CAPSIM

PROJECT
REPORT
GROUP 9

Akshay Kumar. J (1240)

Ajay Aditya. S (1156)

Govind Venugopal (1135)

Manimaran Ramakrishnan (1158)

Jacob Naveen (1162)

Saran. S (1116)

Submitted on:
1
11-03-2020
 Table of Contents

Industry Analysis

1.1 Size of the Industry 5

1.2 Structure of the Industry 5

1.3 Growth rate over the past years 8

1.4 Expected growth rate in the future 9

1.5 Industry specific growth rate 10

1.6 Segmental analysis 12

1.7 Key operating metrics 15

1.8 Dynamics of the Industry 16

1.9 Regulations that affect the Industry 19

1.10 Imports and exports 21

1.11 Recent events 24

1.12 Analysis of Costs and profitability 25

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Firm’s Analysis

2.1 Market size 26

2.2 Segmental presence 27

2.3 Market share in each segment 36

2.4 Financials 41

2.5 Ratio analysis 42

2.6 Strategic decisions 45

2.7 Future Outlook 57

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 Industry Analysis

Automobile Industry

The passenger vehicle sales in India crossed the 3.37 million units in FY19 and is further expected to
increase to 10 million units by FY20. Passenger vehicle exports is estimated to touch about 6,90,000
units in 2019-20.

India is predicted to emerge as the world’s top third largest passenger vehicle market by 2021. This
wasn’t an easy journey for our nation, it took India around seven years to increase annual production
from 3 million vehicles to 4 million vehicles. The next milestone of 5 million vehicles on road is
estimated to happen within the next 5 years. This very much depends on today’s economic
development continuing, with a projected annual GDP growth rate of 7% through 2020, urbanization,
a burgeoning consuming class, supportive regulations and policies.

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 1.1) Size of the industry

Size of the Industry 3.37 million units

Geographical Distribution Jamshedpur, Pune, Lucknow, Gurgaon,
Delhi, Mumbai, Bangalore, Chennai etc.
Output per annum Rs 2,000 crore per annum
Percentage in the world market 6-8%
Market Capitalization 5% of the share
Export To touch about 7 lakhs unit in 2019-20

1.2) Structure of the industry

Key players

1. Maruti Suzuki

Maruti Suzuki, the most trusted car makers in the Indian market. Founded nearly four decades ago, it
was a joint venture between an Indian company, Maruti, and Suzuki, a Japanese automobile
manufacturer. Maruti Suzuki now holds 37% share of the auto market in India. Its first car model,
Maruti 800, was considered the most successful automobile in India. One can easily detect this auto
on Indian streets even the last production unit for such car has closed for seven years. Maruti Suzuki
has developed technology in creating cars for the Indian market with international standards. Its best-
selling models include Alto, Swift, Ertiga and Celerio.

2. Hyundai

Hyundai is a famous car brand from Korea. Since it entered Indian market in 1996, Hyundai Motor
India Limited has become India’s second-best carmaker, just after Maruti Suzuki. Since the launch of
its first model in 1998, Hyundai has developed strongly and consistently improved the design, quality,
and efficiency of its products. Many elegant and affordable models in their portfolio are Eon, Santro,
Grand i10, Xcent, i20, and Verna.

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3. Tata Motors

As one of the biggest car makers in Asia and the leading bus and truck manufacturer in the nation,
Tata Motors is exceptionally welcomed in Indian markets for giving awesome features at ideal costs.
Established in 1945, Tata Motors now owns six assembly units in India and four in other nations.
Besides cars, it also produces trucks, buses, and military vehicles. Tata’s famous models are Tata
Safari, Tata Nano, Tata Iris, Zest and Tata Sumo.

4. Honda

Honda Cars India Limited is a subsidiary of Honda, a multinational automobile manufacturer coming
from Japan. It was first launched in India in 1995 and since then, it has become a great car producer
in this market. Honda provides various products from automobiles to motorcycles, mountain bikes,
engines, solar cells and ATV. Honda is holding quite a large share in India auto market thanks to its
attractive, fuel-efficient and reasonably-priced products. However, many people still complain about
its high price for car spare parts. The Accord, Amaze, Brio, Civic and Jazz are Honda’s most successful
car models.

5. Ford

Entering the Indian car market in 1995, with it’s headquarter in Chennai, Ford India remains one of
the top car manufacturers in the country. Indians like Ford cars because of its high-quality engines,
great interior space, fuel-efficient performance and affordable prices. Some of Ford famous lines are
Classic, Figo, Ecosport, Endeavour, and Fiesta.

6. Renault India

Renault is a giant automobile from France. In 2005, it was established in India under the name Renault
India Private Limited in Oragadam, Chennai. Renault cars are known for their compact SUVs, fuel
efficiency, and great performance. Besides Duster, Scala, Pulse, Koleos and Fluence are their best-
selling models.

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7. Volkswagen

Volkswagen India, started in 2007, is a subsidiary of German car giant Volkswagen. It is now a big
player in Indian auto market with Vento and Polo as two most popular models. Though its high-
performance engine and long-lasting cars are well-received, their lack of spare parts for replacement
still annoys many buyers.

8. Mahindra & Mahindra

Founded in 1945 in Mumbai, Mahindra and Mahindra is an Indian leading car and tractor
manufacturer. Whether it is a tractor, an SUV or commercial vehicles, Mahindra and Mahindra will
pamper you with durable, strong and secure ones. Scorpio and Bolero are the successful models of
this auto giant.

8. Toyota

Japanese auto company Toyota started Toyota Kirloskar in India in 1997 and has built their reputation
with Altis, Corolla, Etios, Fortuner and Qualis models. Despite holding a large share in the auto market,
they do not produce diesel-powered car models and their production line is limited compared to
other’s opponents.

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Market-Share

1.3) Growth Rate over past 5 years

Growth rate for 5 years

14.08152

7.19118
5.33544

5Y HISTORICAL REVENUE GROWTH(%)

Maruti Suzuki India Ltd Mahindra and Mahindra Ltd Tata Motors Ltd

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 Market Cap

52070.543, 16%
Maruti Suzuki India Ltd

62712.085, 20% Mahindra and Mahindra Ltd

204103.413, Tata Motors Ltd
64%

Only Maruti Suzuki, M&M and TATA motors are the Indian listed companies.

1.4) Market Overview

The Indian passenger car market is anticipated to register a CAGR of 9.5% during the forecast period
(2019-2024).

The Indian automotive industry has been experiencing steady growth in the demand for and sales
of passenger cars, owing to improvement in economic condition and rise in the consumers’
disposable incomes. The country has witnessed a gradual shift from transportation to
comfortable/convenient transportation, and from convenient transportation to luxurious and safe
transportation.

• The globalization and commercialization further helped to increase connectivity and

broaden the overall automotive industry’s presence and importance in the country.
• The Indian automotive industry is shifting from just being a components manufacturer, to
an assembler and manufacturer of complete vehicles, including passenger cars.

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 • India is also a major exporter of automotive parts, components, and assembled vehicles to
countries in the Middle East and Asia, which is expected to continue to be a major
contributor to the Indian automotive industry’s revenue.
• With the growing presence of international automobile manufacturers and brands in the
country, and the consumers’ ability to purchase new cars and maintain those, the consumers
have been willing to buy more than one passenger cars to suit their various daily needs and
travel purposes.
• Additionally, a consistent rise in population has been a major factor responsible for the rise
in the automotive industry’s revenue, both for commercial vehicles and passenger cars.
• Furthermore, with the growing focus on improved fuel economy and reduced exhaust
emissions, the demand for and sales of electric vehicles, especially electric cars, are
expected to witness fast growth during the forecast period. However, inadequate charging
infrastructure and high cost of electric cars may hinder the growth of the market.

1.5) INDUSTRY SPECIFIC GROWTH DRIVERS

Auto Component Industry

The Indian automotive component industry is expected to witness healthy growth in the future, due
to increasing domestic demand, increasing exports, and the increasing flow of investments in the
automotive components sector.

Additionally, the Union Budget of 2018-2019, proposed an increase in the basic custom duty on
completely knocked down (CKD) imports of motor vehicles from 10% to 15%, benefitting the
demand for passenger cars among the consumers, especially for the entry-level cars. This, in turn,
is expected to support the domestic passenger car market.

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Connected Vehicles

Connectivity is still in the early stages of market in India. A minimum share of vehicles sold in India
come with factory-fitted connectivity features, but the mass adoption of smartphones, coupled with
low data costs, could enable connectivity features to increase in market share.

