RESEARCH REPORT ON WHY GLOBAL LEADERS FAIL TO MAKE MARK IN

INDIAN 4-WHEELER INDUSTRY?

 INDIAN AUTOMOBILE INDUSTRY- An Overview

The automotive industry in India is one of the largest in the world and it became the 4th
largest in the world with sales increasing 9.5 per cent year-on-year to 4.02 million in 2017
and expected to be third largest by 2022. Starting from the era when there was too slim of a
variety of cars available in Indian market, Indian automobile industry has come up a long
way to have a diverse array of cars these days. The progress in the automobile industry is
exhilarating. The avant-garde car industry never fails to amaze consumers with new
technologies in the areas of safety, entertainment, usefulness, or simply pure innovation. It is
full of examples of innovation that have revolutionised the way we see transportation and
travel today example is the advent of Electric cars and their growing acceptance in Indian
market.

In 2017 the industry was the 7th largest manufacturer of commercial vehicles and due to the
growing pace of Indian automobile market, a number of car manufacturers including the
global leaders have locked their horns in the Indian auto market. The World Economic Forum
ranks India 30th on the global manufacturing index, which assesses the manufacturing
capabilities of more than 100 countries. In the past three to four years, India improved on
nine out of ten parameters for ease of doing business. India is also a prominent auto exporter
and has prominent potential in near future. Automobile exports grew 20.78 per cent during
April-November 2018. It is expected to grow at a CAGR of 3.05 per cent during 2016-2026.
In addition, several initiatives by the Government of India like the government’s “Make in
India” initiative has played an important role in elevating country’s position. And the major
automobile players in the Indian market are expected to make India a leader in the four
wheeler market in the world by 2020.

There are a number of top automobile companies running their operations in India, which
again have a range of models in different segments of cars. However, while looking for top
10 automobile companies in India, one name that lead the list is Maruti Suzuki India. It has
consistently been the dominant leader in the Indian automobile industry. However, there are
also other big names like Hyundai Motors, Tata Motors, Mahindra and Mahindra, Hindustan
Motors etc.

Mini cars and hatchback cars have been the mainstay for the automobile industry in India,
with share around 50 percent and growth of 6 to 7 percent between financial year 2014 and
2017. These segments will continue to maintain a dominant position, but the majority of
growth is expected to come from new segments such as compact SUVs, sedans, and luxury
vehicles. The Indian auto industry is on the cusp of transformation, moving from BS-IV to
BS-VI and later to electric vehicles. Despite various hurdles like GST and no clarity on
the electric vehicle policy, the auto industry recorded a milestone in the financial year 2017-
18. .
  INVESTMENTS MADE-

In order to keep up with the growing demand, several auto makers have started investing
heavily in various segments of the industry during the last few months while some major
players packed their bags from the emerging Indian market like GM.
On the whole the industry has attracted Foreign Direct Investment (FDI) worth US$ 19.29
billion during the period April 2000 to June 2018, according to data released by Department
of Industrial Policy and Promotion (DIPP).
Some major Investments are-

 Hyundai is planning to invest US$ 1 billion in India by 2020.

 SAIC Motor has also announced to invest US$ 310 million in India.
 Mercedes Benz has increased the manufacturing capacity of its Chakan Plant to 20,000 units
per year, highest for any luxury car manufacturing in India.
 As of October 2018, Honda Motors Company is planning to set up its third factory in India
for launching hybrid and electric vehicles with the cost of Rs 9,200 crore (US$ 1.31 billion),
its largest investment in India so far.

 THE STORY IN A TABLE

Carmaker Units sold in FY 2017-18 Market share

Maruti Suzuki 1643467 49.98%

Hyundai Motor India 536241 16.30%

Mahindra & Mahindra 248859 7.56%

Tata Motors 210200 6.39%

Honda Cars India 170026 5.17%

Toyota Kirloskar 140645 4.27%

Renault India 102222 3.10%

Ford India 90061 2.73%

  WHY MARUTI IS A LEADER?

Maruti Suzuki India is an undisputed leader in the Indian automobile industry. It started its
journey in February 1981 as Maruti Udyog Limited, the company created history in the
Indian automobile market with its most popular model Maruti 800.

The company became the first Indian automobile company to manufacture one million
vehicles in 1994. The company became Maruti Suzuki India Limited on September 17, 2007.

1. EVERY MARUTI HAS A STORY:

From its first model the company has made a place in the hearts of the customer by clicking
on the right nerve. Presently it has 1820 sale retailers in 1471 locations compared to
Hyundai’s 718, Tata’s 539 and Mahindra’s 436 business networks. People buy Maruti
because they appeal to the heart as much as they appeal to the head.

