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Indian Cv Market


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Overview of Indian Commercial Vehicle with Eicher Motors as reference. - part of Strategic Management Project

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Indian Cv Market

  1. 1. INTRODUCTION Commercial Vehicle Market in India The Indian commercial vehicles (CV) industry has a long history, possibly dating back to the passenger vehicles industry. Telco, the first entrant in the segment, continues to be the largest till date, with a market reach unrivalled by its competitors. Telco pioneered production of commercial vehicles in the country with technical collaboration with Daimler-Benz of Germany in 1954. The industry has made a significant contribution to the country’s industrialization and progress. In fact, India achieved self-sufficiency in commercial vehicles, except in the high-tonnage classes, where the demand has nonetheless been limited. The entry of Ashok Leyland, with technology from British Leyland, marked the beginning of competition in the truck and bus segment. The substantial rise in petrol prices in 1976 lead to conversion of almost all CV to diesel engines. The continuous increase in petrol prices since then and the subsidy provided to diesel increased flavor for diesel commercial vehicles continued till date. The next major change in the industry came about in late eighties, when the superior Japanese Light Commercial Vehicles (LCV) made their debut in India. The Japanese invasion, however, fizzled out very soon as the new entrants ran into losses as a result of the rising yen. This brought to the fore the critical role of indigenization as a means of ensuring steady growth and survival during difficult times. However, Telco was the biggest beneficiary of the fiasco. Telco soon upgraded its products to match the Japanese in style and finish, nonetheless with much the same aggregates, with the result that it emerged as the main contender by cornering more than 50% of the LCV market. The marginal players in the commercial vehicle industry like Hindustan Motors, Premier Automobiles Ltd and Standard Motors Pvt Ltd withdrew from LCV market in late eighties due to stiff competition in passenger car market and their inability to compete in the CV market. Prior to 1985, CVs were available only in two categories i.e. 2 ton and 8 ton and above. The second-hand down rated vehicles were used to transport low weight for short distance. But with the entry of Japanese players fuel efficient vehicles filled the gap between 2 and 8 ton. The commercial vehicle (HCV and LCV combined) sales have increased from 68,392 in 1980 to 141,098 in 1990 at a CAGR of 7.5%. The industry witnessed a drop in sales in 1986 because of economy slowdown. The commercial vehicle sales witnessed a drop in 1991 and 1992 as a result of severe credit crunch and recession in the economy. But with 1 MBA MARKETING MANAGEMENT, IMS DAVV
  2. 2. the revival in economy it zoomed back in 1993 and witnessed an above average growth till 1997. The slow down in demand was again seen, in FY98 and FY99, later followed by a robust growth in FY2000. The earthquake in Gujarat, followed by drought like conditions persistent in Rajasthan and Madhya Pradesh etc. and the mounting fiscal deficit lead to decline in the overall demand in FY2001. Industry structure The commercial vehicle sector can be broadly classified as Light Commercial Vehicles (LCV) and Medium & Heavy Commercial vehicles (M&HCV) based on the Gross Vehicle Weight (GVW) of the vehicle. The HCV segment can be further classified into three segments based on gross vehicle weight as follows - ICV: Intermediate commercial vehicle with GVW of 8 to 10 ton. MCV: Medium commercial vehicles with GVW of 10 to 15 ton. HCV: GVW of 16 ton and above. M & HCV can also be classified into two categories depending on their usage as trucks and buses. Buses are passenger carriers. Trucks include goods carriers along with specialized vehicles like dumpers, tractor-trailers etc. The ICVs fall in the load category of 8 to 10 ton GVW and are often substituted for medium or heavy commercial vehicles in trunk routes and cities. Eicher Motors and Swaraj Mazda are two manufacturers operating in this segment. The composition of truck sales as a total of HCV sales fluctuated between 67% and 80% in the nineties. This wide variation in composition of HCV sales is due to the cyclical nature of truck sales compared to steady sales witnessed by buses. Therefore, during a downturn 2 MBA MARKETING MANAGEMENT, IMS DAVV
