B2 Group 4 SM-I Project

STRATEGIC MANAGEMENT - I
Industry Analysis –
Automobile Sector in
India
Institute of Management Technology
REPORT
Group 4 – B2
Mohd. Afroze Ali (09FT-085)
Mohd Asif (09FT-086)
Mohit Gupta (09FT-087)
Mohit Sharma (09FT-088)
Mudit Mishra (09FT-089)
Suresh Varma (09FT-090)
Table of Contents
Automobile Industry: An Overview..................................................................................................5
Evolution..........................................................................................................................................6
Safety Norms.............................................................................................................................10
Homologation............................................................................................................................11
Taxes and duties.......................................................................................................................11
Domestic Player Profiles..............................................................................................................13
Fiat India Pvt. Ltd......................................................................................................................14
Ford India Ltd............................................................................................................................14
General Motors India Pvt. Ltd..................................................................................................15
Honda Siel Cars India Ltd........................................................................................................15
Hyundai Motors India Ltd.........................................................................................................16
Maruti Suzuki India Ltd.............................................................................................................16
Nissan Motor India....................................................................................................................17
Skoda Auto India Private Ltd...................................................................................................17
Tata Motors Ltd.........................................................................................................................18
Toyota Kirloskar Motors Ltd.....................................................................................................18
Volkswagen Group India Pvt. Ltd...........................................................................................19
Mahindra & Mahindra Ltd........................................................................................................19
PESTEL ANALYSIS INDIA..............................................................................................................20
Political landscape........................................................................................................................20
Current strengths......................................................................................................................20
Current challenges....................................................................................................................20
Future prospects.......................................................................................................................20
Future risks................................................................................................................................20
Economic landscape....................................................................................................................21
Future risks................................................................................................................................21
Social landscape...........................................................................................................................21
Future risks................................................................................................................................22
Technological landscape.............................................................................................................23
Future risks................................................................................................................................23
Legal landscape............................................................................................................................24
Future risks................................................................................................................................24
Environmental landscape............................................................................................................24
Future risks................................................................................................................................25
PORTER’s DIAMOND MODEL.......................................................................................................26
Demand Conditions......................................................................................................................26
Factor Conditions..........................................................................................................................27
Related and Supporting Industries.............................................................................................27
Firm Strategy, Structure and Rivalry..........................................................................................27
PORTER’s FIVE FORCE ANALYSIS............................................................................................28
The threat of new entrants...........................................................................................................28
The bargaining power of buyers/customers..............................................................................28
The threat of substitute products................................................................................................29
The amount of bargaining power suppliers have......................................................................29
The amount of rivalry among competitors.................................................................................29
CRITICAL SUCCESS FACTORS...................................................................................................29
RECENT POLICY CHANGES........................................................................................................30
Auto Policy, 2002..........................................................................................................................30
Environmental regulations...........................................................................................................32
Mashelkar committee recommendation.....................................................................................32
Segmentation by shape...................................................................................................................34
Target Marketing Segmentation.....................................................................................................34
Geographic....................................................................................................................................35
Demographic.................................................................................................................................35
Behavioural Segmentation...........................................................................................................36
Psychographic Segmentation.....................................................................................................37
Segmentation based on Type.........................................................................................................38
Corporate Analysis...........................................................................................................................39
Maruti: History and Background..................................................................................................39
The Beginning...........................................................................................................................39
The Evolution:............................................................................................................................40
Past Strategies:.............................................................................................................................41
Financial Performance:................................................................................................................43
Maruti’s SWOT Analysis:.................................................................................................................47
Strategic Capabilities:...................................................................................................................48
Current Strategies Followed By MUL.............................................................................................49
Major Future Strategies...................................................................................................................52
Key Success Factors........................................................................................................................54
Future Challenges for MUL in next 5 years:..................................................................................55
Recommendations............................................................................................................................56
References........................................................................................................................................57
Automobile Industry: An Overview
The Indian passenger cars and utility vehicles industry reached a size of around 2.4 million
units (including exports) in 2009-10. With continued healthy volumes expected over the next
5 years, the cars & utility vehicles industry will reach volumes of 4 million units by 2015. In
2009-10, domestic sales grew by 25.6 per cent (y-o-y), due to recovery in consumer
confidence, stimulus package by the government and availability of finance. However, there
was no significant capacity addition in 2009-10, leading to the industry’s operating rate
increasing to 77 per cent from 63 per cent in 2008-09.
The domestic demand for passenger vehicles has sharply recovered during the current year,
with growth at 21.2% during the eight months of 2009-10, supported by fiscal incentives and
a revival in the underlying economy. The demand revival has been sharp in contrast to H2,
2008-09, when the volumes suffered on weak consumer confidence caused by global
economic crisis and cutback on vehicle financing by banks/ NBFCs due to liquidity
constraints.
Domestic demand has also been supported by competitive pricing adopted by the OEMs.
While manufacturing costs have increased sharply over the years on commodity price rise
and tightening of emission/ safety norms, however adjusted for these, the real price increase
has been muted. OEMs have largely passed on benefits of reduction in excise duties,
economies of scale and value engineering to end customers, facilitating demand growth.
New model launches have also been a key factor in sustaining consumer interest.
Passenger Cars are divided into 6 segments depending on their length:-
1. A1 Segment: Cars, with length upto 3,400 mm

2. A2 Segment: Cars, with length of 3,401 – 4,000 mm
6. A6 Segment: Cars, with length of more than 5,001 mm
Evolution
Starting its journey from the day when the first car rolled on the streets of Mumbai in 1898,
the Indian automobile industry has demonstrated a phenomenal growth to this day. For forty
years since India's independence from the British in 1947, the Indian car market was
dominated by two localized versions of ancient European designs -- the Morris Oxford,
known as the Ambassador, and an old Fiat. This lack of product activity in the Indian market
was mainly due to the Indian government's complex regulatory system that effectively
banned foreign-owned operations. Within this system (referred to informally as the "license
raj"), any Indian firm that wanted to import technology or products needed a license/permit
from the government. The difficulty of getting these licenses stifled automobile and
component imports, creating a low volume high cost car industry that was inefficient,
unprofitable, and technologically obsolete. The two dominant products Ambassador and Fiat,
although customized to the poor road conditions in India, were based on a stale design
concept (with outdated features), and were also fuel inefficient.
In the early 1980's, the Indian government made limited attempts at reforming the
automotive industry, and entered into a joint venture with Suzuki of Japan. The joint-venture,
called Maruti Udyog Limited, launched a small but fuel efficient model (called "Maruti 100").
Priced low, the product became an instant hit. The joint venture now produces three small-
car models, a van, and a utility vehicle at a rate of more than 250,000 a year. Despite being
a late entrant, Maruti's vehicles are estimated to account for as much as 70 per cent of
India's car population.
In 1991, a newly elected Indian government took over and faced with a balance-of-payments
crisis initiated a series of economic liberalization measures designed to open the Indian
economy to foreign investment and trade. These new measures effectively dismantled the
license raj which had made it difficult for Indian firms to import machinery and know-how,
and had disallowed equity ownerships by foreign firms. In 1993, the government followed up
its liberalization measures with significant reductions in the import duty on automobile
components. These measures have spurred the growth of the Indian economy in general,
and the automotive industry in particular.
The timeline through which the Indian Automobile sector has evolved is as follows:-
1940s
An embryonic automotive industry emerges in India

1953
Efforts to create a manufacturing industry to supply the automotive industry with components
get underway, spearheaded by the Indian government and leading entrepreneurs.
1970 to 1980
India's automotive industry begins to grow relatively fast, fuelled by six automotive
companies:
 Telco (now Tata Motors)

 Ashok Leyland
 Mahindra & Mahindra
 Hindustan Motors
 Premier Automobiles
 Bajaj Auto
However, having a car was still seen as a luxury. This was at least partly because the
sector's growth was held back by requirements for production licences and restrictions on
both production within India and on imports.
1981 to 1985
Japanese manufacturers begin to build motorcycle, car and commercial vehicle factories in
India, often in partnership with Indian firms.
Component manufacturers also enter into joint-venture agreements with European and US
firms. Exports start to grow.
1986 to 1990
The auto component sector, which had been protected by high import tariffs, squares up to
competitors as the rules are changed.
Maruti Udyog enters the passenger car segment. During the following years, Japanese
manufacturers started selling motorcycles and light commercial vehicles.
1991 to1995
Economic liberalisation gets underway, allowing passenger car production without licences,
though import restrictions remained in place.
Hero Honda emerges as a major operator in the motorcycle market, while Maruti Udyog
becomes the leading passenger car maker.
In April 1993, the licensing requirement for cars was abolished, resulting in the entry of
various global players to set up capacities for manufacturing cars and utility vehicles for the
domestic market and exports.
In 1995, a policy was framed, whereby automobile companies were required to sign a
memorandum of understanding (MoU) with the Directorate General of Foreign Trade (DGFT)
to obtain licences for importing completely knocked down (CKD)/semi-knocked down (SKD)
kits to be assembled at plants in India. Automobile manufacturers also had to comply with
the government's conditions on foreign direct investments, known as trade-related
investment measures (TRIMS).
The highlights of this policy are as follows:
 Global manufacturers must be involved in the actual production of cars and must not
merely assemble vehicles in the country.
 Manufacturers must achieve indigenisation levels of up to 50 per cent within 3 years,

and 70 per cent by the end of 5 years, from the date of starting commercial
production.
 Foreign manufacturers must invest a minimum of $50 million as equity capital in a

joint venture, if the venture involves majority of foreign equity ownership.
 Foreign exchange outflows must be balanced with inflows over a period of 5-7 years.
 In addition to vehicles, the venture will be allowed to export components, in order to