2. PRICE OF OWNERSHIP/MAINTENANCE:

The capital price, cost of capital, opportunity cost, and therefore the elements cost area unit
quite low cost compared to its rivals. Company works on low margin and bets on its market
share.

3. SOUNDED MILEAGE:

Maruti Suzuki leads the frontier in producing economical diesel engines that offer excellent
mileage compared to its rivals thus luring the price conscious Indian consumers

4. BACK END/LOCAL ENGINEERING:

MSIL initially imported varied elements from its parent Suzuki (Japan) and few alternative
overseas vendors; however over the years the company created certain domestic plants where
that just about everything from gear box to animal skin seats were manufactured. Today,
MSIL has an incredible face system that provides and supports it well.

5. SELLING VALUE:

It’s one amongst the foremost vital issue wherever most of the Indians would take into
account before shopping for a vehicle the returns on investment. Maruti Suzuki excels fine
once more during this space wherever it's its own separate platform known as Maruti True
worth, Sell, get and Exchange

6. PRODUCT PORTFOLIO:

Maruti Suzuki confirms that it's a product for each Indian socio economic class. Currently,
it's sixteen models across VI segments (Hatchback, SUV, Muc, Sedan, Crossover, mini Van)
that are far above its rivals providing an expensiveness of choices for each client before he
buys one.
 7. CANNIBALIZATION (MARKETING):

In selling strategy, cannibalization refers to a discount in sales volume, sales revenue, or

market share of 1 product as results of the introduction of a replacement product by identical
producer. As an example, if the customer’s budget is on a lower aspect, he or she could
purchase associate Alto rather than a Wagon-R or Wagon-R rather than Swift or Swift rather
than Baleno. Though the volumes of Wagon-R, Swift, Baleno area unit hit, the sales still stay
with Maruti. Therefore Maruti ensures that the client rather than progressing to a Tata motors
or Hyundai Motors or any of its competitors stays with Maruti-Suzuki.

8. SPECIALIZE IN RURAL MARKETS:

Maruti Suzuki began to specialize in rural markets terribly early a lot of before its rivals that
is associate another vital issue for its sales volumes. Currently, MSIL’s sales from rural
markets area unit concerning thirty third that is extremely high compared to its rivals.

Some other facts that lead to Maruti’s success-

 First to launch a dedicated call centre for Customer Services.2000

 First to launch exclusive pre-owned cars and exchange vertical under the banner
of True-Value.2001.

 Initiated the concept of driving schools from their huge network of dealerships.

 ROADBLOCK FOR GLOBAL LEADERS-

1. LACK OF KNOWLEDGE ABOUT INDIAN MARKET

It’s the lack of knowledge of the Indian market and the requirements of the Indian consumer
that has created roadblocks for these automobile giant. To be successful in any market,
understanding the customer is most important to design the right product line-up, effective
distribution channels and marketing campaign. These global brands with their board members
sitting in Detroit, Wolfsburg or Tokyo, do not have in-depth understanding of the conditions
or factors impacting the Indian market when they vote on an investment proposal for a small
car platform hence end up in picking the wrong road map.

2. EXPECTING BIGGER MARGINS

Global market leader offer work on hefty profits and margin on per unit hence these
companies are often reluctant to bet on a small car. Globally, they are known for producing
big cars that offer fat margins, but in India the margin on a small car ranges between $500
and $1,000 per unit and the investment required in developing both big and small cars is
somewhat the same so the big brands often end up misreading the profit portfolio and making
mistakes on new product development.
A top executive said the boards of big European and American companies have to realise that
the investment proposals for the Indian market for new products
Cannot be seen with the same lens as they see those in developed markets. The per unit profit
in India will always be a fraction of that in a developed market

3. UPDATING THE PORTFOLIO

The success of Maruti and Hyundai in India is due to regularly updating of their product
portfolio and building an effective consumer insight. They kept on reading the current
market trends and came up with cars that best suited the need of the customer at the moment.

