Passenger Car 'industry in India


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Passenger Car 'industry in India

  1. 1. Market Structure of Passenger Cars Industry A Project Report On Market Structure of Passenger Car Industry SUBMITTED TO: SUBMITTED BY: Dr. c. s. shylajan Aishwarya tomar harshdeep singh
  2. 2. Market Structure of Passenger Cars Industry Acknowledgement It is a great pleasure and privilege for us to present this project on “Passenger car Industry”. We express our sincere sense of gratitude towards our professor Dr. Shylajan, under whose fruitful guidance, encouragement and support the project was completed. We would also like to thank our professor for letting us take this diverse topic and giving us necessary suggestions to make it a better report.
  3. 3. Market Structure of Passenger Cars Industry Index: History of passenger cars industry Market share post Independence Concentration & Herfindahl Index during Post independence Market Share of today’s Market Concentration ratio Herfindahl Index Evbolution of market structure Entry Barriers Competitive threat in the Industry MARUTI SUZUKI - Introduction - Cars Produced - Pricing and Non-Pricing Strategy - Pricing Behavior& Variants - SWOT Analysis & Porter’s Five Force Model - 800 vs Nano Mahindra And Mahindra - Introduction - Cars Produced - Pricing and Non-Pricing Strategy Hyundai - Introduction - Cars Produced - Pricing and Non-Pricing Strategy Honda - Introduction - Cars Produced - Pricing and Non-Pricing Strategy TATA - Introduction - Cars Produced - Pricing and Non-Pricing Strategy Some Important comparison Conclusion
  4. 4. Market Structure of Passenger Cars Industry History It is on record that the first motorcar on the streets of India was seen in 1898. Mumbai had it’s first taxi-cabs by the turn of the century and in 1903, an American company began to operate a public taxi service with a fleet of 50 cars. The import of vehicles grew consistently after the 1920s, crossing 30,000 units by 1930. It was towards the end of the war that the importance of establishing an indigenous automobile industry in India was realized when Premier Automobiles Ltd. (PAL) and Hindustan Motors (HM) set up factories in the mid 40s for progressive manufacture rather than assembly from imported components. HM was established in 1942 for the manufacture of certain auto components, but it was only in 1949 that the company actually begun making cars. While Pal and HM focused on passenger cars at the time of independence, the Mahindra brothers, Kailash Chandra and Jagdish Chandra founded Mahindra & Mahindra in 1945 with the objective of making utility vehicles. The three decades following the establishment of the passenger car industry leading up to the broad banding period of the yearly 1980s were the dark ages for the consumer whose choice throughout this period was limited essentially to two models the ambassador and the Padmini. Car ownership was usually a bitter experience, thanks to the indifference of car companies and the shabby quality of their product indeed, the cars being churned out of the factories were so bad it took up to ten days to the pre delivery inspection. First winds of liberalization in the early 1980s a series of liberal policy changes were rapidly introduced marking a crucial turning point for the automobile industry. The change of attitude on the part of the government coincided with the state taking a direct interest in the auto business, with 74% stake in Maruti Udyog Ltd. (MUL) and the joint venture between SUZUKI of Japan and the Indian government. This was revolutionary departure from the government restrictions, previous policies on the foreign equity and technology.. 1993-till now: The de-licensing of the industry in 1993 opened aluice gates a flood of international 7auto-makers that rushed into what they saw as the last remaining untapped market – the largest democratic market of the world. The next couple of years saw an unprecedented growth in the industry with the assembly lines working overtime to meet demand. However India was a much tougher market than they had imagined. Till today the industry has grown enormously, bringing in a number of new companies ending up into a highly competitive industry
  5. 5. Market Structure of Passenger Cars Industry Market Share Post Independence: Concentration Ratio: As there are two major firms in the market, PAL with the share of 42% and HM with the share of 48%. Concentration Ratio = 42% + 48%= 90% Herfindahl Hirschman Index: (42*42)+(48*48)+(10*10) = 4168 Herfindahl index of 4168, which is near 5000 shows that the market is majorly divided between two major firms. And that the market Structure can be considered as Duopoly. 42% 48% 10% Passanger Car Sales during Post Independence period PAL HM Others
