A project report on analysis of the pre owned car market in hublli of true value


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A project report on analysis of the pre owned car market in hublli of true value

  1. 1. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Value Section 1 Executive Summary WWW. BABASAB PATIL FREEPPTMBA.COM 1
  2. 2. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Value Executive summaryIndian auto market is booming the auto manufacturers from all over the world areattracted by indian market for both,manufacturing and sell cars to indian and exportmarket.Making the right choice while buying a used car is very important. Maruti Suzuki,Indias favorite car company, understands you concerns regarding quality,documentation and value for money. That is why we ensure that the used car you buyfrom us has never had an accident and is free from defects or legal hassles. What youget is a car that is optimized for trouble-free performance and therefore needsminimum maintenance. Of course, all this is possible only because of Maruti Suzukisdirect involvement, which includes thorough checks, a complete reconditioning atstate-of-the-art Maruti Suzuki workshops and certification by a Maruti SuzukiEngineer present at the TrueValue outlets. Thats not all, as a mark of a assurance wegive you a warranty up to 1 year and 3 free services. Buy a Maruti Suzuki certifiedused car and make a wise investment.Title of the project"Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti TrueValue"Problem definition: Maruti has come out with a concept of creating a new market for Pre Owned(second hand) cars which it calls ‘True Value’. Therefore Bellad Motors as afranchisee wants to know the opportunity it has in the market (Hubli- Dharwad)against the New Cars, and what strategies can be applied to attract the customerseffectively. WWW. BABASAB PATIL FREEPPTMBA.COM 2
  3. 3. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True ValueNEED FOR THE STUDY:  As there are petty dealers in the ‘Pre Owned’ Car market in Hubli- Dharwad it is important to learn about the ‘Target Audience’ and the market.  To know how has Maruti handled the ‘Pre Owned’ market until now?  To know what the market share is?  To understand and work on the gaps, if any.Objective:To know and study/analyses the effectiveness of second hand car sales by MarutiSuzuki’s ‘True Value’ concept through it’s dealer Bellad Motors in Hubli city.Sub Objectives- – To know the nature of the market for used cars in the Twin Cities. – To enumerate the various players for used cars in the Twin cities. – To enumerate the various reasons for customers opting a used car. – To find out the awareness/ knowledge level of customers on the concept of ‘True Value’ offered by Bellad Motors. – To access the impact of promotional activities on the sale of used cars.Methodology:Research ApproachExploratory research Exploratory research is concerned with discovering the general nature of theproblem and the variable that relate to it. Exploratory research is characterized byhigh degree of feasibility and it tends to rely on secondary data.Data collection approach To carry out this research, primary data and secondary are collected.Primary data (survey data) WWW. BABASAB PATIL FREEPPTMBA.COM 3
  4. 4. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True ValueSystematic collection of information directly from respondents. This data is collectedfor the descriptive research.The survey data collected during the study includes the data collected throughquestionnaire and face-to-face interview with customer to know about the consumerbehavior.Secondary dataThe first step in data collection approach is to look for secondary data. Usually it isthe data developed for some purpose other than for helping to solve the problem athand. Secondary data are collected through various magazines, internal experts,website, directories, and external experts.Measurement TechniqueQuestionnaire:-For the purpose of this project self-administered questionnaire to potential customersand for standard commercial business enterprises located in Hubli Dharwad city.Analysis of DATAData are useful only after analysis. Data analysis involves converting the series ofdata recorded observations into descriptive statements.The survey will carried out in Hubli-Dharwad city, and the sample size was 100.Theinformation gathered is transferred to a SPSS coding sheet, interpretation. WWW. BABASAB PATIL FREEPPTMBA.COM 4
  5. 5. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True ValueFindingsProfessionals: • 36 % of Respondents are of age 25-35, 37 % of Respondents are of age 35-45, 23 % of Respondents are of age 45-55, 4 % of Respondents are of age greater than 55 • 88 % of Respondents are male, 12 % of Respondents are Female • 42 % of Respondents are under income Rs.1,00,000-Rs.1,50,000 and 36 % of Respondents are under income Rs.1,50,000-Rs.2,00,000 • 81 % of Respondents are Married • 31 % of Respondents have one child and 38 % of Respondents have two children • 68 % of Respondents don’t have their own car • Out of remaining 32% of sample size 54 % of Respondents have Pre owned cars • 54 % of Respondents came to know about uncertified dealers through Advertisements and33 % of Respondents came to know about uncertified dealers through Friends & Neighbours • Out of 68% of sampling who don’t own car, 31 % of Respondents wants to go for new car and 63 % of Respondents wants to buy pre owned car and 63% would buy it from uncertified dealers. • 50 % of Respondents considers budget while buying pre-owned car and 40 % of Respondents considers milage while buying pre-owned car, • 40 % of Respondents heard about “Maruti True Value” • Remaining 60% heard it from Advertisements, friends/neighbours • 58% say they would not buy from ‘True Value’ WWW. BABASAB PATIL FREEPPTMBA.COM 5
  6. 6. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True ValueSample of Students:• The sample is non-localities• 68% of them are staying here since more than 2 yrs.• 56% get more than Rs 10,000/- as their monthly pocket money.• 60% own a vehicle, out of which 60% own a 2 wheeler, and 40% a 4 wheeler.• 80% out of the 40% owning a 4 wheeler, own a ‘Pre-Owned Car’.• 70% have purchased it locally.• 55% of the sample is interested in buying a car (pre- owned) for time being.• 78% said they would buy from an Un-certified Dealer.• Expected price range is- 83% said Rs 50,000- 75,000• 53% are aware of the concept of Maruti’s ‘True Value’.• 42% have heard it from news papers, and 0% from melas.• 71% say they would not buy from Maruti ‘True Value’.Sample of Dealers: • 20 % are established in the market since 5-10 years and 50 % are since from 10- 15 years • 50% use middlemen for sales. • Promotion activities-  60%- use news papers WWW. BABASAB PATIL FREEPPTMBA.COM 6
  7. 7. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Value  40% - pamphlets  25%- Melas • 70% consider festive season as peak point for sales. • The average sales per year is- 60% said- 25-125 cars • 30% said- 425- 525 cars • 67% say customers look for budget • 68% say customers look for age of the car • 90% say customers look for mileage Recommendations and Suggestions - For the Professionals:• Target Segment- the target customers whom I suggest Bellad Motors should concentrate is the advocates, lecturers and petty business men, because they are the respondents who are keen in buying pre owned cars.• The target can also be segmented age wise, 25-45 are the most interested segment in buying a pre owned car.• Bellad Motors should make an effort to advertise and promote ‘True Value’ through various mediums like news papers, melas and pamphlets.• Mostly the age group of 25-35 is aware of the Maruti’s True Value concept.• Family size influences in buying a car is proved through the Chi Square Test, therefore respondents of the lower income category can also be looked at, for the sales of the pre owned cars.• Out of respondents who own pre owned cars, 98% bought it from a Un- Certified dealer, this shows that people do not prefer buying pre- owned cars from WWW. BABASAB PATIL FREEPPTMBA.COM 7
  8. 8. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Value certified dealers, therefore Maruti True Value should make an effort to change this mind set of the people in Dharwad city.• When respondents were asked what have they heard of Maruti True Value, the responses were mostly negative. ‘Price’ was the major issue they have with ‘True Value’.• ‘Pre-Owned’ is more of a sophisticated word for the localities; the other petty dealers have an upper hand on this front, as they use a much simpler and an easily understood word ‘second hand’. Therefore I suggest that Bellad considers this point.• The Bellad showroom is what comes to peoples mind when asked if they have heard of Maruti ‘True Value’, it is because of the easy view from the highway. For the students:• Most of the students want to buy a pre owned car from an un certified dealer, because of the price factor, therefore when targeting the students category lowering the price should be considered• The expected price of the pre owned cars is from Rs 50,000- 75,000.• The expected age of the car is mostly 3-5 yrs, which the company can consider these aspects when targeting the students.• More than 50% of the students are not aware of the True Value concept, which again calls for advertisements from Bellad Motors.• 61% of the students get more than Rs 10,000 as their pocket money, this signifies that it can be assumed the students are from well to do families and Bellad Motors can use this as a advantage and try perusing them.• From the personal interaction with the students, the insights gained were, that the students go to these second hand car melas, and 0% 0f them have known or heard of True Value conducting melas, therefore I suggest that it be advertised properly.• The awareness can be spread by using banners and displayed it in front of the college campus in the most attractive manner. WWW. BABASAB PATIL FREEPPTMBA.COM 8
  9. 9. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Value Industry profile WWW. BABASAB PATIL FREEPPTMBA.COM 9
