Sonalika’s foray into passenger vehicles

Deepak Pandit, Shalini Rahul Tiwari and Arun Sahay

Introduction Deepak Pandit is

Professor at the
Around 2002, the Sonalika Group decided to focus its attention on the expansion of the Department of
group’s presence in the passenger vehicle sector. The group already had a considerable Entrepreneurship and
presence in the farm sector with the flagship company of the group, International Tractors Strategy, Fortune Institute
Limited (ITL), which produced Sonalika brand of tractors and was the third largest player of International Business,
in the Indian market[1]. The group had well-developed technologies related to the farm Delhi, India.
Shalini Rahul Tiwari is
sector, which were developed over several years through its experimentation with powerful
Professor at the
technologies in the agriculture sector, especially, in North India. Its presence gained
Department of Strategy,
prominence by means of widespread marketing and distribution channels. Innovation and
Sonalika believed that the growing passenger vehicle market of India opened up an Entrepreneurship,
Institute of Management
opportunity for diversification and further growth. This understanding led to the creation of
Technology, Ghaziabad,
a subsidiary, namely, International Cars and Motors Limited (ICML) in 2004. In early 2006,
India. Arun Sahay is
ICML launched its multi-utility vehicle (MUV) named “Rhino” with the target of filling the gap Professor at Centre for
left by Toyota’s Qualis – a highly popular vehicle in the MUV segment – after Toyota’s Research Studies, Birla
decision of discontinuing the production of Qualis in 2006. ICML sold a little over 5,000 Institute of Management
units in two years. It, however, had to scale down the production of Rhino[2], as the vehicle Technology, Noida, India.
had failed to make its mark in the niche MUV segment. After attempting to rectify the
perceived shortcomings of the vehicle, ICML launched an improved version of Rhino under
the brand name “Extreme” in early 2012[3].
Among the passenger vehicles, the utility vehicles had shown a robust double digit growth
during the intervening period, but “Extreme” was not able to make its mark in the MUV
market. The analysts wondered about the reasons behind failure of Rhino for not being able
to successfully fill the gap created by Qualis though it was designed to do so. They also
wondered about the inability of Extreme to make its mark in the growing utility vehicle
The work on this case was
segment. While analysts did their job, the management had to take a call on what next. completed while the First
They had work out their future strategy. author was appointed as an
adjunct faculty by AICTE (All
India Council for Technical
Education at Birla Institute of
Management Technology,
Sonalika Group: The promoters Greater Noida India. We would
like to thank AICTE for the
grant and BIMTECH for
The Sonalika Group is headed by the Chairman Lachhman Das Mittal, who has been providing the opportunity to
actively involved in all the operations of the company. He is supported by his two sons complete this work.
Amrit Sagar Mittal and Deepak Mittal. The former is the Vice Chairman and handles Disclaimer. This case is written
sales and marketing for the group, while the latter is the Managing Director and looks solely for educational
purposes and is not intended
after R&D and operations. Lachhman’s grandsons have also been groomed to share to represent successful or
responsibility and to participate in decision-making. Raman Mittal, the grandson, had unsuccessful managerial
decision-making. The authors
joined business as full time Executive Director in 2011 and is involved in various may have disguised names;
functions of International Tractors Limited (ITL), while Sushant Sagar Mittal, the other financial and other
recognisable information to
grandson, is a Director in Sonalika[4]. protect confidentiality.

DOI 10.1108/EEMCS-05-2017-0091 VOL. 8 NO. 4 2018, pp. 1-27, © Emerald Publishing Limited, ISSN 2045-0621 EMERALD EMERGING MARKETS CASE STUDIES PAGE 1
 Group background
In the state of Punjab (located in northern India), a small firm in 1969 began its operations
in trading and gradually diversified into manufacturing of agricultural equipment such as
threshers and cultivators. The firm adopted the brand name Sonalika, which was the
popular brand of a high yielding variety of wheat. Gradually, the company ventured into a
range of agricultural implements such as planters, cultivators, disc harrows, disc ploughs
and MB ploughs. To market its products efficiently, the company further established an
extensive distribution network throughout India. In early 1990, Sonalika moved up the value
chain by entering tractor business. Tractors, in India, are used both for harvesting and
haulage purposes. Sonalika decided to produce tractors for harvesting segment for which
the production facility was set up at Hoshiarpur, Punjab. The group had constantly invested
in the state-of-art facility, which had an annual capacity of 200,000 tractors (see Exhibit 1
for timeline).