  3. 3. in truck demand, the contribution from buses, though steady in volumes, increases in terms of percentage of total HCV sales. The contribution by bus sales to total M&HCV sales has increased from 18.5% in FY97 to 33.16% in FY2001. In terms of truck sales, Telco commands a leadership by cornering 77.1% of the total truck sales with the rest taken up by Ashok Leyland. Hindustan Motors also account for about 0.7% of total sales but it exports all its products. In the bus segment, Ashok Leyland had a market share of 48.3% in FY2000 with the rest being taken by Telco. As indicated in the table below, sales of LCVs kept pace with HCVs from FY94 to FY96.The volume differential between M&HCVs and LCVs has been widening since FY97. In FY2001 this gap has been on a decline as the LCV sales increased by 4.4% but the HCV sales dropped by 21.3%. 3 MBA MARKETING MANAGEMENT, IMS DAVV
  4. 4. In the last twenty years or so, the sales of the LCVs in relation to M&HCVs has increased its share from 27.4% in FY81 to 71.7% in FY2001 which was up from 54.1% FY2000. However during the current fiscal 2001-02 the total commercial vehicle sales declined by 6% y-o-y in April- August especially in the LCV segment indicating mixed fortunes for different players in the industry. Region Wise Sales Breakup (till FY99) If we compare region wise sales data for two years (CY99 and CY98), we find some interesting changes. In 1998, sales were maximum in the western region with Maharashtra leading the pack. However, in 1999, the northern region just managed to inch ahead of the western region with Uttar Pradesh beating others to the post. The southern region came in third in both the years. The industrialized states in the west have traditionally seen higher truck sales. Truck Sales Break-up By Region Sales %age of Sales %age of Region (1999) total sales (1998) total sales North 24,839 29.3 14,168 27.7 East 14,686 17.4 9,041 17.6 West 24,160 28.5 16,453 32.1 South 16,701 19.7 8,049 15.7 Exports 4,296 5.1 3,516 6.9 Total 84,682 100 51,227 100 Source : SIAM Interestingly, southern India leads in sales of buses. This is because of a) the presence of Ashok Leyland and other private sector players in the region and b) the region as a whole is not well developed in terms of being connected by rail. In 1999, sales in all the regions fell except that in the west. Bus Sales Break-up By Region Sales %age of Sales %age of Region (1999) total sales (1998) total sales North 4,962 20.3 5,515 21.4 East 2,579 10.5 3,066 11.9 West 6,971 28.5 5,408 21.0 South 7,057 28.9 9,219 35.8 4 MBA MARKETING MANAGEMENT, IMS DAVV
  5. 5. Exports 2,889 11.8 2,561 9.9 Total 24,458 100.0 25,769 100.0 LCV Sales Break-up By Region Sales %age of Sales %age of Region (1999) total sales (1998) total sales North 15,746 19.5 13,668 18.2 East 7,118 8.8 7,588 10.1 West 27,207 33.8 27,622 36.9 South 24,606 30.5 18,240 24.3 Government & Exports 5,876 7.3 7,816 10.4 Total 80,553 100.0 74,914 100.0 Source : SIAM Note: For sales of LCV and HCV, refer Appendix A2 Government Policies The liberalization of government policy with respect to foreign, technical and financial collaboration lead to a sudden spurt in technical collaboration in LCV segment. For example: Toyota Motor, Mitsubishi and Mazda entered the commercial vehicle segment in collaboration with DCM, Eicher and Swaraj Motors respectively. The liberal foreign technology policy, lead to substantial improvement in technology of commercial vehicles. But at the same time the import bill jumped at a rapid pace as these vehicles were having high import content. The broad banding introduced in 1984, has helped producers to optimize installed capacity and adjust the product mix to market demand. This in turn helped in obtaining economies of scale for larger players like Telco and M&M. The automobile industry is a major contributor to the GOI exchequer in the form of excise duty, customs and other levies. But the government expenditure for development of roads is just 25% of the total contribution to the GOI exchequer. For example in FY95, the GOI spent just Rs3.5bn on roads compared to automobile industry’s contribution to GOI exchequer of Rs16.62bn. The Commercial Vehicle sector is controlled by GOI policies on depreciation norms, diesel pricing and Motor Vehicles Act. The change in depreciation norms for CV in the finance bill affects the demand for vehicles, as they are purchased by companies to obtain tax shelter along with utility. 5 MBA MARKETING MANAGEMENT, IMS DAVV
