Maruti A Success Story

CSAE STUDY : MARUTI (I) LTD.

A SUCCESS STORY IN INDIAN CAR MARKET

By- V. K. S. Bankoti

Industry Overview

The de-licensing of auto industry in 1993, however, opened the gates to international automakers into the country with an idea to tap the large population base in India. Car sales managed to cross the 500,000 mark in 1999.

Year 2001 was a spate of new vehicle launches as well as controversies, financial troubles, mergers and shutdowns & it's a quite ever increasing competitive market.

For the first time, in the financial year end in 2005, the total sales of passenger vehicles - cars, utility vehicles and multi-utility vehicles - crossed the one-million mark to touch 1.06 million, with exports of 166,000 vehicles. Study says that by 2010 India will take over Germany in sales volumes and Japan by 2012.

Geographical overview

An understanding of the zone-wise sales of passenger cars in the country shows the northern states at the top with over 43.9 percent of the country\'s total car sales in 1998, followed by western states with a share of about 25.3 percent and southern group with nearly 19.5 percent. The eastern states have less than 11.3 percent total car sales in the country.

The car penetration in India is concentrated in a few developed states. The eight states namely Delhi (which accounts 38% of sales in the Northern region and 16.7 percent of nationwide sales), Maharashtra (which accounts 10.3 percent of nationwide sales), Tamilnadu, West Bengal, Gujarat, Kerala, Karnataka and Uttar-Pradesh possessed major portion of cars sales in the country.

Marketing and Advertising: What is going on?

Passenger cars may not remain an urban phenomenon. For faced with rising income levels in rural areas due to a recovery in commodity prices and prospects of a good monsoon, an increasing number of auto companies are aggressively making inroads into inner semi-urban/rural areas. Companies have drawn innovative strategies to boost sales in these areas.

Maruti has been a regular at rural melas this year including the likes of the Kisan Mela (Ludhiana), Sonpur Mela (Bihar), the Kila Raipur Sports Mela (Punjab) , Pushkar Mela (Rajasthan) and Auraiya(Uttar Pradesh).

Hyundai has been doing a series of city road shows covering semi-urban areas and is now planning to hold more road shows and region specific marketing activities and promotions.

Maruti Udyog launched its insurance services to provide hassle-free accident claims to customers, flexibility to undertake post accident repairs from any dealer workshop irrespective of where the vehicle was purchased and near cash-less transaction for post accident repairs.

What\'s Next?

* Understanding of the world scenario makes it clear, that all the major development in car market is in the emerging markets - where GDP expansion rates are higher and the car market is still dominated by first time-buyers. This has created a huge market for established carmakers to pursue India.

* There\'s a clear shift in the purchase patterns of consumers buying cars. They are kicking their price conscious attitude to purchases because of easy availability of consumer finance. They have become more knowledgeable and are willing to pay a slightly higher price, if they get the value for money they are looking for.

* Up gradation has become a reason to celebrate for carmakers.

* Long-term survival, then, will depend on the car company\'s ability to rack up volumes and use that to lower its sourcing and manufacturing costs.

* The interest of many car manufacturers will lie in keeping the price gap between two segments wide.

* When the carmakers are planning fuel-efficient models and also CNG version in addition to the petrol and diesel makes, the extension of concessional 5 per cent duty on import of LPG conversion kits as applicable to CNG conversion kits is good news.

* The government\'s policy of allowing import of second-hand cars will help the used car market become organised, thus gaining an element of credibility and therefore ensured expansion.

Current Situation of Industry

In 2002, the Indian government formulated an auto policy that aimed at promoting integrated, phased, enduring and self-sustained growth of the Indian automotive industry.

It allows automatic approval for foreign equity investment upto 100% in the automotive sector and does not lay down any minimum investment criteria.

Lays emphasis on R & D activities carried out by companies in India

Weighted tax deduction of upto 150% for in-house research and R & D activities

Formulation of an appropriate auto fuel policy to ensure availability of adequate amount of appropriate fuel to meet emission norms

Confirms the government's intention on harmonising the regulatory standards with the rest of the world India became the fastest growing car market in the world in 2004, growth rate of 20%. Car sales was 8,82,094 units against 8,20,179 units in 2004-05. 11th largest passenger car in the world and is expected to be the 7th largest market by 2016. Automobile industry expert predicts that by 2050 every sixth car in the world will be for Indians.

Production of 4-Wheelers

Manufacturers 2005-06

(Apr-Mar)

In Nos. Manufacturers 2005-06

(Apr-Mar)

In Nos.

Japanese OEM Korean OEM

Maruti Udyog Ltd. 572,097 Hyundai Motor India Ltd. 260,440

Toyota Kirloskar Motor Pvt. Ltd. 44,975 American OEM

Honda Siel Cars India Ltd. 41,361 General Motors India Pvt. Ltd. 30,687

Swaraj Mazda Ltd. 11,946 Ford India Pvt. Ltd. 26,946

Total 670,379 Total 57,633

European OEM Indian OEM

Skoda Auto India Pvt. Ltd. 9.767 Tata Motors Ltd. 449,878

Daimler Chrysler India Pvt. Ltd. 1,780 Mahindra & Mahindra Ltd. 128,601

Volvo