Capability development of Sonalika Group

In 1995, Sonalika made a technical and marketing collaboration with Renault (Agriculture
division)[5]. The later had identified India as a base for producing units in this segment
which led to the joint venture between Sonalika and Renault. This enhanced Sonalika’s R&D
capability and helped it in upgrading the facilities and systems, thereby resulting in the
tremendous improvement of Sonalika’s product quality and credibility. The group emerged
as a mainstream player in farming and agricultural products. Soon, it decided to enter the
CIS (Commonwealth of Independent States) and African countries. Later, the group
created a subsidiary, “International Tractors Limited (ITL)”, which looked after the
production and marketing of tractors. ITL became the flagship unit for Sonalika in a short
time.
The agriculture division of Renault was sold to Class Motors, Germany in the year 2000.
Further, Renault took a decision of shifting its manufacturing outside India. During the
intervening period, Sonalika was experiencing good growth in tractors and had made
significant inroads in the rural market. This encouraged ITL to decide to design and
develop the product in-house which led to the establishment of a major R&D Centre. In
2001, ITL started in-house designing and production of tractor engines. Its R&D
department was split into two units – Tractors and Engines. In 2004, ITL collaborated with
the agriculture division of Yamaha Motors creating a joint venture to enhance the efficiency
of its tractors.
Sonalika’s ITL unit produced heavy duty tractors from 20 to 110 HP and exported them to
several countries around the world. Export of tractors started in 2006; gradually expanding
its wings to African, CIS and SAARC countries. Subsequently, it established assembly lines
in Nigeria, Cameroon, Algeria, Germany, Argentina and Brazil in collaboration with local
distributors. In 2013, Sonalika sold almost 9,500 tractors overseas, which contributed 17
per cent to its revenues[6]. On an average, tractor sold overseas fetched 30 per cent more
margin as compared to the one sold locally. By March 2017, Sonalika had exported 75,000
tractors to overseas markets and registered its presence in 80 nations worldwide, including
25 European nations[7]. In the domestic market, Sonalika had 10 per cent market share in
2013. It targeted achieving 15 per cent in the next two years, but it could achieve a market
share of 12.3 per cent at the end of year 2016 –2017[8]. Notwithstanding, the company
aspired to become the market leader by gaining more than 30 per cent market share in
farm equipment segment[9]. To meet these targets, Sonalika commissioned another plant
at Fatuah in Bihar with an annual capacity of 20,000 units. The existing capacity of the plant
was augmented to tap the nearby markets of east Uttar Pradesh, Bihar, Jharkhand, West
Bengal, Odisha and north-eastern states[10].

PAGE 2 EMERALD EMERGING MARKETS CASE STUDIES VOL. 8 NO. 4 2018

Sonalika’s entry into automobiles
With the success of ITL in tractors, Sonalika grew confident about its technical and
marketing capabilities. It decided to leverage them for entering the automobile market
through utility vehicles. Under the umbrella of Sonalika Group, another subsidiary
“International Motors and Cars Limited” was formed in 2004. The manufacturing facility was
established at Amb, Himachal Pradesh where preferential treatment for sales and income
tax was available. This facility could produce up to 2,000 utility vehicles a month. Sonalika
employed INR 50 billion for conceptualization, prototype development, and testing of
vehicles. ICML, thus, was geared up to enter the MUV segment and subsequently to
expand to other automobile segments[11]. This was the time when Toyota had vacated the
market by discontinuing the manufacturing and marketing of Qualis though the demand
existed and Qualis was Toyota’s bestseller[12]. Sonalika had decided to encash this
opportunity.

The passenger vehicles segment – trends and opportunities

The car and utility vehicle (UV) industry in India had displayed a consistent growth fuelled
by higher GDP expectations and lower vehicle prices resulting from reduction in excise
duty. Another significant trend emerging in the automobile segment was the introduction of
financing schemes for automobile purchases that resulted in upgrading existing cars and
buying multiple cars[13]. Despite this, even in 2016-2017, for every 1,000 Indians, there
were only 20 cars. This clearly provided a growth opportunity for automobile
manufacturers[14].
Hitherto, the growth in the automobile market was primarily driven by the small cars
which had grown by a CAGR of 6 per cent between FY 2009-2010 and 2014-2015.
Though the sales dipped between FY 2011-2012 and 2013-2014 due to economic
slowdown and deregulation of petrol resulting in price hike, the growth was on the path
of recovery.
The Indian Automobile industry had experienced significant growth since liberalization; the
market had attracted automobile manufacturers from all over the world such as Honda,
Toyota, Hyundai, GM, Ford, Renault, Nissan, Volkswagen, BMW, Chevrolet and Skoda.
Indian players such as Tata, Mahindra and Maruti had become more active. In the year
2004, the total number of passenger vehicle sold crossed one million mark. India became
one of the fastest growing markets for private vehicles[14]. The industry had witnessed a
growth of 29 per cent in 2003 and a growth of 22 per cent in 2004. Buoyed by the response,
the car manufacturers were launching new models; Honda launched Civic, Ford launched
Focus, Skoda launched Fabia and so on. Fiat upgraded its Palio, while Chevrolet
introduced Spark, and Toyota was planning to launch Innova to replace its highest selling
SUV Qualis which, in 2004, had sold 36,699 units registering a growth of 19 per cent.
Though the growth was largely driven by compact cars, the companies were launching
utility vehicles as well. Nissan was planning for a manufacturing facility for its UV X-trail;
Hyundai planned the launch of Tuscon, and Toyota planned the launch of a high priced UV
Fortuner in 2004[15]. Tata had also given a facelift to its SUV Sumo and launched it as
Sumo Victa resulting in the sale of 30,006 units. General Motors, too, had joined the band
wagon launching its Tavera which sold 8,417 units in 2004.
Being encouraged by the significant growth of the automotive sector, the government
termed it as the sunrise sector and intended to improve the competitiveness of the sector
to make India a Global Automotive Hub. The government launched the first Automotive
Mission Plan (AMP) 2006-2016 to nurture a complete ecosystem for the sector (Exhibit 2).
The broad objectives of this plan were to make India a significant player in the world by
making it attractive for firms to establish their manufacturing hubs; to increase the
contribution of Indian automotive sector in the GDP; and to enhance employment

