A Microeconomics focused presentation of Tata Motors - 2 Wheeler Era. Discussed in detail on how TATA can introduce a new 2 wheeler in an already existing competitive market and try to gain a market share. All strategies including Finance, Marketing and Sales have been briefly discussed with a 5-year growth plan.

1. Presented by:
Mayank Agrawal

2. • Tata Motors Limited (formerly TELCO, short for Tata Engineering and Locomotive Company) headquartered
in Mumbai, is an Indian multinational automotivemanufacturing company and a member of the Tata Group.
• Its products include passenger cars, trucks, vans, coaches, buses, sports cars, construction equipment and military
vehicles.
• Founded in 1945 as a manufacturer of locomotives, the company manufactured its first commercial vehicle in 1954
in a collaboration with Daimler-Benz AG, which ended in 1969.
• Tata Motors entered the passenger vehicle market in 1988 with the launch of the TataMobile followed by the Tata
Sierra in 1991, becoming the first Indian manufacturer to achieve the capability of developing a competitive
indigenous automobile.
• In 1998, Tata launched the first fully indigenous Indian passenger car, the Indica, and in 2008 launched the Tata
Nano, the world's cheapest car.
• Tata Motors acquired the South Korean truck manufacturer Daewoo Commercial Vehicles Company in 2004 and
purchased Jaguar Land Rover from Ford in 2008.
Introduction

3. The Journey

4. The Journey

5. Overview of Indian Automobile Industry
Two Wheeler Segment
• In FY 2018, India reported sales of more than 20 M+ two-wheelers in a year.
• Sales grew 14.8 percent over FY 2017 - a seven-year high.
• Two wheeler industry saw a total sale of over 2.01 Crore units in the Indian domestic market.
• Motorcycles and scooters contributed 62.4 % and 33.27 % to the total sales respectively.
• Within the Two Wheelers segment, Scooters and Motorcycles grew by 19.9 percent(67.19 lakh units) and
13.69 percent (1.26 Crore units) respectively, while the sales of mopeds declined by 3.48 percent in
recently concluded FY 2017-18, when compared to sales in April-March 2017.
• The Two Wheelers segment dominates the market in terms of volume owing to a growing middle class,
young population and the growing interest of the companies in exploring the rural.

6. • Strong growth in demand due to rising middle class and young’s populations purchasing power.
• Greater availability of credit and financing options.
• Indian automotive industry targeting to increase exports of vehicles five times in 2016-26.
Growing Demand
Growth Opportunities
• Shift in focus to cleaner green energy sources, such as Electric Bikes.
• Innovation is likely to intensify among engine technology & alternative fuels.
• Government aims to build India into an R&D hub.
• At the present, Chinese companies do not seem to pose any sizeable threat to Indian two-wheeler makers.
According to analysts, Indian customers’ demanding attitude and an overall competitive environment has put up
virtual barriers for Chinese two-wheeler makers to make their India foray successful.

7. Rising Investment
• India has significant cost advantages; auto firms save 10-25 % on operations vis-à-vis Europe & Latin America.
• Cumulative FDI inflow of around US$ 19.29 billion in automobiles sector between April 2000 – June 2018.
Policy Support
• Automotive Mission Plan: 2016-26 shows clear vision of government.
• NATRip the government aims to develop India as a global manufacturing center and R&D Hub at a total Cost of
US$ 388.5 million to enable the industry to be on par with global standards.
• Reforms like GST to help boost the sector’s growth.
• Under - FAME (Faster Adoption & Manufacturing Of (Hybrid) and Electric Vehicles in India -Incubation center
to be set up for startups working in electric vehicles space.
• 100 % FDI Under Automatic Route.

8. Recent Trends in Competitors
• Premium motorbike sales in India crossed one million units in FY18.
• India's electric vehicle (EV) sales increased to 25,000 units during FY 2016-17 and are poised to rise further on
the back of cheaper energy storage costs and the Government of India’s vision to see 6 million electric and
hybrid vehicles in India by 2020 .
• Sales of electric two-wheelers are estimated to have crossed 55,000 vehicles in 2017-18.
• As of September 2018, China’s leading Electric Vehicle (EV) company, Sunra, is planning to enter into Indian
markets and set up a factory in Bangalore, Karnataka.
Luxury Vehicles
Electric Vehicles