  10. 10. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Value AUTOMOBILE INDUSTRYIn India there are 100 people per vehicle, while this figure is 82 in China. It isexpected that Indian automobile industry will achieve mass motorization status by2014.Industry OverviewSince the first car rolled out on the streets of Mumbai (then Bombay) in 1898, theAutomobile Industry of India has come a long way. During its early stages the autoindustry was overlooked by the then Government and the policies were also notfavorable. The liberalization policy and various tax reliefs by the Govt. of India inrecent years has made remarkable impacts on Indian Automobile Industry. Indian autoindustry, which is currently growing at the pace of around 18 % per annum, hasbecome a hot destination for global auto players like Volvo, General Motors andFord.A well developed transportation system plays a key role in the development of aneconomy, and India is no exception to it. Today Indian automotive industry is fullycapable of producing various kinds of vehicles and can be divided into 03 broadcategories: Cars, two-wheelers and heavy vehicles.Snippets • The first automobile in India rolled in 1897 in Bombay. • India is being recognized as potential emerging auto market. • Foreign players are adding to their investments in Indian auto industry. • Within two-wheelers, motorcycles contribute 80% of the segment size. • Unlike the USA, the Indian passenger vehicle market is dominated by cars (79%). • Tata Motors dominates over 60% of the Indian commercial vehicle market. • 2/3rd of auto component production is consumed directly by OEMs. • India is the largest three-wheeler market in the world. • India is the largest two-wheeler manufacturer in the world. • India is the second largest tractor manufacturer in the world. • India is the fifth largest commercial vehicle manufacturer in the world. WWW. BABASAB PATIL FREEPPTMBA.COM 10
  11. 11. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Value • The number one global motorcycle manufacturer is in India. • India is the fourth largest car market in Asia - recently crossed the 1 million mark.Segment Know-howAmong the two-wheeler segment, motorcycles have major share in the market. HeroHonda contributes 50% motorcycles to the market. In it Honda holds 46% share inscooter and TVS makes 82% of the mopeds in the country.40% of the three-wheelers are used as goods transport purpose. Piaggio holds 40% ofthe market share. Among the passenger transport, Bajaj is the leader by making 68%of the three-wheelers.Cars dominate the passenger vehicle market by 79%. Maruti Suzuki has 52% share inpassenger cars and is a complete monopoly in multi purpose vehicles. In utilityvehicles Mahindra holds 42% share.In commercial vehicle, Tata Motors dominates the market with more than 60% share.Tata Motors is also the worlds fifth largest medium & heavy commercial vehiclemanufacturer.MiscellaneousHyderabad, the Hi-Tech City, is going to come up with the first automobile mall ofthe country by the second half of 2008. It would be set up by city-based PrajayEngineers Syndicate in area of more than 35 acres. This Autopolis would havefacilities for automobile financing institutions and insurance services to create acomplete range of services required for both auto companies and customers. It willalso have a multi-purpose convention centre for auto fairs and product launches. WWW. BABASAB PATIL FREEPPTMBA.COM 11
  12. 12. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True ValueINDIAN AUTOMOBILE HISTORYDuring the 1920s, cars exhibited design refinements such as balloon tires, pressed-steel wheels, and four-wheel brakes.In BriefThe origin of automobile is not certain. In this section of automobile history, we willonly discuss about the phases of automobile in the development and modernizationprocess since the first car was shipped to India. We will start automotive history fromthis point of time. The automobile industry has changed the way people live andwork. The earliest of modern cars was manufactured in the year 1895. Shortly the firstappearance of the car followed in India. As the century truned, three cars wereimported in Mumbai (India). Within decade there were total of 1025 cars in the city.The dawn of automobile actually goes back to 4000 years when the first wheel wasused for transportation in India. In the beginning of 15th century Portuguese arrived inChina and the interaction of the two cultures led to a variety of new technologies,including the creation of a wheel that turned under its own power. By 1600s smallsteam-powered engine models was developed, but it took another century before afull-sized engine-powered vehicle was created.The actual horseless carriage was introduced in the year 1893 by brothers Charles andFrank Duryea. It was the first internal-combustion motor car of America, and it wasfollowed by Henry Fords first experimental car that same year. One of the highest-rated early luxury automobiles was the 1909 Rolls-Royce Silver Ghost that featured aquiet 6-cylinder engine, leather interior, folding windscreens and hood, and analuminum body. It was usually driven by chauffeurs and emphasis was on comfortand style rather than speed. During the 1920s, the cars exhibited design refinementssuch as balloon tires, pressed-steel wheels, and four-wheel brakes. Graham Paige DCPhaeton of 1929 featured an 8-cylinder engine and an aluminum body. The 1937Pontiac De Luxe sedan had roomy interior and rear-hinged back door that suited moreto the needs of families. In 1930s, vehicles were less boxy and more streamlined thantheir predecessors. WWW. BABASAB PATIL FREEPPTMBA.COM 12
  13. 13. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Value INDUSTRY INVESTMENTAccording to Commerce Minister Kamal Nath, India is an attractive destination forglobal auto giants like BMW, General Motors, Ford and Hyundai who were settingbase in India, despite the absence of specific trade agreements.Current Scenario • On the cost front of Indian automobile industry, OEMs are eyeing India in a big way, investing to source products and components at significant discounts to home market. • On the revenue side, OEMs are active in the booming passenger car market in India. • The Indian automobile industry crossed a landmark with total vehicle production of 10 million units. • Car sales was 8,82,094 units against 8,20,179 units in 2004-05. • The two-wheeler market grew by 13.6 per cent with 70,56,317 units against 62,09,765 units in 2004-05. • Commercial vehicles segment grew at 10.1 per cent with 3,50,683 units against 3,18,430 units in 2004-05.Snippets • By 2010, India is expected to witness over Rs 30,000 crore of investment. • Maruti Udyog has set up the second car with an investment of Rs 6,500 crore. • Hyundai will bring in more than Rs 3,800 crore to India. • Tata Motors will be investing Rs 2,000 crore in its small car project. • General Motors will be investing Rs 100 crore and Ford about Rs 350 crore. • Ashok Leyland and Tata Motors have each announced over Rs 1,000 crore of investment. India, sourcing base for global auto majors. • Passenger car and motorcycle segment is set to grow by 8-9%. The two- wheeler segment will clock 11.5% rise by 2007. WWW. BABASAB PATIL FREEPPTMBA.COM 13
  14. 14. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True ValueWhy IndiaThe economy of India is emerging. The following table shows the ranking of India inthe past four years.Rank 2005 2004 2003 20021 China China China China2 India Thailand Thailand Thailand3 Thailand India USA USA4 Vietnam Vietnam Vietnam Indonesia5 USA USA India Vietnam6 Russia Russia Indonesia India7 Korea Indonesia Korea KoreaTwin Advantages: • Scaling costs • Optimizing resources INDIAN AUTOMOBILE INDUSTRY GROWTHThe passenger car and motorcycle segment in Indian auto Industry is growing by 8-9per cent.Facts & FiguresIndia, in auto sector, is turning to be a sourcing base for the global auto majors. Thepassenger car and the motorcycle segment is set to grow by 8-9 per cent in comingcouple of years, says the ICRA report. The industry is likely to maintain the growthmomentum picked up in 2002-03. The ICRAs analysis points on the auto sectorthat the passenger car market in the country was inching towards cars with higherdisplacements. The sports-utility-vehicle (SUV) that was getting crowded everyday,would witness intense competition as many SUVs had been competitively priced, thereport said.Honda, Suzuki, General Motors and Hyundai, the global automakers had alreadylaunched their premium SUVs in the market to broaden their portfolio and createproduct excitement in the segment estimated at about 10,000 units annually. Heavycommercial vehicles market would rise at 5.5 per cent and sales of light buses and WWW. BABASAB PATIL FREEPPTMBA.COM 14
  15. 15. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Valuetrucks would achieve 4.7 per cent growth. For the tractors, the report predicts agrowth at 4.6 per cent.Indian Auto Market Growth for the year 2005-06 • The domestic automobile industry sales grew 12.8 per cent at 89,10,224 units as against 78,97,629 units in 2004-05. • The automotive industry crossed a landmark with total vehicle production of 10 million units. • According to the Society of Indian Automobile Manufacturers (SIAM), car sales was 8,82,094 units against 8,20,179 units in 2004-05. • The growth of domestic passenger car market was 7.5 per cent • Car exports stood at 1,70,193 units against 1,60,670 units in 2004-05. • The two-wheeler segment, the market grew by 13.6 per cent with 70,56,317 units against 62,09,765 units in 2004-05. • Motorcycles had the upward march, 17.1 per cent in domestic market touching 58,15,417 units against 49,64,753 units in 2004-05. • Scooter segment grew by 1.5 per cent, fall at 9,08,159 units against 9,22,428 units in 2004-05. • Commercial vehicles segment grew at 10.1 per cent with 3,50,683 units against 3,18,430 units in 2004-05. • Medium and heavy commercial vehicles managed a growth of 4.5 per cent against 23 per cent growth in the year ended March 31, 2005. • Light commercial vehicles sales growth was 19.4 per cent at 1,43,237 units against 1,19,924 units in 2004-05. • Three-wheelers sales rose by 17 per cent at 3,60,187 units against 3,07,862 units in 2004-05.Auto Component Market WWW. BABASAB PATIL FREEPPTMBA.COM 15