VOL. 8 NO. 4 2018 EMERALD EMERGING MARKETS CASE STUDIES PAGE 3

 opportunities for the youth. The review of 2006-2016 showed that the Indian automotive
sector contributed about 7 per cent to the GDP and led to the creation of 25 million jobs.
It had been able to attract FDI of more than INR 15.75 billion helping India emerging as a
manufacturing hub for automobile[16]. Having seen the success of the earlier plan, the
government had proposed to initiate Automotive Mission Plan 2016-2026. This plan is
believed to be more ambitious as the goal is to make the auto industry contribute 12 per
cent to GDP[17].
Between FY 2009-2010 and 2014-2015, the number of households that could afford a small
car increased by a CAGR of 16 per cent owing to the rise in disposable income and easy
availability of finance even to the rural population that was to contribute to the growth in
sales of small cars[17]. In FY 2016-2017, 7,62,000 UVs were sold as compared to 58,600
in FY 2015-2016 (Exhibit 1). The UV segment had been traditionally acceptable to
customers of rural segment because of its larger seating capacity and motorability on
rough roads. This was evident from a major shift in product profile with the launch of
compact UVs like Renault Duster and the Ford Eco Sport in the years 2012 and 2013,
respectively. Priced reasonably and having attractive features, UVs saw the buyers shifting
towards it from sedans. Even the export of utility vehicles from India had seen a healthy
growth[18]. Ford held 57 per cent of the export UV market which was closely followed by
Hyundai, Nissan and Maruti, the top selling models being Ecosport, Creta, S-Cross and
Vitara Brezza[19].
Although Mahindra & Mahindra (M&M) had been the largest player in the domestic UV
segment, its share had seen a steady decline since FY 2011-2012. M&M’s performance
had been affected by the entry of players like Ford and Renault in the market and more
recently through the launch of several UV models by Maruti and Hyundai. The decrease in
M&M’s market share could also be attributed to the fact that its UVs were mostly diesel
based, whereas its competitors had launched UVs that were petrol based[20]. The new
models of compact UVs that were launched belonged to the INR 1.5m range constituting
superior features. This caused the shift in the consumer preference from sedans to UV.
Another interesting trend to note was the deregulation of diesel price which made diesel
more expensive resulting in the reduction of customer preference for diesel vehicles.
Further, state governments were taking proactive measures to curb the rising pollution from
diesel vehicles forcing the manufacturers to modify their product mix[21]. CNG and LPG,
because of lower emission and lower average cost (INR 2.4 and INR 1.5 per kilometre as
compared to INR 5 and INR 3.5 for petrol and diesel, respectively) of running the vehicle,
became popular among the vehicle users[22]. Observing this trend, companies such as
Maruti, Hyundai, Honda and Tata had launched CNG and LPG based variants of the
existing vehicles[22].
The UV segment had experienced intense rivalry among M&M, Toyota and Maruti because
they introduced newer models of compact UVs in the market (Exhibits 3 and 4). The share
of compact UVs had been increasing in the overall UV segment (Exhibits 4 and 5). Models
such as Maruti’s S-Cross, Hyundai’s Creta and M&M’s TUV 500 were popular among the
buyers owing to attractive price range and enhanced features. This trend continued with
the launch of Maruti Brezza and Honda’s BR-V in 2016-2017[22]. With the constant
increase in competition from the foreign players, Indian manufacturers were continuously
investing in the R&D for developing new models. It was estimated that the R&D spending
by leading Indian cars and UV manufacturers was inching closer to global levels of 4 to 6
per cent of their total revenue[22]. The sales of utility vehicles were expected to grow at a
rate of 13 to 15 per cent in the coming year, which was stronger than the overall growth in
passenger vehicles (Exhibit 2). Changing customer preferences, availability of petrol
variants and launching of new models, especially in the compact UV space, were pushing
the demand for UVs[22].