  6. 6. In the past, the GOI changed the depreciation norms to control the tax collection from corporations. For example: The decrease in depreciation rates from 33% in 1989-90 to 20% in 1990-91 lead to drop in MUVs and CVs. During fiscal 2001-02 the depreciation rates hiked from 40% to 50% in a move to reduce the taxable profit in transport business. The Motor Vehicle Act came into effect from July 1989. It was intended to streamline laws related to emission norms, maximum age of vehicles, restriction on payloads and other safety measures. But the law was never implemented with full heart, leading to laxity of norms in all aspects of automobile industry. For example: over loading of vehicle by three times, usage of very old vehicles to carry lower loads for shorter hauls etc.The cut-off life of vehicles and overloading are governed by Motor Vehicles Act. Therefore any change in cut-off age fixed for scrapping of old vehicles affects the number of vehicles available to carry the load in the country. For example: The Supreme Court order to scrap more than 15 year old commercial vehicles in the capital, will lead to reduction of 15,000 vehicles. This will lead to increased demand for new commercial vehicles as the transport tonnage drops substantially. Until 1986, trucking was a regulated activity with truck operations restricted to short-haul intra-state transport. Multi-state trucking permits were issued by states, subject to certain ceilings. The ceiling on national permits was removed in 1986, resulting in adequate availability of trucking capacity in the economy. The availability and prices of diesel is controlled by the GOI through restriction on distribution and imports. The road transport was paralyzed during Gulf war due to shortage of diesel in the country, since it heavily depends on oil imports. The total dismantling of Administered Price Mechanism (APM) latest by March2002 and subsequent reforms has resulted in the diesel prices in the country being linked to international crude prices. In 1999-2000 budget, one rupee cess was imposed on per liter diesel and has been in place for last two years for funding the rural road sector and the National Highway Projects. The corpus of Rs9620 mn from the cess fund has been made available to States during FY2000-01. The total plan outlay for roads in the budget 2001-02 is Rs87270 mn.The pricing of the vehicle to a large extent depends on the excise duty charged by the GOI on ex-factory price. After the rationalization of excise duty in the budget 2001-02 ; the special excise duty for CVs is levied at 16% and total duty is pegged at 32%.The differential in duty structure also affects the demand for respective segments e.g. differential duty provisions between 8-seater and 10-seater changed the demand for each of the segments. Over and above state governments charge sales tax and octroi to effect the final price to customer. In the current year, uniform sales tax to the tune of 12% has been levied in all the states across India. This has in turn affected significant increase in the final prices of commercial vehicles specifically in the northern India. 6 MBA MARKETING MANAGEMENT, IMS DAVV
  7. 7. Technology and usage of commercial vehicles Transport sector consists mainly of rail and road segments. Railways carry long distance heavy cargo such as fertilizer, steel, grain, salt etc. HCVs complement and compete with railways for such cargo. M&HCVs are used for transport of heavy commodities such as steel cement, fertilizers etc. LCVs are preferred for high volume low bulk cargo such as consumer goods, textiles, for short distance haulage. A LCV is defined in the Motor Vehicles Act as a vehicle with GVW of not more than 6 ton. A HCV is defined as vehicle with GVW of more than 6 ton. Gross vehicle weight is defined as vehicle weight plus rated payload. Rated payload is the maximum weight permitted to be loaded on the vehicle under Motor Vehicle Act. The payload