meet export obligations.
The main objective of adopting the MoU route was to limit foreign exchange outflow and
ensure that foreign companies investing in India commit long-term investments for the
manufacture of automobiles, instead of merely importing and selling models.
1996 to 2000
International car makers enter the Indian market, a trend that accelerates. Advanced
technology is introduced to meet competitive pressures, and environmental and safety
imperatives.
Automobile companies start investing in service network to support maintenance of on-road

vehicles. Auto financing starts emerging as an important driver for demand.
2001 to present
In April 2001, Quantitative restrictions (QRs) on automobiles were removed as the WTO, of
which India is a member, does not allow QRs, like import licences and import quotas, on
foreign trade. Since then, imports of all new and used automobiles have been allowed.
Cars developed and produced entirely in India for both the domestic and exports markets
emerge. Financial services firms begin to offer car loans, in cooperation with the car
industry.
Efficiency, capacity and environmental issues are identified, along with initiatives aimed at
encouraging research and development to address such issues.
Safety Norms
Safety norms are regulatory in nature and have led to a lot of technological changes in the
industry. The systems complying with these norms can be classified as active and passive
safety systems. Active safety features provide the driver, better control over the vehicle,
whereas passive safety features are a part of the vehicle design and help prevent/ minimise
injury to the vehicle’s occupants and the pedestrians in case of a crash.
Although safety standards in India are not much developed, the automobile industry is
progressively aligning technically with international safety standards. The Central Motor
Vehicles Rules (CMVR) came into existence from 1989, and deals with construction,
equipment, and maintenance of vehicles. Vehicles manufactured in the country have to
comply with relevant Indian Standards (IS) and Automotive Industry Standards (AIS).
The government is planning to amend the Central Motor Vehicle Rules, the Bureau of Indian
Standards and other relevant provisions and introduce safety regulations that will conform to
global standards.
Government of India, in co-ordination with various state governments and Indian automotive
industry, had initiated to form the National Automotive and R&D Infrastructure Project
(NATRIP) and create a state of the art testing, homologation, validation and R&D
infrastructure facility in the country. This project aims at creating core global competencies in
the automobile sector in India and position India prominently on the global automotive map.
Homologation
Homologation means ensuring through tests whether a vehicle produced out of a

manufacturing facility meets the safety and environment stipulations of the country in which it
is sold. At present, there are three authorised homologation testing centre in India, namely
Automotive Research Association of India, Pune; Vehicle Research Development &
Establishment, Ahmednagar; and Indian Institute of Petroleum, Dehradun. The government
has decided to upgrade and expand the existing facilities located at the Automotive
Research Association of India, Pune and Vehicle Research Development & Establishment,
Ahmednagar.
Taxes and duties
One of the key determinants of the demand for automobiles is acquisition cost, which is
largely determined by sale price (ex-showroom price) and current income levels. In India,
various taxes and levies account for 30-35 per cent of the ex-showroom price of a passenger
car. Levies and taxes include excise duty of 8 per cent on small cars (less than length of
4,000 mm) and 20 per cent on others, natural calamity cess of 1 per cent, central sales tax
of 2 per cent, uniform VAT of 12.5 per cent and road and registration tax of 7-8 per cent.
Rationalisation of the tax structure could reduce prices.
The three key fiscal tariffs that influence car prices and hence, demand, include:
 Sales tax / VAT
Before May 2000, different state governments levied different rates of sales tax
ranging from 4 to 12 per cent. This created disparity in the price of the same model
across different states, encouraging the purchase of vehicles in states with lower
sales tax. To prevent this, the government fixed the sales tax on cars in all states at a
uniform rate of 12 per cent, with effect from May 1, 2000. However, the same has
been replaced by VAT with effect from April 1, 2005. A uniform VAT rate of 12.5 per
cent is applicable in all the states of India, except for Uttar Pradesh from April 1,
2007. VAT has been implemented in Uttar Pradesh from January 1, 2008 with a rate
of 12.5 per cent for cars and utility vehicles.
 Excise duty
Excise duty rates directly affect the price of vehicles, and hence the affordability. The
excise duty on cars and UVs has been reduced from a historical high of 40 per cent
in 2000-01 to 24 per cent in Union Budget 2003-04. In the Union Budget 2006-07, the
special excise duty of 8 per cent was abolished on small passenger cars of length
less than 4,000 mm and engine capacity of 1,200 cc for petrol cars and 1,500 cc for
diesel cars; however, cars having a length of more than 4,000 mm and UVs were not
changed. In the Union Budget of 2009-10, with the continued support of fiscal
stimulus, the excise duty on cars with engine capacity less than 1.2 litres has been
maintained at 8 per cent. It was reduced to 8 per cent in December 2008 from the
previous level of 12 per cent due to slowdown in the economy. However, in Union
Budget 2010-11, with recovery in consumer sentiment, the excise duty was
increased by 2 per cent on all cars and utility vehicles.
 Customs duty
Basic customs duty rates determine the protection the government gives to the
domestic industry. The basic customs duty on cars and UVs was reduced from 65
per cent in 1994-95 to 35 per cent in 2000-01. However, after the removal of
quantitative restrictions on imports in April 2001, the basic customs duty on
CBUs/SKDs was increased to 60 per cent, while for second-hand cars, the basic
customs duty was maintained at 100 per cent to provide protection to domestic
OEMs. Nonetheless, to lower the input costs of the domestic industry, the
government has reduced the import duties on components and CKD units. In Union
Budget 2006-07, the customs duty on cars and UVs in CKD form and components
used for manufacturing cars and UVs has been reduced from 15 percent to 12.5
percent. In Union Budget 2007-08, the customs duty was further reduced to 10.3
percent.
Domestic Player Profiles
The Indian passenger cars and utility vehicles industry has 18 players. However, the
intensity of competition is different in different segments.
Number of Players
Segments No. of Players (2009-10)

A1 2
A2 9
A3 10
A4 – A6 11
Source: SIAM, CRISIL Research
Fiat India Pvt. Ltd
The company has a plant in Ranjangaon in Pune, Maharashtra with a capacity of 1,35,000
units. It has a network of 103 dealers and the major launches have been Fiat Palio (2001),
Fiat 500 (2008), Fiat Linea (2009), Grande Punto (2009).
It plans to launch a CNG variant of Palio in the later part of 2010 and is working towards
unveiling a low cost car for India by 2012, which is a part of 50:50 joint venture with Tata
Motors. The car will be broadly in the 1-litre engine configuration and will be priced between
Rs. 3.5 lakh and 4 lakh.
The company had, in 2008, invested around Rs 40 billion for setting up a plant at
Ranjangoan to manufacture 200,000 vehicles and 3,00,000 engines.
Ford India Ltd.
It is a subsidiary of Ford Motor Company and has a plant in Chengalpattu in Chennai, Tamil
Nadu with a capacity of 1,00,000 units. It has a network of 167 dealers and some of the
major launches have been Ford Ikon (1995), Endeavour (2003), Fusion (2004), Fiesta
(2005) and Figo (2010) in addition to variants of Fiesta and Endeavour.
It plans to launch a small car to be priced lower than Figo by the end of 2011. The company
also plans to give a facelift to its existing models – Fiesta, Ikon plus and Endeavour by the
end of 2010.
Ford India earlier invested Rs 25 billion to double its production capacity to 0.2 million units
by the end of 2010. The additional capacity will mainly be used for manufacturing compact
cars. It exported its first batch of 1.4 litre and 1.6 litre high-compression petrol engines from
the Maraimalai Nagar unit, near Chennai, to sister facility AutoAlliance Thailand (AAT). It has
been exporting diesel powertrains from the Indian engine facility, with a production capacity
of 2.5 lakh units per annum, to South Africa since 2008.
General Motors India Pvt. Ltd
The company has plants in Halol in Panchmahals, Gujarat and Talegaon in Pune,
Maharashtra with total capacity of 2,25,000 units. It has a network 0f 200 dealers and some
of the major launches have been Optra (2003), Tavera (2004), Aveo (2006), Spark (2007),
Captiva (2008), Cruze (2009), Beat (2010).
It plans to launch a plug-in hybrid sport-utility vehicle, Buick by 2011, an electric vehicle
Chevy Volt and electric and diesel variant of some of the earlier models.
GM announced a capital expenditure of around Rs 16 billion to produce light commercial and

passenger cars by end of 2011 in collaboration with its Chinese partner, Shanghai
Automotive Industry Corporation (SAIC). It has pulled out from its JV with Reva Electric Car
Company to produce an electric variant of Spark. GM will now produce the e-Spark on its
own, and is expected to launch it by end of 2010.
Honda Siel Cars India Ltd
It is a subsidiary of Honda Motors Corporation and has plants in Takapura,Rajasthan and

Greater Noida, Uttar Pradesh with total capacity of 1,20,000 units. It has a network of 106
dealers and some of the major launches have been City (1998), Accord (2001), CR-V
(2003), Jazz( 2009).
The company is planning to launch a small car by October 2011 to be priced at Rs 3.5 – Rs
4.0 lakh. Initially, the company is targeting to achieve 80 per cent localisation level.
Honda is expanding capacity at its plant in Greater Noida to 1.2 million units from 1 million
units by end of 2010.HSCIL has also announced an investment of Rs 10 billion in its new
facility at Rajasthan with an initial capacity of 60,000 units, which will be ramped up to 0.2
million units at a later stage. However, the company has recently postponed the expansion
in Rajasthan and is expected to commission it by the middle of 2012.
Hyundai Motors India Ltd
It is a subsidiary of Hyundai Motors Corporation and has a plant in Sriperumbudur, Tamil