PAGE 4 EMERALD EMERGING MARKETS CASE STUDIES VOL. 8 NO. 4 2018

ICML’s entry in the utility vehicle segment
ICML geared its resources to enter the MUV segment with a vehicle named “Rhino”. The
MUV segment, around FY 2005-2007, was dominated by TATA’s Sumo and Mahindra’s
Bolero. Till 2004, “Qualis” from Toyota stable was the most popular UV capturing almost 40
per cent of the market. Qualis was an instant hit and was mainly used as a taxi in India.
However, with the plan of Toyota to launch an upgraded vehicle “Innova” in this segment,
Qualis was phased out. For the fear of cannibalization of Innova owing to Qualis, the
company had decided to discontinue the latter. ICML had sensed this opportunity and
aspired to capitalize on it. Rhino was, thus, contemplated to fit the space vacated by
Qualis. The specifications of the proposed UV were decided accordingly.

Capability development at ICML

ICML had already operationalized a facility at Amb for the production of vehicles and had
planned to use initially its existing distribution network across India though it knew that the
present distribution network, though good enough, may not be sufficient for the distribution
of UVs. It started scouting for dealers to expand their network and simultaneously
undertook the in-house designing of the vehicle at Amb where the facility was equipped
with a modern paint shop. This unit had already undertaken a contractual painting job for
Tata Ace. The engines and transmissions were to be procured from ITL’s plant[23]. ICML
had to design and develop the product completely from scratch as its capabilities were
limited to designing tractors. All the processes required for product development and
testing were developed by ICML without any help from ITL. ICML had developed the
process of electro deposition for painting of UVs. However, the development of an engine
was a formidable task for ICML, so it decided to get engines from Isuzu and build their
product around it. By carrying out necessary research and collecting data for design as
well as those of customer’s choice, ICML ascertained the market potential. Rhino was
designed to be more spacious with additional seating capacity and higher engine power of
100 and 120 BHP with 25 per cent higher fuel efficiency. It wanted to repeat Sonalika’s
performance in the tractor market that expressed customer satisfaction and appropriate
technology adoption. The R&D in the tractor sector had enhanced Sonalika’s knowledge,
expertise and capability for technology absorption[24].
In addition to technical and market factors, it tried to create cost related synergies across
the value chain, as expressed in an interview of Gaurav Saxena, Director Sales &
Marketing:
The major share of revenues within the Sonalika group comes from the tractor business. which
contributes as much as 85 to 90 per cent. We have a common plant for engine and
transmissions. Many body parts are being manufactured in-house. We make around 60,000
tractors per annum. The synergy between the two companies is helping us a lot, especially
during sourcing parts from the vendors. Thus, this affects the cost, and we are able to
manufacture the vehicles at a reasonable cost[25].

Market scenario
Rhino was designed as a competitor of Tata Sumo, Mahindra Bolero, and consequently
GM’s Tavera. It was intended to give competition also to both Mahindra Scorpio and Tata
Safari in future. Tata’s Sumo enjoyed the advantage of having low maintenance cost and
presence of a large number of service centres across the country. ICML had distribution
channel all over India, but the network of dealers and service centres was small. Hence, the
company had to play a vital role in convincing their prospective customers for provision of
satisfactory service. Rhino also needed to compete with Mahindra Bolero which was used
as a common transport in semi urban areas and class II towns and cities. Bolero, though
competitively priced, did not provide opposite seating arrangement in taxi version as

VOL. 8 NO. 4 2018 EMERALD EMERGING MARKETS CASE STUDIES PAGE 5

 provided by Rhino. Later, GM’s Tavera became popular among UVs because of its
reasonable price and spacious interior.
In June 2007, Sonalika Group Chairman, Lachhman, stated that the price of Rhino is
competitive because it was produced at a tax-free location that enabled the company to
provide tax benefit of approximately INR 1,50,000 per vehicle to their customers. He,
further, added, “We are also looking at exporting Rhino Rx to African countries besides
neighboring Nepal and Bangladesh”[26]. Rhino Rx had high-caliber MG Rover 2000 cc
diesel engine fully compatible with Bharat Stage III emission norms that provided gliding
speed of 160 km/h. Rhino was a fuel-efficient vehicle in the UV category, as it provided
mileage of 15-17 km/litre[27].
Rhino was launched in three variants; the base model being priced at INR 5,45,000 and the
top end model at INR 6,85,000. Thus, it was positioned as a Qualis like vehicle with a Sumo
price tag. The company hoped to sell 5,000-6,000 units in the first year. “We have always
been known as the price warriors in the market. With this aggressive price tag, we are trying
to replicate our success in the tractor market”, stated Lachhman[28].
With the competitive price, initially the company was selling almost 400-500 units monthly
in FY 2008-2009 but later the sales dropped. Different customer feedback forums and
Sonalika customer care portal had both positive[29] and negative[30] comments; these
comments were mainly about engine reliability, spacious design to poor servicing and
resale value.