4. CLUBBING INDIAN MARKET WITH CHINESE MARKET

Most of the car manufacturers made a major mistake of clubbing the Indian car market
segment with the Chinese market under emerging markets as because the two consumers are
very different hence the strategy turned out to be flawed

5. RELYING ON EXPORTS
Companies that have developed products in India and for India have been able to find
markets in other continents as well. For instance,
Ford India Private Limited is exporting over 90,000 Eco Sport cars per year, almost twice the
amount of domestic sales. Similarly, Hyundai
And Volkswagen is using their factories in India as a global hub for compact hatch and
sedans but overtly dependence on exports leads to their ignorance of Indian market and hence
they fail to make an impact.
6. CHEAP IS NOT THE ONLY WAY
The general assumption that India mass market for 4 wheeler is for cheap cars is a general
failure as the customers has equally welcomed Hyundai’s i20 despite being one of the most
expensive superminis in the market

 WHAT NEEDS TO BE DONE

1. REIMAGINE AND REINVENT

The brands need to reimage their structure in the domestic market and came out with
innovative strategies on the consumer front.

2. GO GRANULAR
As pointed out earlier, a large share of demand in India will come from 49 clusters and rural
pockets. It is important for companies to outline their addressable clusters up front and invest
in appropriate products.

3. PARTNER TO BUILD RELEVANT ASSETS

Foreign brands need to partner with domestic brands to utilise their domestic understanding
and invest sensibly in the industry.
4. CHOOSE LEADERS WIDELY

One of the biggest flaws in the automobile industry is seen in the HR strategies of these
leaders as these companies generally hire expatriate top officials who don’t have much
understanding of the local situation and they try to impose their western strategy ignoring the
local leader’s plans and the executions turns out to be total flop. Hence the companies need to
focus more of the local leaders and provide them the freedom to devise plans and implement
them on regional front and then map the outcomes.

5. EMPOWER THE ORGANIZATION IN INDIA AND INVEST IN TALENT

6. EMBRACE TECHNOLOGY

Develop a clear and time-driven strategy for embracing digitization, big data analytics, and
connectivity.

7. RESEARCH
In order to succeed in the market, many man hours need to be spent to understand the psyche
of the Indian consumer. India has several different regions with different languages, cultures,
geography and economics. Treat it as a continent, not a country. Research is imperative. In
order to succeed in the market, many man hours need to be spent to understand the psyche of
the In. dian consumer. India has several different regions with different languages, cultures,
geography and economics. Treat it as a continent, not a country.

There are a couple of exceptions to this trend in Toyota and Honda whose only successful
models in India are cars that do well in the ASEAN (Thailand, Indonesia, etc.) markets. The
American companies tick almost none of these boxes.

 LOOK AT SOME HANDY FAILURE

GM FAILURE

Ford began its India journey in 1995 with GM following in 1996. The Indian market was quite
primitive at this time, so both these companies had time to establish themselves. GM began
with the German brand Opel which was received extremely well at the time. Customers loved
the feel of a solidly built European design. You’d think that they would have built on that
success. Instead, the brand was killed and replaced by Chevrolet. In isolation, this seems like
no bad thing. The issue is, Chevrolet began selling cars designed by the recently deceased
Daewoo motors of South Korea with the bowtie logo slapped on them. GM wrongly believed
that they needed to be cheap, without being bargain basement, rather than premium.

This led to a gradual and continuous fall in sale numbers with no new products launched and
no plans to rescue the failing brand. Instead of picking cars and platforms from their relatively
competitive European or even American arms, GM kept offering old models from the Chinese
or Korean markets. That’s not to say that these markets aren’t capable of producing good cars.
It’s just that as consumers, Indians wanted something that was either really cheap or really
good. Being a middle market player took them nowhere. The sad irony in all of this is that
their two best selling products in their troublesome Indian journey, the Cruze & Beat were
both globally successful models, not older or cheaper options.

FORD ISSUE
Ford India has made its own missteps as well, although they are still surviving. Their two most
successful models to date have been a European Ford Fiesta based hatchback, the Figo, and a
global model, the Eco sport. Recently, they began exporting the latter to the US market as
well. Although the mistakes are fairly similar between GM & Ford, Ford has relied more on its
higher quality products from Europe to source platforms and technologies. As America’s
number one brand and a star performer in Europe, Ford has all the tools in its arsenal to grow
in India. Whether they will is almost entirely up to them!

REFRENCES
https://economictimes.indiatimes.com/why-worlds-biggest-automobile-players-have-failed-to-
win-the-attention-of-indian-buyers/articleshow/52158687.cms
https://economictimes.indiatimes.com/read-why-general-motors-decision-to-hit-the-brakes-in-
india-is-a-big-mistake/articleshow/58782544.cms
https://www.quora.com/Why-is-Maruti-Suzuki-such-a-popular-automobile-brand-in-India
https://en.wikipedia.org/wiki/Automotive_industry_in_India
https://economictimes.indiatimes.com/topic/Hyundai-India