Demand Determinants Determinants of demand for this industry include vehicle prices (which are determined largely by wage,

material and equipment costs) and exchange rates, preferences, the running cost of a vehicle (mainly determined by the price of petrol), income, interest rates, scrapping rates, and product innovation. Price of Tata Indica: Price of Tata Indica is the most important factor while assessing the demand for tata indica car as the product falls in the compact segment of cars which are economical and target the masses of India. Income: India being a developing economy the movement in income determine the affordability of motor vehicles and thus affects the demand. Price of Other Compact Segment Cars: The Indian customers are cost centric and hence the demand for Tata Indica depends on the price of its close substitutes i.e. other cars in the same segment like Maruti Suzuki Swift, Ritz, Ford Figo, Chevrolet Beat, Fiat Punto, Hyundai i10, Santro, etc. Exchange Rate: Movement in the value of Rupee determines the attractiveness of Indian products overseas and the price of import for domestic consumption. Product Innovation : It is an important determinant as it allows better models to be available each year and also encourages manufacturing of environmental friendly cars which in turn attracts the customers. Demographics: It is evident that high population of India has been one of the major reasons for large size of automobile industry in India. Factors that may be augment demand include rising population and an increasing proportion of young persons in the population that will be more inclined to use and replace cars. Also, increase in people with lesser dependency on traditional single family income structure is likely to add value to vehicle demand. Infrastructure: Longer-term determinants of demand include development in Indians infrastructure. Indias banking giant State Bank of India and Australias Macquarie Group has launched an infrastructure fund to rise up to USD 3 billion for infrastructure improvements. India needs about $500 billion to repair its infrastructure such as ports, roads, and power units. These investments are been made with an aim to generate long-term cash flow from automobile, power, and telecom industries. (Source: Silicon India) Price of Petrol and Diesel: Movement in oil prices also have an impact on demand for large cars in India. During periods of high fuel cost as experienced in 2007 and first half of 2008, demand for large cars declined in favour of smaller, more fuel efficient vehicles. The changing patterns in customer preferences for smaller more fuel efficient vehicles led to the launch of Tata Motors Nano one of worlds smallest and cheapest cars.

Advertising of Tata Indica: Advertising can increase brand loyalty and awareness to the goods and increase demand.

Effects of Macroeconomics variables on Demand for Tata Indica

National Income : The per capita income for India for first quarter of 2011 is Rs 54527. As income elasticity is defined as ratio of percentage change in quantity to percentage change in income holding all other factors constant . As price of Tata Indica petrol version ranges from 3 3.69 lakhs and diesel version ranges from 3.5 5 lakhs thus the effect of increase in income on demand for the product will be beyond a certain level of income. Also the change in demand for significant change in price is very less . . Income

Quantity Technology : With new innovations in technology for production, better fuel efficiency, the cost price of product can be reduced and this will lead to reduction in price of Tata indica so its becomes more affordable to customers . Also development in technology for increasing fuel efficiency the demand will increase. Inflation: With increase in inflation , RBI increases the CRR ( amount that banks have to keep with RBI) which is 6.0 % presently and repo rate ( rate at which banks borrow money from RBI) which is 8.00 % presently , so the bank loan interest rate also increasing ( 12.5%- 14%) and this affects the demand for Tata Indica as it is a luxury good and people buy it on loans from banks.

Demand in Future There is increasing competition from various brands like Maruti Suzuki, Honda, Hyundai , Ford , Chevrolet, Toyota and other players which are bring new cars into the market with lower price segment ( 1.7- 4 lakhs) so this is going to affect the demand for Tata Indica in future. As inflation is continuously increasing so this may also affect the sales as bank loan interest rate is increasing with inflation. Demand for Automobile is also affected with price of Petrol and Diesel. Prices of fuel is continuously increasing in market due to increase in brent crude oil prices with is currently $111.36 this will affect the demand for the product as petrol and diesel are compliments to Tata indica .