There are several connectivity-linked applications that are picking up in India. Basic in-car
entertainment, navigation, and in-car connectivity have developed rapidly over the last decade.
More advanced features that utilize car sensor data, driving behaviour, and vehicle-health
parameters are also evolving, particularly with aftermarket solutions.

Several start-ups are leveraging this data coupled with proprietary hardware and algorithms to build
solutions on improving safety and security, tracking vehicle activity or theft, monitoring and
influencing driver behaviour, and enabling timely repairs and maintenance. Moreover, car
connectivity affects not just OEMs but also several ecosystem players, including insurance
companies, telecom operators, and technology companies.

Autonomous Vehicles

Autonomous vehicles (AVs) offer promise to resolve some of India’s road-safety challenges.
Drivers and passengers in India see about 12 percent of global road fatalities, and more than 80
percent of road accidents involve some aspect of driver error. Avs have the potential to reduce
traffic congestion and improve safety and fuel efficiency.

Certain advanced driver-assistance system features such as park assist, navigation service, anti-lock
brake assistance, electronic stability program, and others have started to make their way into
vehicles in India. And once the Bharat New Vehicle Safety Assessment Program comes into full force
these features will see significant uptake.

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Shared Mobility

Penetration of shared mobility in India remains low compared with China and the United
States, but a major shift is under way in densely populated cities where the use of cabs costs less,
comparatively, than driving a personal car. Major stakeholders from the government to automakers
to venture-capital funds and cab aggregators agree that the industry will continue to grow,
becoming a significant alternative to commuting in growing urban areas.

The pace of this change likely depends on three main triggers:

• First is asset utilization, where cab aggregators’ ability to sweat their assets will determine their
ability to expand and offer more competitive rates to customers while letting drivers earn.

• Second, clarity in regulations will simplify compliance and encourage more people to join the
movement.

• Third, several cities in India are investing heavily to upgrade their transport infrastructure. This is
not just limited to building metros in big cities. The role of shared-mobility players will evolve as
transport infrastructure becomes mature.

1.6) Segmental Analysis

The classification of segment is done based on the length of the vehicle (Passenger car segment)

A1 Segment – Mini – Up to 3400mm (M800, Nano)

A2 Segment – Compact – 3401 to 4000mm (Alto, wagon r, Zen,i10,A-star,Swift,i20,palio,indica etc)

A3 Segment – Midsize – 4001 to 4500mm (City, Sx4, Dzire, Logan, Accent, Fiesta, Verna etc)

A4 Segment – Executive – 4501 to 4700mm (Corolla, civic, C class, Optra, Octavia etc)

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A5 Segment – Premiun – 4701 to 5000mm (Camry, E class, Accord, Sonata, Laura, Superb etc)

A6 Segment – Luxury – Above 5000mm (Mercedes S class, 5 series etc)

B1 Segment – Van – Omni, Versa, Magic etc

B2 Segment – MUV/MPV – Innova, Tavera, Sumo etc

SUV Segment – CRV, Vitara etc

Classification of Cars based on body Shape

ONE BOX (VAN/MPV) – It means Engine area, Passenger area & luggage area all in one box. There
won’t be separate compartment. For eg. Omni, Ace Magic, Versa

TWO BOX (HATCHBACK) – It means Engine are has a separate cabin while Passenger area and
luggage area are together. For eg. M800, Alto, Santro, i10, A*, Swift etc.

THREE-BOX (SEDAN/SALOON/NOTCHBACK) – It means Engine area, Passenger area & luggage area
all are having different cabin. For eg. SX4, City, Fiesta, Dzire, Ambassador, Indigo CS etc.

ESTATE/STATION WAGON – Its nothing but sedan whose roof is extended till the rearto create
more boot space. For eg. Indigo Marina, Octavia Combi, etc.

SUV (Sports Utility Vehicle) – These vehicles have large tyres, higher seating, higher ground
clearance. The engine area is separate, but the passenger & luggage area are enclosed together.
Most of these vehicles are equipped with either 4-wheel drive system or has the option for that.
For e.g. CRV, SAFARI, GRAND VITARA, PAJERO etc

SEMI NOTCHBACK – It’s a sedan whose boot door can be opened like a hatchback (wagon r, swift),
where the rear wind shield too opens along with the boot door. Unlike sedan whose rear wind shield
is always fixed. There are only few examples for SEMI NOTCHBACK – Skoda Octavia, Accent Viva.

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 Maruti Suzuki led the Indian passenger car market in 2018, in the hatchback, sedan, and
SUV and MUV segments. Mahindra registered the highest sales in SUVs, after Suzuki, whereas
Hyundai led the hatchback and sedan segments, after Suzuki. MSIL started upgrading the engines
of its most-sold vehicles that are compatible with BS6 norms, and Baleno was the first model
launched in April 2019. The most sold MPV by MSIL, Ertiga, may also get a BS6 upgrade in the
second- half of 2019.

Hyundai, Mahindra & Mahindra, Honda, Toyota, and Ford India have added new passenger cars to
their product line-up. The vehicles launched in 2018 and Q1 of 2019 include Hyundai Santro;
Honda’s Amaze and Civic; Toyota’s Camry Hybrid and Yaris; Mahindra’s XUV 500, XUV 300, TUV 300
Plus, and Marazzo; and Ford’s updated Figo, Aspire, and Freestyle.

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 1.7) Key operating metrics for the industry

1. Number of Units Manufactured – This metric measure how many vehicles were produced by
a car manufacturer in each time:

This metric is important because it helps a manufacturer identify if it’s keeping up the demand and
potentially if there is an oversupply of specific models within the industry.

2. Total Cost to Manufacture – This metric measures the amount of money incurred by
manufacturers to produce one vehicle:

This metric gives us an indication of an automotive company’s ability to produce vehicles efficiently.

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 3. Utilization Rate – Expresses the capacity rate a vehicle manufacturer is utilizing during
available production time. Actual vehicle output/Potential vehicle output.

Utilization rate signifies if an automotive manufacturer is making good use of its time and labour. A
lower utilization rate may be costly for the manufacturer.

1.8) Dynamics of The Industry

The mix of markets driving the global automotive sales has changed yet again. The pace of global
vehicle sales growth is expected to slow over the next few years. It needs to focus on how to be more
agile in identifying emerging trends and on how to change strategies faster. We believe the
automotive industry is likely to witness more changes in the next decade than it saw in the last 20
years. We have identified six drivers of change that will shape the automotive ecosystem over the
next decade.

4. Accelerating pace of disruptive innovation

Rapid evolution of the shared mobility market has not only proven the benefits of asset-light business
models, but also their ability to rapidly deploy across the globe. Therefore, these new entrants are

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also proving that the capital-intensive nature of the automotive industry, which served as a barrier to
entry, is in fact becoming a liability.

New requirements for urban and individual mobility based on asset usage have also opened the doors
for a multitude of new entrants ranging from journey planners to mobility aggregators that provide
consumers with a one-stop interface to plan, book and pay across all modes of transport. In short,
disruption has become the fundamental to the rapid evolution of the mobility ecosystem.

5. Battle to own relationships in a digital market

Mobility remains dominated by personal vehicles, and the market is far from the tipping point at
which services start to generate more revenues than vehicles. But the pace of adoption of mobility
solutions does raise the risks for the auto industry losing its visibility of consumers, and it has ignited
discussions on customer relationship and life cycle management among automakers and retailers.

In the outcome economy context, purchasing decisions made for each ride are influenced by factors
including availability, comfort, ease of use, reliability ratings and pricing; this is entirely different from
the world of vehicle purchase decision-making where brand perception, driving experience and total
cost of ownership are principal considerations.

6. Digitalization across the value chain

More data and increasingly sophisticated connectivity across the value chain have impacted the entire
industry ecosystem. From exploring the monetizing opportunities at the consumer end to
transforming workplaces by applying robotics, the power of digitalization is substantial. Managed, it
can be a major source of competitive edge. But if unmanaged, it’s a source of risk.

While automakers, suppliers and connectivity infrastructure companies have been leveraging their
access to vehicle data to progressively drive innovation, they have had limited success in creating
additional sustainable revenue streams.

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Digitalization also challenges existing workplaces and employment practices as employees demand
greater connectivity and mobility to fulfil their roles more efficiently, irrespective of their functions.

7. Secure resources for business continuity

Rapid innovation and the increasing prevalence of diverse collaborations have created fresh
challenges in capturing valuable IP from company-wide innovation programs and formalizing IP
ownership structures in collaborations with third parties.

Also, demographic changes and the focus on new technologies are threatening traditional operational
knowledge. An aging workforce and early retirement schemes are a drain on the industry’s traditional
engineering and process knowledge in many mature markets.

