognition
In May 2000 ,Tata Engineering and Locomotive Company Ltd. (Telco) won a national award
for successful indigenous technology used in the Indica car project. The award titled 'National
award for successful commercialization of indigenous technology by an industrial concern' for
indigenous development and commercialization of Tata Indica car was presented by the
minister for human resource development, science and technology and ocean development,
Dr. Murli Manohar Joshi.
In November 1999 Telco was awarded the 'Department of scientific and industrial research
national award for indigenous design of the Tata Indica. It was the first company in India to
implement stringent emission norms well ahead of the mandate dates.
Promotions
The Indica advertising made interest for the car go into overdrive. The campaign revolved
around the premise that the Indica would not just meet people's expectations, it would exceed
them. Every advertisement has a story to tell
Pre launch Campaign

The Indica campaign began in the right earnest in December 1998. It was advertised as the
launch of a car that will spell doom for the small cars. It was directly aimed at Maruti 800. The
ad line used in the first campaign was “Car makers will suddenly remember all the things they
forgot to give you”. This hinted that Indica would have more features than any of the existing
small cars. Indica used the catch lines like “ More car per Car” “More dreams per car” to
suggest that Indica will be bigger in size to the existing small cars yet be in the small car
category. It competes with the mid size cars on size and give them a run for their money with
its cheaper price tag.
At the launch of the car TELCO claimed that the people would never have to suffer from a
small car again and that the n end of the year (1998) would be the end of the small cars.
30
Launch Campaign
The launch campaign of Indica focussed on the many advantages that it offered over other
cars in the same segment. It promised the customers more than the current offerings. Its first
advertisement carried the following catch line “50cc moped, 100cc bike 800cc car. Time you
asked for more.”
It then concentrated its efforts on criticizing the negative aspects of Maruti 800 and highlighted
how Indica has removed those very defects and presented a very sophisticated and modern
car to the Indian customer. It even pointed out that the shape of Maruti was very
unconventional and that people would prefer the shape of Indica to Maruti 800. The
advertisement read “ Box shaped, bubble shaped, wedge shaped. But then Gentlemen prefer
curves”
The launch campaign also focussed on the roomy interiors of Indica, a feature not offered by
Maruti at that point of time. Also the expertise of TATA in diesel engines and fuel efficiency of
these were the highlight of the launch campaign of Tata Indica.
Post Launch Campaigns
While the Launch campaign focussed on the features of Indica the post launch advertisements
focussed on the superior after sales service and longer warranty periods offered by Indica.
Telco was the first company to offer an 18-month warranty period on engine parts. The most
famous line used during this campaign was “We could go on and on about service or give you
the one word summary. TATA.” While their main adversary was the Maruti 800 ,Telco felt that
it could also tap the mid size segment using the selling point of space given by Indica. They
carried a campaign, which said “Forget small cars, we even make big cars feel small”
It then went on to highlight the fact that Indica was Euro II compliant even before it was legally
binding upon car manufacturers to do so. It also highlighted the concrete wall safety test that
Indica withstands and tried to showcase the car as a safe and strong car.
31
THE RACE HAS JUST BEGUN . . .
With increasing disposable incomes and ever-growing burden on the public modes of
transport, the Indian passenger car industry is heading for a bright future provided car
manufacturers offer a world class cars that give value for money, use novel marketing
concepts to entice potential buyers and offer good after-sales service.
Demand for passenger cars in FY2002 is projected at approximately 970,755 units while
production is expected to reach 1,210,000 units. The year is likely to witness a spurt in exports
due to excess supply and liberalization of export policy by the government.
Some of the future strategies that need to be addressed while entering in to Indian small car
market include the redesign of the vehicle to suit the Indian road conditions and to develop
aggressive marketing strategy to counter the cost advantage enjoyed by dominant players like
Maruti due to high capacity utilization. With growing number of two wheeler owners opting for
used cars, vehicles with higher resale value and excellent service network are likely to account
for a major market share in the near future. Moreover, the introduction of Euro III and Euro IV
norms in the near future is likely to increase the scrapping rates of cars.
Exports are likely to increase in the near future with the entry of international car giants like
Daewoo, Hyundai, Honda Siel, GM and Ford that intend to use India as a manufacturing
production base..
32
Reference web sites and books.
Japan Enters Indian Industry by Raja Venkataramani, Radiant Publishers.
www.bangalorebest.com/cityresources/Automotive/
www.economictimes.com
http://www.autoindia.com/cardata/sangls1.html
http://www.cybersteering.com
http://www.orionhyundai.com/profile.html
www.bsstrategist.com
www.financialexpress.com
www.indiaserver.com/thehindu/
www.domain-b.com/industry/automobiles/
www.marutiudyog.com
www.telcoindia.com
A&M Magazine (Sept 1999 – Dec 2000)
India Today
Business Today
Business World
33

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A CASE STUDY ON

THE INDIAN SMALL CAR INDUSTRY

Prof. Tapan Panda

A BRIEF OVERVIEW ON THE INDIAN SMALL CAR INDUSTRY

Despite projected over capacities--and current losses, carmakers continued to queue

The Pre 1997 Car Market

The Protected Giant MUL

The Advent of the Auto Majors

An Original Equipment Manufacturer (OEM) needs a minimum economic size of 1.50

An Original Equipment Manufacturer’s competitive advantage lies in its marketing

The After Sales Service Scenario

So they are reconciled to adopting a minority role or becoming auto component

Market Potential of Small Car Segment

Rise in the Income Levels

MAURTI UDYOG Ltd.

Maruti has introduced new models with a focus on:

The Department of Disinvestment (DoD) has prepared a Cabinet note-recommending sale of

Customer Care Centers

Daewoo India Ltd.

Distribution and Service Network

Why did Cielo fail?

Daewoo committed a fundamental error by opting for a discount-based promotional strategy,

A better pricing strategy

Efforts to improve Customer Service:

Technology and R&D

Tata Engineering and Locomotive Company (TELCO)

History & Evolution

Awards and Recognition

Pre launch Campaign

THE RACE HAS JUST BEGUN . . .

Reference web sites and books.

Japan Enters Indian Industry by Raja Venkataramani, Radiant Publishers.

A&M Magazine (Sept 1999 – Dec 2000)

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