9. • Hero MotoCorp will invest Rs 2,500 crores (US$ 387.9 million) by FY21 to increase its production capacity in
India.
• With the total investment of around US$ 163.7 million, Honda Motorcycle & Scooter India expanded its
production of Activa in three variants at Ahmedabad plant.
• As of October 2018, Honda Motors Company is planning to set up its third factory in India for launching hybrid
and electric vehicles with the cost of Rs 9,200 crore (US$ 1.31 billion), its largest investment in India so far.
• Most of the firms have adapted themselves to cater to the large Indian middle class by dropping their
traditional structure and designs.
Capacity Addition
Catering Indian Needs

10. • Carmakers such as BMW, Audi, Toyota, Skoda, Volkswagen & Mercedes-Benz have started providing customized
finance to customers through NBFCs. Auto finance business of NBFCs in India is expected to grow at a CAGR of
15 per cent by FY20 on the back of better macroeconomic environment and government’s focus on
infrastructure and rural areas.
• Hero MotoCorp will launch five new two-wheelers in FY19.
• Superbike seller Motorcycle Kinetic Pvt Ltd is planning to develop 300cc-500cc bikes in India by 2021. The
company is also planning to set up a plant in Supa, Maharashtra with a capacity of 60,000 units.
New Financing Option:
Launch Of New Models

11. TWOWHEELER SALES IN INDIA
FiscalYear Units Sold
Unit
Charge
YOY
Growth
2006-2007 7842572 -610363 -8.44%
2007-2008 7232209 179948 2.43%
2008-2009 7412157 1956083 20.88%
2009-2010 9368240 2422065 20.54%
2010-2011 11790305 1645464 12.25%
2011-2012 13435769 361979 2.62%
2013-2014 14805481 1007733 6.81%
2014-2015 16004581 1199100 7.49%
2015-2016 16455911 451330 2.74%
2016-2017 17589511 1133600 6.44%
2017-2018 20006406 1250825 7.99%
Two Wheeler Sales in India (Historic Data)

12. TOP 10 Scooters Sales
Models Sept '17 Sep '16 Market Share
Honda Activa 322922 301529 46.80%
TVS Jupiter 93573 60943 16.36%
Hero Maestro 55508 41550 5%
Suzuki Access 41676 33248 6.27%
Honda Dio 39397 26417 10.07%
Yamaha
Fascino
21274 25168 4.10%
Hero Duet 17830 23158 3%
Yahama Ray 15405 22186 2.08%
Hero Pleasure 15186 17272 5.15%
TVS Prep 13406 11683 16.36%
Two Wheeler Scooter Market Share (2016-17)

13. Competitors Market Share
One of the methods to examine the presence of non-competitive forces within the industry is through the
construction of the Herfindahl Index and concentration ratios. These have historically been used in the U.S. to
formulate antitrust laws aimed at regulating competition. The Herfindahl Index is calculated as follows.
Where, N is the number of brands, Si is the volume of brand i.
The report also shows the oligopolistic nature of the Indian two-wheeler industry and the propensity of the major
players to increase their share. In this paper we assess the degree of imperfection in the two-wheeler industry by
using Hirschman Herfindahl Index (HHI).
HHI Index = 36.222++29.112 +14.112+11.372
Thus, HHI Index = 2487.65

14. The overall two-wheeler market is Oligopoly. However, when we look in the particular scooter segment Honda leads
the market.

15. Two Wheeler Scooter Market Share (2017-18)

16. HHI Measurement of Indian Scooter Market
▪ The Herfindahl-Hirschman index (HHI) is commonly accepted measure of market concentration.
Manufacturer
Market Share in
Percentage
(2017-18)
SquaredValue
of Market
Share
Hero Motocorp 13.15 172.9225
Honda Scooters 56.87 3234.1969
IndiaYamaha Motor 6.18 38.1924
Mahindra Two Wheeler 0.16 0.0256
PiaggioVehicles 1.01 1.0201
Suzuki MotorCycles India 6.27 39.3129
TVS Motor Co 16.36 267.6496
HHI=3753
▪ Since the Herfindahl-Hirschman index is greater than 2500, it is a Monoploy market with Honda as a
leader.