  16. 16. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True ValueThe Indian auto parts industry is significantly fragmented with a large number ofplayers having a turnover of less than US$10 million per year. The industry directlyemploys about 2,50,000 people and has an annual turnover over US$ 56.3 billion. • Estimated market size - US$ 6.7 bn • Estimated market size by 2012 - US$ 17 bn • Projected CAGR - 15%Market Advantage • Fast paced urbanization to rise from 28% to 40% by 2020. • Upward migration of household income levels. • Middle class expanding by 30-40 million every year. • Growing working population.Vehicle Production in IndiaIndia is the 11th largest Passenger Cars producing countries in the world and 4thlargest in Heavy Trucks Indian Market Analysts are jubilant over the fact that Indiahas the fastest growing automobile industry (passenger cars segment) in the worldtoday. This is seen as the result of rapid increase of middle-class population in thecountry combined with the governments pro-development policies. The findings ofInternational Organization of Motor Vehicle Manufacturers revealed that in India thecar production had grown to 30% in 2004, thus leading the table, Brazil came adistant second with the increase of 17%.Automobile Industry is the largest industry in India with an impressive growth in thelast two decades. The reason behind the growth was abolition of licensing in 1991 andpermitting automatic approval and successive liberalization of the sector. Accordingto estimation the compound annual growth rate (CAGR) of Indian Automobile saleswill grow at 9.5% and will touch a mark of 13,008 million by 2010. The figure forFY05 was 8.45 million units. To tap this large opportunity, the Indian AutoCompanies along with the global giants have announced huge expansion plans.Maruti Udyog Ltd. was the largest 4-Wheelers producer in 2005-06 followed by TataMotors. Hyundai did well but the difference was nearly half of Tata Motors.Production of 4-Wheelers WWW. BABASAB PATIL FREEPPTMBA.COM 16
  17. 17. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True ValueTypes of Vehicle 2002-03 2003-04 2004-05 2005-06Passenger Vehicles 557400 782550 960480 1045880Utility Vehicles 114470 146330 182020 196380Multipurpose Vehicles 51450 60670 67370 66665Total 723320 989550 129870 1308925 ANALYSIS OF THE CAR MARKET IN INDIAThe automotive industry is one of the largest industries worldwide and in India aswell. The automotive sector drives upstream industries like steel, iron, aluminum,rubber, plastics, glass and electronics, and downstream industries like advertising &marketing, transport and insurance.The automotive industry can be divided into five sectors: • Passenger Cars • Multi-Utility Vehicles (MUVs) • Two-Wheelers • Three-Wheelers • Commercial Vehicles-Light Commercial Vehicles (LCVs) / Medium & Heavy Commercial Vehicles (M&HCVs) TractorsDespite a head start since its beginning in the 1940s, the Indian automotive industryhas been moving at a slow pace mainly due to the all-pervasive regulatory atmosphereprevailing till recently. Moreover, the industry was considered low-priority as carswere thought of as unaffordable luxury for the masses.In the post-liberalization period the passenger car sector witnessed a boom, owing toeconomic vibrancy, changes in government policies, increase in purchasing power,improvement in lifestyles, and availability of car finance. The industry wasderegulated in 1993, and many companies, both Indian and foreign (Daewoo, Ford,General Motors, and DaimlerChrysler), entered the market. However, the smoothsailing was disrupted in the last quarter of 1996. The automotive industry, which WWW. BABASAB PATIL FREEPPTMBA.COM 17
  18. 18. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Valuecontributed substantially to the industrial growth in FY1996 failed to maintain thesame momentum between FY1997 and FY1999. The overall slowdown in theeconomy and the resultant slowdown in industrial production, political uncertaintyand inadequate infrastructure development were some of the factors responsible forthe slowdown in the automotive industry.While the passenger car segment, with the launch of many new models, postedpositive growth rates in FY 2000 and FY 2001, the upturn was rather brief. InFY2002, the automotive sector especially the passenger car segment continued to reelunder the pressure of over-capacity with low demand. FY2003 witnessed a healthygrowth in the passenger car sales with the pick up in the economy. The passenger carsales in the first half of FY2004 were also buoyant.However, the contribution of the automobile sector to industrial output, number ofcars per person, automobile sector employment as a percentage of industrialemployment, number of months income required to purchase a car, and penetration ofcars are quite low. Low demand and lack of vision on the part of the OEMs andpolicymakers stunted the Indian automobile industry. However, major carmanufacturers worldwide foresee future demand in India. The regulatory environmenthas been liberalized and demand has picked up. Global OEMs who enjoy scaleeconomics both in terms of manufacturing and research and development haveentered the Indian market, leading to a shift in the business operations of suppliers,assemblers and marketers.Key Demand DriversDisposable income was perceived as the key factor driving passenger car demand. Butover time, other factors included the need for greater mobility, non-availability ofpublic transport services, availability of cheap finance, development of the used-car WWW. BABASAB PATIL FREEPPTMBA.COM 18
  19. 19. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Valuemarket, introduction of new technologically superior models, increasing levels ofurbanization, and changing consumer profiles. Market CharacteristicsProduct PenetrationThe penetration of passenger cars in India stood at five per thousand persons asagainst 27 for two-wheelers in 2000. Significantly, the Indian figures are lower thaneven those for economies like Indonesia (14 and 62). The relatively high penetrationof two-wheelers in India reflects the populations need for mobility and their limitedaffordability.Automotive Penetration (vehicles in use per thousand persons)* Passenger Cars Two wheelersUSA 478 14United Kingdom 373 12Japan 395 115Germany 508 36China 3 8Indonesia 14 62South Korea 167 59India 5 27*Source: World BankMarket Segmentation WWW. BABASAB PATIL FREEPPTMBA.COM 19
  20. 20. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True ValueConsidering that affordability is the most important demand driver in India, thedomestic car market has been segmented on the basis of vehicle price till SIAMintroduced the length-based2 classification of passenger cars since FY2003. Theautomobile industry in India is still concentrated around the mini and the compactsegments which together account for around 81.8% of the automobile market in termsof units sold in FY2003.Demand Projection for Passenger Cars FY2003 FY2004 FY2007 CAGR (Actual (Forecast) (Forecast) )Passenger car sales 611715 666248 838845 8%Domestic SalesIncreased affluence, wider selection and the ready availability of car loans is drivingthe Indian car market through the roof. During the last five years (2000-05), theproduction of passenger cars in India increased by more than 100 per cent. Indiaachieved the sales of 1.11 million vehicles last year (2005).Domestic sales have been growing at a clipping pace:• Passenger car sales rose by 22.84 per cent during April-September 2006,compared to the corresponding period n 2005.• The cumulative growth of overall sales of passenger vehicles during April-September of 2006-07 was 20.73 percent.• Utility Vehicle (UVs) sales grew at 12.85 per cent during the same period.• Overall, the commercial vehicles segment grew at 36.96 per cent. Growth ofMedium and Heavy Commercial Vehicles was 39.92 per cent. Light CommercialVehicles also performed well with a growth of 32.86 percent. WWW. BABASAB PATIL FREEPPTMBA.COM 20
  21. 21. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True ValueExportsIndia is fast emerging as a manufacturing base for car exports. According to theSociety of Indian Automobile Manufacturers (SIAM), a total of 89,338 vehicles wereexported in September 2006, a 58.07 per cent jump as compared to the same monthlast year. While passenger vehicle exports grew at 13.15 per cent, two-wheelers andcommercial vehicle exports grew at 27.80 per cent. Major Manufacturers of Automobiles in India• Maruti Udyog Ltd.• General Motors India• Ford India Ltd.• Eicher Motors• Bajaj Auto• Daewoo Motors India• Hero Motors• Hindustan Motors• Hyundai Motor India Ltd.• Royal Enfield Motors• Telco• TVS Motors• DC Designs• Swaraj Mazda LtdForeign players in IndiaCalendar 2006 has seen the entry of many high-end brands into the country. TheIndian automobile market will see at least 30 new launches, spanning everything fromaffordable hatchbacks to mid-size models to super luxury high-end cars and SUVs. WWW. BABASAB PATIL FREEPPTMBA.COM 21
