Cielo: A Car in Trouble

Compiled By: Astha Dhall Atul Singhal Charu Nayyar Chitra Singh Gaurav Manocha Mahesh Pratap Prateek Arun

The entry of the Korean automobile major, Daewoo Motors India Ltd. (Daewoo) in the Indian passenger car market was heralded as a milestone for the industry. Daewoo's first vehicle, the 1500 cc Cielo was launched in three versions (Cielo, Cielo GLX and Cielo GLE) in July 1995. Consumers who until now had no other option besides the Maruti Esteem in the mid-size segment , rushed to buy the Cielo. Bookings for the three models reached 114,000 in a short span of time. With the car registering high initial volumes and its plans to become a Rs 100 billion company by 1998-99, Daewoo seemed all set to give MUL serious competition. However, Daewoo was in for a major shock as around 70,000 customers cancelled their bookings within a few months. Daewoo had predicted an annual turnover of over Rs 10 billion and sales of 20,000 cars by March 1996 - but managed to record a turnover of Rs 6.05 billion and sales of only 9,044 cars.

Major Problems

The timing of entry into Indian market was wrong as there was a liquidity crunch due to the recession in the Economy which resulted in demand declining sharply.

Availability of spare parts was a big issue as the company entered the market with a high import content, thereby not being able to keep the prices significantly lower than the competitors. The low indigenization level also translated into high cost of spare parts.

The lack of a focussed approach and inconsistent policies were reported to be the two main reasons that led to the Cielo's poor performance. Imposition of Strategies successful in European and Korean market. Market survey was inappropriate.

The mileage the car gives is nothing to write home about. Well maintained cars usually return 6-7kpl in city. Economy? Only a CNG conversion agenda makes Cielo worthwhile. At the time of its launch in 1995, the Cielo was the first car to offer fuel injection in its class. But bad quality fuel meant that the injectors would easily get clogged dropping mileage to an abysmal 4-5kpl in city.

Test Drive Scheme

In April 1997, Test drive scheme was introduced to lure buyers. Option of buying car with 70% payment or returning back. Scheme entitled all car owners to participate in a draw where 200 cars were given to the winner for 18 months to test and experience the car.

Diwali Bonanza Scheme

Offered one Cielo free on purchase of every 10 cars. The promotional scheme was pushed by Daewoos marketing head from Korea.

Low Finance Rates Scheme

Finance rate offered was 14.33% as compared to the prevailing 23%. Desperation to increase sales led to offers of unheard incentives.

A hefty price cut of 0.15 million in Jan98 with the failure of schemes. Price in Delhi showrooms.
Model Launch Price(in Millions) 0.62 0.68 Reduced Price (in Millions) 0.49 0.57

GLE GLX

To educate the customers on the new positioning, highlighting the cars features.

Idea was to convey that Cielo offered more value for less money.

Aspects of technology val-you, comfort val-you and safety val-you were emphasized on.

Brand Positioning

Frequent change in the positioning of Cielo leading customers confused. Initial positioning - technology with aesthetics to premium family car to Val you.

Family car positioning did not match with the premium image.

MATIZ

Oct 1998- MATIZ was launched . 23,265 units in April-Dec 1999, demand increased by 52.2% to 35,398 units April-Dec 2000.

Further CIELO took a back seat after Matiz success globally.

MATIZ was going places operating in 114 countries. Failure in INDIA due to SANTRO.

May99 Nexia was launched in two variants. Replaced GLE & GLX version of Cielo with Cielo Executive & Nexia. Exterior similar to Cielo though interior was changed. Cielo & Nexia couldnt be positioned differently.

Stopped advertising for impression of phasing it out.

Cielo

leaving

Thank You