17. • The scooter segment saw a growth of almost 20 % in volumes during FY2018.
• A major factor was the increased demand for scooters from rural and semi-urban areas. People have started to look at
scooters as a preferred mode of transport thanks to improved road quality, a scooter's unisex appeal and the healthy
growth in the number of working women in these areas as well.
• Launch of new 125 cc scooters in the segment,namely Honda Grazia, TVS Ntorq and Aprilia SR 125, tries to capture the
interest in scooters from the urban market, where people are looking to buy stylish, powerful and feature rich scooters.
• ICRA expects domestic two-wheeler volumes to grow at 8-10% during FY2019, on an expanded base of FY2018.
• In terms of segment wise growth trend, we expect scooters to continue to outpace the overall two-wheeler volume
growth in domestic market in FY2019.
Scooter Market- Segment Analysis and Prediction

18. Scooter Vs MotorCycle Market Share

19. CHARACTERISTICS OF MONOPOLY MARKET
▪ PRODUCE WHEN MC=MR(PROFIT MAXIMIZATION)
▪ PRICE MAKER RATHER THAN PRICE TAKER
▪ HIGH ENTRY & EXIT BARRIER
▪ ONE SELLER WITH HIGH MARKET SHARE AS COMPARED TO OTHERS
▪ PRODUCTS: UNIQUE PRODUCTS
▪ CAN RETAIN LONG RUN PROFIT DUE TO ENTRY BARRIER
▪ PERFECT KNOWLEDGE MARKET CONDITION

20. In the case of monopoly one firm constitutes the
whole industry.Therefore, the entire demand of the
consumers for a product faces the monopolist. Since
the demand curve of the consumers for a product
slopes downward, the monopolist faces a downward
sloping demand curve.
Demand Curve of the Monopolist

21. Demand curve facing the monopolist will be his average
revenue curve. Thus, the average revenue curve of the
monopolist slopes downward throughout its length.
Since average revenue curve slopes downward, marginal
revenue curve will lie below it. This follows from usual
average- marginal relationship. The implication of
marginal revenue curve lying below average revenue
curve is that the marginal revenue will be less than the
price or average revenue
Average & Marginal Revenue Curves

22. Shifts of the Demand Curve of Monopolist
Factors affecting demand in the two wheeler scooter market
• The price of substitutes
• Increasing fuel Price.
• Purchasing Power of the consumers.
• Rising income level of the consumer
• Inflation of the country
• After sales service cost
• Tastes and preferences
• Population in market or market size
• Price of Spare Parts
• Availability of nearby service station
• Financing options available in the market

23. Market Share Forecast
ICRA expects the domestic two-wheeler volumes to grow at 8-10 per cent during FY 2019, on an expanded base
of FY 2018. But the real story is how the humble scooter has made a resounding comeback nearly two decades
after the fast and fancy motorcycles spelt its doom.

24. FiveYear Plan for TATA -YUVA
Initial Threat to Business
• Technological Monopoly
Honda, being a segment leader, has technological advancements catering to the public current needs.
• Predatory pricing
This involves dropping price very low in a ‘demonstration’ of power and to put pressure on existing or potential rivals.
Multiple small players exist in the market that put pressure in terms of comparatively lesser price.
• Limit pricing
Limit pricing is a specific type of predatory pricing which involves a firm setting a price just below the average cost of
new entrants – if new entrants match this price they will make a loss!
• High set-up costs
If the set-up costs are very high then it is harder for new entrants.
FiveYear Plan for TATA -YUVA

25. • High ‘sunk’ costs
Sunk costs are those which cannot be recovered if the firm goes out of business, such as advertising costs – the greater
the sunk costs the greater the barrier. High initial investments made in set up of factory and other related entities can
not be recovered if the product fails, since this is a new segment for the company.
• Advertising
Heavy expenditure on advertising by existing firms can deter entry as in order to compete effectively firms will have to
try to match the spending of the incumbent firm.
• Brand loyalty
Activa enjoys huge brand loyalty followed by TVS and Hero.

26. Key to Success in the market
• Accelerated Manufacturing Capacity
Tata, being a huge colongmorate has the capacity and financial capability to invest in this project at an accelerated
rate, provided the product hits off well with the market.
• Electric vehicles will take off
This may offer an opportunity for automakers to meet increasingly strict CO2 emissions requirements and to provide
an array of new consumer and fleet products.
• Connectivity will expand
Connectivity, which is already having an impact, will expand to include a much wider range of features, such as
automobile -to- X appliance communications. For instance, your home air conditioning system will automatically
activate when you (and, more precisely, your YUVA) are 20 minutes away.

27. • Profit pools will shift through new services
New rental two wheelers markets are emerging, where in many startups and established rental services have started
adding more scooters in their offerings due to their low rental cost offered and easy drivability. The shift of culture in
exploring new places among the youth has thus forced the market to offer more convenient drivability options. This
could serve as a new opportunity(market segment) to capture, as they did with Tat Indica.
• Business models will become more local
Operating globally has become significantly more challenging and complex. Automakers must find ways to
understand and navigate the regulatory policies wherever they sell their products and wherever they have
manufacturing facilities and suppliers. The market has become Glocal and the opportunity window to export to other
international markets has also significantly increased.