Nadu with a capacity of 6,00,000 units. It has a network of 289 dealers and some of its key
models are Santro, Accent, Sonata, Getz, i10, i20, Verna etc. Hyundai plans to introduce a
diesel variant of its premium compact car i10 and i20 by the end of 2010-11. The company
will also launch Santa Fe, its premium sports utility vehicle by the end of 2010-11. It also
plans to launch a low-cost car of 800 cc engine priced at $3500 (Rs 1,65,000) in India by the
end of 2011.
The company has announced setting up a new diesel engine plant with an annual capacity
of 0.3 million units, for which Hyundai will invest $550 million (Rs 250 billion). The company
has no major plans to expand its vehicle manufacturing capacity in the medium term.
Maruti Suzuki India Ltd
It is a subsidiary of Suzuki Motors Corporation with plants is Manesar and Gurgaon in

Haryana with a capacity of 10,00,000 units. It has a huge network of 812 dealers and is the
market leader in passenger cars. Some of its key models are M800, Alto, Zen, Swift, Ritz,
Dzire, SX4, Wagon-R, A-Star etc.
In January 2010, MSIL also launched the Eeco, a multipurpose vehicle, at an aggressive
price tag of Rs 2.58 lakh for the non-air-conditioned variant (ex-showroom Delhi).
The company re-launched the BS-IV–complaint Wagon R with a new K-series engine, priced
between Rs 3.28 and Rs 3.81 lakh (ex-showroom Delhi) in April 2010.
The company re-launched the BS-IV complaint Alto with a new K-series engine, priced
between Rs 2.29 and Rs 2.80 lakh (ex-showroom Delhi) in May 2010.
The company is planning to launch another multipurpose vehicle RIII by end of 2012.
Kizashi, its luxury sedan, is expected to be launched in India by end of 2010-11. The
company also announced plans to launch the SX4 hatchback by end of 2010-11, priced at
Rs 4.0 lakh-6.0 lakh.
MSIL will be launching a small car to be priced below Rs 2.0 lakh within one year.
The company is working on a plan to launch electric cars and compressed natural gas
(CNG) variants for three or four models in the domestic market by 2010-11.
Maruti Suzuki announced a capital expenditure of Rs 60 billion over two years for R&D, new
model launches and capacity expansion. Out of the total, around Rs 15 billion would be
invested in R&D expenditure.
Nissan Motor India
The company has a plant in Oragadum in Chennai, Tamil Nadu which will be commissioned
from 2010-2011. Some of its models are Teanna, X-Trail and Micra. In June 2010, the
company launched its first small car in the compact segment (A2) – Micra – in India at an
estimated price of Rs 3.8 lakh to Rs 5.25 lakh (ex-showroom, Delhi).
The Renault-Nissan alliance has so far invested Rs 23 billion of its committed investment in
its greenfield plant at Oragadam, about 50 km south-west of Chennai. The alliance signed
an agreement with the Tamil Nadu Government in February 2008, committing an investment
of Rs 45 billion in seven years. The plant started producing cars from June 2010. The plant
will have an initial capacity of two lakh cars a year, which will go up to four lakh cars by
2015.
Skoda Auto India Private Ltd
A subsidiary of Volkswagen Group, it has a plant in Aurangabad, Maharashtra with a

capacity of 40,000 units. It has a network of 67 dealers and some of its launches have been
Octavia (2001), Superb (2004), Laura (2006), Fabia (2007).
Skoda plans to launch a small car in India by 2011 priced between Rs 3 lakh and Rs 5 lakh.
It is also planning to introduce its sports utility vehicle, Yeti, in India in 2010-11. The
company also plans to unveil cheaper variants of Fabia by mid-2010-11. The company is
planning to build new Octavia on a modified Fabia or Polo platform by replacing the existing
Octavia with an all-new model towards the end of 2010 at a price of Rs 8-10 lakh. This is
because the earlier model needs expensive up gradation to meet BS IV emission norms.
Tata Motors Ltd.
The company has plants in Pune, Maharashtra, Pantnagar , Uttarakhand and Sanand
,Gujarat with a total capacity of 3,00,000 units. It has a network of 250 dealers and some of
its key models are Sumo, Indica, Indigo, Safari, Indica V2, Nano etc.
Tata Motors will launch new variants of the Range Rover, Range Rover Sport and the
Discovery 3 with some Indian feature upgrades by end of 2010-11. Indicruz, a crossover
between Indigo sedan and SUV Safari, is planned to be launched in 2010 in petrol and
diesel variants, priced at Rs. 7-10 lakh.
TML also has in pipeline models like -7-seater Tata Aria, a multi-purpose small vehicle Tata
Venture, and a compact passenger carrier Magic Iris by end of 2010-11. Its small car Nano
will also come in new variants, including electric, diesel and hybrid, within the next three
years. TML may launch an 800 cc engine car by 2012 to priced at around Rs 3,00,000.
Tata Motors invested Rs 30 billion in 2009 for the first phase of its Nano car project at
Sanand, Gujarat, which has annual production capacity of 0.25 million units and can be
scaled up to 0.5 million units. Production from this plant has commenced; however, the
company will be able to operate at 100 per cent capacity only in 2011.
Toyota Kirloskar Motors Ltd.
The company has a plant in Bidadi in Benagluru, Karnataka with a capacity of 70,000 units.
It has a network of 93 dealers and some of its key models are Camry, Corolla, Innova,
Fortuner, Prius etc.
Toyota-Kirloskar Motor unveiled its hybrid car Prius priced between Rs 26.5 lakh and Rs
27.8 lakh (exshowroom New Delhi) in January 2010. The company is looking to launch an
MPV to be positioned in between its new small car and the Innova, at a price of Rs 6 lakh to
Rs 8 lakh by 2012.
The company also plans to launch the hatchback Etios to be priced at Rs 5.5 lakh and the
sedan at Rs 6.5 lakh by end of 2010.
The company is investing Rs 32 billion in its second car plant at Bidadi near Bengaluru,
adjacent to the existing plant, which is expected to commence by end 2010 or early 2011; it
will have an annual production capacity of 0.7 million units and can be scaled up to 0.2
million units. This plant will manufacture passenger cars, including Corolla as well as a new
strategic small car.
Volkswagen Group India Pvt. Ltd.
The company has a plant in Chakan in Pune, Maharashtra where production will commence
from 2010-11. It has a network of 43 dealers and some of its key models are Passat, Jetta,
Beetle and Polo.
In March 2010, the company launched its first small car Polo in the compact segment (A2) in
India at an estimated price of Rs 4.3-6.7 lakh (ex-showroom, Delhi). In April 2010, the
company launched variants of its sedans Passat 1.8 L TSI priced at Rs 19.20 lakh
(exshowroom, Delhi) and Jetta 2.0 L diesel Comfort line priced at Rs 15.92 lakh (ex-
showroom, Delhi).
The company launched its super luxury car Phaeton at Rs 76.3 lakh (ex-showroom, Pune) in
May 2010. This will come as VW’s third CBU import, the other two being the Touareg and
the new Beetle.
The company is expected to launch Vento, a sedan version of its compact car Polo, in India
at an estimated price of Rs 9-10 lakh by end of 2010.
Mahindra & Mahindra Ltd.
The company has plants in Nashik, Kandivali and Chakan in Maharashtra with total capacity
of 1,62,600 units. It has a network of 800 dealers and some of its key models are
Commander, Marshall, Bolero, Scorpio and Logan.The company is relaunching Logan with a
new brand name and makeover by the end of 2010.
M&M bought out its French partner Renault’s 49 percent stake in the joint venture –
Mahindra Renault Pvt. Ltd. It has also emerged as the preferred bidder for South Korean
sports utility vehicle manufacturer Ssang Yong Motor Company(SMC).
It has also acquired a 55.2 percent stake in electric vehicles manufacturing company – Reva
Electric Car Company.
PESTEL ANALYSIS INDIA
Political landscape
• The general elections in April and May 2009 saw the unexpected victory of the Indian
National Congress party, led by Manmohan Singh. Singh's government has become the
only one to be re-elected since the time of the country's first prime minister, Jawaharlal
Nehru.
• India continues to rank high on corruption but lacks the political will to implement tough
policies. Most political battles are based around caste and religion rather than development.
Current strengths
 Strong democratic setup
 Stable macroeconomic policies
 Improved relationships with Europe and North America
Current challenges
 Peace process with Pakistan is in abeyance
 Terrorism
Future prospects
 The new Congress government could initiate economic reforms
 Improved accountability of politicians
 Right to Information Act
Future risks
 Emergence of strong regional parties
 Social and communal tensions
Economic landscape
• Fiscal pressure in India has built up due to the implementation of farm loan waivers and
pay-panel
recommendations, which increased the pay of government employees. The fiscal deficit of
union and state governments is expected to cross 12% during 2008 -09.
•The Indian economy witnessed robust growth during 2007–08 and this was the third year in
succession when the Indian economy grew by 9% or above. However, the global economic
downturn has caused GDP growth to decline to 7.1% in 2008–09.
Current strengths
 Inherent strength of the economy
 Largest working age population pool in the world
 Highly favored FDI destination
Current challenges
 Unemployment
 Energy constraints and over-dependence on oil imports
 GDP fluctuates with monsoons
Future prospects
 Strong infrastructure spending and foreign direct investments expected to drive
industrial growth
 Expanding domestic market driven by rising disposable income and improving penetration
 Sector specific opportunities
Future risks
 Imbalanced regional development and widening economic disparities
 Poor infrastructure
Social landscape
• Despite the focus on sustained improvement in the quality of life of the population in
general and the poor in particular, India’s progress on the social sector front continues to
be slow.
 Continued neglect of some states, such as Jammu and Kashmir, Bihar, Himachal,
Uttrakhand, and the northeast region, has led to social and economic unrest, which has
fueled militancy
 The gender ratio in India has been improving. In the beginning of the 20th
century, it was 972. By 1991, however, it was 927, which increased to 936 in
2001.
 Public health investment in the country has been comparatively low,
accounting for just 5.3% of the GDP in 2006.
Current strengths
 Improving sex ratio
 Growing percentage of young population
 Rapid urbanization
Current challenges
 Healthcare remains a major concern
 Weak social security system
 Improving literacy rate but still lagging far behind
 Low Human Development Index (HDI) rank
Future prospects
 Employment guarantee scheme
 Rising life expectancy
Future risks
 Government’s authority is challenged
 Rising population density
 Inability to control the birth and fertility rates
Technological landscape
• The prevailing education system of India has not been able to match the needs of industry.
Most of the science and engineering graduates require further training before they can begin
work. The 11th five year plan gives priority to R&D by increasing opportunities in science
and expanding R&D in universities.
• India’s competitiveness in the IT sector has been well maintained. Revenue from the
Indian IT software and services sector, including the domestic and exports segments but
excluding hardware, touched nearly $40 billion during 2006–07, and is expected to grow by
nearly 27% to $49–$50 billion in fiscal 2008.
Current strengths
 Strong knowledge base
 Cost advantage
Current challenges
 Gross expenditure on R&D remains less than 1% of GDP
 Talent pool requires further vocational training
Future prospects
 Government policies promoting R&D
 Significant competitive advantage in biotechnology research
Future risks
 Patents are on the rise, but nowhere near its
peers
Legal landscape
• The expansion of the tax base has augmented the availability of resources to the
central government and individual states.
• Lack of a single regulator for the financial sector has resulted in a limited growth
of this sector, as the interlinkages have not been fully exploited
Current strengths
 Comprehensive legal framework for business entities
 Taxation policy driving foreign investment
 Implementation of VAT
Current challenges
 Corporate governance
 Weak implementation of intellectual property laws
 Judicial delays
Future prospects
 Expansion of tax base
 Good prospects in legal process outsourcing
 Impact of Foreign Trade Policy 2004–09
Future risks
 Implementation of regulations
 Lack of single financial market regulator
Environmental landscape
• India is a poor performer on the Environmental Performance Index (EPI). In an EPI