determines the earning capacity of the vehicle, since freight rates are charged on the basis of ton/ km transported. The payloads in the Indian market range from 0.675 ton to 40 ton. However in India, overloading ie loading the vehicle with weight in excess of its rated payload is the norm, although it is a punishable offence. For overloading, the size of platform and power of engine play a major role. The important factor for evaluating production or demand will be vehicle ton produced/ sold, rather than number of vehicles. For example: for a requirement of 6 ton payload the transporter can purchase either 3 vehicles with 2 ton payload or 2 vehicles with 3 ton payload. The CVs are compared, based on price per payload vice-versa operating cost of the vehicle. On the basis of fuel used, vehicles can be classified as diesel or petrol driven vehicles. Diesel vehicles are economical and more popular in India. Petrol vehicles have strong niche in hilly/ cold areas where vehicles require a cold start. In India, trucks and buses have the same chassis and other features, with only the body being different. Elsewhere in the world these two differ in terms of suspension, steering systems, number of axles etc. As India lacked expertise in vehicle manufacture, technology had to come from outside the country. Telco had a collaboration with Mercedes-Benz for some time, however it was discontinued later. 7 MBA MARKETING MANAGEMENT, IMS DAVV
  8. 8. Oligopolistic conditions in the commercial vehicles segment prevented technology advancement. The truck segment is still dominated by single or twin axle vehicles. Very low prices and low labor costs favored small fuel-inefficient units. Further, the over loading possibility with single axle trucks in comparison to multi axle vehicles (MAV) nullifies the financial advantages resulting in subdued demand for MAVs in the country. To make matters worse for MAVs, congestion at truck terminals in urban centers virtually rule out the entry for them. Commercial vehicles business is characterized by strong entry barriers of high initial cost, requirement of strong distribution/ after sales service network, vendor/ ancillary network, long gestation period and technological adaptations to peculiar Indian conditions etc. Due to these barriers, commercial vehicle sector, unlike passenger cars, does not face any significant immediate threat from new MNC ventures. Product life-cycle for CV has become shorter as players have accelerated new product launches to retain market shares. New products that cater to niche consumer segments have also increased the market segmentation. High ancillarisation is an integral feature of the industry. Typically 60-70% of the components are sourced from third party vendors. Development and upkeep of an ancillary network is one of the most crucial tasks. On the face of balance sheet, material cost accounts for about 70-75% of total cost for CVs. This however should be interpreted keeping in mind that typically, about 60-70% of components are sourced from outside. These components, treated as material cost have in- built overheads (which are fixed cost) of the vendors. Emission Norms: India is implementing emission norms in two phases. The Euro I norms were implemented in 1996 and Euro II norms have become applicable wef 1 April, 2000. As both ALL and Telco have technical collaboration with Hino engines and Cummins respectively for producing engines meeting Y2K emission norms, the CV segment will not be facing any major threat. But it is leading to increase in prices of CV in the near future. 8 MBA MARKETING MANAGEMENT, IMS DAVV
  9. 9. Demand-supply, import-export Demand Both passenger carrier (bus) and goods carrier segments have a predominant customer segment each. The passenger segment derives its major portion of sales from STUs (approximately 80%) and private bus operators. But for goods carrier major portion of sales is from fleet operators and transport companies (approximately 80%) and the rest from government institution and private bodies. The total demand for CVs comprises both private as well as the public sectors. Since 80% of CV's are purchased on credit, the availability of credit is a major factor influencing demand. The credit squeeze affects the demand negatively. For example, the demand dropped in 1983, 1991 and 1998 mainly for