  22. 22. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True ValueMercedes, BMW, Porsche, Audi, Bentley and Rolls Royce are already here. Now, theItalian marquee Lamborghini is also planning to enter the country. The Italianmarquee plans to launch the Gallardo.German luxury car maker Audi AG is preparing to drive into India a range of sporty,lifestyle cars like S8 and RS4 early next year. The year 2007 will also mark Audisentry into merchandising in Indian car bazaar.CAR STATISTICS INDIAThe Indian automotive industry is the 2nd fastest growing in the world. About 8million vehicles are produced annually in this country toady. During 2005-2006, Indiahas emerged as the 3 rd largest market in the Asia Pacific Region. With various carmanufacturing companies setting up their units in different parts of the country, theproduction of the cars will increase at a very fast rate. The car statistics indicate thatIndia will soon become one of the top 10 car manufacturing countries , leaving behindthe U.K. Car statistics also show that by the end of the fiscal year 2006-2007, the carproduction capacity in India will exceed the mark of 2 million. Thus, the productionof cars will increase by 70% from the present capacity of 1.2 million.The domestic sales of passenger cars have increased significantly over the years. Agraphical representation of the domestic sale of cars will give you an insight about thepresent market situation prevailing in the country: In the recent years, India hasemerged as one of the major bases for manufacturing small passenger cars. At presentthe Indian automotive industry boasts of being the 3 rd largest manufacturer of smallcars. According to the car statistics almost 70 % of the cars sold in this country comeunder the segment of small cars. A number of car manufacturers like: Maruti Udyog,Tata Motors, Hyundai, Honda, Ford, Hindustan Motors, Fiat, General Motors etcoffer various new model of cars now and then. It is expected that the variousautomobile manufacturers will be investing about $ 5 billion in India, between 2005-2010. WWW. BABASAB PATIL FREEPPTMBA.COM 22
  23. 23. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True ValueAs per the car statistics, export of passenger cars from India has also grownconsiderably over the last decade. A graphical representation of car export trend willhelp you to make an in-depth analysis of the present status of the Indian automotiveindustry: With new strategies being implemented and more investments being madein Indian automotive industry the production as well as the domestic sale and exportswill increase substantially.India definitely is shining; with a GDP that is sparkling at over 8 per annum thecountry certainly is on the right course. The automobile exports are at an all time highas was indicated by Society of Indian automobile Manufacturers in a report releasedin 2006. According to the report, the passenger car segment saw a rise of 9% inJanuary 2006.The following table will provide a clear picture of the rapid rise of automobile Exportin India.Analysis of Indian Exports:Strengths • Cost competitiveness in terms of labor and raw material. • Established manufacturing base. Economics of scale due to domestic market. • Potential to harness global brand image of the parent company. • Global hub policy for small car like Hyundai, Suzuki, etc.Weakness • Perception about quality. • Infrastructure bottlenecks.Opportunities • Huge export markets such as Europe, America, Africa, and others for Indian cars.Threats • China, Malaysia, Thailand, etc. • Many other countries also have strategies for export promotion. WWW. BABASAB PATIL FREEPPTMBA.COM 23
  24. 24. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True ValueExport Imperatives:Internal Factors: • Attaining high quality for global standards. • Continuous cost reduction for global competitiveness. • Supply chain management (logistics). • Attaining economies of scale & scope.External Factors: • Improve infrastructure (ports, roads, etc). • Improve EXIM regulations.The Indian passenger car segmentThe Indian car industry an be classified, based on the price of the car, into the ‘small’car or the economy segment (up to Rs.0.25mm), mid-size segment (Rs.0.25 –0.45mn), luxury car segment ( Rs 0.45 -1mn) and super luxury car segment (aboveRs1 mn).The models in the car market can be fitted to different segment as given below:-Category ModelsEconomy segment (up to 0.25mn) Maruti Omni, 800, PadminiMid-size segment (Rs0.25-0.45mn) Swift, Wagen-R Premier 118NE,Ambassador,Nova, Fait Uno,Zen, Huundai Santro, Daewoo Matiz, Tata Indica, Contessa, Aulto.Luxury Car Segment Tata Indica, Maruti esteem,Ford Ikon, Opel Astra, Fait Siena, Opel Corsa, Hyundai Accent, Tata Estate, Ford Feasts, Honda City,Lancer.Super luxury segment ( Above Rs 1mn) Merceds Benz, BMW, Nissan, Audi, Luxus, Skoda and other imported Models.The demand for passenger cars can be segmented on the basis of the user segment asthose bought by taxi operators, government/non government institutions individualbuyers etc. A major portion of the demand in India accrues mainly from personalvehicle owners. WWW. BABASAB PATIL FREEPPTMBA.COM 24
  25. 25. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True ValueIndustry analysis using porters five force:Porters “five force of competition” model views the profitability of an industry asdetermined by the five source of competition pressure. Theses five force ofcompetition include three source of “Horizontal” competition – competition fromsubstitute, the threat of competition from entrants, and competition from establishedproducers – and two source of “vertical” competition – the bargaining power ofsuppliers and buyers. The following write-up is a view of the Indian passenger carindustry from these five angles leading to the expected changes in the coming years inthe underlying structure of the Indian passenger car industry.Competition from substitute Inadequate Public Transportation System: In developed nations city plannershave tried to relieve congestion and pollution by creating an efficient publictransportation system. However, they have been remarkably ineffective inencouraging motorists to forsake their cars for buses or subway. The publictransportation system in India is not only extremely inadequate, it is notably poor inquality. This scenario is not expected to change drastically in the next ten years. Electric cars: All the major car manufacturers in the world are currentlydeveloping electric cars or hybrid cars to reduce pollution in the coming years.However, these technologies wll requires considerable length of time to becomecommercially feasible in developing nations.The lack of inadequate public transportation system coupled with the fact that theelectric or hybrid cars are still in the developmental stage means that the Indian carindustry faces minimal competition from substitutes.Treat of new entrants Economies of scale: in the automobile industry, economies of scale act as asignificant entry barrier since it is a capital-intensive industry. Globally, it has been WWW. BABASAB PATIL FREEPPTMBA.COM 25
  26. 26. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Valuewitnessed that car manufacturers with low volumes find it extremely difficult tosurvive given the high per unit cost. The acquisition of Rolls Royce, Jagur, Rover, andAMC/jeep are a testament to this. On the other hand by entering on a large scale, oneruns the risk of drastic under-utilization of capacity as observed by Daewoo’sexperience in India. Since the economy segment cars are expected to drive volumegrowth in India in the coming years, it is extremely important for a manufacturer tohave a model in this segment to reduce his per unit cost. Government policy: the license-raj of the Indian government toll 1991 acted asa significant barrier for any new entrants in the passenger car industry. Moreover, thegovernment’s perception of the car being a “luxury “rather than a modern “necessity’resulted in this sector being labeled as “low priority.” However, the liberalization ofthe Indian economy has removed this hindrance. huge capital Costs: Huge capital Cost act as significant entry barrier and onlyestablished companies with deep pockets possess the resources to enter theautomobile industry. Significant costs are involved in the development of a new car ascan be seen by Telco’s Indica car which has incurred an expenditure of Rs.17 bn. Absolute cost Advantages: Maruti’s presence in the car industry since 1984gives it considerable cost advantage over the new entrants. Not only are its plantshighly depreciated and its cars highly indigenized as compared to its competitors, ithas a wide distribution and service network which will require mammoth resource toreplicate.Absolute Cost Advantage: Maruti’s presence in the car industry since 1984 gives itconsiderable cost advantage over the new entrants. Not only are its plants highlydepreciated and its cars highly indigenized as compared to its competitors, it has awide distribution and service network which will require mammoth resource toreplicate.Although liberalization of the Indian economy has reduced the impact of governmentpolicy as an entry barrier, the car industry still enjoy high entry barriers due to hugecapital costs involved in setting up efficient plants and numerous cost advantagesenjoyed by Maruti. The recent pull-out of Peugeot is an example that even a globalautomobile company could find it extremely difficult to operate in India if it faceslabor trouble and Rivalry between Established competitors. WWW. BABASAB PATIL FREEPPTMBA.COM 26
  27. 27. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Value Highly Concentrated Industry : The Indian car industry is highlyconcentrated with Maruti itself accounting for about 80% of all sales. The lack ofcompetition in the economy segment to Maruti 800 has given the companyconsiderable power. Its dominance in this segment gives it the power to crosssubsidize its models in the other segment. However, this scenario is expected tochange drastically over the next three years with a number of new models beinglaunched to challenge maruti 800s dominance the scenario in the economy segmentcould be similar to that in the premium segment currently with intense pricecompetition. The slashing of cielo`s price by 25%has led to ford and opel introducingcheaper models Diversity of competitors: 1984 and 1993 have been land mark years for theIndian car industry. The entry of Maruti in 1984 changed the complexion of theindustry as for the first time Indian had opportunity a buy a car which was comparableto the Japanese automobile. 1993 was a historic year as the industry was deregulatedan India become the latest battlefield for global auto majors. The last few years haveseen the industry integrate with global automobile industry and evolve into beingextremely competitive. For the first time, Maruti’s position as the leader of the carindustry will be severally challenged especially if three new cars (Tata Indica,Daewoo, D’Art, and Hyundai Santro) in the economy segment can deliver thepromised performance. Product differentiation: One of the key trends observed in the car industryduring the last decade is that the products of different companies have becomeincreasingly similar especially in the economy and mid-size segment. There is aperceptible shift towards “car” being treated as a commodity rather than as aconsumer good. In the premium car segment in India, differentiation betweendifferent models is declining as companies strive to increase volumes by cuttingprices. Even Opel Astra has decided to introduced a new model without any frills toreduced its prices by Rs.10 million. Increase in Working Capital Needs: The intense rivalry between theautomobile companies will mean that the companies would have to give longer creditperiods to its dealers. The substantial over-capacity in the industry will lead to WWW. BABASAB PATIL FREEPPTMBA.COM 27