  6. 6. Market Structure of Passenger Cars Industry Market Share Today: Concertration ratio: As there are 5 major firms, concentration ratio of 5 major firms is the addition of their market share that is 44.24+10.59+13.88+5.11+6.97=80.79 Herfindhal index : Addition of each firms squared market share. =2706.5821 Now we can see that our herfindhal index has decreased from 4168 to 2706.5821 ,this tell us that the competition in the market has increased which has lead to decrease in the market share of each firm. It also tell us that the market structure is oligopoly. 44.24% 10.59% 13.88% 5.11% 6.97% 19.21% Passenger Car Sales in march 2013 Maruti Mahindra Hyundai Honda Tata Others
  7. 7. Market Structure of Passenger Cars Industry Evolution of market structure: By comparing the Herfindahl Index of the two time period we can say that the market structure can become oligopoly from duopoly. ENTRY BARRIERS IN CAR INDUSTRY 1. The amount of capital required to start a car company is enormous. 2. Limited capacity of parts suppliers. Many have downsized their operations to the point that they do not have excess capacity. 3. Competition. There are already significant well established competitors. 4. Government regulations regarding safety design, emission standards and fuel efficiency. 5. Patent protection laws may prevent the use of certain innovations. 6. Marketing a new brand can be difficult and very expensive. Competitive Threats In The Industry: The Porter's analysis for the LCV and the M and HCV segments show strikingly similar results except for the threat of new entrants. In the LCV market there exist a small number of large companies between whom there is a high degree of competition. To gain market share companies are focused on innovation and strong marketing strategies. The companies are usually not diversified beyond automotive manufacture. As a result, if the automotive sector is in a downturn, it could raise exit barriers. Hence the overall rivalry is strong in this market
  8. 8. Market Structure of Passenger Cars Industry Maruti Suzuki
  9. 9. Market Structure of Passenger Cars Industry Introduction: It is a leading four-wheeler Automobile Manufacturing in South Asia. Suzuki Motor Corporation of Japan holds a majority stake in the company. It was the first company in India to mass-produce and sell more than a million cars. It is largely credited for having brought in an automobile revolution to India. It is the market leader in India. On 17 September 2007, Maruti Udyog was renamed to Maruti Suzuki India Limited. The company's headquarters remain in Gurgaon, near Delhi. The company annually
  10. 10. Market Structure of Passenger Cars Industry exports more than 50,000 cars and has an extremely large domestic market in India selling over 730,000 cars annually. Maruti 800, till 2004, was the India's 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. Cars under Maruti Udyog Ltd.: Pricing Strategy: -Caters to all segments and has a product offering at all price points -Their pricing strategy is to provide an option to every customer looking up for a car. Non- Pricing Strategy: -Its focus is mainly on the export market, it is looking to make India an exclusive base for manufacturing small cars -It would design small cars suitable for Indian conditions as a strategy to beat the stiff competition with the global car makers -It would be launching compact cars with more features to meet the needs of the customer. Price Behavior: 2009- Rs. 3,31,700/- As we can see the price has been growing at almost a constant 2010- Rs. 3,45,500/- rate we can say price behavior is not volatile as it is not very 2011- Rs. 3,59,000/- fluctuating rather it is constantly growing. 2012- Rs. 3,76,500/- 2013- Rs. 3,91,600/- Variants: omni Alto 800 Eeco Alto WagonR A-star Ritz Swift Swift DZire Gypsy Ertiga SX4 Kizashi Grand Vitara
  11. 11. Market Structure of Passenger Cars Industry Top End: 15-30 Lac Second End: 5-10 Lac Third End: 3-5 Lac Low End: < 3Lac SWOT Analysis: Grand, Vitara SX4, Kizashi, Swift DZire WagonR, Swift, Estilo, Eeco Alto 800, Alto, Omni STRENGHTS 1. Established distribution and after sales network 2. Understanding of the Indian Market 3. Brand Image 4. Experience and know how in technology WEAKNESSES 1. Lack of experience with foreign markets 2.Comparitively new to diesel cars. 3.People resistant to upper end models 4.Heavy import tariffs on fully imported models OPPORTUNITIES 1. Increased purchasing power of indian middle class families 2.Government subsidies 3. Tax benefits 4.Prospective buyers from two wheeler segment THREATS 1. Competition from second hand cars and tata nano. 2.Threat from chinese manufacture