8. Diverse sources of unpredictability

The number of regions witnessing dramatic changes in their political landscape, rise in terrorism,
social tensions and interstate conflicts, all signal growing worldwide instability. Having established a
footprint across most major markets, companies across the automotive ecosystem are now being
challenged by local volatilities, including in raw materials, foreign exchange and financial markets.

Volatility in the price of raw materials and the value of currencies has a direct impact on automakers’
profitability. And volatile financial markets can impact customer demand, refinancing costs and
valuations.

6. Unprecedented scrutiny

Besides regulators and activist shareholders, advocacy groups are playing a greater role in demanding
strict process definitions and adherence. Armed with social media and digital penetration, these
stakeholders have the potential to trigger significant risks, which may not be detected by traditional
automotive industry processes and risk monitoring.

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National and international regulators are increasing the pressure on compliance, governance and
transparency. This evolving and heterogeneous landscape of global regulations is driving complexity
into international operations and igniting new areas of risk.

1.9) Regulations for the industry

Legal Framework

Government regulation in the automotive industry directly affects the way cars look, how their
components are designed, the safety features that are included, and the overall performance of any
given vehicle. As a result, these regulations also have a significant effect on the automotive business
by generally increasing production costs while also placing limitations on how cars are sold and
marketed. Automotive regulations are designed to benefit the consumer and protect the
environment, and automakers can face stiff fines and other penalties if they are not followed.

In the 1950s, a consumer could easily differentiate one car from another by its make and model. Car
designs varied wildly year to year, and the creativity of these designs were part of their sales appeal.
However, these designs also differed greatly from one another in terms of safety.

How Government Regulation Affects How Cars Look

For example, the 1953 Mercury Monterey had a rigid steering column and sharp levers on the heating
system that could potentially impale a driver on impact. As the government stepped in and started
adding more modern safety requirements, such as seatbelts, airbags and crumple zones, many of the
car designs started looking the same so that automotive companies could more easily comply with
these requirements. Every safety feature has design limitations, takes up a certain amount of space,
and has to fit in a specific area of the car. This limits a car designer’s options when creating concepts
for new vehicles.

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Lawmakers also made fuel efficiency a higher priority in recent years. The Corporate Average Fuel
Economy (CAFÉ) is a set of national standards for automotive fuel efficiency that went into effect after
the Arab oil embargo in the early 1970s. The standards were upgraded in 2012 to increase fuel
efficiency goals to 54.5 miles per gallon by 2025. The development and implementation of new
technologies to reach these goals require substantial investment from automotive companies to
ensure new car models are both fuel-efficient and safe.

Emissions Laws Increase Cost

Emissions laws also affect a car maker’s bottom line. Catalytic converters and other devices designed
to reduce a car’s emissions cost money to develop, test, and mass-produce. While this expense is
typically passed on to the consumer, environmental regulations still significantly affect the day-to-day
operations of the automotive sector.

Government regulations are not restricted to the United States. Most automotive companies make
vehicles that ship around the globe. It is in their best interests to have standardized vehicles that do
not require modification before being sent to a foreign market. As a result, many cars are designed
to meet not only U.S. regulations, but the regulations of other countries as well. This adds further
expense and hampers the design process because many different criteria need to be met for a vehicle
to be street-legal in different parts of the world.

According to the data released by Society of India Automobile Manufacturers (SIAM), Indian
automakers exported a total of 4,595,000 units with largest contribution coming from two-wheelers
at 3,258,883 units, both registering growth of 20.15 per cent and 22.87 percent respectively. Three-
wheeler segment grew fastest by 55 per cent in the mentioned review period. Here’s is a detailed
analysis of the export’s performance of the auto segments in CY 18.

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 1.10) EXPORTS AND IMPORTS

EXPORTS

2017-2018

According to SIAM, 701,157 passenger vehicles were sent off India between January-December 2018.
That is lesser by 5.26 per cent compared to 740,095 passenger vehicles exported during 2017.

The top five passenger vehicle exporters

• Ford India
• Hyundai Motor
• Maruti Suzuki
• Volkswagen India
• General Motors
contributed 83 per cent of the total passenger vehicle exports from India in 2018. Indian passenger vehicle
makers dispatched 583,576 units. While the top three PV exporters contributed over 60 per cent to the total
exports. Barring Hyundai Motor, whose share in total exports grew by 2 per cent to 22.8 per cent in CY 18, all
the other top five players witnessed slump in exports. Hyundai Motor India exported 160,010 units last year.

Placed at fourth spot, Volkswagen India’s exports declined sharply by 30 per cent at 64,165 units during
CY 18 while the exports share contracted to 9.15 per cent from 12.44 per cent a year ago. In total, half of the
14 key passenger vehicle makers slipped to negative in export during 2018. The downturn in auto exports last
year came mainly due to fall in shipments to key exports markets such as Indonesia and Sri Lanka.

However, exporting a relatively smaller number of units, OEMs like Mahindra & Mahindra, Renault
India and Tata Motors remained in positive showing a growth trajectory of 88 per cent, 7 per cent and 18 per
cent at 11,925 units, 12,129 units and 2,773 units respectively.

Passenger vehicle (PV) exports from India increased by 5.89% in the first nine months of the
current fiscal, with Hyundai Motor leading the segment with dispatches of around 1.45 lakh units, as
per the latest data by SIAM.

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2018-2019

PV exports stood at 5,40,384 units in the April-December period of the current fiscal as
compared with 5,10,305 units in the same period of 2018-19.Car shipments saw 4.44% growth at
4,04,552 units, while utility vehicle exports saw a rise of 11.14% at 1,33,511 units during the April-
December period, the Society of Indian Automobile Manufacturers’ data showed.

o Hyundai Motor India Ltd (HMIL) led the segment. The South Korean automaker exported
1,44,982 units to overseas markets during the period under review, up 15.17% over the same
period last fiscal. The company exports vehicles to over 90 countries across Africa, Middle East,
Latin America, Australia and Asia Pacific. With cumulative sales of 1,44,982 units and a market
share of 26.8 per cent from April-December, Hyundai has once again maintained its leadership
position in the exports market with its super performer brands.

o Volkswagen India exported 47,021 units in April-December period, followed by Kia Motors
India which dispatched 12,496 units.

o Renault India shipped out 12,096 units during the period.

o Home-grown auto major Mahindra & Mahindra exported 10,017 units

o Toyota Kirloskar Motor dispatched 8,422 units during the period

o Honda Cars India exported 3,316 units to global markets

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 o Other notable exporting companies during the period included FCA India and Tata Motors with
2,391 and 1,842 units, respectively

Imports
Automakers in India have had one of their most tumultuous years in 2019, with sales volume declining
for months on end. Just when it seemed like the base had adjusted to low levels and sales could begin to look
up, there are new worries.

If prolonged, the lockdown of Wuhan, one of China’s so-called “motor cities”, and other neighbouring ones,
housing several automotive plants, threatens to disrupt supply of components to India’s vehicle makers.

After all, the Indian auto industry is highly dependent on Chinese parts. About 27% of the roughly $17.5 billion
worth of component imports into India comes from China, according to rating agency.

Some global component giants such as Bosch have already sounded alarm bells, given their heavy reliance on
China as an exports base. Vinnie Mehta, director general of Automotive Component Manufacturers Association
of India, says, “Even if vehicle manufacturing is adversely impacted due to imports from China indirectly, it
would resonate across the whole value chain.”

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To be sure, it is still early to estimate the extent of the impact. A spokesperson of a four-wheeler maker said
that for now, the company has enough components to continue running its production and sales operations.

There is also a silver lining for some sub-sectors in the component universe. Tyres could be beneficiaries as
cheap Chinese imports, which had jeopardized the local industry, would decline. Some metals and commodity
suppliers may also gain as imports from China would fall too.

Be that as it may, if the epidemic is not contained in the next couple of weeks, it would adversely hit vehicle
production in India. In one sense, the ongoing demand slowdown is a boon. So far in 2020 auto sales have
fallen 15% from a year ago.

However, hopes of a revival in domestic auto sales in the second half of FY21 (near the festive season) may be
dashed if component supplies are at risk for a prolonged period.

1.11) Recent Events in the Automobile Industry

1) Vehicle production may be critically hampered due to coronavirus outbreak: SIAM

2) Auto dealers fear they will not be able to liquidate BS-IV stock before March 31 deadline: FADA

3) Maruti launches BS-VI compliant Ignis at starting price of Rs 4.89 lakh

4) 1in 5 cars sold in India comes with automatic transmission.

5) Great Wall Motor to invest $1 bn in India, launch first SUV in 2021

6) Maruti Suzuki to sell one million green vehicles.