  28. 28. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Value increased inventory holding. These two factors point towards an increase in working capital needs of car companies.  The competition between firms in the car industry is expected the intensify considerable as never companies will start reducing Maruti’s dominance of the market the expected significant over-capacity in the industry, increasing working capital needs, and high exit barriers coupled with low differentiation between models especially in the economy segment will put downward pressure on price and profitability of companies. Bargaining power of Buyers• Buyers price Sensitive: Car buyers in India are extremely price-sensitive especially in the economy segment. Although it is too early to judge the three new small cars and Maruti response to it, we can expect the price competition to intensify since buyers would e more willing to switch while intense competition among the companies would require them to generate volumes.• Relative bargaining power : Gone are the days when the India car buyer had to buy one of the 30,000 Ambassadors or Fiate, which were produced. The penetration of satellite television has globalized the Indian customer. Car companies have seen forced to revamp their dealer network. From a small shed for a dealership, the shift is towards huge dealership who not only offer complete range of services for the car but also make sure that the customer has a replacement vehicle so that they may not become immobile.• Availability of Easy financing: the entry of numerous car companies has brought along with it a massive increase in the availability of cheap finance for the Indian consumer. This hassled to fierce competition among the car companies and has even led to free gifts being doled out to buyers to lure them to purchase a particular car. Bargaining Power of Suppliers Diminishing Supplier Power : one of the key trends observed in the global auto industry is the significant increase in outsourcing of car parts. In India, the development of the auto ancillary industry has also brought in this phenomenon. WWW. BABASAB PATIL FREEPPTMBA.COM 28
  29. 29. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True ValueHowever, the large number of competitors for supplying each part implies that in thecoming years, supplier power will diminish to a large extent except for suppliers whohave almost monopolistic power like Mico-Bosch. Also, there is a increasing shifttowards reduction in vendor base for a company which means that the chosensuppliers also have to make substantial financial investments to enhance the quality oftheir products.Supplier power in the automobile industry will diminish greatly in the coming yearsdue to the large number of competing supplier, threat of cheaper and better-qualityimports, and an increasing trend towards reduction of a car company’s vendor base.Conclusion Although it is possible to predict with some confidence the qualitative impact ofindividual structural changes, there are difficulties, first in predicting the quantitativeimpact of structural changes, and second, in predicting the aggregate effect ofsimultaneous structural changes that have conflicting effect n probability. The Indiancar industry is still in a nascent stage. The economy car segment acconts for themajority of the cars sold. However, as the economy picks up stream again and theIndian market matures, the car industry will also climb up the learning curve. Theindustry has virtually no competition from substitute at next decade. High entrybarrier due to high capital costs is also a positive indicator for the existing carmanufacturers. However, the intense competition between firms and increasingbargaining power of the buyers indicate towards intensifying competition adcompetition and depressing profitability. It will also lead to an increasing need ofworking capital for these companies who will e faced with longer credit periods andhigher inventory holdings. However, given the low motorization in India andincreasing per capita incomes, the potential exists for the Indian car industry toincrease profitability y generating significant volumes and reducing manufacturingcosts. Significant opportunities exist for players to spot gaps in the market and cater toparticular niche markets like sports utility vehicles and minivans. The diminishingpower of the supplier industry will help the industry in improving the quality of carcomponents and getting longer payment periods. The key to success in the Indian carmarket will be offering good quality cars that offer value for money, run innovativemarketing campaigns to attract potential buyers, and offer excellent after sales WWW. BABASAB PATIL FREEPPTMBA.COM 29
  30. 30. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Valueservice. Companies, which have a range of vehicles in all the segments of the marketlike Maruti, will be at a significant advantage due to their ability to cross-subsidizemodelManufacturing processThe body panel and engine constitute a major portion of the total cost of carmanufacture. A typical cost structure for car is as given below.Parts/assembly % of total costGlass 5Brakes/wheels/tyres 6Interiors 7Transmission system 8Ignition/exhaust system 8Steering/suspension 9Comfort fittings 11Engine 16Body 18Others 13Car manufacturing is basically assembly of components procured from ancillaries orauto component manufacturers. Nearly 80% of auto components are outsourced bythe car manufacturers. This helps in reducing the capital cost needed to setup a carmanufacturing plant. WWW. BABASAB PATIL FREEPPTMBA.COM 30
  31. 31. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Value Company profile WWW. BABASAB PATIL FREEPPTMBA.COM 31
  32. 32. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Value Maruti Suzuki motors MARUTI UDYOG LIMITED Maruti Udyog Ltd is one of Indias leading automobile manufacturers and the market leader in the car segment, both in terms of volume of vehicles sold and revenue earned. 18.28% of the company is owned by the government, and 54.2% by Suzuki of Japan. The Indian government held an Initial Public Offering of 25% of the company in June of 2003. The company annually exports more than 30,000 cars and has an extremely large domestic market in India selling over five hundred thousand cars annually. Maruti 800, till 2004, was the Indias largest selling compact car ever since it was launched in 1983. More than a million units of this car have been sold worldwide so far. Currently, Maruti Alto tops the sales charts. Due to the large number of Maruti 800s sold in the Indian market, the term "Maruti" is commonly used to refer to this compact car model. Till recently the term "Maruti", in popular Indian culture, was associated to the Maruti 800 model. The largest selling car from Marutis stable, Maruti 800In the order they were launched: • Maruti 800: Launched 1983. Largest selling car in India, till 2004. • Maruti Omni: Launched 1984. • Maruti Gypsy: Launched 1985. • Maruti 1000: Launched 1990 • Maruti Zen: Launched 1993 with a facelift in 2003.Production ended in 2006. • Maruti Esteem:Launched 1994 • Maruti Wagon-R:Launched 1999 Modified 2006 • Maruti Baleno:Launched 1999 • Maruti Alto:Launched 2000. Currently the largest selling car in India • Maruti Grand Vitara:Launched 2003 WWW. BABASAB PATIL FREEPPTMBA.COM 32
  33. 33. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Value• Maruti Grand Vitara XL-7• Maruti Versa: Launched 2004• Maruti Swift: Launched 2005• Maruti Zen Estilo Launched in 2006• Maruti Swift Diesel Launched in 2007Services offered• Authorized Service Stations- Maruti is one of the companies in India which hasunparalleled service network. To ensure the vehicles sold by them are servicedproperly Maruti had 1545 listed Authorized service stations and 30 Express ServiceStations on 30 highways across India.• Maruti Insurance- Launched in 2002 Maruti provides vehicle insurance to itscustomers with the help of the National Insurance Company, Bajaj Allianz, New IndiaAssurance and Royal Sundaram. The service was set up the company with theinception of two subsidiaries Maruti Insurance Distributors Services Pvt. Ltd andMaruti Insurance Brokers Pvt. Limited.• Maruti Finance- To promote its bottom line growth, Maruti launched MarutiFinance in January 2002. Prior to the start of this service Maruti had started two jointventures Citicorp Maruti and Maruti Countrywide with Citi Group and GECountrywide respectively to assist its client in securing loan. Maruti tied up with ABNAmro Bank, HDFC Bank, ICICI Limited, Kotak Mahindra, Standard Chartered Bank,and Sundaram to start this venture including its strategic parnters in car finance.Again the company entered into a strategic partnership with SBI in March 2003. SinceMarch 2003, Maruti has sold over 12,000 vehicles through SBI-Maruti Finance. SBI-Maruti Finance is currently available in 166 cities across India.• Maruti TrueValue- Maruti True Value is a service offered by Maruti Udyog toits customers. It is a market place for used Maruti Vehicles. One can buy, sell orexchange used Maruti vehicles with the help of this service in India WWW. BABASAB PATIL FREEPPTMBA.COM 33