28. FiveYear Plan for TATA -YUVA
To establish the position in two-wheeler market we have a 5-year strategy ready for Tata yuva. The year by
year horizontal growth strategy for implementing is shown in brief below:
Phase 1
Year 1: Launching Tata Yuva – a new brand of automatic two wheelers exclusively on the Indian non- premium
commuter segment market. Supported by proper technological partnership addressing the growth drivers in the
relevant segment.
Phase 2
Years 2&3 : Developing into premium/electric scooter segment using the above established brand name.
Phase 3
Year 4&5: Use the untapped potential in used two wheelers resale market.

29. Action Plan
We recommend the following stepwise detailed action plan to achieve the growth plan established five-year growth plan.
Business Objectives
Phase 1:
• Acquiring manufacturing capabilities for scooter segment.
• Invest hugely in R&D for development of differentiated products offering superior consumer values.
• First place to get this is to target mid income group rural and urban commuters.
• Invest in target marketing and promotion.
• Main motive will be to provide good quality product at affordable price.
• In first year we will look for the responses of the customers & local people, there will be an effort to increase sales and
customer satisfaction so that this idea becomes successful.
• Establishing low cost Consumer friendly after sales service.
• Establish distribution channel for product and spares.

30. Phase 2:
• Acquiring additional manufacturing capabilities for Electric Vehicles .
• Invest in R&D for latest & differentiated products offering superior consumer values .
• Establishing as a brand that offers value at reasonable price .
• Diversify to premium segment cautiously.
• Optimizing existing production capacity reducing cost of production on incremental basis.
• Developing dedicated supply chain.
Phase 3:
• In the 3rd year company would be focusing on vertical integration of its existing offering, by entering into resale retail
market.
• Showrooms which have been places of selling only new product items will be now selling second hand vehicles of
different brands utilizing the mother yuva brand withsub brand name ‘Tata true value’.

31. Target Market
Market Segmentation/Demographics: We define the main market competition and market segmentation along with
positioning.
Phase 1
Target Location - Rural and semi Urban area
Why
Price sensitive market?
What we will offer
We will Offer more values at lower price .
Target group – “Middle income group who are very particular about value for money“.

32. Phase 2:
Target group: Rural, semi Urban and Urban Area
What we will offer
• eco-friendly vehicle for all the demographic locations.
• We are offering more premium segment for Urban class
• We are offering more valued product for existing market.
Target People: Tech Savy class, Youth lookig for premium Style, Working Ladies
Phase 3:
Rural, semi Urban and Urban Area “ Untapped resale market “
What we will offer :
• Low cost Product upgradation in Resale market
• Low cost Premium Product in resale value with brand assurance.
Target People : People looking to upgrade with changing technology.

33. Competitive Strength
Technology
Engine: Features Like Eco Performance – giving more mileage and better engine performance
The new scooter uses a 125 cc 3-valve, single-cylinder engine tuned for 9.3 bhp and 10.5 Nm of peak torque
Add on: Mobile charger, Adjustable seat height , boot light, anti theft system , Telescopic Front Suspension, Easy Accessible
Kick Start,Bigger Wheels with Tubeless Tyres , External Fuel Filling, Combined or Integrated Braking System,
Design: Sporty design, daytime running lamp, 12-inch alloy wheels with a front disc brake and an LED tail light
Price: Sub 45K . to compete with honda activa the most favourate brand in the segment
After Sales service: Greater efficiency through the life. End-to-end maintenance- digitizing their maintenance and
servicing processes , Seamless integration of new technologies- new CRM system, web portal, analytics or
maintenance system, there can be no doubt that professional integration into the system landscape is essential for
optimizing the service process in favor of the customer.

34. Marketing and Branding
Phase 1
Product Communication through proper channel in the markets. Customer Awareness through TV, newspaper, social media
using text, images, videos, Ads etc. for enhancement of the new vehicle. Using proper promotional channel, it will target to
emerge as the market leader for the product.
Phase 2
EVs are an excellent option for frequent urban journeys about 100 kilometers with one EV charging. As a marketer, it should
explain the real benefits of using an EV effectively and should be able to differentiate with petrol or diesel vehicles rather
than giving general information about the EVs, offer specific details about these products. The main reason for
choosing a EV over the fuel based vehicles has to be properly communicated to the consumers.
Phase 3
In the consequent phase, it has the plan to penetrate into the resale market of two wheelers. In order to excel in the resale
market, it should provide quality products after testing and re-modelling as well as should provide periodic service as others
provide for new products. Additionally it can provide guarantee and warranty for certain period for the products and all
these value added services should be effectively advertised before the transactions.