Market response to rhino

In 2008, ICML realized that the problems in the vehicle were affecting the sales adversely
and decided to address them promptly. Customer feedback kept on getting more negative
with the passing time[31]. The Isuzu engine was low on power and could produce only 75
PS, which hampered the performance of the vehicle. They discovered around 32 issues
related to the reliability of engine that needed to be addressed urgently. The problem got
aggravated with small network of dealers and service centres[32]. The vehicle was sold
more in the rural areas as compared to cities because the aesthetics did not appeal to the
urban buyer. Positioning of the vehicle was suspected, as the same product targeted both
the end user and the taxi segment. The absence of Antilock Braking system and airbags
made the vehicle appear quite unsafe to the consumers. Moreover, the awkward
positioning of the accelerator and steering wheel gave a feel of driving a tractor instead of
a MUV[33].
For promoting sales of Rhino, the dealers generated leads and made them familiarize with
IAFL (International Autotrac Financial Limited) which was started by Sonalika’s ITL for
providing finance to customers interested in buying Rhino but the customer’s capacity for
buying the UV was given little attention. Subsequently, with the failure of the UV, the sales
dipped and the existing customers started defaulting on their EMIs. The image of Rhino
was, further, dented with the selling of the re-possessed vehicles acquired by IAML for a
much lesser price, not to speak of financial losses caused to IAFL.

Redevelopment of capabilities
It was time for ICML to go back to drawing board to address the issues and re-launch a
better product. It started by restructuring ICML that led to the establishment of independent
resource teams and separation of R&D function from production function[34], but the core
R&D still remained with the parent company – ITL.
This time, they entered into technical collaboration with MG Rover of UK for engine
development. Subsequently, an indigenously designed CRDi G-One series of engines was
developed. In 2010, Gaurav had elaborated in an interview about the multiple variants of
engines used in Sonalika’s MUV[35]. In addition to MG Rover, ICML had tie-ups with

PAGE 6 EMERALD EMERGING MARKETS CASE STUDIES VOL. 8 NO. 4 2018

consultants for specific issues and hired resources from other players in the auto sector,
namely, Mahindra & Mahindra and Eicher for getting assistance in amending and
developing a more effectual and competent process.
The distribution network was also expanded to gain presence in southern India. ICML
increased the network to 75 dealers from the existing 45 dealers and planned to increase
it further to 100. Expressing an optimistic scenario for Rhino, Gaurav said in an interview:
There are many companies in India that started as a tractor manufacturer and have grown into
big corporate entities. Many companies began as truck manufacturers and become big
automotive players. It depends how you position yourself in the market. In the coming years, we
have to give a clear demarcation of our different product offerings. As far as the branding is
concerned, we shall be working on it after the joint venture is formed, so that we are able to give
a different flavour to the customer[36].

Relaunch of Rhino as extreme

ICML launched the new version of Rhino as “Extreme” in 2012 giving the vehicle more of
a SUV look. The vehicle had an integrated front, a rear bumper guard, and bonnet scoops,
which made it look bold. The exterior of the vehicle was in dual colour and had improved
features such as body coloured handles, front fog lights, false wheel arches, side steps and
outside rear view mirrors with integrated side indicators. But these features were unable to
please the customers who were obvious from the reviews that highlighted the lack of luxury
in the interior of the vehicle. The price for Extreme ranged between INR 5,68,000 and INR
8,65,000 bringing it to a direct competition with Mahindra’s Xylo and Quanto as also
Maruti’s Ertiga.
Apart from distributing the MUVs in north India, ICML introduced the vehicle in southern
India in collaboration with Cromo Automotive[37]. The company was quite optimistic about
the sales; Gaurav said in an interview[37]:
The company has earmarked an investment outlay of Rs. 1,000 crore (INR 10 billion) and Rs.
300 crore (INR 3 billion) has already been invested in the Extreme MUV project. We are working
on several other variants and even a smaller vehicle.

The company also claimed to have a strong network of 100 dealers of which five were
present in Andhra Pradesh[37]. Gaurav seemed quite confident of the product and even
hinted at the introduction of several variants of MUV in the coming years[37]. In this
direction, ICML had installed a new plant for manufacturing plastic components for
sourcing quality components for the interior of the vehicle[38].
Despite these, the product did not pick up as expected; it sold dismal numbers over 3
years (Exhibit 3). Customers perceived that the new vehicle was not different from the
earlier version – Rhino. By this time, the SUV market was flooded with the launching of many
new or improved products. Ertiga and Innova were the evident examples of new cars
launched in the market; they were pitched on many review forums. Both positive and
negative perceptions for the two MUV segment cars could be noticed. While manufacturers
were concentrating on MUVs, the customers preferred smaller cars or “mini MUV” over
bigger ones[39]. Unfortunately, customers’ preferences were not considered while
designing the product; hence, several questions arose regarding product development
and marketing strategies adopted by ICML.