  34. 34. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Value • N2N Fleet Management- N2N is the short form of End to End Fleet Management and provides lease and fleet management solution to corporates. Its impressive list of clients who have signed up of this service include Gas Authority of India Ltd, DuPont, Reckitt Benckiser, Sona Steering, Doordarshan, Singer India, National Stock Exchange and Transworld. This fleet management service include end-to-end solutions across the vehicles life, which includes Leasing, Maintenance, Convenience services and Remarketing. • Accessories- Many of the auto component companies other than Maruti Udyog started to offer components and accessories that were compatible. This caused a serious threat and loss of revenue to Maruti. Maruti started a new initiative under the brand name Maruti Genuine Accessories to offer accessories like alloy wheels, body cover, carpets, door visors, fog lamps, stereo systems, seat covers and other car care products. These products are sold through dealer outlets and authorized service stations throughout India. • Maruti Driving School • Exports- Maruti Exports Limited is the subsidary of Maruti Udyog Limited with its major focus on exports and it does not operate in the domestic Indian market. The first commercial consignment of 480 cars were sent to Hungary. By sending a consignment of 571 cars to the same country Maruti crossed the benchmark of 3,00,000 cars. Since its inception export was one of the aspects government was keen to encourage. Every political party expected Maruti to earn foreign currency. Angola, Benin, Djibouti, Ethiopia, Europe, Kenya, Morocco, Sri Lanka, Uganda, Chile, Guatemala, Costa Rica and El Salvador are some of the markets served by Maruti ExportsKey Competitors- • Tata Motors • Hyundai India • Ford India • FIAT India WWW. BABASAB PATIL FREEPPTMBA.COM 34
  35. 35. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Value • General Motors IndiaPride Pointers • India’s largest automobile company • MUL Rolls out one car every 43 second. • Around 4 million people in India are proud to own maruti cars. • The highest installed production capacity • More than 35,000 trained technicians for customer support. • Largest Sales network-270 sales outlets • Largest service networks- 359 dealers workshop • Cities covered by sales- 172 • Cities covered by service- 922 • Spare Parts Store- 26 • MGP Shopee- 11 • True Value network- 127 outlets Some Milestones- WWW. BABASAB PATIL FREEPPTMBA.COM 35
  36. 36. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Value1983- Launched, hence bringing the first revolution in the Indian car market in termsof• Technology• Availability- production Capacity• Fuel Efficiency• Choice of colour• Shape May- 1993, Zen the world car unvieled at a world premier.• November- 1994, Esteem the first luxury car on Indian roads launched• December- 1999, Baleno, the top end of the luxury car launched.• March-2000 WagonR the original tall boy launched.• September-2000, Alto launched in three variants• October-2001, Versa, India’s first MPV launched in three variants• April-2002 Grand Vitara, the SUV launched.Some Milestones in Exports• MUL Export cars to more than 100 countries.• India’s largest exporter of completely built cars (CBU) during 2001-2002 bothin terms of volume and value. WWW. BABASAB PATIL FREEPPTMBA.COM 36
  37. 37. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Value• Cumulative export sales crossing the 2.5 lakh mark, far more than any carcompany in the country.Local market trends• Sales, particularly in the small car segment, will drive passenger car sales inthe near in term. However, within the next two years , capacity is expected to be twicethe total demand for cars.• With developments in the small car segment acquiring a degree of stability interms of price competition, the action is shifting to the mid-size car segment. sales inthis segment will pick up as new models come in and income levels rise but it is stillsome times till it comes anywhere close to the economy sized segment.• What will also drive car sales is the wide availability of finance schemes by avariety of banks and FI’s.• Sales in the used car market is also expected to do well as more an dmoreolder models get replaced by newer ones at a faster pace. The coming in of Euro 3 and4 norms will also increase scrappage rates.• In view of expected surplus in the domestic market, India will emerge as oneof the leading car sourcing point in the Indian subcontinent.• Consumers will be the beneficiaries as a result of marketing war, as they willbe offerd technologically superior products at better price and terms and conditions.But the customer has a risk of model discontinuation as a result of shake-out expectedin the industry.• India offers a releatively low cast production base and is strategicallypositioned as a launching base for third country export to Asia-pacific and Europeanmarkets• Growth in road transport, increasing urbanization and privatization of publictransport will into growing demand for commercial vechile which is sited to reachthree hundred thousand by 2001, growth of disposable incomes will push up demandfor two-wheelers to 4.5 million, of three-wheelers to 250 thousand and of passengercar to 420 thousand over the same time span. WWW. BABASAB PATIL FREEPPTMBA.COM 37
  38. 38. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Value• India has added advantage of an extensively segmented market and a well-developed dealer network.• Growth of consumer finance leasing and hire-purchase options for vehicledealers and buyers also boost demand.• A well developed component industry offers opportunities for sourcing. Thescope is vast for foreign collaboration to produce branded models stressing onemission standards, fuel efficiency, advanced features and contemporary styles. WWW. BABASAB PATIL FREEPPTMBA.COM 38
  39. 39. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Value BELLAD MOTORS (P) LTD.BELLAD MOTORS (P) Ltd is a multi franchise automobile dealership based atHubli servicing the North Karnataka. The Bellad Group with a standing of more thanthree decades in Automobile industry established their prestigious Maruti Dealershipin the year 2006.Ideally located on Hubli Dharwad highway the dealership can boast of a spacious4000 sq ft. and well lit showroom with ample frontage. The showroom has thecomplete range of cars for display and test drive and professional and trained salesstaff always eager to serve and delight our value customers.The service center with an area of 6000 sq ft has two post lifts, pneumatic tools,computerized wheel alignment and wheel balancing machines and a most modernpaint booth which can handle any make of car. The service personnel highly trainedand professional with up to date knowledge owing to the groups policy ofimplementing continuous learning programs. A 24 hours emergency road serviceattached to the service division is always on call and is a confidence booster to ourcustomer.The parts center in an area of 2000 sq ft is well stocked and has a wide range ofaccessories to suit the varying needs of our customers.The dealership with its professional management looks forward to their growth byfocusing on customer centric and value added offers to their customers. Bellad Motors(P) Ltd with their network of branches at Bagalkot and Karwar are striving hard tosatisfy their customers. WWW. BABASAB PATIL FREEPPTMBA.COM 39
  40. 40. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Value ORGANIZATION CHART Managing Director Deputy General Manager HRD M. W/S Parts Sales Account Manager Manager Manager M.T.V Team Leader Team Leader Team Leader Team Leader Sr. Sales Executive Sales Executive Sales Executive Sales Executive Sales ExecutiveSales Executive Sales Executive Sales Executive Sales Executive Reception Data Entry WWW. BABASAB PATIL FREEPPTMBA.COM 40
  41. 41. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True ValueSALES DEPARTMENT Managing Director Deputy General Manager Sales Manager Team Leader Team Leader Team Leader Team Leader Bagalkot Karwar Sales Executives Sales Executives Sales Executives Sales Executives WWW. BABASAB PATIL FREEPPTMBA.COM 41
  42. 42. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Value WORK STATION Managing Director Deputy General Manager Customer Care Works Manager Manager Assistant Assistant Works Customer Care Manager Manager Service Advisor Floor Floor Supervisor Supervisor Technicians Technicians WWW. BABASAB PATIL FREEPPTMBA.COM 42
  43. 43. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Value SERVICE DEPARTMENT WORKMEN 25 SUPERVISERS 04 HEAD OF THE DEPT 01SALES DEPARTMENT MD = Managing Director DGM = Deputy General Manager T.L = Team Leader S.E = Sales Executive M.T.V = Maruti True ValueThe following chart explains the Sales Department. In that Sales Manager handles thesales promotion activities, Customer Care Executive handles the identifying thecustomer problems and solving. Branch Managers are district wise and their work isto take the information form the sales executives about the needs of vehicles and sendthe same information to the Sales Manager and bring the vehicles from SalesManager to Sales executives. Karnataka in Hubli Bellad Motors (P) Ltd. showroom islocated on PB road at Unkal Cross. The workshop located at there itself, carries outafter sales operations, free service, paid service and Running repairs.Quality Management System:  Bellad Motors has a documented and established quality management system to ensure that  The documentation structure of Bellad Motors can be represented in the following manner. 1. QULITY MANUAL 2. QULITY SYSTEM ROCEDURES 3. WORK INSTRUCTIONS AND CHECKLIST 4. FORMS AND CARDS 5. REFERENCE STANDARDS AND EXTERNAL ANNUALCustomer Focus at Sales: WWW. BABASAB PATIL FREEPPTMBA.COM 43