7) MG Motor India eyes increasing production of SUV Hector by up to 30%

8) Connected cars poised to become common phenomenon in India: Report

9) Hyundai’s new Creta SUV receives 10,000 plus bookings in one week

10) Car makers to stop BS-IV production ahead of March 31 deadline.

11) Hyundai rolls out online sales platform.

12) Audi bets on pre-owned car business and petrolisation to drive back to growth.

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 8.12) Cost components

There are four major cost drivers in the production and sale of an automobile:

• Raw materials
• Labour
• Advertising
• R&D (research and development)
• Raw materials contribute about 47% to the cost of a vehicle. On average, an automobile is
47% steel, 8% iron, 8% plastic, 7% aluminum, and 3% glass. Other materials account for the
remaining 27%.
• Approximately 22% of an automaker’s operational costs depend on steel. So, any fluctuation
in global steel prices has a direct impact on profitability. Steel billet prices came down
drastically from 15.2 euros per metric ton in 2008 to 4.8 euros per metric ton in 2013. This
significantly improved manufacturers’ gross margins. During this period, the gross margins
increased by 200 basis points, or bps, from 15.2% to 17.2%.
• Traditionally, automakers only used aluminum for wheels, cylinder blocks, and other engine
parts. Aluminum is twice as expensive as steel. However, this trend is changing in response to
stringent fuel economy standards. The US government’s Corporate Average Fuel Economy, or
CAFE, regulations require vehicles to have an average fuel consumption of 34.1 miles per
gallon, or mpg, by 2016. Vehicles are required to have an average fuel consumption of 54.5
mpg by 2025.

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The shift towards aluminium

Although it’s more expensive than steel, aluminium is much lighter. It has a similar strength. Every
10% reduction in weight improves the fuel economy by 5–7%. Currently, due to cost constraints, only
Premium segment cars—like Tata Motors’ (TTM) Jaguar XF and the Audi (AUDVF) A8—have
aluminium bodies.

The new Ford (F) F-150 will launch in January 2015. It will have a high proportion of aluminium
in its makeup. Toyota (TM) also said it will be using aluminium in the future for hoods, closures, and
parts to make cars lightweight.

Investors can gain exposure to the auto industry through the Consumer Discretionary Select
Sector SPDR ETF (XLY). Ford and General Motors account for 2.6% and 2.1% of the fund, respectively.

After raw materials, labour is the biggest cost source for automakers. It’s also the most contentious.
In the next part of this series, we’ll focus on labour costs.

2) FIRM ANALYSIS
2.1) Market size

● Domestic four-wheeler market has expanded at 7.08 percent compound annual growth rate
between FY13-18 with 29.07 million vehicles produced in the nation in FY18. From April-July
2018, automobile industry expanded 16.69 percent year-on-year to achieve 10.88 million vehicle
units.

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● In General, domestic cars deals expanded at 7.01 percent compound annual growth rate
between FY13-18 with 24.97 million vehicles getting sold in FY18. Vehicle deals in July 2018 saw
a year-on-year development rate of 7.9 percent crosswise over sections, driven by 46.24 percent
development in three-wheeler deals as far as rate.

PRODUCT LINE OF MARUTI SUZUKI

Maruti ALTO Maruti ALTO Maruti WAGON Maruti CELERIO Maruti
800 K10 R STINGRAY

Maruti RITZ Maruti SWIFT Maruti SWIFT Maruti Suzuki Maruti OMNI
DZIRE Ertiga van
Maruti EECO GYPSY GRAND VITARA Maruti-Ciaz Maruti baleno
van

2.2) Segmental Presence

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 GEOGR
DEMOG
APHIC
RAPHIC
AL

PSCHO
BEHAVI
GRAPH
ORAL
IC

GEOGRAPHICAL: -

• Country wise segment

• Urban and semi urban areas
• Geographical segmentation is one amongst the foremost vital basis of segmentation of the
car sector, particularly in massive sized countries like India, wherever the conditions in
several regions.
• Taking the division in India itself, we find that produces of tractors would concentrate
exclusively on those zones wherever horticulture is of prime significance and would focus on
those agriculturists United Nations office have sizeable land possessions and have the assets
to shop for a tractor.
• On the other hand, business vehicle firms would area the market on the possibility of
convergence of ventures in a few areas.
• Luxury car makers would without a doubt focus on the metropolitan districts for the offer of
their autos, though minimal car makers would conjointly mull over forming urban
communities and townships into thought all through the strategy for division of their item.

28
 • Having the big selection of models in nearly each section of the car market. Maruti Suzuki
offers sixteen brands and a hundred and fifty variants spanning across all segments
consisting. Therefore, serving the varied vary of consumers. Whole product strategy focuses
on occupation to the requirements of just about all the segments from the
centre category to high category.

DEMOGRAPHIC

With autos inside the economy area, mid-extend segment luxury and very premium segment Target
bunch for the entire incorporates anybody over four 100000 p.a. compensation, people attempting
to alter from 2-wheeler to 4-wheeler, twenty to thirty year olds utilized as experts and
managers. The centre category, higher bourgeoisie, Upper class, and Affluent classification the age
of 21-65 years incorporates of its target audience. Maruti Suzuki positions all its16 brands
in nearly as some ways to serve totally different needs and needs of shoppers such as:

Alto– Let’s go- Positioned as India’s most fuel economical automotive which might be afforded by
lower financial gain teams further.
Wagon R– galvanized Engineering- Positioned as a whole which works well with people that need to
steer economic and fascinating life style, mirror confidence and have the multifarious temperament.

Swift– You’re the fuel– Positioned because the automotive with vogue, fashionable appearance,
and young angle.
Swift Dzire- the centre car- Positioned as associate degree entry-level sedan for the
aspirational category.
SX4– Men area unit Back– Positioned because the powerful automotive for men.
Ertiga– “A Feeling known as LUV” – Life Utility Vehicle– Positioned as a compact seven-seater,
one which is able to have a tiny low footprint and a good turning radius.

Maruti-Suzuki use differentiated selling to draw in all segments. Others, like Hyundai, and
Microsoft attractiveness to 2 or a lot of segments, however not all segments.

29
Reason why it’s differentiated because:-almost each category of individuals will afford
cars created by Maruti.
Middle category
Maruti uses differentiated selling as a result of it provide:-

1. Sales maximization.
2. Recognition as a specialist

• For socio-economic class individuals 30aruti launched cars ,ike :-

800 (Launched 1983)
Omni (Launched 1984)
Gypsy (Launched 1985)
Wagon R (Launched 2002)
Alto (Launched 2000)

For higher socio-economic class ,cars like:-

Swift (Launched in 2005)
SX4 (Launched in 2007)
Swift Dzire (Launched in 2008), A-star (Launched in 2008),
• Ritz (Launched 2009), Estilo (Launched 2009),Eeco (Launched 2010)
Maruti New Wagon R (Launched 2010)

PSYCHOGRAPHIC:

It basically focuses on middle class people, but company does sports car too.

In view of psychological segment, vehicle makers return up with entirely unexpected variation of the
models of their item. This has been for the most part observed inside the instance of autos,
wherever organizations ordinarily returned up with 2 or 3 variations of a comparative model, and
it’s been found out in terms of professional career investigators that the variation of the medium
variation of the model moves the foremost.

30
Tag-lines like “Men are Back” (used by Maruti Suzuki for the launch of a replacement car) and
“Definitely Male” (used by Bajaj for a well-liked bike) target a specific class of
people and facilitate to extend sales and recognition therein phase.
Manufacturers of luxury cars like Ferrari, Porsche, etc target the section of the society with an
outsized income and position, and this will be achieved by psychological segmentation.

BEHAVIORAL: -

As mentioned earlier, activity segmentation is finished on the premise of the advantages sought-
after, loyalty standing, etc.
This is another necessary means that for segmentation within the automobile sector, and
taking another time the instance of an automotive, Daimler, the manufacturer of
luxury automotive Maybach, customises the cars consistent with needs and requirements of
the merchandise.

Benefits
client appearance for the subsequent advantages from an automotive.
Power
People do seek for power from power. In keeping with their, would like they give the impression of
being for cars in their several power basket (i.e. 600cc – 1300cc). The next power is expounded to
offer higher speed, acceleration by the customers.
Distribution of households (owning a car) by financial gain
Distribution of house (owning a car) by accomplishment
Technology
With all form of merchandise out there within the tiny cars market, technology will act as a,
somebody for client. New technologies like MPFI (multipurpose fuel injection), turbo charging,
electronic traction management, opposing protection braking systems, and convertors.