  12. 12. Market Structure of Passenger Cars Industry Porter’s Five Force Model: Forces Threat of New Entrants Bargaining power of buyers Bargaining power of suppliers Threat of substitute products Rivalry among competitiors Result -Government policies -patents and proprietary knowledge -asset specificity -Economies of scale -Product differentiation is high -Buyers get incentives in the form of cost discounts & better after sales services -Presence of substitute inputs is high. -switching costs of suppliers is high. -Intense players -better Technology -industry concentration -High fixed costs -Diversity -Low cost Switching MARUTI 800 AND TATA NANO The Maruti 800 was the real people’s car in India. Significantly, at the time it was launched it was priced above the Fiats and the Ambassadors. Yet a generation, sick of the poor quality of the existing cars with their antiquated features, couldn’t get enough of the 800 which always seemed to be appropriately priced but overwhelmingly reliable. The Nano’s positioning as the “upgrade-from-scooter” may have built a romantic aura around its creation but defies the basic theory of pricing which contends that “the price for any specific good/service is the relationship between the forces of supply and demand.” The Rs.1 lakh tag was based neither on demand nor on supply. Consequently, the tag of the “lowest priced car in the world” may have been great for garnering media eyeballs but did little to satisfy real consumer needs. Successful products normally follow one of three approaches to pricing. A simple “cost- plus” strategy or one derived after researching how much a consumer is willing to pay. Finally, of course, there is competitive pricing, whereby a company figures out what its competitors are charging, then pegs its own prices accordingly. Rs.1 lakh was an arbitrary figure fixed somewhere between the cost of a two-wheeler and the then lowest priced car in the Indian market. Following none of the existing canons of pricing, it needed something special in the product or its positioning if it had to succeed. The
  13. 13. Market Structure of Passenger Cars Industry failure of the Nano proves it had neither of those virtues MAHINDRA & MAHINDRA
  14. 14. Market Structure of Passenger Cars Industry Introduction: The Company was Incorporated and converted into Public Limited in 1955 at Mumbai.. Mahindra & Mahindra, branded on its products usually as 'Mahindra', it produces SUVs, saloon cars, pickups, commercial vehicles, and two wheeled motorcycles and tractors. Mahindra started making passenger vehicles firstly with the Logan in April 2007 under the MUVs, LCVs and three wheelers. It manufactures over 20 models of cars including larger, multi-utility vehicles like the Scorpio and the latest XUV 500.
  15. 15. Market Structure of Passenger Cars Industry Cars under Mahindra and Mahindra: Pricing Strategy: -Provides the customer with SUVs in a price much lesser than imported cars -cuts cost by incurring greater profits by using best material Non- Pricing Strategy: -Concept of “Reverse Engineering” is implemented. -Partnering with local university for new technology developing. -more focus on global market in spite of only 2.5% domestic market share. HYUNDAI Mahindra Axe Mahindra Bolero Mahindra Legend Mahindra Maxx Mahindra Armada Mahindra Verito Mahindra Thar Mahindra Scorpio Mahindra Quanto Mahindra Xylo Mahindra XUV 500
  16. 16. Market Structure of Passenger Cars Industry Introduction: Hyundai Motor India Limited is a wholly owned subsidiary of the Hyundai Motor Company in India. It is the 2nd largest automobile manufacturer in India. When Hyundai Motor Company entered the Indian Automobile Market in 1996 the Hyundai brand was almost unknown throughout India. For more than a decade till Hyundai arrived, Maruti Suzuki had a