  44. 44. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Value  The Field executives visit the customers and explain the features of the vehicle to them.  Demonstration and test drives shall be given whenever required.  The Performa invoice/price list terms and conditions will be given.  The order booking forms duly collected from the customer and clarity with regard to the terms and conditions are explained and the copy id handed over to customer along with the receipt or payment made.Customer Focus at Service: a) The customer can book the vehicle for the servicing/repairs either through the telephone or personally the front office. b) The detail shall be entered in booking register by the telephone operator. c) The list of the vehicles shall be given to front office ~very morning to accept the vehicles for servicing for that date. d) The customer can bring their vehicle for servicing without booking. However such vehicle shall be accepted only after ensuring that there is enough capacity for the booked vehicles. e) On the bases of kilometers run by the vehicle and customer requirement, the customer shall explained about the type of the servicing/repairs and spare parts required and to ensure that the service station has the required capacity to accept the vehicle. f) Before accepting the vehicle, a mutually acceptable delivery time and date is fixed with the customer. g) The customers consent shall be taken on the estimated cost of the repair/service of the vehicle. h) All the details of the work required along with the date and time of the delivery and the established cost shall be recorded in the job order card before commencement of the work. WWW. BABASAB PATIL FREEPPTMBA.COM 44
  45. 45. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Value The various models of vehicles from Maruti Udyog Ltd. Sold and serviced at Bellad Motors.  Maruti-800 car  Maruti omni  Zen Estilo  Alto  Wagon-R  Esteem  Versa  SX4  Vitara  SwiftThe various types of servicing done at Bellad Motors.  Services-Free service and paid service.  Running repair.  Quick service repair.  Break down service.The external manuals acquired from Maruti Udyog Ltd. To sell and service thevehicles.  Sales policy bulletin  Marketing circulars  Service manuals  Service circulars  Service bulletin  Warranty bulletin  Spares parts price catalogue  Spares parts price list  Spare parts procedure manuals WWW. BABASAB PATIL FREEPPTMBA.COM 45
  46. 46. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Value  Spare parts bulletin  Spare parts circulars  Maruti service quality standards  Customer care manual  Service marketing manual.OVERVIEW OF THE INDIAN SECOND HAND CAR MARKETThe pre-owned, or used, car market continues to be fragmented and unorganized.Despite the rapid growth of the organized used-car dealers and manufacturer-ownedpre-owned car outlets, the market for old vehicles continues to be dominated byindividuals trying to sell and buy cars.However, the pre-owned vehicles market is likely to mature as the car ownership basegrows. The scorching pace at which the new car market has grown this fiscal and thegrowth projections for the next are indicators of the potential growth of the used-carmarket in the next few years.Further, in addition to the number of two-wheeler owners who are looking to buya car, the number of existing small-car owners hoping to upgrade to a three-box(sedan) car will progressively drive used-car sales in the two critical B and Csegments. The C segment (particularly entry-level) used car sales are expected towitness the kind of sales boom that B segment used cars saw over the past twoyears.Organized market imminentCompany-owned used-car outlet and increased demand for certified used cars arelikely to become the dominant themes. It is evident, from the surge in the number ofcar manufacturers entering the pre-owned cars business, that the used car market isgetting increasingly attractive, both in terms of its potential to generate sales volumesand higher margins. For the car-maker, the organized used-car business also throws WWW. BABASAB PATIL FREEPPTMBA.COM 46
  47. 47. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Valueup the possibility of better using the dealer-cum-service outlets vehicle servicingcapacity.The manufacturer-sponsored pre-owned car business has seen entrants such as thecar market leader Maruti Udyog, with its Maruti True Value brand, Ford India,with its Ford Assured, and Hyundai with its Hyundai Exchange brand. Afterstarting out in a small way amongst their dealerships, many of thesemanufacturers are now actively involved in streamlining their used-caroperations.Better place to shopFor the used-car buyer, the manufacturer-sponsored outlet is much better place to goshopping. In addition to being able to buy a certified car at a fair price, these outletswill also ensure that the paper work is right, throw in a couple of free services, offeran extension of warranty at times, help with the transfer of the vehicles ownershipand complete formalities at the regional transport office (RTO).A certified used car, including the charges for inspection and certification, is usuallypriced 5-10 per cent more than a similar used car in the unorganized segment. Despitethe higher cost, for the average first-time car buyer, a certified car is the better option.In the absence of any organized car history services being offered by independentconsultants and a more transparent vehicle insurance system, getting backgroundinformation about the previous owner and the used-car is extremely difficult forbuyers looking for a deal.Used-Car Buyer Behavior :However, used-car buyers continue to be hesitant to shop for their cars atmanufacturer-sponsored outlets.A recent study about the resale value of cars in India conducted by NFO Automotive,part of the NFO World Group, threw up interesting points. Some of the key findingsof NFO Automotives inaugural 2003 India Used-Car Buyer Study (UCBS) were: WWW. BABASAB PATIL FREEPPTMBA.COM 47
  48. 48. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Value• Very few Indian buyers pay for an expert to evaluate the vehicles; most rely on their personal mechanics and friends.• Low reliance on vehicle financing at 20 per cent compared to nearly 65 to 70 per cent for new car buyers.• Word-of-mouth, classified advertisements, and used-car brokers are the key sources of deciding brand and price, with the Internet and manufacturer-backed sources playing only a limited role.• Lack of shopping - over 60 per cent owners are pre-determined in their used-car model choice and do not shop around.• The age of car (model year) and kilometers on the vehicle are the top evaluation criteria. The degree of importance attached to accident history, ownership transfers, and service/ parts availability is relatively lower. Used-car finance More than two-thirds of all new cars sold are part financed through auto loans. Intense competition, reliable retailing channels and cross-subsidization of the financiers interest costs by the vehicle manufacturer have brought down interest rates for new cars dramatically during the last two years. However, the interest rates for financing used-cars continue to be uncompetitive. The interest rate for financing of new cars ranges between 7 per cent and 11 per cent on a reducing balance basis depending on manufacturer and model. On the other hand, interest rates on used cars range from 14 to 19 per cent, close to the rates for a personal loan. The interest rates for certified cars being offered by manufacturer-sponsored outlets are usually lower than financing for used-cars bought from the open market. This again is largely due to the higher reliability factor and, in some cases, to some kind of preferred financing arrangement the manufacturer has with the financier. More reliable experience- WWW. BABASAB PATIL FREEPPTMBA.COM 48
  49. 49. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Value Overall, the process of buying a used-car can be fruitful and risk-free, if you take the necessary precautions (refer accompanying story) and opt for buying a certified car. With the increased presence of the organized used-car dealer, the rate of growth in the pre-owned car market is likely to outstrip new car sales. Though a more market-friendly interest rate, which is on a par with the prevailing rates for new cars, will continue to elude used-car financing, at least the differential between the two rates are expected to gradually narrow. This is likely to happen after the reliability factor goes up in the used- car market. Tip sheet Buyers Check out these following aspects before closing a deal:• If you are on a tight budget and plan to buy an entry-level car in any of the segments, a used-car may not always be the best option to upgrade to the higher segment. Instead, you may opt for a new car in the lower segment.• If you do decide to upgrade to a bigger, higher segment used-car, then you have to be ready for accelerated depreciation post-purchase and uncompetitive interest rates, if you are part financing the buy.• It is better to go in for a certified used-car rather than trusting the judgment of your neighbourhood mechanic.• Check the used-car sellers insurance records for the cars claims (accident) history, if any.• Avoid cars that have had more than one previous owner.• A used-car owner who has been meticulous with the cars paper work and maintains an exhaustive log of repairs, oil change, service will, in all probability, have been meticulous with the car too. WWW. BABASAB PATIL FREEPPTMBA.COM 49
  50. 50. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Value• If you are confident of about your own assessment skills and feel that you can do the job of scouting for a used-car better, then the pointers given in the box alongside may be of help. Sellers Here are a few pointers that can be of use when you decide to sell your car:• Selling your car through a used-car dealer may be a better option than attempting it yourself, despite the commission that you have to fork out to the dealer.• It will also still be worth it, especially if your car is more than three/four years old, to get the vehicle used-car certified by an authorized car dealer or certifying agency.• Passenger car manufacturers are nowadays offering attractive loyalty bonuses and exchange plans for programmes for existing car owners to upgrade or switch to a new car. But if your car is not more than three years old, it may still fetch a better price in the open market. So, sell that car yourself and talk down the price of the new one with the dealer. You will win both ways.• Go to the used-car market with realistic expectations. Remember if your car has had crashes in the past, no matter how well it has been restored, its resale value will have dropped never be the same.• If you have avoided frivolous repairs and the subsequent insurance claims from your auto insurance company, or if your car has had an accident-free history, then, do not forget to transfer the no-claims bonus from the used cars insurance policy to the insurance cover for the new car. You can transfer almost half of your no- claims bonus and help shave off a large chunk of the premium payable on the new car. ANALYSIS OF THE MARKET• Global Scenario WWW. BABASAB PATIL FREEPPTMBA.COM 50