ICML’s efforts to establish “Extreme” brand

ICML exhibited three new vehicles in the Auto Expo held in Delhi in 2012; Extreme – an
alternative of Rhino with six and nine seated variants, Windy – a commercial single cab
pickup vehicle and Oyster – a lifestyle double cab. Similar to Rhino, these vehicles had the
2.0-litre CRDI engine which was also sourced to GM by ICML for the Tavera Neo model.

VOL. 8 NO. 4 2018 EMERALD EMERGING MARKETS CASE STUDIES PAGE 7

 The director marketing and sales of ICML, Gaurav[40], in this regard said:
We have received good interest from potential customers at our stall for all the three new
products. The visitors are drawn toward the smart looks, exclusive features, and new variants.
The pickup and double-cab come with complete package to cater to the mid and low end of
customers and offer “personal segment feel” too.

ICML, subsequently, planned to develop a pick-up truck under the brand name “Extreme”.
The product was in the development phase in 2013. Apart from this, ICML had also
launched Ambulance on “Extreme” platform in 2013. The ambulance came in both AC and
non-AC variants within a price range of INR 6,15,000 to INR 6,58,000. Be that as it may, the
location of manufacturing facility in Himachal Pradesh became questionable looking at
ICML’s aspiration of exporting vehicles.
Meanwhile, Sonalika’s flagship company ITL was looking out for buyouts in Europe. In
October 2012, Sonalika sold 12.5 per cent of its stake to Blackstone Group (private equity
player) of USA for $100m. ITL had raised this money to fund their acquisitions and
expansion[40]. The balance sheet of the group was virtually debt-free. This helped the
Sonalika in getting a fair valuation of the firm. The UV segment was growing in terms of
volume to which the firm responded by launching newer variants and models.
In 2008, the market speculated about ITL’s collaboration with Pininfarina. It was thought that the firm
along with Pininfarina would come up with a “new world vehicle”, especially designed for the
Keywords:
developed markets. Though the firm was silent about the project, in early 2017, Motown Magazine
Diversification,
spotted the “EVO the SUV coupe” at the Hoshiarpur plant of Sonalika. The magazine described the
Innovation,
car to have been stylishly designed on the outside[41].
Strategy,
Dynamic capabilities, With all ups and downs, ICML was still in the race and working for producing a black horse in UV
Product development/ segment. Meanwhile some more automobile firms landed in India and existing car manufacturers
innovation added UV in their product range. Time alone can tell which side the camel will sit.

Notes
1. Available at: www.sonalika.com/india/sonalika-group/csr
2. Available at: www.autocarpro.in/news-national/international-cars-tatas-helping-hand-1062
(accessed 3 December 2016).
3. Available at: www.cartrade.com/car-bike-news/icml-unveils-extreme-muv-plans-to-launch-the-
model-soon-in-india-118447.html (accessed 3 December 2016).
4. Available at: www.sonalika.com/india/sonalika-group
5. Available at: http://indiaempire.com/article/610/farming_success
6. Available at: www.crisilresearch.com/industryasync.jspx?serviceId⫽4&State⫽null#storyId#77777
00016392#sectionId#3243#newsFeedId#undefined (accessed 29 August 2017).
7. Available at: http://economictimes.indiatimes.com/industry/auto/news/industry/sonalika-tractors-
sales-up-19-6-in-fy17/articleshow/58026665.cms (accessed 29 August 2017).
8. Available at: http://economictimes.indiatimes.com/industry/auto/news/industry/sonalika-tractors-
sales-up-19-6-in-fy17/articleshow/58026665.cms (accessed 28 August 2017).
9. Available at: http://articles.economictimes.indiatimes.com/ (2014), -02-01/news/46897929_1_tafe-
ld-mittal-market-share
10. Available at: www.financialexpress.com/archive/sonalika-targets-to-sell-100000-tractors-per-year/
1201192/
11. Available at: https://autoportal.com/newcars/icml/about.html
12. available at: www.rediff.com/money/ (2005), /feb/01qualis.htm
13. Available at: http://indiatoday.intoday.in/story/indian-auto-industry-what-to-expect-in- (2005), -as-
new-models-roll-out/1/194338.html (accessed 3 October 2017).
14. Cars and Utility Vehicles: Outlook (2015), -16 to 2019-20, Crisil Industry Research, p. A-1.