35. Pricing Strategy
Phase 1
Penetration Pricing Strategy
Will launch at sub 45k segment to target both the scooter like activa and economic commuter bike segment( splendor) .
Honda Activa is currently priced at 60-65k. With same features and lower price, the product will capture the market.
Phase 2
Cost-plus pricing strategy for existing Product line
With established market the company can move to cost per pricing strategy. The cost can beincreased owing to increase in
expenses and additional value addition.
Penetration Pricing Strategy for new product line
The premium bike will be launched in sub 75k market. At this price range the competition will be with Vespa operating in
premium segment at 80-85k range and also with activa offering higher value.

36. Phase 3
Cost-plus pricing strategy for existing Product line
• Established in the market we can follow cost plus pricing strategy for all the product line.
• Also, the premium brand once established can be priced at premium pricing offering more customization.
Price bundling
• Combining products and/or services to increase value, and therefore price
Resale Market:
• In the resale market owing to the established brand value we can have price bundling strategy. Being a practically
unorganized market, we can offer better value addedservices in bundled price.

37. Financial Analysis
Particulars Phase 1 Phase 2 Phase 3
Y. 1-2 Y.3-4 Y. 5
Sales 45390 59007 68085
Less : Excise duty 2642 2642 2642
Net Sales 42748 56365 65443
Total operating income 42748 56365 65443
Cost of materials consumed, net of
expenditures capitalised 30804 36964.8 40045.2
Stores and tools 230 230 230
Employee cost 1990 4577 5970
Factory, administrative and other expenses 1338 1338 1338
Sales and after sales expenses 2000 2000 2000
Total expenditure(Operating costs and
expenses)-COGS 36362 45109.8 49583.2
Earnings before interest, tax, depreciation
and amortisation (EBITDA) 6386 11255.2 15859.8
Interest 2 2 2
Depreciation and amortisation 614 614 614
Operating profit 5770 10639.2 15243.8
Profit before tax 5770 10639.2 15243.8
Tax expense 3016 3166.8 3468.4
Per unit Profit after tax 2754 7472.4 11775.4
Estimated Per Unit sales Realisation

38. Particulars Total
A. Buying of Land 1500000 X 800 ₹ 1,20,00,00,000
B. Manufacturing facility ₹ 5,00,00,00,000
C. R & D Expenses ₹ 1,00,00,00,000
D. Other Expenses ₹ 80,00,00,000
F. Total (A+B+C+D+E) ₹ 8,00,00,00,000
Estimated Cost in capacity Installation

39. Year Per unit Sales
Number of
Units sold
Net Sales
(in ₹)
Net Sales
(in Cr.)
Phase -1 42748 20000 854960000 85.5
Phase -2 56365 50000 2818250000 281.8
Phase -3 65443 150000 9816450000 981.6
Year
Per unit Sales
Realisation
Number of
Units sold
NSR (in ₹)
NSR (in
Cr.)
Phase -1 2754 20000 55080000 5.5
Phase -2 7472.4 50000 373620000 37.4
Phase -3 11775.4 150000 1766310000 176.6
Estimated Revenue
Estimated Profits
Year Profit Ratio
Phase -1 6.07%
Phase -2 16.46%
Phase -3 25.94%
Profit Ratio

41. Breakeven Analysis
Contribution
Margin
Fixed cost
YEAR 1 2754 8,00,00,00,000
YEAR 2 7472.4 7944920000
YEAR 3 7472.4 7197680000
YEAR 4 11775.4 6263630000
YEAR 5 11775.4 4497320000
YEAR 6 15000 1553470000
YEAR 7 15000 -2196530000
Payback period

42. Funding
• The reserve and surplus of Tata motors will be the major source of fund of 40,00,000,000.
• Tata can get additional funding from Tata finance limited of Rs 40,00,000,000.

43. Rising raw material costs remains the biggest challenge for sustaining profit margins Raw materials remain the
biggest component in the cost structure of OEMs accounting for around 85% of total costs. Thus, the Operating Profit
Margins (OPM) of OEMs is quite sensitive to movement in prices of major raw materials like steel, aluminum and
rubber. After a period of benign raw material prices in 2016-17, prices of most commodities showed an upward trend
in 2017-18. Despite the strong demand, OEMs were able to pass on the increase in input costs to customers only
partially; but could mitigate the adverse impact to some extent through internal cost reduction and focus on
changing product mix towards superior margin products in future.
Future Outlook and Challenge