31
Behavioural segmentation:

ROAD WARRIORS

GENERATION

PRICE CONCIOUS

Behavioural consumption of people:

32
 HEAVY CONSUMPTION

MEDIUM CONSUMPTION

LOW CONSUMPTION

TARGETING OF MARUTI SUZUKI

It’s a noted incontrovertible fact that the agricultural market has been the foremost contributor for
the two-wheeler trade growth. 46% of the sales of Hero MotoCorp square measure attributable to
the agricultural phase. This phase has the potential for growth and may be relied upon for a
property growth. Not simply the two-wheeler however conjointly the hackney coach phase will
communicate this phase for its growth. On identical lines has the Indian Auto major, Maruti Suzuki,
taken its new course of action. Currently, one out of each 3 cars that the maker sells is
oversubscribed within the rural phase.

The company has set expectations of 50% sales from the agricultural phase by 2015-16. Perhaps, it’s
perpetually been the success issue for the corporate. Even throughout the slump within the sales
within the entire phase, Maruti managed to cross the road while not facing any drawback. Reason,
by little question, was the continual sales within the rural market. Maruti already includes a tight
hold on this phase. Last month there was a jump within the sales and therefore the company
witnessed a growth of 55%

33
Maruti’s rural market focus initiative started manner back in 2007. The corporate metameric the
category into tiny clusters. It approached its potential customers through the Panchayats. Curiously
the agricultural market isn’t simply searching for the tiny and low-cost cars. There has been growing
interest within the high finish cars too. The media has competed its half in carrying the
communication of those automobile corporations to the potential customers. Maruti Suzuki, during
a bid to form its presence stronger, has spread out twenty three new stores within the tiny cities.

After launching tiny family cars, government sedans for corporates and organization, and premium
compacts for young population for of these years, Maruti Suzuki India (MSIL) can presently launch
an automobile ‘Ignis’ targeting at Millennials, kids born in late Eighties and Nineties, the
corporate same on weekday.

Booking of this latest tiny automobile can begin from January one through the company’s web
site and official launch can happen on January thirteen. Like its premium hatchback Baleno and
crossover S-Cross, Ignis are oversubscribed through MSIL’s Nexa showrooms across the country.
The company contains a network of 197 Nexa retailers in one hundred fifteen cities across India and
it plans to succeed in up to 250 such retailers by finish of this year in one hundred fifty cities, RS
Kalsi, decision maker selling & Sales, MSIL, told reporters here.
Speaking on the newest automobile, he said, “This are associate degree entry phase giving from
Nexa – a premium urban compact vehicle for the millennials. Millennials have a want to
form a distinction and wish to square out on the premise of the alternatives they create. 1st time job
seekers, following a passion in life, UN agency stood up to disagree, can expertise the Ignis.”
Powered by one.2-litre gasoline and one.3-litre diesel engines, the
new automobile can have heap vibrant options, associate degreed additionally one will customise
the automobile from an array of decisions accessible at Maruti Suzuki dealers.
Ignis also will be accessible in transmission (AMT) choices for each gasoline and diesel in line
with, analysts pursuit the business, worth of the Ignis base variant is predicted to start out from
₹4.70 large integer to ₹5 large integer.

POSITIONING OF MARUTI SUZUKI

34
Maruti attempt to comprehend the client’s demography and brain research to position a brand
because they totally emerged with the emerging time and trends of the market they knew it very
well that if they won’t change soon they will be out of the market just like HMT ambassador.

• Maruti have changed from being a deals driven association to an absolutely client driven
association.
• Their slogan is simply depend on their dependability and affordability with ‘way of life’ which
means ‘Lifestyle’, so basically they are different from others because they are totally a
costumer driven company and they have successfully penetrated the market and made an
image of affordable and consumer based company as well as they are inside the mind of the
consumers that if its Maruti-Suzuki there will a good value for them as well as return on their
money.
• Small cars are positioned in Republic of India as town cars that are simple to drive, provide
high mileage, with low operational price and low worth. Attributable to the tremendous
growth within the little automobile market, varied world automobile makers are coming
into this market and so resulting in growing competition. This has more LED to each
manufacturer positioning it, higher than the rest, by upgrading merchandise, many versions,
new technology giving discounts & offers, higher finance choices. The table below shows
client targeted price

35
 making
positions in
hatchback
cars
DDID and
lowest
K-series
maintenance
engine is
cost
used.

POSITION
ING
16 valve
only engine
cylinder
with chain
head is used
driving
to give
timing
5 step multi efficient
system
injection consumption
system
gives
efficient
conbustion

SALES NETWORK:

Maruti Suzuki has the largest sales and service network amongst car manufacturers in India. It
had 802 sales outlets in 555 cities and 2740 service workshops in 1335 cities. The service
network of the Maruti Suzuki includes Dealer workshops, Authorized service stations and
Maruti service zones.

36
 The following pie chart clearly describes the sales network of Maruti Suzuki.

It is amply clear from the above pie chart that, Maruti Suzuki gradually increased its sales and
service network. In year 2005-06, the total sales network was 375 whereas in year 2006-07 the
number of sales network reached to 491. In year 2009-10 the number of Sales networks
increased by 121 over 2008-09 and reached to 802. In year 2011-12 the total number of Sales
networks was 1100 i.e a growth of 17.89 percent over 2010-11.

2.3) Financials

➢ DOMESTIC SALES:

Maruti Suzuki is the only Indian company who has crossed the 10 million sales mark since its
inception. The company has the largest sales and service network amongst car manufacturers
in India. In the month of October 2012, Maruti Suzuki reported 85.46 percent increase in total
sales at 1,03,108 vehicles, in same month the company had recorded domestic sales of
96,002

vehicles compared to 51,458 vehicles in 2011. In November 2012, the company sold total
1,03,200 vehicles and in the same month last year, the company sold 91,772 vehicles.

37
We can see the performance of Maruti Suzuki with respect to Domestic Sales through following
graph.

Domestic Sales of Maruti Suzuki

From the above chart it is revealed that the domestic sales of Maruti Suzuki India Limited in
year 2009-10 was 8,70,790 vehicles i.e. a growth of 20.58 percent than domestic sales of 2008-
09. In year 2011-12 Maruti- Suzuki sold 1006316 vehicles i.e. a negative growth of (-) 11.16
percent over 2010-11. In year 2010-11, the company sold 1132739 vehicles.

38
 Net Sales of Maruti Suzuki

The following pie chart describes the net sales of Maruti Suzuki during 2004-05 to 2011-12.

From the above pie chart it is revealed that Maruti Suzuki’s total Net Sales in year 2004-05 was
109108 million whereas the net sales in year 2005-06 was 120,034 million. In year 2010-11,
Maruti’s total net sale was 361,282 million whereas the total net sale in year 2011-12 was
347,059 million. In year 2011-12 Maruti Suzuki’s net sale was decreased by (-) 3.93 percent over
2010-11.

EXPORT:
Maruti Suzuki India Limited exporting to 98 countries in Europe, Asia, Latin America, Africa and
Oceania. Some leading overseas markets of Maruti include Germany, Netherland, France & UK.
Presently the company exports various models like A-Star, Ritz, Estilo and Maruti 800. In year
2009-10, Maruti Suzuki clocked export sales of 147,575 units its highest ever and in 2011- 12,
the company exported 1,27,300 units.

The following are the top ten export destinations of Maruti Suzuki India Limited.

39
Top Ten Export Destinations of Maruti Suzuki

Sr.No Country Vehicles Exported (In No)

(As on 31 March 2010)

1 Netherlands 78,514

2 Algeria 68,506

3 Italy 52,250

4 United Kingdom 48,641

5 Chile 45,029

6 Germany 38,423

7 Srilanka 30,078

8 Hungary 22,924

9 Nepal 22,368

10 Egypt 18,523

The following chart clearly focuses on Export of Maruti Suzuki during 2004-05 to 2011-12.

40
 Export of Maruti Suzuki

It is revealed from the above chart that the export of Maruti Suzuki in year 2009-10 was
147,575 vehicles whereas the company exported 138,266 vehicles in year 2010-11 i.e the year
2010-11 saw negative growth by (-) 6.30 percent over 2009-10. The year 2011-12 had also seen
a negative growth by (-) 7.87 percent over 2010-11. The year 2009-10, recorded marvellous
growth of 110.75 percent over 2008-09.

The following graph stated the economic performance of Maruti Suzuki India Limited during
2004-05 to 2011-12. The graph depicts the profit of company after tax.

41
 Profit after Tax

It is amply clear from the above chart that Maruti‟s profit after tax in year 2004-05 was 8536
million whereas after 2004-05, the profit of Maruti Suzuki gradually increased till 2007-08 as
the year 2008-09 recorded less profit over 2007-08. Also from 2009-10, Maruti Suzuki recorded
less profit. In year 2009-10, Maruti‟s profit after tax was 24,976 million whereas in year 2010-
11 the company‟s profit reached to 22,886 million. In year 2011-12, Maruti‟s profit after tax was
not remarkable. In this year the company recorded 16,351 million profit.