study carried out in 2008, India was ranked 120 out of 146 countries.
• India’s dependence on thermal energy, mainly coal-based, has resulted in a host of

environmental problems.
Current strengths
 Biodiversity
 Right to information
 Comprehensive environmental policy framework
Current challenges
 Air pollution
 Depleting water resources
 Poor performance on environmental indicators
 Dependence on fossil fuels for energy requirements
Future prospects
 Reduction of carbon footprint
 Public private partnership and eco tourism
Future risks
 Economic growth’s adverse impact
 Enforcement deterrents
PORTER’s DIAMOND MODEL
Porter's Diamond Model
Demand Conditions
• Local demand is skewed heavily towards low-cost vehicles, including scooters
• The premium segment is benefiting from higher levels of personal wealth, attracting
investment from brands such as Audi, while Tata has expanded the Jaguar Land
Rover division into India
• CAGR of 89% over next 5 years
• The FY2008/09 budget provided further support for the growing small car segment
through a cut in excise tariffs
• Low switching costs

• Large no. of choices at the lower end
• Price sensitive buyers
• Good brand building lowers treat of buyers
• Demand for new cars hampered by huge second hand car market (Substitutes)
Factor Conditions
• 100% FDI allowed by govt. after 2002 Auto Policy
• Huge import tariffs promote local production of goods
• The cost of production is generally higher than some other Asian states, such as
China
• Cheap labor available depending upon the setup region
• Technology present to meet the environmental norms set up
• Fragmented suppliers
• Fiscal incentive to auto makers performing R&D in India

•
Related and Supporting Industries
• Competitive Ancillary industry present
• Consolidation by steel suppliers enables availability of raw materials
• Supply chain networks needs improvement
• Removal of ruling of indigenization

Firm Strategy, Structure and Rivalry
• Mass production required for economies of scale
• Major new car makers are currently on down turn
• Rush from global companies to get a foothold
• Entry method is normally joint venture
• Price sensitive buyers with large no. of options offered at lower level
• Rivalry intense as no. of competitors = 15
PORTER’s FIVE FORCE ANALYSIS
Following are the 5 forces using which the attractiveness of an industry can be
estimated.
1. Threat of new entrants.

2. Bargaining power of buyers/customers.
3. Threat of substitute products
4. Amount of bargaining power suppliers have
5. Amount of rivalry among competitors
The threat of new entrants
In most markets, the capital and expertise needed to setup an auto or parts
manufacturing facility, would be a great enough barrier to entry to prevent many new
entrants from setting up.
However, given India's incredible growth forecasts, infrastructure progress (especially

new and better roads), and ever-expanding financing options to rural residents, the
market is attractive. As such, we expect the threat of new entrants to be high.
Result: Unfavorable
The bargaining power of buyers/customers
Buyers in India have a wide variety of choice. There are more than 20 foreign
manufacturers selling in India (including ultra high-end such as Rolls-Royce and
Lamborghini). Of course there are also a plethora of incredibly cheap choices, like the
famous Tata Nano.
Result: Unfavorable
The threat of substitute products
India is famous for its two-wheelers (bikes and mopeds) and three-wheelers. These are
very real and obvious threats to auto manufacturers.
Result: Unfavorable
The amount of bargaining power suppliers have
It is likely that the suppliers to the manufacturers have considerable bargaining power.
They are not held ransom by one single manufacturer as they can market their products
to any of the others in India.
Result: Unfavorable
The amount of rivalry among competitors
High. The industry is not yet in its shake-out phase and is still struggling to find the up-
and-coming stars and possibly topple the leaders.
Result: Unfavorable
CRITICAL SUCCESS FACTORS
Below are a few key drivers of change/critical success factors for the Indian
automotive industry (not necessarily in the order of importance):
a) Consumer Demand
b) Oil/Energy policies
c) Shifting lifestyles
d) Economy
e) R&D
f) Consumer Attitudes
g) Manufacturing Technologies
h) Legislation and regulations
i) Socio-demographics
j) Globalisation
k) Environment
l) Urbanisation and Infrastructure development
RECENT POLICY CHANGES
Auto Policy, 2002
The Auto Policy of 2002 did away with most of the clauses in the earlier auto policy. The
highlights of the policy were:
 The removal of the ruling on indigenisation: Since most companies had already
achieved over 70 per cent indigenisation due to the cost advantages arising out
of sourcing components locally (as compared to paying high customs duty for
the import of the same), this is not expected to benefit the companies in India.
However, it may benefit new companies likely to enter India in the future.
 Removal of the export commitment clause: For all the companies (including
those who had signed agreements with DGFT in 1997) in September 2002, the
government removed the export commitment clause. The removal of this clause
benefited manufacturers like Daewoo Motors, Honda SIEL and Hindustan
Motors (which is involved in technical collaboration with Mitsubishi for the Lancer
model), as some of them had large outstanding export obligations.
 Automatic approval of foreign equity: The government started the trend of

automatic approval of foreign equity up to 100 per cent for the manufacture of
automobiles and components.
 Specific fiscal incentives: The government announced special fiscal incentives

for cars of less than 3.8 metres in length, in order to establish India as the Asian
centre for the export of small cars and MUVs.
 Rebate and deduction of taxes and duties: Proposal for an increase in weighted
deduction, from the existing 125 per cent, for research and development (R&D)
activities under the IT Act, 1961. In addition, there was an introduction of a
rebate on the applicable excise duty for every 1 per cent of the gross turnover
spent on R&D.
 Provision of tax incentives: Provision of tax incentives, automatic approvals and

import of equipment under the concessional import duty to encourage the setting
up of independent auto design firms.
The ratification of this Auto Policy had the following implications:
 Most major global car manufacturers already had a presence in the Indian
market. Hence, the policy did not trigger the entry of many new players.
 In accordance with its commitment to make India as a hub for small cars, the
government, in the Union Budget of 2006-07, abolished special excise duty
(SED) of 8 per cent on small cars (passenger cars having length less than 4,000
mm and engine capacity of 1,200 cc (petrol) and 1,500 cc (diesel)). However, on
MUVs, the special excise duty has been retained.
 In accordance with its commitment to the WTO, the government has gradually
lowered import duties within a stipulated time frame. Thus, the government has
brought down the import duties on components/CKDs from 30 per cent in
February 2003 to 12.5 per cent in February 2006, which has helped reduce the
costs of these components. These were further reduced to 10.3 per cent from
2008-09.
 Fiscal incentives offered by auto manufacturers on R&D have had a marginally

positive impact on their profits, as R&D costs account for 1-2 per cent of sales.
Environmental regulations
 Under the Auto Policy of 2002, the government has announced an

Environmental Policy for automobiles. Some of the key provisions of the policy
are as follows:
 Approval of the Dr Mashelkar Committee provisions, which provide the time

schedule for the phased implementation of vehicular emission norms.
 Encouragement for the manufacture of automobiles using alternative fuel

technologies, like compressed natural gas (CNG) and electric batteries.
 Adopting the international system of levying road tax, based on the principle of
higher tax for older vehicles, to discourage the use of old vehicles. At present,
road taxes are levied at the time of purchase and are based on the type of the
vehicle.
These clauses will encourage manufacturers to produce cars and utility vehicles with
improved technologies and alternative fuels, which would be lower in price and
emission levels. Sales of new cars are also likely to increase, since customers will be
deterred from buying older cars due to higher road tax on the same. Incentives for the
upgradation of auto ancillary units to international standards will result in the availability
of good-quality and competitively-priced components in the domestic market.
Mashelkar committee recommendation
On September 1, 2001, the government constituted the Mashelkar Committee to:

 Recommend an ‘Auto Fuel Policy' for major cities and the rest of the country
 Formulate a roadmap for its implementation, and
 Recommend suitable auto fuels, automobile technologies and fiscal measures.
In October 2003, government accepted the following recommendations of the

Mashelkar Committee report:
 The government should only stipulate vehicular emission standards and

corresponding fuel specifications, without specifying vehicle technology and the type
of fuel to be used.
 A roadmap for the implementation of vehicular emission norms and auto fuel quality
as follows:
Passenger cars and utility vehicles

Coverage applicability
Entire Country Bharat Stage II 1st April 2005
Euro III Equivalent 1st April 2010
11 Major Cities Bharat Stage II 1st April 2003

Euro III Equivalent 1st April 2005
Euro IV Equivalent 1st April 2010
 In order to comply with BS-III equivalent norms, the fuel used has a maximum
sulphur content of 0.035 percent, which was 0.05 per cent for BS-II. For BS-IV
compliant, the fuel should have maximum sulphur content of 0.005 per cent. The
table below details the prescribed limits of the emission norms for vehicles. The
mainrequirements for graduating to Euro-III/Bharat Stage-III are lower HC and NOx
levels.
 Matching quality of petrol and diesel, as specified by the committee, should be

simultaneously made available.
 In addition to petrol and diesel as auto fuels, the government has permitted the use
of CNG and LPG as auto fuels. The government has also encouraged the use of di-
methyl, bio-diesel, hydrogen, electric and fuel cells or any other vehicle or fuel
technology that will help meet the prescribed emission norms.
 Other cost-effective measures such as comprehensive inspection and certification

system for in-use vehicles, fitting of emission reduction devices in existing vehicles,
traffic management and construction of by-passes should be established with private
sector participation.
 The government should provide fiscal and financial incentives to the manufacturers
and users of electric vehicles to make these vehicles competitive.
Segmentation by 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 rear to
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 eg. 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 windshield too opens along with the boot door. Unlike sedan whose
rear windshield is always fixed. There are only few examples for SEMI NOTCHBACK
- Skoda Octavia, Accent Viva.
Target Marketing Segmentation
Geographic
a. Region: The major regions for small car market in India are north, south, and
west. The most auspicious months in the south, when buyers, laterally lap up cars from the
showrooms, often turn out to be the lean season in the north or west. So marketers need to
identify when to market a product according to the region in which the consumer lies.
b. Rural/Urban: Since more than 60% of the total population is living in interiors, it
becomes all the more important to cater to this segment. However, so far, the marketers
have laid more focus on Urban/semi urban market and their products are primarily catering
to the needs of the urban segment. But with the recent market hits, the companies are trying
to pay more attention the rural market segment to gain profits. Ex: Maruti Suzuki India said
that by the end of 2009 calendar year as much as 8 per cent of sales will come from rural
areas, up from 3.8 per cent last year.
Ex: Tata Magic which is priced @ 2.6lacs is primarily targeted to the rural India.
Demographic
a. Age & life cycle stage: Student, Young Married, Single working. The average age
profile of a car buyer is 25-46 years. Although the percentage of people buying cars between
31 and 40 years of age has remained stagnant at 31 per cent (1999-03), there has been a 9
percentage point increase in the number of car buyers in the 25-30 age groups. The number
of older people (51 to 60 plus) buying cars has gone down.
b. Family Size: Average Indian household size is 5 people. Hence Small cars are
the most obvious and affordable choice available for the Indian middle class.
c. Income: Higher income households tend to be less price-sensitive, placing a

higher value on buying higher-quality merchandise. Because of the growth in dual-income
households, there has been a dramatic growth in the proportion of total spending in the
economy coming from such households, implying that the market for high-end products and
services should increase substantially. Thanks to the easy availability of cheap financing
options, there has been an increase in the number of younger people buying cars in India
during 1999-2003EMI: a factor affecting the most of the buyers. 3 out of the 4 cars sold in
the country are funded by a loan.
d. Occupation: Occupation of the consumer affects the buying power. For ex: A
Regular salaried employee will easily get finance done for buying a car , whereas a self
employed consumer will opt for full down payment option. This explains the reason for high
contribution from salaried and self employed people in buying small cars
e. Literacy
Behavioural Segmentation
a. Decision Roles: When it comes to car, where huge investment is involved, people
generally tend to take reference from other users. They go for test rides, get it checked from
some experienced people who are much more comfortable about cars.
b. Occasions: In India, people do buy cars in the festival season, and during the
marriage seasons.
c. Benefits: Consumer looks for the following benefits from a car.

i. Power: People do look for power from power. According to their need they
look for cars in their respective power basket (i.e. 600cc – 1300cc). A higher power is
related to give higher speed, acceleration by the consumers.
ii. Technology: With all sort of products available in the small cars market,
technology can act as a differentiator for consumer. New technologies such as MPFI
(multi point fuel injection), turbo charging, electronic traction control, anti locking
braking systems, and catalytical convertors.
iii. Fuel Economy: People do look for better fuel economy in terms of mileage
given by the car. Preferred Fuel: With the rise in petrol prices, people have been
looking for alternatives such as diesel, CNG, LPG. Many car buyers in India prefer
the diesel variant whatever may be the choice of car, because of the favourable cost
differential diesel.
iv. Low operational cost: For some of the users, operational cost is a major
factor in deciding the buying decision. Operational cost includes Maintenance cost,
insurance cost, spare parts, cost of service.
v. Space and comfort: Buyer does look for spacious and comfortable ride.
Various factors in deciding comfortable ride are leg room, head room, driving
position, adjustable steering.
vi. Safety: the most important factor for family buyers is the safety feature of a
car. A car must follow safety norms, various safety features which people look in car
are ABS, airbags.
vii. Styling: To certain buyers, functionality was not everything, looks were
also important. They wanted styling, and contemporary looks.
d. User Status: The kind of buyer can be classified into non-buyer, first time buyers,
and repeat buyers. The major of the buyers in the small car are a first time buyer, that’s why
this market is often referred as entry level car market. While going for car replacement, 50
percent of small car owners in India are again going for small cars and are reluctant to
experiment with luxury cars.
e. Usage Rate: On the basis of the frequency of travel, people decide on the car to
buy. In case a person needs a family car only for family outing, they may look for a one time
investment in a spacious car. On the other hand, if a person has huge amount of daily travel,
he would prefer a good mileage car with less operational cost as well.
Psychographic Segmentation
a. Social Class – Social class plays a major role in segmentation for the automobile
industry. With more than 40% of the population of Indian lying in the middle class bracket, it
becomes all the more important segment for the marketers to consider. Working class and
upper lowers constitute the other prime target in the small car manufacturers.
b. Life-style – life style is an important psychographic segmentation composed of a

combination of factors such as activities, interest and opinions. Ex: As part of its rebranding
exercise, Fiat India is rolling out a number of products to cater to the lifestyle segment in the
auto market.(economic times)
c. Personality – The customers are further segmented on their personality traits like
sports oriented person, easy going. People are also segmented on their value system. The
awareness about the new technologies, latest trends in the car market is a direct attribute of
the level of education of the consumer. This is evident from the fact that 2/3rd of the car
buyer are graduate or above.
Segmentation based on Type
A segment (hatch back or small cars ) - 800, Alto, santro, Spark, WagonR and indica and i10
n etc
A2 segment - Swift , Getz Uva
B Segment - Fabia , Fusion , Esteem , Dzire , Indigo / Marina , Logan , Ikon and accent
C Segment - Optra, Aveo , Fiesta , City , Verna, Sx4 , Cedia
C2 segemnt - Civic, Corolla , octavia
Premuim - Laura , Accord, Sonata , camry
Luxury - BMW , Audis , merc's
MUV - Safari , scorpio , SUmo grande, Tavera Innova
Premuim MUV/ SUV - Captiva , CRV, Tuscon , Grand Vitara
Passenger Car Segmentation and Size of Market