  17. 17. Market Structure of Passenger Cars Industry complete dominance and monopoly over the Passenger Cars segment becauseTELCO and M&M were solely Utility and Commercial Vehicle Manufacturers. HMIL's first car, the Hyundai Santro was launched in 23 September 1998 and was a runaway success. Within a few months of its inception HMIL became the second largest automobile manufacturer and the largest automobile exporter in India. To cater to rising demand, HMIL commissioned its second plant in February 2008, which produces an additional 300,000 units per annum, raising HMIL’s total production capacity to 600,000 units per annum. Cars under Mahindra and Mahindra: Pricing Strategy: -Price of regular has been standardized across all the models, and is the first step towards standardized service cost. -Final aspect of the strategy is to increase the average selling price of Hyundai cars all over India by introducing more premium and higher end products. Non- Pricing Strategy: -Educate the customer about Hyundai building a corporate image -Create hype and expectation about the cars -Explain the virtues of its products -To ensure that Indian customers develop a positive association with Korean car makers. HONDA Hyundai Eon Hyundai i10 Hyundai Santro Xing Hyundai i20 Hyundai Grand i10 Hyundai Accent Hyundai Verna Hyundai Elantra Hyundai Sonata Hyundai Santa Fe
  18. 18. Market Structure of Passenger Cars Industry Introduction: Honda Cars India Ltd. (HCIL) is a subsidiary of the Honda of Japan for the production, marketing and export of passenger cars in India. Formerly known as Honda Siel Cars India Ltd, it began operations in December 1995 as a joint venture between Honda Motor Company and Usha International of Siddharth Shriram Group. In August, 2012, Honda
  19. 19. Market Structure of Passenger Cars Industry bought out Usha International's entire 3.16 percent stake for 1.8 billion in the joint venture. The company officially changed its name to Honda Cars India Ltd. (HCIL) and became a 100% subsidiary of Honda Cars under Honda: Pricing Strategy: :Honda, over the past month, has made some surprising moves. The brand, which otherwise commands a premium, sharply re----duced the prices of its bestselling City and the premium hatchback Jazz. 2.Honda Spiel Cars India (HSCI) has introduced a new and cheaper variant of its flagship City sedan to boost demand for the model, persisting with its strategy of offering its cars at lower prices in India. 3.HSCI had recently lowered prices of its models at a time when rivals are planning to do the opposite. Non- Pricing Strategy: 1.Superior quality 2.World wide expansion 3. Optimum safety 4. Driving pleasure 5, three joy- joy of buying joy of selling and joy of producing TATA Brio Amaze City Accord CR-V
  20. 20. Market Structure of Passenger Cars Industry Introduction: The company’s manufacturing base in India is spread across Jamshedpur (Jharkhand),
  21. 21. Market Structure of Passenger Cars Industry Pune (Maharashtra), Lucknow (Uttar Pradesh), Pantnagar (Uttarakhand), Dharwad (Karnataka) and Sanand (Gujarat). Tata's dealership, sales, service and spare parts network comprises over 3,500 touch points. Tata Motors is the country's market leader in commercial vehicles and among the top three in passenger vehicles. Passenger cars: The company launched the compact Tata Indica in 1998, the sedan Indigo in 2002 and the station wagon Indigo Marina in 2004. Utility vehicles: The Tata Sumo was launched in 1994 and the Tata Safari in 1998. Cars under Tata: Pricing Strategy: 1. They aim at keeping their prices low to compete with firms like Maruti. Non- Pricing Strategy: 1. The four pillars would be enhanced product focus, world class manufacturing, enhanced sales experience and enhanced service experience 2. Sustainable competition Tata Nano Indica eV2 Indigo eCS Manza Club Class Aria Indica Vista Safari Safari Storme Sumo Gold Sumo Grande
  22. 22. Market Structure of Passenger Cars Industry Some Important Comparisons:
  23. 23. Market Structure of Passenger Cars Industry Conclusion: This project has given an insight on how the duopoly market converted into an oligopoly after the liberalization reforms of 1991. It shows us how Maruti has always been a dominant player in the market and how it continues to keep it’s position safe. Although there are a number of firms in the market but major market is taken up by 5-6 firms only. Marruti’s variants have been in competition with all sorts of cars be it TATA NANO or be it HONDA ACCORD, it has been fighting every genre of car manufacturing. It tells us when some company launches it’s product the competitive firm is already on the path of making a product to fight it in the market. This project gives us proper information of how economics work under Passenger Car industry. It depicts all the information like Concentration Ratio , Herfindahl Index, Evolution in the market, Pricing strategy etc. It has been one great Project report to gain knowledge along with hard work.