2.4) Ratio analyses

Net PS
PE Profit Return on Operating Premiu
Sub- Rati Margi Investmen Profit m vs
Name Ticker Sector o n t Margin Sector
Maruti Suzuki India Four
Ltd MARUTI Wheelers 26.7 8.9 16.2 9.5 157.8

42
 Mahindra and Four
Mahindra Ltd M&M Wheelers 10.8 5.7 6.8 10.9 -34.9
TATAMOTOR Four
Tata Motors Ltd S Wheelers -1.9 -9.6 -16.6 -9.7 -81.3
TATAMTRDV Four
Tata Motors Ltd R Wheelers -0.8 -9.6 -16.6 -9.7 -81.3
Four
Force Motors Ltd FORCEMOT Wheelers 11.7 3.9 7.1 3.6 -69.1
HINDMOTOR Four
Hindustan Motors Ltd S Wheelers 3.9 4949.7 - -1347.3 21110.3

2.5) Strategic decisions:

Maruti Suzuki Porters Five Forces Analysis

Power of buyers

In the last 15-20 years, Maruti Suzuki managed to dominate the Indian automotive market based on
a value for money foundation of producing cheap fuel-efficient cars backed by good after sales with
little regard given to style or features. In the past, this served the market well due to the economic
realities of weak purchasing power, barriers such as regulatory protection and information
asymmetry. But as incomes rise, and technology fuels disruptive technology, while knowledge
becomes a commodity, power has shifted somewhat to buyers. Sources of competitive advantage
are beginning to move beyond price to include differentiation, hence why Hyundai is gaining (Rao
2014). Nevertheless, because Indians rank car resale value very highly, it makes switching brands
very hard, so they get locked into certain brands limiting buyer power of Indian car buyers hence
the continued dominance of Maruti

43
Power of suppliers

Due to the sheer number of car manufacturers and brands setting up shop in India, it has also
spawned an influx of component manufacturers who supply the auto industry. This gives them
power over some brands that are not OEM manufacturers such as Tata Motors or Mahindra.

Rivalry within existing firms

India’s automotive industry currently resembles a duopoly with the top two car manufacturers
commanding more than 65% of the entire passenger vehicle market consisting of 18 car and SUV
manufacturers ((Annual Report 2017; Mukherjee 2017; Mundy 2017). This is a legacy of many
factors including early mover advantage of the Maruti Suzuki joint venture since 1982 while Hyundai
started manufacturing operations in 1992, the first foreign car brand to do so (Rao 2014).
Government subsidy arising from the government’s shareholding in the Maruti Suzuki joint venture
was an added perk for Maruti at least until 2007 when the government sold its shareholding. These
factors have helped Maruti and Hyundai build unmatched distribution, sales and service outlets,
helping them establish brand loyalty and reputation that will take time for rivals to overcome (Rao
2014).

Threat of substitutes

Another unique feature of India’s automotive industry is the massive presence of two wheelers,
whose unit volume sales reached 18million (or 81% market share of the automobile market)
compared to passenger vehicle unit sales of 3.4million–13% market share (Statista 2017). This
means car purchases in India have a far bigger threat from two-wheeler substitutes compared to
other modes of transportation in other countries. Together with the rail, they offer a more
affordable way of travelling within the country for the poor as almost half of two-wheelers sales
comes from rural markets. Car rentals and cab aggregating platforms are another substitute whose
continued growth is driven primarily by millennials but whose threat isn’t substantial due to
fragmentation with demand mostly for short duration trips or weddings (Euro Monitor 2017;
Mukherjee 2016).

44
Threat of entry/Barriers to entry

Maruti Suzuki is all too aware of the threat new entrants pose to both its dominance of market
share as well as profitability in different car segments as well as the automobile entire market. The
threat of entry in an industry is usually determined by the barriers to entry that existing players set
up to try and barricade themselves from competition. In India’s automobile industry, Maruti is
facing increased competition from domestic rivals such as Hyundai Motors India that has been
eroding Maruti Suzuki dominance since 2012.

Maruti Suzuki has embarked on a strategy of raising entry barriers to fortify itself against increased
competition. In business strategy, one of the most effective offensive strategies incumbent market
leaders use when facing market share erosion across key segments is to raise entry barriers through
tactical manoeuvres such as capital expenditure on new products, increased differentiation aimed
at reinforcing consumer loyalty, or an outright price war against an encroaching competitor to deter
them

A price war or increased capital expenditure on new car models isn’t the most favoured option by
carmakers because it’s risky yet very expensive. Maruti Suzuki has instead managed to gain and
sustain its current competitive advantage through a four thronged counter-offensive strategy that
has focused on raising entry barriers and fortifying its dominant position through

1) incremental product intervention,

2) distribution network expansion,

3) improved service offering and

4) digitization.

The leader and the No. 2 remain the same, but that is perhaps the only constant in the Indian
automobile sector in the past two decades. Other than volumes of cars sold having surged, the
number of models and variants along with the sheer number of carmakers in the fray have
burgeoned, making it a market unrecognizable from the one two decades ago.

45
 2.6) Value Chain of Maruti Suzuki

Five big shifts

Choices aplenty: In 1996, top six models accounted for 93.4 per cent of total industry unit sales. In
2016, top six models contributed under 34 per cent

Shrinking minis: With car penetration in India at 31/1,000 cars, entry-level mini cars still remain the
biggest selling model. But its share has shrunk from 41.7 per cent to 8.2 per cent and will shrink
further
Shifting centre of gravity: More income and higher aspirations mean buyers are buying pricier cars
like Swift, Dzire and Hyundai i20 making the compact car over Rs 4 lakh the most popular segment

Undisputed leader: Maruti Suzuki, with a parent deeply focused on India, has maintained and in fact
tightened its grip on the roads with four out of top six models from its stable

Two-horse game: Maruti and Hyundai have lorded over the market. It also means other MNCs are
yet to get a grip on Indian roads and along with homegrown Tata Motors and M&M.

46
Cost drivers:

Maruti Suzuki to shift its manufacturing plant to Gujrat: The advantages of moving car
manufacturing to the new plant, in addition to an industry friendly government, is that the Gujarat
location Maruti chose is virtually equidistant from the north and south of the country. That will save
shipping time and cost. The Gujarat ports are closer too, which will enable Suzuki export at a cost-
effective rate. Choosing a comparatively backward area like Behcharaji, still baffles me, though!
Maybe it is a cheaper land and not having to compete with the likes of Ford, Peugeot, Tata etc for
labour/manpower in Sanand that may have prompted them. And Maruti is an institution, so it may
not need a vendor ecosystem of Sanand/Ahmedabad.

Primary activities at Maruti Suzuki

9. Inbound L o g i s t i c s

Inbound Logistics i.e. the receiving and warehousing of raw materials, and their distribution to
manufacturing.

Maruti Suzuki’s inputs primarily comprise raw materials and purchased components. Raw
material includes rubber, glass, steel, plastic, aluminum. Tyre, windshields, and airbags are
example of parts or components. The company has implemented tierization of suppliers and Just
in Time supply logistics.

Unique Features:

➢ In order to improve quality and generate economies of scale, MUL has reduced the
number of vendors of components in India from 370 as of March 31, 2000 to about 100 as
in 2005. By lowering the time and cost involved in dealing with more vendors, they have
increased their supply chain efficiencies In case of repair and replacements, costs of
defective components supplied are borne by the vendor.

➢ Information systems – Vendors are linked through the Internet-based information

network, which maintains online information regarding order status and delivery

47
 instructions. These have helped in reducing both inventory levels and lead times required
for the supply of various components.

➢ The company has instituted sustainable practices in its relationship with vendors like
communicating realistic volumes to avoid excess capacities and inventories and making
quick payments to facilitate healthy cash flows and financial discipline.

➢ To reduce supply bottle necks, transport related uncertainties, high in-transit inventories
(related to long distance transport) and ultimately its total inventory levels, Maruti-Suzuki
creates incentives for far away suppliers to move near its plant. These incentives
comprise: setting up a supplier park with excellent on-site infrastructure; offering
subsidized, well located and industrially developed land; sales tax concessions; and
reliable power supply generated by Maruti-Suzuki itself.

➢ Over 76% of the company’s 246 suppliers are located within 100 kilometers of radius. This
has facilitated cost reduction in supply chain.