(Million Units) Next 5Yr CAGR Past 5Yr CAGR
(Percent) (Percent)
2008-09 2013-14 2008-09 to 2003-04 to
2013-14 2008-09
Mini, A1 0.05 0.38 50.4 -21.7
Compact, A2 0.89 1.38 9.3 19.1
Small, (A1 and 0.94 1.76 13.5 11.7
A2)
Mid Size, A3 0.24 0.36 8.6 12.7
A4-A6 0.05 0.08 11.8 9.5
Total Passenger 1.22 2.21 12.5 11.8
Car (Domestic)
Utility Vehicles 0.33 0.49 7.9 10.2
(Domestic)
Total passenger 1.55 2.69 11.6 11.5
cars and UVs
(Domestic)
Export (Cars 0.33 0.79 19.1 21.8
and UVs)
Total 1.89 3.48 13.1 12.9
Corporate Analysis
Maruti: History and Background
During 1960s and the 1970s there were only two manufacturers in the market, Hindustan
Motors and Premier Automobiles with limited production capacities. The consumer had a
choice of two cars made in India under licence. One was a Fiat, which was no longer
produced in Italy. And the other was a '50s Vauxhall, all but forgotten in England. The import
of passenger cars was restricted to the State Trading Corporation (STC) and foreign
diplomats.
During that period the passenger car industry in India grew at a nominal CAGR of
approximately 3.6%. The rate of customs duty levied on cars was 225%.
The Beginning
Maruti Udyog Limited (MUL) was established in Feb 1981 through an Act of Parliament, to
meet the growing demand of a personal mode of transport caused by the lack of an efficient
public transport system. It was established with the objectives of - modernizing the Indian
automobile industry, producing fuel efficient vehicles to conserve scarce resources and
producing indigenous utility cars for the growing needs of the Indian population. A license
and a Joint Venture agreement were signed with the Suzuki Motor Company of Japan in Oct
1983, by which Suzuki acquired 26% of the equity and agreed to provide the latest
technology as well as Japanese management practices. There was an option in the
agreement to raise Suzuki’s equity to 40%, which it exercised in 1987. The collaboration with
a foreign name was a first. 40% FDI was allowed into a company. It then looked almost
sacrilegious for existing economic policy. Five years later, in 1992, Suzuki further increased
its equity to 50% turning Maruti into a non-government organization managed on the lines of
Japanese management practices.
In subsequent years, India underwent a series of liberalization measures. The government
lowered excise duties, and customs tariffs. This helped the company maintain its inaugural
price of Rs. 47,500. It was on December 14, 1983 that MUL launched the first Maruti vehicle
- the Maruti 800. The first model was the SS80, a 796cc hatchback car.
The Evolution:
Maruti’s history of evolution can be examined in four phases: two phases during pre-
liberalization period (1983-86, 1986-1992) and two phases during post-liberalization period
(1992-97, 1997-2002), followed by the full privatization of Maruti in June 2003 with the
launch of an initial public offering (IPO).
The first phase started when Maruti rolled out its first car in December 1983. During the
initial years Maruti had 883 employees, a capital of Rs. 607 mn and profit of Rs. 17 mn
without any tax obligation. From such a modest start the company in just about a decade
(beginning of second phase in 1992) had turned itself into an automobile giant capturing
about 80% of the market share in India. Employees grew to 2000 (end of first phase 1986),
3900 (end of second phase 1992) and 5700 in 1999. The profit after tax increased from Rs
18.67 mn in 1984 to Rs. 6854.54 mn in 1998 but started declining during 1997-2001.
During the pre-liberalization period (1983-1992) a major source of Maruti’s strength was the
wholehearted willingness of the Government of India to subscribe to Suzuki’s technology
and the principles and practices of Japanese management. Large number of Indian
managers, supervisors and workers were regularly sent to the Suzuki plants in Japan for
training. Batches of Japanese personnel came over to Maruti to train, supervise and
manage. Maruti’s style of management was essentially to follow Japanese management
practices.
During the pre- liberalization period the focus was solely on production. Employees were
handsomely rewarded with increasing bonus as Maruti produced more and sold more in a
seller’s market commanding an almost monopoly situation.
In 1992, Suzuki’s shareholding in Maruti increased to 50%. A year later in June 1993, GOI
delicensed the passenger car industry in India. Overseas entities were permitted to set up
automobile manufacturing facilities in India through joint ventures with Indian entities. The
overseas entities were permitted to own up to 51% of the equity of such joint ventures until
1995 and more than 51% after 1995. As a result, overseas manufacturers such as General
Motors, Ford, Daimler-Chrysler, Peugeot, Fiat and Daewoo Motors entered the passenger
car and utility vehicles market in India. Most of the new car manufacturers introduced cars in
the mid or large car segments. Premier Automobiles Limited and Maruti were the only
manufacturers in the entry-level small car segment during this period.
Between fiscal 1993 and fiscal 1997, demand for passenger cars increased at a CAGR of
24%. Demand increased largely due to the availability of new models, high demand from the
corporate sector, and increased availability of affordable consumer financing. Between 1997
and 1999, a number of new models were launched in the compact and mid-sized car
segments.
Past Strategies:
Before MUL came into existence, the production of passenger car in India, manufactured by
HML and PAL, was low and remained around only 40,000 units per year for nearly two
decades. However, within three years of MUL coming into existence, it expanded its
production capacity to 100,000 units per annum. The distinctive features of MUL can be
summarized as follows:
 Small car design: It was fuel-efficient and cheap, and its overall quality was much
superior to its competitors.
 Location: Choosing a Greenfield site in Gurgaon, helped it avoid labor problems that
its competitors had to face as Bombay (PAL) and Calcutta (HML) were hot-beds of
labor activism.
 Economies of scale: Ramping up production capacity helped it in achieving
economies of scale.
 Supplier Network: MUL followed the Japanese supplier system as was being
followed by Suzuki in Japan.
Also, MUL brought about a profound effect on the automotive component industry in the
following ways:
 Increased the scale of the whole industry.

 Improvement in Quality standards.
 Partnerships and Tie-ups with suppliers.
Maruti adopted the norm of wearing a uniform of the same color and quality of the fabric for
all its employees thus giving an identity. All the employees ate in the same canteen. They
commuted in the same buses without any discrimination in seating arrangements.
Employees reported early in shifts so that there were no time loss in-between shifts.
Attendance approximated around 94-95%. The plant had an open office system and
practiced on-the-job training, quality circles, kaizen activities, teamwork and job- rotation.
Near-total transparency was introduced in the decision making process. There were laid-
down norms, principles and procedures for group decision making. These practices were
unheard of in other Indian organizations but they worked well in Maruti. During the pre-
liberalization period the focus was solely on production. Employees were handsomely
rewarded with increasing bonus as Maruti produced more and sold more in a seller’s market
commanding an almost monopoly situation.
Maruti was the undisputed leader in the automobile utility-car segment sector, controlling
about 84% of the market till 1998. This was the time when Hyundai Motor and Tata Motors
made sensational debuts after the Government of India abolished the licensing requirements
and permitted foreign players entry into the market. With increasing competition also coming
in from local players like Hindustan Motors, Mahindra & Mahindra and foreign players like
Daewoo, PAL, Toyota, Ford, Mitsubishi, GM, the whole passenger car industry structure
underwent a radical change and resulted in the declining profits and loss of market share for
Maruti.
What hampered Maruti’s growth during this period was the 50-50 equity holding of the
Government of India and Suzuki Motor Corporation (SMC). What did not help Maruti’s cause
either was the fact that this partnership was dispute-prone. This contributed to inefficient
decision-making especially at the top management level. At the same time, however, Maruti
entered into a strategic alliance with General Motors (GM) in order to capitalize on GM’s
technological know-how and leverage on its brand strength in the medium-end car segment.
In the wake of its diminishing profits and loss of market share, Maruti initiated strategic
responses to cope with India’s liberalization process and began to redesign itself to face
competition in the Indian market. The redesign process saw Maruti complete a Rs. 4000 mn
expansion project which increased the total production capacity to over 3,70,000 vehicles
per annum. Together with the redesign plan, there was a shift in business focus of Maruti
from "production, production and production" to "marketing and customer focus".
Focus on customer care became an important element in Maruti’s strategies. To increase its
market share, Maruti launched new car models, concentrated on marketing and institutional
sales. Cost reduction and increasing operating efficiency were another redesign variable.
Cost reduction was achieved by reaching an indigenization level of 85-90 percent for all the
models. This also mitigated the foreign exchange risk.
Maruti planned to reduce costs, increase productivity, quality and upgrade its technology
(Euro I&II, MPFI). In addition, it followed a high volume production of about 400,000 vehicles
/ year, which entailed a smooth relationship between the workers and the managers.
Incorporating the best practices of Suzuki, helped Maruti arrest a slide in the market share.
With the program of organizational redesign, rationalization of cost and enhanced
productivity, Maruti bounced back to capture back over 50% of the market.
An industrial relations dispute in its Gurgaon plant in September 2000 and its manner of
handling by the Government brought the focus back on the equity holding structure of the
company. Now, SMC wanted a majority stake in the company which they eventually
acquired in May 2002. They now had the management control.
Financial Performance:
Maruti commands over 50% of the market share of the passenger vehicles, according to a
CRISIL report. However, this share has been on a decline and is expected to fall further with
the entry of newer players. This, however, doesn’t imply that Maruti’s leadership days are
over. Maruti may still show an increase in absolute sales numbers but to maintain over 50%
market share may be a difficult task.
Maruti decided against infusing technology into its 800 to enable it to meet Bharat Stage 4
emission norms and instead decided to pull out the model from Metros. This led to a fall in its
market share in the A1 segment also called the Entry-level segment owing to its low price.
What also contributed to the fall is the big-bang entry of Tata Motors’ Nano in the segment.
The launch of Dzire helped it to increase its share in the A3 segment. Maruti, however, has
been a prime example of companies introducing multiple products in the same segment and
yet defying cannibalization to a large extent. The launch of Ritz is a shining example to prove
the same.
Maruti’s sales, however, have been on an uptrend. This strong growth however doesn’t get
reflected in the market share figures. The operating margin hovers aroung 12-14%. It saw a
dip in 2008-09 owing to the high raw material prices.
Maruti has always looked upon India as a hub to export cars. Infact, India has already been
designated as an export hub for the small car A-Star and exports to Europe have already
begun from India. The figure below indicates the contribution of rising exports to Maruti’s
total sales.
The raw material costs form the biggest chunk of the costs incurred by Maruti Suzuki India
Limited accounting for around 80% of the total costs. However, more often than not these
costs are transferred to the end-consumers as shown in the figure below:
With an increasing focus on customer service, Maruti has been trying to increase its service
outlets. It has added approximately 840 service outlets in a space of 5 years. These service
outlets were added in over 300 cities where Maruti previously had no presence as is shown
in the figure below:
In the same vein, Maruti has also been concentrating to increase the sales points and sales
force by trying to increase its geographical presence. Maruti’s cars now can be bought in
454 cities at over 681 sales points. The growth in the same in the last 5 years can be seen in
the graph below:
Maruti’s SWOT Analysis:
Strengths:
 Continuous improvements in operational efficiency and productivity have enabled

Maruti to be the price leader in the Indian passenger car industry.
 Strong brand recall – Another name for ‘Small Car’.
 Unmatched customer service outlet network.
 Efficient supply chain.
 Largest presence in Rural India.
 One-Stop Shop for customer requirements.
Weaknesses:
 Dependence on Suzuki Motor Corporation on technology requirements.