this reason. The cost of credit affects the operating margins of transport operators, by way of raising the break-even point of fleet operations. The other important factors influencing demand of CV are depreciation norms, diesel prices and changes in the Motor Vehicle Act. As most of the CVs are purchased by corporate entities (institutions, companies, partnerships etc) the depreciation norms provide tax shelter and affect the purchase of CVs. The availability and price of diesel plays a key role in operating profits of the vehicles about 45% of the cost goes towards buying the fuel. An increase in diesel prices causes imbalance in economics of fleet operators as they will not be able to pass on the increase in cost to end-users. Market expansion for freight availability for trucks is largely a function of economic growth and shortfall in railway's haulage capacity. The increase in economic activity helps in increased freight availability and hence has a positive impact on demand for CVs. Over and above the shortage in competent mode of transport, railways help the road traffic to increase freight movement through CVs and in turn increase demand for new trucks. Demand for buses is largely dependent on allocation of state budgets as almost 90% of the buses are purchased by the state transport undertakings. Thus, the State budget allocation for purchase of new buses by state transport plays a key role in demand for buses. The demand for CVs has exceptionally mixed trend on account fluctuating M&HCV and the LCV sales, which have not been moving in tandem with each other. As indicated in the table above, the industry has seen a wide fluctuation in sales volumes over the past decade. The sales for CVs has increased from 131,668 in FY91 to 171,319 vehicles in FY2000 at a CAGR of 3%.After posting a positive growth in FY91 and FY92, the segment witnessed a downturn in FY93 mainly due to a credit squeeze, but bounced back in late FY94 to record a y-o-y growth of 32% in FY95. After high double digit growths in 9 MBA MARKETING MANAGEMENT, IMS DAVV
  10. 10. the years FY94, FY95 and FY96, cyclicality again raised its head and from H2 FY97 onwards, the sales of CVs started dwindling, leading to a drop of 33%yoy in FY98. This downtrend continued well into FY99. However, things bounced back in FY2000 with sales recording a growth of 22.4%yoy.The demand in FY2001 fell by 12.2% due to overall economic sluggishness. During FY2001, the overall demand dropped as the M&HCV segment recorded a 21.3% decline in sales though the LCV segment grew by 4.5% y-o-y. In the half year ending 2001-02 , the M&HCV sales increased by 20.7% y-o-y and the LCV sales dropped by 10.5% y-o-y. Note: For trends in the sales of CV, LCV and HCV, refer Appendix A2 Supply Market Share For M&HCVs :- Company FY2001 FY2000 FY1999 Ashok Leyland 36.4 33.6 34.9 Telco 63.4 66.2 64.7 HM 0.1 0.2 0.4 Source : SIAM The M&HCV sector is an oligopoly with the control resting with Telco and Ashok Leyland. Hindustan Motors is a marginal third player with a market share of 0.1%. Telco commands a market share of 63.4% of the total M&HCV sales in the country. Ashok Leyland has seen a slight decline in its market share in FY2000 to 36.4% as compared to 33.6% last year. The company has attributed this to the fact that it has gone in for restructuring of its dealer network in the north and eastern regions of the country, which meant that sales were affected for around five to six months. Market Share In LCV Segment :- Company FY2001 FY2000 FY99 Ashok Leyland 0.8% 0.8% 1.0% Bajaj Tempo 5.2% 7.5% 6.5% Eicher 13.4% 11.5% 9.4% M&M 9.5% 10.8% 9.0% Swaraj 8.1% 6.6% 5.3% Telco 62.9% 62.8% 68.7% 10 MBA MARKETING MANAGEMENT, IMS DAVV