➢ The JIT system has evolved over the last 25 years in the company from monthly
scheduling to daily scheduling of parts order and finally in 2003 the release of schedules
on hourly systems, a practice that aids in maintaining less than two hours inventory of
components within the company.

➢ Maruti-Suzuki gets involved in establishing suppliers, supplier JVs with local suppliers and
asks Japanese suppliers to do the same. For instance, Maruti Suzuki formed a joint
venture with ‘Futaba Industrial Co., Ltd.’ (Futaba) for manufacture of Exhaust Systems
Components (ESCs). Futaba is the largest manufacturer of ESCs in Japan and has
operations in many countries. This joint venture will ensure supply of high quality ESCs to
the Company at lower cost.

II.) Oper ations

Transform inputs into final product form through machining, packaging, assembly, equipment

48
 maintenance, testing, printing and facility operations.

Production process at Maruti Suzuki:

➢ Maruti Suzuki’s manufacturing facility consists of fully integrated plants with flexible
assembly lines located at Gurgaon. The scale and complexity of the Company’s
manufacturing operations have now moved to a different league. Maruti Suzuki has
implemented Production Management System, which is a strategy to achieve
Manufacturing Excellence evolved through participative approach. PMS is

o A system which is people driven and ensures involvement of all levels (Managers,
Executives, Supervisors)

o A system which ensures ownership

o A system which brings in standardization of systems & processes

o A system which ensures Sustainability

➢ Maruti Production System or MPS draws learning’s from its parent company Suzuki Motor
Corporation’s concepts on `lean manufacturing’ under Suzuki Production System
i.e. SPS. Setting trends in new products and achieving customer delight starts with
Manufacturing Excellence and Maruti’s manufacturing excellence hinges around four
important pillars-Cost, quality, Safety and Productivity.

Cost

Every employee working on the line is ‘Cost Sensitive’ and functions in capacity of a Cost Manager.
He is a key contributor in suggesting how to keep costs of production under control.

Maruti Suzuki initiated a program called “Challenge 50:30” whereby cost was reduced by 30%

49
 and productivity was improved by almost 50% during the 3 years ending March 2006.

Quality

A product of poor quality requires repeated inspections, entails wastage in terms of repairs and
replacements. “Do it right first time”, is the principle followed to avoid wastage.

Distribution network:

Maruti Suzuki is one of the companies in India which has a huge distribution network. Today it
has 802 dealerships across 555 towns and cities in India. To ensure proper after sales service
Maruti Suzuki has 2,740 workshops (including dealer workshops and Maruti Authorized Service
Stations) in 1,335 towns and cities. It has 30 Express Service Stations on 30 National Highways
across 1,314 cities in India.

III) Outbound Logistics

Outbound logistics include the activities that deliver the product to the customer by passing through
different intermediaries. Some outbound logistics activities are material handling, warehousing,
scheduling, order processing, transporting and delivering to the destination. MARUTI SUZUKI GOOD
COMPANY OR GOOD STOCK B can analyse and optimise the outbound logistics to explore
competitive advantage sources and achieve its business growth objectives.

Because, when outbound activities are timely managed with optimal costs and product delivery
processes put a minimum negative effect on the quality, it maximises the customer satisfaction and
increases growth opportunities for the firm. MARUTI SUZUKI GOOD COMPANY OR GOOD STOCK B
should pay specific importance to its outbound value chain activities when its offered products are
perishable and require quick delivery to the end customer.

IV) Marketing and Sales

At this stage, MARUTI SUZUKI GOOD COMPANY OR GOOD STOCK B will highlight the benefits and
differentiation points of offered products to persuade the customers that its offering is better than
competitors. Only producing a high quality product at affordable costs and distinctive features

50
cannot create value until MARUTI SUZUKI GOOD COMPANY OR GOOD STOCK B invests on the
marketing and sales activities. The sales agents and marketers play an important role here.

Some examples of MARUTI SUZUKI GOOD COMPANY OR GOOD STOCK B’s marketing and sales
activities are- sales force, advertising, promotional activities, pricing, channel selection, quoting and
building relations with channel members. The company can use the marketing funnel approach to
structure its marketing and sales activities. The marketing strategies can either be push or pull in
nature, depending on the MARUTI SUZUKI GOOD COMPANY OR GOOD STOCK B’s business
objectives, brand image, competitive dynamics and current standing in the market.

Effective and wisely integrated marketing activities can develop the brand equity of MARUTI SUZUKI
GOOD COMPANY OR GOOD STOCK B and help it stand out from the competition. However, MARUTI
SUZUKI GOOD COMPANY OR GOOD STOCK B must avoid making false commitments about product
features that cannot be fulfilled by the production department. It indicates the need to ensure
coordination between different value chain activities.

V) Service

Aims to enhance or maintain the value of the product, such as installation, repair, training, parts
supply, and product adjustment

➢ Over the last few years, the company strengthened the existing practices and
experimented with many new initiatives by way of kaizens (continuous improvements) to
delight its customers. These initiatives ranged from product design and quality to network
expansion and included new service programs to meet unsaid needs of customers.

➢ There are more than 400 Maruti dealer workshops and more than 1,500 Maruti
Authorized Service Stations, covering more than 900 cities in India. In addition, 24-hour
mobile service is also offered under the brand “Maruti on road Service”. As a benchmark
for dealers with respect to service quality and infrastructure facilities, MARUTI SUZUKI has
launched service stations under the brand “Maruti Service Masters or MSMs.
➢ MARUTI SUZUKI also has service stations on highways in India under the brand “Express

51
 Service Stations”. To promote sales of spare parts and the availability of high quality,
reliable spare parts for its products, spares are sold under the brand name “Maruti
Genuine Parts”, or MGP. These are distributed through the dealer network and through
the authorized sellers of the spare parts.
➢ Many of the Service Stations are at remote locations where MARUTI SUZUKI does not
have dealers. Some of these Service Stations are integrated into the sales process in order
to increase sales of the cars and related products and services such as spares and
accessories, insurance and financing.
➢ In recent years, the Company has used IT to enhance interface with the customer. It has
deployed a world class Dealer Management Solution across its vast network of dealers
throughout the country. The solution has helped dealer managements to access a wide
range of information about their operations, as also customer satisfaction and feedback.

Key Initiatives

I) Car pickup & delivery facility for women car owners

Setting up “Express Service Bays” & “2 – Technician Bays”

As the name suggests the company set out to delight its customers by offering them faster car
service by introducing new concepts such as Express Service Bays & 2- Technicians Bays. These
are done for customers who are hard pressed for time.

II) Mega Camps

The company aggressively conducts ‘Mega Camps’ throughout the country round the year.
Activities undertaken during a mega camp include complimentary car wash, AC & Pollution check
up, oil and fuel top ups, wheel alignments etc.

III) Service at your Doorstep through Maruti Mobile Support

Another unique initiative is the doorstep service facility through Maruti Mobile Support. Maruti

52
 Mobile Support is a first of its kind initiative and is expected not only to help the company reach
out customers in metro cities but also as a mean to reach semi urban /rural areas where setting
up of new workshop may not be viable.

IV) Car Safety device: Immobilizer

The company used technology to meet customer needs and even delight them. Following
feedback that the company’s cars were more prone to theft owing to their resale value, the
company worked on an anti-theft immobilizer or “I-Cats;” system for all its new cars.

V) Complete car needs

The company’s effort of providing all car-related needs – from learning to drive a car at Maruti
Driving Schools to car insurance, extended warranty and eventually exchanging the existing car
for a new one – under one roof at dealerships also enhances customer satisfaction.
VI) The Low-Cost Maintenance Advantage

A car may be affordable to buy, it may not necessarily be affordable to maintain, as some of its
regularly used spare parts may be priced quite steeply. Not so in the case of a Maruti Suzuki. It is
in the economy segment that the affordability of spares is most competitive, and it is here where
Maruti Suzuki shines.
Secondary activities at Maruti Suzuki

10. Procurement

The function of purchasing raw materials and other inputs used in the firm’s value creating
activities.

• About three fourth of the car, by value, is outsourced. Any improvement in the car in
terms of technology and design, quality or cost has to essentially include the Company’s
vendors and their support. In the year 2007-08, the Company signed two joint venture
agreements with global component manufacturers for cost reduction through
localization of components for Maruti Suzuki cars. The Company is setting up a Suppliers
Park in Manesar, close to its car plant on an area of 100 acres for Just-In-Time supplies.

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 • In the early eighties, the Company made significant efforts in trying to develop a
component industry from ground zero. Over the next two decades, about 110 foreign
technology collaborations were facilitated and Maruti Suzuki engineers worked closely
with the vendors’ engineers to enable to deliver cars which are both high quality and cost
competitive. Now, the relationship has matured, and most direct vendors or Tier 1
vendors are competent enough to work on their improvement, but there is major scope
for modernization of some sections of Tier 2 vendors. The Company has identified this as
an opportunity for further quality, up gradation and cost reduction.