 Not associated with sophistication – Failure of Maruti Baleno.
Opportunities:
 Rising income levels of households – Huge market potential.

 Rising Indian middle-class and their splurge.
 Potential for exports in, so far, unaddressed regions.
 Untapped Rural markets.
Threats:
 Growing competition in compact car segment.

 Rise in petrol prices and growing popularity of substitute fuels.
 Growing popularity of hybrid cars and their possible Indian entry.
 Entry of Tata Nano.
 Rise in raw material prices.
Strategic Capabilities:
Threshold Capabilities:
Threshold Resources:
 Plants in Gurgaon and Manesar with a production capacity over 1 million cars per
annum.
 Pre-owned cars business.
 Research & Development Hub.
Threshold Competencies:
 Quality-focus.
 Efficient supply chain management.
Capabilities for Competitive Advantage:
Unique Resources:
 Strong Brand value – Another name for ‘Small Car’.

 Largest dealer presence.
 Unmatched customer service outlet network.
Core Competencies:
 Marketing - Successfully managing multiple cars in a single segment.

 Providing one-stop solutions for all car-related problems of consumers.
Current Strategies Followed By MUL
I. Pricing Strategy - Catering To All Segments
Maruti caters to all segments and has a product offering at all price points. Maruti gets 70%
business from repeat buyers who earlier had owned a Maruti car. Their pricing strategy is to
provide an option to every customer looking for up gradation in his car. Their sole motive of
having so many product offering is to be in the consideration set of every passenger car
customer in India. Here is how every price point is covered.
II. Offering One Stop Shop To Customers Or Creating Different Revenue

StreamsMaruti has successfully developed different revenue streams without making huge
investments in the form of MDS, N2N, Maruti Insurance and Maruti Finance. These help
them in making the customer experience hassle free and helps building customer
satisfaction.
Maruti Finance: In a market where more than 80% of cars are financed, Maruti has
strategically entered into this and has successfully created a revenue stream for Maruti.
Maruti has tied up with 8 finance companies to form a consortium. This consortium
comprises Citicorp Maruti, Maruti Countrywide, ICICI Bank, HDFC Bank, Kotak Mahindra,
Sundaram Finance, Bank of Punjab and IndusInd Bank Ltd.( erstwhile-Ashok Leyland
Finance).
Maruti Insurance : Insurance being a major concern of car owners. Maruti has brought all
car insurance needs under one roof. Maruti has tied up with National Insurance Company,
Bajaj Allianz, New India Assurance and Royal Sundaram to bring this service for its
customers. From identifying the most suitable car coverage to virtually hassle-free claim
assistance it's your dealer who takes care of everything. Maruti Insurance is a hassle-free
way for customers to have their cars repaired and claims processed at any Maruti dealer
workshop in India.
True Value – Initiative to capture used car market
Another significant development is MUL's entry into the used car market in 2001, allowing
customers to bring their vehicle to a 'Maruti True Value' outlet and exchange it for a new car,
by paying the difference. They are offered loyalty discounts in return. This helps them retain
the customer. With Maruti True Value customer has a trusted name to entrust in a highly
unorganized market and where cheating is rampant and the biggest concern in biggest
driver of sale is trust. Maruti knows its strength in Indian market and has filled this gap of
providing trust in Indian used car market. Maruti has created a system where dealers pick up
used cars, recondition them, give them a fresh warranty, and sell them again. All
investments for True Value are made by dealers. Maruti has build up a strong network of
172 showrooms across the nation. The used car market has a huge potential in India. The
used car market in developed markets was 2-3 times as large as the new car market.
N2N: Car maintenance is a time-consuming process, especially if you own a fleet. Maruti’s
N2N Fleet Management Solutions for companies, takes care of the A-Z of automobile
problems. Services include end-to-end backups/solutions across the vehicle’s life: Leasing,
Maintenance, Convenience services and Remarketing.
Maruti Driving School (MDS): Maruti has established this with the goal to capture the
market where there is inhibition in buying cars due to inability to drive the car. This brings
that customer to Maruti showroom and Maruti ends up creating a customer.
III. Repositioning Of Maruti Products
Whenever a brand has grown old or its sales start dipping Maruti makes some facelifts in the
models. Other changes have been made from time to time based on market responses or
consumer feedbacks or the competitor moves. Here are the certain changes observed in
different models of Maruti.
Omni has been given a major facelift in terms of interiors and exteriors two months back. A
new variant called Omni Cargo, which has been positioned as a vehicle for transporting
cargo and meant for small traders. It has received a very good response from market. A
variant with LPG is receiving a very good response from customers who look for low cost of
running.
Wagon-R was perceived as dull boxy car when it was launched. This made it a big failure on
launch. Then further modifications in engine to increase performance and a facelift in the
form of sporty looking grills on the roof. Now it’s of the most successful models in Maruti
stable.
IV. Customer Centric Approach
Maruti’s customer centricity is very much exemplified by the five times consecutive wins at J
D Power CSI Awards. Focus on customer satisfaction is what Maruti lives with.
Maruti has taken a number of initiatives to serve customer well. They have even changed
their showroom layout so that customer has to walk minimum in the showroom and there are
norms for service times and delivery of vehicles. The Dealer Sales Executive, who is the first
interaction medium with the Maruti customer when the customer walks in Maruti showroom,
is trained on greeting etiquettes. Maruti has proper customer complain handling cell under
the CRM department. The Maruti call center is another effort which brings Maruti closer to its
customer. Maruti enjoys seventy percent repeat buyers which further bolsters their claim of
being customer friendly. Maruti is investing a lot of money and effort in building customer
loyalty programmes.
V. Committed To Motorizing India
Maruti is committed to motorizing India. Maruti is right now working towards making things
simple for Indian consumers to upgrade from two-wheelers to the car. Towards this end,
Maruti partnerships with State Bank of India and its Associate Banks took organized finance
to small towns to enable people to buy Maruti cars. Rs. 2599 scheme was one of the
outcomes of this effort.
Maruti is busy fine-tuning another innovation. While researching they found that rural people
had strange notions about a car - that the EMI (equated monthly instalments) would range
between Rs 4,000 and Rs 5,000. That, plus another Rs 1,500-2,000 for monthly
maintenance, another Rs 1,000 for fuel (would be the cost of using the car). To counter that
apprehension, the company is working on a novel idea. Control over the fuel bill is in the
consumer's hands. But, maintenance need not be. Says Khattar: "What the company is
doing now is saying how much you spend on fuel is in your hands anyway. As far as the
maintenance cost is concerned, if you want it that way, we will charge a little extra in the EMI
and offer free maintenance."
VI. Disinvestment And IPO Of Maruti Udyog Limited
The size of Maruti’s sell- off deal is proof of success. On the investment of Rs 66 crore it
made in 1982, when Maruti Udyog Limited (MUL) was formally set up, the sale represents a
staggering return of 35 times The best part of the deal is the Rs 1,000 crore control premium
the Government has been able to extract from Suzuki Motor Corporation for relinquishing its
hold over India’s largest car company.
The Indian car giant Maruti Udyog Limited has finalized its two mega investment plans — a
new car plant and an engine and transmission manufacturing plant. Both the projects will be
implemented by two different companies. At its meeting the company's board approved a
total investment of Rs3,271.9 crore for these two ventures, which will be located in Haryana.
VII. Realisation Of Importance Of Vehicle Maintenance Services Market
In the old days, the company's operations could be boiled down to a simple three-box
flowchart. Components came from the 'vendors' to the 'factory' where they were assembled
and then sent out to the 'dealers'. In this scheme, you know where the company's revenues
come from. The new scheme is more complicated. It revolves around the total lifetime value
of a car.
VIII. Playing On Cost Leadership
Maruti is the price dictator in Indian automobile industry. It’s the low cost provider of car. The
company has set itself (and its vendors) the target of a 50% improvement in productivity and
a 30% reduction in costs in three years. The ability to keep lowering the prices sets Maruti
apart from other players in the league. Maruti spread the overheads over a larger base.
The impressive sales and profits were the result of major efforts within the company. Maruti
also increased focus on vendor management. Maruti consolidated its vendor base. This has
provided its vendors with higher volumes and higher efficiencies. Maruti does that by
working with vendors, assuring them that for every drop in price, volumes will go up. Maruti
is now encouraging its vendors to develop R&D capability for specialized components.
Based upon such activities, product competitiveness in the market will further increase.
Maruti also made strides in applying IT to manufacturing. A new Vehicle Tracking System
improved efficiency on the shop floor and enhanced quality control. The e Nagare system,
adopted from Suzuki Motor Corporation, smoothened Maruti’s Just In Time operations.
Major Future Strategies