PAGE 8 EMERALD EMERGING MARKETS CASE STUDIES VOL. 8 NO. 4 2018

15. Available at: www.financialexpress.com/archive/passenger-vehicle-sales-top-1000000-in- (2004),
-05/132336/ (accessed 3 October 2017).
16. Available at: www.crisilresearch.com/industryasync.jspx?serviceId⫽4&State⫽null#storyId#77777
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VOL. 8 NO. 4 2018 EMERALD EMERGING MARKETS CASE STUDIES PAGE 9

 Exhibit 1. Sonalika’s timeline

Figure E1

1995
Collaboraon with Renault 2001
1969 Decided to serve the cis
(commonwealth of independent ITL STARTED IN-HOUSE 2006
Began its operaons in DESIGNING AND PRODUCTION
trading states) and African countries from Started export of tractors
India. OF TRACTOR ENGINES
The company adopted Split its R&D department into
They expanded to African 2017
the brand name of Created a subsidiary countries, CIS countries, and
‘internaonal tractors limited two units – tractors and engines Exported 75,000
Sonalika SAARC countries
(ITL)’

1990 2000 2004 2013

Start the producon of Renault sold its agriculture
tractors division to class motors,
Germany
Sonalika was experiencing good
growth in tractors
Collaboraon with the
agriculture division of
Yamaha motors
9,500 tractors overseas which
contributed 17% to its revenues
Tractor unit sold overseas fetched
30% more margins as compared
to the one sold locally
10% market share

Source: Adapted by the case writers based on the information available on Sonalika’s website

Exhibit 2. Growth trend in passenger cars, UV’s and vans

Table EI
Year and units
sold
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018 (P)
Types of Units Growth Units Growth Units Growth Units Growth Growth
vehicles (‘000) (%) (‘000) (%) (‘000) (%) (‘000) (%) (%)

Passenger vehicle 2,506 ⫺6.1 2601 3.7 2788 7.2 3047 8.3 ⫺10-12
Passenger cars 1,790 ⫺4.7 1876 4.8 2025 7.9 2103 3.8 ⫺9-11
Small cars 1,563 ⫺0.6 1620 3.5 1754 8.3 1857 5.9 ⫺8-10
Sedans 22 ⫺24.7 256 13.7 271 5.9 246 ⫺9.6 ⫺9-11
Utility vehicles and vans 716 ⫺9.5 725 1.2 763 5.2 944 23.5 ⫺12-14
Utility vehicles 525 ⫺5.1 554 5.3 586 6.4 762 29.9 13-15
Vans 191 ⫺19.6 171 ⫺10.2 177 3.5 182 2.4 –7-9
Source: CRISIL industry research outlook 2015-2016 and 2017-2018

PAGE 10 EMERALD EMERGING MARKETS CASE STUDIES VOL. 8 NO. 4 2018

Exhibit 3. Firms and models launched across segments

Table EII
Category
Small cars Sedans UVs (Excluding vans)
of cars No. of No. of No. of No. of No. of No. of
Year players models players models players models

2007-2008 7 14 9 16 10 20
2008-2009 7 16 7 10 11 22
2009-2010 8 22 8 11 10 23
2010-2011 9 24 12 12 11 25
2011-2012 10 26 15 13 12 27
2012-2013 10 27 14 14 13 30
2013-2014 12 30 14 16 15 31
2014-2015 13 28 13 18 17 33
2015-2016 12 36 13 29 14 54
2016-2017 12 37 13 29 14 55
Source: CRISIL industry research outlook 2015-2016 to 2019-2020

VOL. 8 NO. 4 2018 EMERALD EMERGING MARKETS CASE STUDIES PAGE 11

 Exhibit 4. Player wise–models and domestic sales (utility vehicles only)

Table EIII
Company Model 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017

Force Motors 5,959 8,849 8,487 10,201 3,478 2,778 3,339 2,729
Ltd. Traveller 41 798
Trax-Gama 5918 8849 7400 9294 2942 2618 3192 2686
Force One 289 907 536 160 147 43
Ford India Ltd. 2598 3142 2242 1454 45640 52289 41,434 55,019
Endeavor 2598 3142 2242 1454 632 231 1274 6472
Ecosport 45008 52058 40,160 48,547
General Motors 16458 20063 23217 20930 29167 21504 15,389 12,990
India Ltd. Captiva 1124 1732 1125 477 91 57 11 –
Tavera 15334 18331 22092 20453 10048 13489 10,645 7880
Enjoy 19028 7958 4567 4982
Trailblazer 166 128
Hindustan 1711 2581 1977 1958 1541 1819 1502 660
Motors Montero 56 69 86 15 9
Outlander 412 1253 320 80
Pajero 1243 1259 1571 1863 1541 1819 1502 651
Honda SIEL 474 516 319 301 1018 31379 8935 26,969
Cars India Ltd. Mobilio 30518 8063 2141
CR-V 474 516 319 301 1018 861 578
BR-V 20,417
Hyundai Motors 14 467 1611 760 698 1877 64,796 98,498
India Ltd. Santa Fe 467 1611 760 698 1877 960 259
Tuscon 14 1340
Creta 63,836 96,899
International 1011 564 337 50 77 270
Cars Ltd.(ICML) Extreme 77 270
Rhino 1011 564 337 50
Mahindra & 139704 158626 193292 256535 219422 206837 225,554 229,467
Mahindra Ltd. Bolero 73824 83130 100797 117665 107177 100553 81,559 69,328
Scorpio 36973 43439 50985 50168 50949 51553 48,079 49,317
XUV500 13819 45418 30007 34418 36,320 26,894
Xylo 28907 32057 27691 25067 13961 8472 7271 6588
HT 6 24
Thar 7964 8645 5935
ST 7974 904
Quanto 16434 7505 1939 1815 2417
Rexton 1783 1843 1010 228 121
Supro 3230 6928
TUV300 24197 26241
KUV100 14210 35698
Maruti Suzuki 3983 5666 6525 79192 61119 68198 94416 195741
India Ltd. Gypsy 3841 5570 5381 2804 1295 5968 4323 2157
Versa 51 8
Vitara 91 88 27 13 2 1
Ertiga 1117 76375 59822 62230 60,452 63,527
Vitara Brezza 24,077 21,417
S-Cross 5,563 1,08,640
Nissan 212 479 290 1443 15421 20873 19,085 10,520
X-trail 212 479 290 49 7
GO⫹ 3234 10,290 7,051
Evalia 1394 593 466 235 1
Terrano 14,821 17,185 8,560 3,468
Renault India 367 39576 47001 39378 27,873 23,433
Koleos 367 388 215 99 76
Duster 39188 46786 39279 18,045 18,947
Lodgy 9752 4486
(continued)