  51. 51. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Value In developed markets like U.S, Europe, Japan etc the market is very big and organized. - U.S Market Size: 1:3(48 Million) - Japan Market Size: 1:1.8(8.4 Million) - India Market Size: 1:1(Estimated) Global Certified Markets In Developed Markets all OE Manufacturers are doing certified programs- like ‘True Value’ - GM-GM Certified - Ford-Ford assured - Toyota-Toyota Certified Used Cars - Honda-Honda Certified - Suzuki-Suzuki Ok, U’s Station Source NFO UCBS-2003 3-level Evolution of Certified Programs- Level 1 Market is highly unorganized, dominated by purchase houses and C2C Market is highly unorganized, Level 2 dominated by purchase houses and C2C; new car dealers also start their used car programs. Level 3 Certified programs by OEM’s start as customers started demanding for assurance from OEM’s.• Indian Used Car Market Estimated - To be 1:1 - i.e. for every one new car one old car is sold WWW. BABASAB PATIL FREEPPTMBA.COM 51
  52. 52. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Value - In U.S the market is 1:3 - Indian market is also growing in the direction of the developed markets. Market Structure• Customer to Customer- 60% - I.e. between friends, relatives and reference individuals.• Broker Market- 30%• Organized Market- 10%• Lacks- - Reliability - structured pricing mechanism - structured exchange/ upgrading facility - Assurance, warranty, etc CUSTOMER ANALYSIS Indian Customer Expectations- Seller expectation Seller expectation Brokers OEM backed dealership Correct pricing of vehicle Prices offered by Pricing is as per or above reflecting market value brokers are as per the market, however only in market. exchange scheme. True evaluation of the None finds faults in Yes, thorough elaborate vehicle cars which do not exist. checklist. Financial speed of setting the Yes, at a cost Yes account reliability Very low High Form of payment- wants Mostly cash Cheque flexibility between cash and WWW. BABASAB PATIL FREEPPTMBA.COM 52
  53. 53. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Value cheque. Car to be left in the Unsafe Safe dealership Credliblity of the buyer Doubtful Can be known Logistics- time and distance Few pockets in the city One or two outlets in limited of travel to selling point. or through local cities. workshops Buyer’s expectation: Buyer’s Brokers OEM backed dealership expectation- Buy a reliable Unreliable Reliable car Backed by refurbishment and warranty provided by a third party. Fair price Unreliable At par with market Transparency Very poor Good Clean Very poor Yes documentation Top 5 reasons for Customer Going for Finance1. 49%- fast paper work2. 43%- interest rate3. 41%- reputation of finance company.4. 33%- good finance terms5. 21%- flexible of finance terms. - Source NFO-UCBS 2003 (2.7) OVERVIEW OF THE TWIN CITIES- HUBLI- DHARWAD- The population of the city as per the 2001 Census was 7.85 lakhs. The present population is more than 10 lakhs. Hubli is well known as a commercial as well as industrial centre, where as Dharwad is seat of learning. The city is well connected with important cities like WWW. BABASAB PATIL FREEPPTMBA.COM 53
  54. 54. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Value Bombay, Bangalore, Hyderabad and port towns of Karwar and Goa and easterns and north-eastern regions by an excellent network of roads and rail. The airport at Hubli is expected to find a place on our national air map. The city is situated in the dividing line between the Malnad and the planes. The Malnad is well known for its forests and forest based industries and the other three side region are known for their agricultural products like cotton, groundnut, oilseeds manganese ore and granite stones. The value of agricultural products coming into Hubli market runs into multiple crores. Hubli is an important industrial centre, with more than 1000 allied small and medium industries already established. There are machine tools industries, electrical, steel furnitures, food products, rubber and lather industries and tanning industries. With the establishment of Bhoruka textile Mill, N.G.E.F and K.M.F. it has gathered momentum in industrial development. Dharwad is the seat of learning with Karnataka University and Agricultural University. There are large number of Arts, Science, Commerce and Law Colleges in the city. Karnataka Medical College, S.D.M. College of Dental Sciences and Engineering and technical institutions are crowning additions to the educational facilities in the city. Due to these educational and industrial facilities, the city attracts considerable floating population. ANALYSIS OF THE CAR MARKET IN HUBLI- DHARWAD• Hubli- Dharwad is one of the fast growing market for Cars in the state.• There are showrooms of most of the segments of the Cars.• The company owned showrooms that are present in the Twin cities are- Maruti, Hyundai, Tata, Skoda, GM Opel, Ford, Toyota, Fiat, Mahindra and Mahindra, HM etc..• There are many co owned service stations, Mercedes has set up it’s service station in Hubli recently. WWW. BABASAB PATIL FREEPPTMBA.COM 54
  55. 55. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Value• There was a demand for the small cars mostly in the Twin cities, because of the shorter distance for traveling, economical, less parking space etc..• The mindset and the consumer behavior is fast towards buying cars in Hubli- Dharwad. SECOND-HAND CAR MARKET IN THE TWIN CITIES. There are about 40-50 unorganized dealers in Hubli- Dharwad. There are only two other certified dealers in the market- Bellad, Automartindia. Insights of the dealers- (sample size - 8MAIN DEALERS)• No proper infrastructure.• The average years of established is 8years• Average sales per year is 180-200 cars• The dealers do not use middle men for their dealings.• The promotional activities are mostly undertaken through Melas and Newspaper ads• The average peak time for the maximum sales in in festive seasons.• They do not give any service or guarantee backup for the vehicles sold.• They say the customers are very satisfied with them.• Cost is the only problem when customers are purchasing.• The major factors considered by the buyer are- - Budget WWW. BABASAB PATIL FREEPPTMBA.COM 55
  56. 56. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Value - Condition - Age WWW. BABASAB PATIL FREEPPTMBA.COM 56
  57. 57. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Value “MARUTI TRUE VALUE”- WHAT IS IT? Maruti Suzuki’s new Initiative along with Maruti Insurance, Maruti Finance and Maruti N2N under Project Vistaar. The Most Reliable Option to Buy or Sell Pre-Owned Cars-• First True Value outlet on 19th Oct-2001• Present network :127 outlets in 94 cities• Product- Sourcing: they buy cars of any make, age and mileage in exchange. Objectives of Maruti Suzuki behind True Value• Increasing New Car sales through exchange.• Managing Residual Value.• Enhancing your Dealer Profitability.• Enhancing motorization-2-4 Wheeler. Unique Strengths• Backed by Maruti Suzuki- India’s largest and most trusted passenger car manufacturer.• The largest used car dealer networks in India run by professional management. WWW. BABASAB PATIL FREEPPTMBA.COM 57
  58. 58. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Value• The Maruti True Value warranty and services can be availed by the customer across the nation at any true value outlet.• Only true value can ensure that if any problem arises anytime their service at their service 24 hours. Maruti True Value Products• GR- Upto 5 years old & upto 1 lac kms- - Warranty- 15000 kms or 1year whichever occurs earlier.• XR- Upto 7 years old & upto 1 lac kms- -Warranty-7500 kms or 6months whichever occurs earlier.• PR- Upto 10 years old & upto 1 lac kms- - No warranty but mechanical refurbishment standards same as GR/XR. Evaluation Process of the Cars at ‘True Value’• Backed by Maruti Suzuki- India’s largest and most trusted passenger car manufacturer.• The largest used car dealer network in India run by professional management.• The Maruti true value warranty and services can be availed by the customer across the nation at any true value outlet. WWW. BABASAB PATIL FREEPPTMBA.COM 58
  59. 59. Analysis of the Pre-owned car market in Hubli for Bellad Motor’s Maruti True Value • Only true value can ensure that if any problem arises anytime their service at their service 24 hours. True Value VS MarketMaruti true Value Brokers and C2CEvery car is bought through a stringent No checking120 point check which is done byprofessionals trained by Maruti- Suzuki.Only cars that meet strict criteria are No assurance of qualitytaken under True value ensuring thatcars are non-accidental and free of anymajor defects.Seller bonofides are verified from RTO DubiousThis ensures that the buyer does not end Riskyup in any legal hasslesAll the 11 systems of the car like No re-conditioningengine, transmission, electrical, brakes,suspensions, body etc are reconditionedto Maruti Suzuki standards.This ensures that the car is reliable, safe Car is not assured of safety reliabilityoptimized fuel economy. Sparkling and any time it can break down: bigclean and aesthetically finished giving tension optionthe experience of the new car.Maruti- Suzuki trained professionals No refurshibment, even the genuinerefurbish every car only with Maruti spares are replaced with spuriousgenuine parts at state of the art.-maruti parts.workshops. WWW. BABASAB PATIL FREEPPTMBA.COM 59