  11. 11. The LCV segment is populated with six players with Telco being the traditional market leader by a wide margin. Telco launched its fully indigenous Tata 407 (GCV-4T,70HP) in 1986 followed by Tata 608, 207, 609, 709E and 713. Telco has been continuously introducing new models in the LCV segment in the last seven years. Its LCVs have a wide range of applications as minibuses, trucks, vans and ambulances. However, since the last four years, Telco is continuously been losing its share of the market as more aggressive players like M & M, Swaraj Mazda, Eicher Motors and Bajaj Tempo have come to cater to the market with their new models. Eicher Motors, for e.g., has come to occupy the intermediate range CV segment and has succeeded to create a niche for itself by rolling out ambulances, egg/broiler carriers, school buses etc, which cater to specific customers. Swaraj Mazda, too, has improved its market share to 8.1% in FY2001, against 6.6 % in the previous year. Demand Supply In CV Segment FY99 FY2000 FY2001 FY2002 (P) Demand M&HCV 79,124 106,106 82,017 87,758 LCV 50,698 55,301 54,602 58,424 Domestic demand 129,822 161,407 136,619 146,182 Exports 10,108 9,912 13,779 13,503 Total demand 139,930 171,319 150,398 159,685 Supply Capacity 330,000 330,000 613,000 613,000 Over capacity Volume 190,070 158,681 150,452 168,506 As % of capacity 57.6 48.1 24.5 27.1 yoy Growth % M&HCV (10.8) 34.1 (22.7) 7 LCV (8.6) 9.1 (1.3) 7 Domestic demand (11.6) 24.3 (15.3) 6.2 Exports (28.2) (1.9) 39.1 (2) Source : SIAM & INDIA INFOLINE 11 MBA MARKETING MANAGEMENT, IMS DAVV
  12. 12. Key Earning Drivers Economic Activity: The availability of freight depends on the economic activity in the country. Therefore, an increase in economic activity broadly represented by growth in GDP helps in increasing the freight availability. Government policy: The GOI policy towards depreciation norms, excise duty sales tax etc will have a bearing on the demand for MUVs and CVs. The levy of 12% uniform sales tax already has and may in the near future play a role in the performance of the industry. Implementation of infrastructure projects: The implementation of infrastructure projects will have a positive impact on demand for CVs & UVs as they are extensively used in transportation of material and people requirement of the projects. Therefore the mega projects like National Highway project, Dhabol power project-II will trigger the demand for segment. Freight rates: The freight rates determine the revenue component of fleet operators. The improvement in freight rates consistently, over a period of time will improve operating profits and build confidence measure for operators. The increasing operating margins combined with improvement in fleet capacity utilization will help in boosting the demand for commercial vehicles. Presently, where on one end, the diesel prices have shot up considerably, on the other end, freight rates have come down substantially due to lack of business. This has in turn affected the operating margins of the fleet operators. If this continues, the fleet operators will not be in a position to extend their operations, thus ultimately pulling down the commercial vehicle sales. Movement in diesel prices: The diesel prices are controlled by the GOI notifications. As a measure of phased dismantling of APM, diesel prices have been linked to international oil prices. This along with drop in oil prices to a decade low, led to drop in diesel prices. This has helped in improving operating margins for operators. But the imposition of one rupee cess, to be used for building road infrastructure, has nullified the effect. Therefore, changes in the GOI policy have to be traced as it has a strong bearing on operating margins of operators. The recent hike in diesel prices have imposed immense pressure on the transport companies and fleet operators, as they are also suffering from lower freight rates. Policy on scrapping of old vehicles: The recent notification by judicial body to ban commercial vehicles above 20 years in age in New Delhi will lead to a demand for at least 15,000 vehicles to be satisfied in short period of time. If similar measures are implemented in other parts of the country will boost demand for new vehicles. 12 MBA MARKETING MANAGEMENT, IMS DAVV
  13. 13. Outlook The M&HCV segment depends much on infrastructure sectors like steel, cement as well as transportation. The infrastructure industry growth index has fallen to 3.4% in November 2001 from 7.4% in November 2000. The cement and coal sectors reported the highest growth rates of 12% and 7.9% respectively whereas the steel grew by mere 0.7%.However the agricultural sector is projected to grow by remarkable 6.9% resulting in the GDP growth during 2002-03 , though on a low base of drought –affected harvest and low food production. Since CV sales have a linkage with industrial growth and diesel prices, the demand may fall on account purchase deferment due to prolonged uncertainties in respect of fuel