PAGE 12 EMERALD EMERGING MARKETS CASE STUDIES VOL. 8 NO. 4 2018

Table EIII
Company Model 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017

Tata Motors 35526 43682 48284 44439 28100 23850 18138 18652
Aria 1421 3890 838 338 1284 132 20
Safari 10482 16170 16066 13001 10005 8561 8347 6159
Sumo 23049 24002 27819 30600 17554 13597 9563 9009
Sumo 165 376 95
Grande
Winger 1995 2089 421
Xenon 88 38 32 1
Hexa 3454
Toyota Motors 53703 64863 69234 93504 71946 80526 68,840 92,604
Fortuner 6280 11996 11538 16279 16551 17668 13,461 13,345
Innova 47294 52588 57543 77062 55312 62727 55242 79,092
LC200 66 43 44 94 62 102 116 153
Prado 63 236 109 69 21 29 21 14
Source: Crisil report on utility vehicles 2015-2016 and 2016-2017

Exhibit 5. Market share change of various manufacturers across segments

Table EIV
Market share
Passenger vehicles
Companies Cars (Market share in %) UVs (Market share in %) (market share in %)

Auto Manufacturers 2012-2013 2016-2017 2012-2013 2016-2017 2012-2013 2016-2017

Maruti India Ltd. 46 52 24 37 39 47
Hyundai Motors 20 20 0 10 14 17
Mahindra & Mahindra Ltd. 4 6 37 25 12 8
Tata Motors 9 6 18 4 12 6
Source: CRISIL research for cars and passenger vehicles report 2017-2018

Exhibit 6. Market share change across categories

Table EV
2017-2018
Categories of passenger (Apr-June)
vehicles 2011-2012 (%) 2012-2013 (%) 2013-2014 (%) 2014-2015 (%) 2015-2016 (%) 2016-2017 (%) (%)

Mini⫹Micro 27 23 24 21 21 19 19
Compact 33 30 36 42 44 42 43
Sedans 17 17 11 10 10 8 6
Compact UVs 5 10 12 12 13 17 19
Other UV 9 11 9 9 7 8 7
Vans 9 9 8 7 6 6 6
Source: CRISIL Research Report on Cars and Passenger vehicles 2017-2018

About the authors

Dr Deepak Pandit is a Fellow of MDI Gurgaon. His publications include teaching cases on
entrepreneurship (Ivey publication) and internationally peer reviewed papers on disruptive
innovation. In his entrepreneurial journey from 2009, Deepak has founded a niche
consulting firm PRACSTRATS for technology and education practices, and a new age
educational venture iSEED where he is the Co-Founder and in-charge of program delivery,
institution development, teaching and research.

VOL. 8 NO. 4 2018 EMERALD EMERGING MARKETS CASE STUDIES PAGE 13

 Dr Shalini Rahul Tiwari is an Associate Professor at IMT Ghaziabad, and currently the Area
Chair for Strategy, Innovation and Entrepreneurship domain. She is a passionate educator
and an enthusiastic researcher. Her research interests vary across – social enterprises,
firms in emerging markets, competitiveness of firms, management education, and
innovation and firm level strategy. She has published widely in journals of international and
national repute.

Dr Arun Sahay is a Professor of Strategic Management. He started his career as an

academician, turned to the corporate world early in life and worked in both public and
private sectors. He made to the top to become the Chairman and Managing Director of
Scooters India Limited. The turnaround of SIL under his leadership is considered a
management miracle both by the practicing managers and academicians. He serves on
many corporate boards, technical and management institutions. He has highly published in
strategy, innovation, entrepreneurship, sustainability and CSR.

PAGE 14 EMERALD EMERGING MARKETS CASE STUDIES VOL. 8 NO. 4 2018