II.) Technology Development

Technology development includes research and development, process automation, and other
technology development used to support the value chain.

Research & Development (R&D)

During 2008, the Company took decisive steps towards building design and development
capability, in-house. The number of engineers in R & D went up from 258, at the start of the
year, to 398 engineers by the end of the year. In line with this, the number of engineers will be
scaled up to 1000 by 2010.

Specific areas in which R&D has been carried out by the company:

• Building Full Mode Change Capability

• Vehicle Design and Development

• Technology absorption, adaptation and innovation

• Localization, development and testing of parts for existing and new models.

• Capabilities strengthened in component and vehicle evaluation, benchmarking and design

optimization.

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 • Capabilities being further strengthened in area of alternative fuels like Diesel, CNG and
LPG.
• Value Analysis/Value Engineering (VA –VE) at the time of design and localization to
maximize cost benefit.
• Acquiring design and cost knowledge through teardown and benchmarking and using it in
future designs and cost reduction.
• Global sourcing and advanced sourcing to get the advanced technologies into India at lower
costs
• Design and development of electronic speedometers, keyless alarm controllers for
enhancing comfort and convenience.

Benefits derived from above efforts

• Indigenization of various vehicle aggregates at lower costs.

• Improvement and up-gradation of existing models for improved comfort, style and
better value for money.
• Continuous reduction in product cost through VA-VE.

• Compliance to new regulations. – Significant cost reduction of new model parts compared
to existing models, ensuring that the new models are profitable from day one.
• Significant cost reduction obtained in existing models.

III.) Human Resource Management

• Activities associated with recruiting, training, development and compensation of

employees. He Company’s key strength is its human capital. The Company has, during
2007-08, spent about Rs.10 crores on training of its employees. The Company conducts
programs such as “Bulandi” and “Chunauti” for the workmen and technicians to enhance
pride in being an employee of the Company and also to create team synergy.

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 • The Company goes further and trains its dealers’ and vendors’ workforce. 3200 programs
have been conducted covering more than 13000 dealers’ salespersons. The Company’s
“Maruti Centre of Excellence” (MACE) is a team dedicated to the development of vendors’
employees. In programs like “Family Connect” and “Parivar Milan”, family members of the
employees are invited to interact with top management to get a feel of the workplace and
environment.

• The Company strengthened the concept of Stay Interviews (as opposed to exit
interviews); to understand employee aspirations, delight factors and areas for
improvement.

• The Suggestions Scheme, which is as old as the Company, continued to make a significant
contribution to business performance. This has led to net savings of worth Rs. 666 million
in 2007-08 as against Rs. 509 million in 2006-07.

• Industrial Relations were cordial throughout the year and no man days were lost on
account of strikes or disruptions.

IV.) Firm I n fr ast ru ct u r e

• Firm infrastructure consists of general management, planning, finance, accounting, legal,

government affairs and quality management

• The Company has again been awarded ISO: 27001 Certification by STQC Directorate
(Standardization, Testing & Quality Certificate), Ministry of Communications and Information
Technology, Government of India after re-assessment. The Company is thus certified to meet
international standards for maintaining information security.
• Maruti Suzuki has two state-of-the-art manufacturing facilities in India. The first facility is at
Gurgaon spread over 300 acres and the other facility is at Manesar, spread over 600 acres in
North India. Maruti Suzuki’s facility in Gurgaon houses three fully integrated plants. Together

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 the three plants have an installed capacity of around 700,000 units.
• Maruti Suzuki was certified with ISO: 9001:2000 in 2001 and aim to achieve the TS- 16949
certification. In addition, it had made the following improvements in terms of producing
defect-free products:
• DFC OK: Maruti Suzuki’s Direct Final Check OK, or DFC OK percentage, which signifies the
percentage of vehicles that pass through the inspection stages as defect-free, improved from
approximately 77% in March 2002 to approximately 90% in March2004.
• Reduction in rejection: Maruti Suzuki’s in-process rejection cost per vehicle, computed as
the ratio of (1) the cost of components rejected due to defects arising during our production
process, to (2) the number of vehicles sold, declined by approximately 65% from fiscal 2002
to fiscal 2004.
• In house warranty: Maruti Suzuki’s in-house warranty costs per vehicle, computed as the
ratio of (1) the aggregate cost of components incurred by us to service warranty claims
arising from operational defects in our manufacturing lines, to (2) the numbers of vehicles
sold in the fiscal year, declined by approximately 85% between fiscal 2002 and fiscal 2004.

Kaizen

Maruti had adopted the Japanese management concept of Kaizen, or continuous improvement.
The Kaizen activities had resulted in the improvement of the in-house capabilities. For example,
they had manufactured 25 multi-axis robots and 16 multi-spot welders. Group discussions among
employees in different departments are conducted on a monthly basis in order to discuss and
resolve problems relating to their areas of operation, an activity referred as quality circle activity.
Based on the belief that individuals contribute to improvement in growth, there has been a
suggestion scheme in which they promote participation of all employees at all levels. The average
number of suggestions made per employee has improved by approximately 35% in fiscal 2004,
when suggestion received were more than 80,000, as compared to fiscal 2002. Some of the other
improvements as a result of the Kaizen process have been increased automation through
automated material transport system.

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 2.7) Future of Automobile in INDIA
1.Prepare for roadblocks

The force of rising income demographics will create opportunities for the incumbents and the
upstarts. India’s average incomes are rising by roughly 10%, the middle class will more than triple to
~100 million households by 2025, and, hence, the question should not be whether the growth will
happen, but it should be how to enable the growth and prepare for it.
And it is not about choices—millennials vs others; shared mobility vs conventional mobility; BEV vs
ICE—but about how to harness the power of the collective. The ecosystem should be solving a
different set of questions. Are there different ownership models for millennials who have fewer
proclivities towards vehicle ownership? How should shared-mobility players be leveraged to increase
the overall mobility market? How to leverage Evs for their real advantages?
The structural issues to solve are around a) adequate road density as peak-time traffic speed is
starting to be grinding halt, b) enough alternative fuel availability, especially CNG, to not artificially
create adoption barriers, c) sufficiently developed EV supply chain to support vehicle manufacturers’
electrification journey in India, and d) availability of sufficient and optimally-priced credit. The
automotive industry is at the cusp of creating the next ‘S’ curve in its evolutionary journey. And
considering the positive benefits that the sector has on the overall economy, the full might of the
industry ecosystem should now come behind the sector to support this upward inflexion in the
trajectory.

11. A tech-agnostic regulation

Consumer is queen in most market segments. She is so in the automotive sector, where consumer-
choice almost always trumps any forced technology offerings. The consumer would weigh a complex
set of buying factors in arriving at their buying decisions, comprising functional and economic criteria.

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The implication is framing regulations in the sector, which should be from the point of view of
outcomes (e.g., emission standards, fleet emission norms, safety requirements), and not to push one
technology versus the other.
Let the market forces prevail to decide between an internal combustion engine (ICE, i.e., petrol,
diesel, CNG fuelled) vehicle, a hybrid electric vehicle (HEV), or a battery-electric vehicle (BEV). Let
consumers take a view based on their usage requirements and total cost of ownership (TCO). In the
longer run, this will foster the right kind of innovation that matters to the consumers.
Competing technologies can co-exist under uniform regulation paradigm which best suit an
individual’s needs and use case, e.g., in 2022, it will make complete commercial sense to run BEVs as
taxis with daily usage of ~200 kms, while for a light user with daily use of 15-20 kms, a petrol/ CNG
vehicle will be most economical. It is also important to maintain consistency of stance across industry
participants. Confusing signals vitiates the consumer’s clarity and timing of what to buy, when to buy,
leading to significant exacerbation of a downswing in demand. It also leads to false expectations in
the consumer’s mind of the rewards of delaying their buying decision which may not accrue.
12. Enter Pre-owned car market

As pre-owned car market is booming; companies should look up to the opportunities in that market
and make variable initiatives on long-run to survive in the sub-continent.

Maruti Suzuki-Toyota joint venture to recycle cars.

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 References:

https://www.bankbazaar.com/car-loan/best-hatchbacks-in-india.html

https://www.marketing91.com

https://www.slideshare.net/pasaks/maruti-case-analysis

https://www.ibef.org/

https://www.financialexpress.com/

https://mckinsey.com/

https://www.statista.com/

https://www.moneycontrol.in/

https://www.indianauto.com

https://www.indiamarks.com/

https://www.automotives-technology.com/

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