I. Phasing out Zen in 2007
The launch of Swift and phasing out Zen is a strategic move. Alto was launched keeping in
mind that it will take over Maruti 800 market in future. Swift was launched in May, 2005 in the
price band starting from 4 lacs. It is a rational decision to kill a product before it starts facing
the decline stage in product cycle.
II. Maruti Plans For A Big Diesel Foray
The new car manufacturing company, called Maruti Suzuki Automobiles India Limited, will be
a joint venture between Maruti Udyog and Suzuki Motor Corporation holding a 70 per cent
and 30 per cent stake respectively. The Rs1,524.2 crore plant will have a capacity to roll out
1 lakh cars per year with a capacity to scale up to 2.5 lakh units per annum. The new car
manufacturing plant will begin commercial production by the end of 2006.
Maruti would set up a diesel engine plant at Gurgaon in line with its plan to become a major
player in diesel vehicles in a couple of years. This has been done in the wake of major
competition from Tata Indica and meets the growing demand of diesel cars in India.
III. Maruti Plans for an New Engine And Transmission Plant
The engine and the transmission plant will be owned by Suzuki Powertrain India Limited in
which Suzuki Motor Corporation would hold 51 per cent stake and Maruti Udyog holding the
balance. The ultimate total plant capacity would be three lakh diesel engines. However, the
initial production would be 1 lakh diesel engines, 20,000 petrol engines and 1.4 lakh
transmission assemblies.
IV. India As Export Hub For Maruti
In August, 2003 Maruti crossed a milestone of exporting 300,000 vehicles since its first
export in 1986. Europe is the largest destination of Maruti’s exports. The top ten destination
of the cumulative exports have been Netherlands, Italy, Germany, Chile, U.K., Hungary,
Nepal, Greece, France and Poland in that order.
The Alto, which meets the Euro-3 norms, has been very popular in Europe where a
landmark 200,000 vehicle were exported till March 2003. Even in the highly developed and
competitive markets of Netherlands, UK, Germany, France and Italy Maruti vehicles have
made a mark. Though the main market for the Maruti vehicles is Europe, where it is selling
over 70% of its exported quantity, it is exporting in over 70 countries.
Maruti has entered some unconventional markets like Angola, Benin, Djibouti, Ethiopia,
Morocco, Uganda, Chile, Costa Rica and El Salvador. The Middle-East region has also
opened up and is showing good potential for growth. Some markets in this region where
Maruti is, are Saudi Arabia, Kuwait, Bahrain, Qatar and UAE.
The markets outside of Europe that have large quantities, in the current year, are Algeria,
Saudi Arabia, Srilanka and Bangladesh.
V. Maruti Emerging As R&D Hub For Suzuki Motor Corporation
The country’s leading car manufacturer will make substantial investments to upgrade its
research and development centre at Gurgaon in Haryana for executing design and
development projects for Suzuki. This includes localization, modernization and greater use
of composite technologies in upcoming models.
The company will be hiring more software engineers and technocrats to handle Suzuki’s
R&D projects. Investment would be more in terms of manpower than in infrastructure, which
is already in place. Apart from working on innovative features, the R&D teams will focus on
latest technologies using CAD-CAM tools to roll out new models that will meet the needs of
MUL’s diverse customers in the future.
Key Success Factors

(1) The Quality Advantage
Maruti Suzuki owners experience fewer problems with their vehicles than any other car
manufacturer in India (J.D. Power IQS Study 2004). The Alto was chosen No.1 in the
premium compact car segment and the Esteem in the entry level mid - size car segment
across 9 parameters.
(2) A Buying Experience Like No Other
Maruti Suzuki has a sales network of 307state-of -the-art showrooms across 189 cities, with
a workforce of over 6000 trained sales personnel to guide MUL customers in finding the right
car.
(3) Quality Service Across 1036 Cities
92% of Maruti Suzuki owners feel that work gets done right the first time during service. The
J.D. Power CSI study 2004 also reveals that 97% of Maruti Suzuki owners would probably
recommend the same make of vehicle, while 90% owners would probably repurchase the
same make of vehicle.
(4)One Stop Shop
At Maruti Suzuki, customers will find all car related needs met under one roof. Whether it is
easy finance, insurance, fleet management services, exchange- Maruti Suzuki is set to
provide a single-window solution for all car related needs.
(5) The Low Cost Maintenance Advantage
The acquisition cost is unfortunately not the only cost customers face when buying a car.
Although 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.
(6)Lowest Cost of Ownership
The highest satisfaction ratings with regard to cost of ownership among all models are all
Maruti Suzuki vehicles: Zen, Wagon R, Esteem, Maruti 800, Alto and Omni.
(7) Technological Advantage
It has introduced the superior 16 * 4 Hypertech engines across the entire Maruti Suzuki
range. This new technology harnesses the power of a brainy 16-bit computer to a fuel-
efficient 4-valve engine to create optimum engine delivery. This means every Maruti Suzuki
owner gets the ideal combination of power and performance from his car.
Future Challenges for MUL in next 5 years:
 Competition has intensified in last 5 years. It is expected to intensify further with GM,
Volkswagen and Chevrolet coming with many models across different price range.
 Indian consumer are now looking beyond robustness, they also desire style and better
designs. Maruti will need to work on these areas to make its cars for stylish.
 Tata Nano changed the Indian landscape in 2009, now even Bajaj is also planning to
launch a extremely low cost car. It will affect Maruti’s Alto. Many other players have
come up with mid ranged cars which will give a tough competition to Maruti.
 Improvements in technology and better manufacturing techniques will improve
operational efficiency thus will improve the margins for care makers. Maruti needs to
encash this thing.
 Increase in competition will lead to higher marketing and selling costs.
 Maruti needs to target all segments (presence in different price bands) to remain market
leader.
 Increase in raw material costs is a big worry for care makers. Using indigenous parts,
electronic procurement etc could be the way out.
 With India fast emerging as manufacturing hub, care makers stand to gain. Maruti needs
to target and use its resources more effectively and use Indian plants as manufacturing
hubs for car export.
 Better control over vendors. Many manufacturers have collaborated with vendors for co-
creation and R&D work. It not only improves efficiency but also helps in low cost design.
Recommendations
 Maruti has to look beyond low cost segment and grow its market share in mid range
segment as well. Though Maruti Swift has been highly successful, but with intense
competition Maruti will need to launch more variants and models to attract more
customers.
 Vendor rationalization would be very important to maintain low cost of procurement and
design.
 Capacity utilization would play an important role. Maruti may manufacture for other
players to utilize unused capacity.
References
 http://www.carwale.com/Forums/viewthread-3176-p2.html
 http://www.scribd.com/doc/19046599/Positioning-Small-Cars-India
 http://www.carwale.com/forums/viewthread-3176.html
 http://www.crisilresearch.com
 DATAMONITOR, "New Cars in India", December 2009
 DATAMONITOR, Country analysis report INDIA, June 2009
 Revving The Growth Engine by Booz & Co., September 2008
 AUTOMOTIVE – A report by KPMG for IBEF, 2006

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STRATEGIC MANAGEMENT - I

Institute of Management Technology

1. A1 Segment: Cars, with length upto 3,400 mm

An embryonic automotive industry emerges in India

 Telco (now Tata Motors)

The highlights of this policy are as follows:

 Manufacturers must achieve indigenisation levels of up to 50 per cent within 3 years,

 Foreign manufacturers must invest a minimum of $50 million as equity capital in a

 In addition to vehicles, the venture will be allowed to export components, in order to

Automobile companies start investing in service network to support maintenance of on-road

Homologation means ensuring through tests whether a vehicle produced out of a

Taxes and duties

Domestic Player Profiles

Segments No. of Players (2009-10)

Ford India Ltd.

GM announced a capital expenditure of around Rs 16 billion to produce light commercial and

Honda Siel Cars India Ltd

It is a subsidiary of Honda Motors Corporation and has plants in Takapura,Rajasthan and

It is a subsidiary of Hyundai Motors Corporation and has a plant in Sriperumbudur, Tamil

Maruti Suzuki India Ltd

It is a subsidiary of Suzuki Motors Corporation with plants is Manesar and Gurgaon in

Nissan Motor India

Skoda Auto India Private Ltd

A subsidiary of Volkswagen Group, it has a plant in Aurangabad, Maharashtra with a

Toyota Kirloskar Motors Ltd.

Volkswagen Group India Pvt. Ltd.

Mahindra & Mahindra Ltd.

 Energy constraints and over-dependence on oil imports

 GDP fluctuates with monsoons

• India is a poor performer on the Environmental Performance Index (EPI). In an EPI

• India’s dependence on thermal energy, mainly coal-based, has resulted in a host of

Porter's Diamond Model

• Local demand is skewed heavily towards low-cost vehicles, including scooters

• CAGR of 89% over next 5 years

• Low switching costs

• Price sensitive buyers

• Good brand building lowers treat of buyers

• 100% FDI allowed by govt. after 2002 Auto Policy

• Huge import tariffs promote local production of goods

• Cheap labor available depending upon the setup region

• Technology present to meet the environmental norms set up

• Fiscal incentive to auto makers performing R&D in India

Related and Supporting Industries

• Competitive Ancillary industry present

• Consolidation by steel suppliers enables availability of raw materials

• Supply chain networks needs improvement

• Removal of ruling of indigenization

• Mass production required for economies of scale

• Major new car makers are currently on down turn

• Rush from global companies to get a foothold

• Entry method is normally joint venture

• Rivalry intense as no. of competitors = 15

PORTER’s FIVE FORCE ANALYSIS

1. Threat of new entrants.

The threat of new entrants

However, given India's incredible growth forecasts, infrastructure progress (especially

The threat of substitute products

The amount of bargaining power suppliers have

The amount of rivalry among competitors

RECENT POLICY CHANGES

Auto Policy, 2002

 Automatic approval of foreign equity: The government started the trend of

 Specific fiscal incentives: The government announced special fiscal incentives