prices and uniform sales taxes. The crude oil has grown by 0.6% in the current fiscal and the sustained increase in the global crude oil prices has led to a hefty increase in the diesel prices. The railways have absorbed this price increase without hiking the freight rates and this might further exert downward pressure on the profitability of truck operators leading to decelerated purchases of new trucks. However with the GDP growth rate estimated to be around 4.5-5% in 2002-03 , with the industry growth expected at the rate of 4% ; there seems to be some recovery in the CV sales in the next fiscal.The CV sales can grow by 7% if the economy grows by around 6.4% which was the earlier projected growth. The growth of medium and heavy trucks and buses would be relatively slower due to better railway efficiency with which trucks compete for moving bulk cargo, higher diesel prices and the poor quality of road infrastructure. The demand for HCVs will depend on replacement demand by the fleet operators, good monsoon implying god agricultural growth. The HCVs sales was up by 20.7% and the LCV sales dropped by 10.5% by the year ending 2001-02. In the long term, the market will slowly shift towards medium and heavy multi-axle vehicles as is the worldwide trend at present. Already, vehicles made by Volvo are being recognized for their better performance in terms of lower turnaround time and lower driver fatigue. This would require large investments in highways which is expected as the government of India continues with its reform agenda. The entry of high tonnage vehicles will contribute towards changing the structure of CV segment in the long run. This will also improve the technology of vehicles available in the country. 13 MBA MARKETING MANAGEMENT, IMS DAVV
  14. 14. EICHER MOTORS LTD. ABOUT EICHER Eicher Motors, was founded in 1982 to manufacture a range of reliable, fuel-efficient commercial vehicles of contemporary technology. The unit manufactures and markets commercial vehicles with Gross Vehicle Weight (GVW) ranging from 5-25 tons. Today, Eicher Motors is one of the leading manufactures of commercial vehicles in India with a 33% market share in the 7T-11T segment. The success and growth of this unit is a result of various customer-driven strategies. The manufacturing facility is situated in Central India – Pithampur, Madhya Pradesh. Eicher Motors has stepped into the Heavy Commercial Vehicle segment with its state-of-the-art HCV, the quot;Eicher 20.16quot;, the first commercial vehicle designed and developed indigenously. Eicher Motors functions through a strong three-tier service network consisting of authorised distributors, service centres and company trained private mechanics. The vehicles are sold and serviced through a network of over 576 Authorized Contact Points all over India, supported by service centres and over 4500 company trained private mechanics, who are close at hand on all major highways throughout India to provide initial quot;first aidquot; to the vehicles if required. In 1986, Eicher Motors entered into a technical and financial collaboration with Mitsubishi Motor Corporation of Japan to manufacture the Canter range of vehicles. The technical assistance agreement with Mitsubishi ended in March ‘94 after successful transfer of technology and on achieving total indigenization with only a few parts sourced globally. Eicher Motors has acquired formidable expertise in designing and developing commercial vehicles. It has a world-class R&D centre manned by a team of brilliant engineers and equipped with latest Computer Aided Design (CAD) and Computer Aided Engineering facilities like NASTRAN, FEM analysis packages. Leveraging its in-house expertise, this unit has successfully developed a wide range of commercial vehicles to meet varying customer needs. The product range includes Trucks : Eicher 10.50, Eicher 10.75, Eicher 10.90, Eicher 11.10, Eicher 20.16 & 30.25; Buses: Eicher Skyline, Eicher Cruiser and Eicher School Bus range of buses. Besides the basic models, it offers over 85 models of ready-to-use custom-built vehicles for various specialised applications. Eicher Motors’ products have been well accepted in the market. This is also demonstrated by significant sales of its commercial vehicles in export markets where the company competes with reputed international brands. 14 MBA MARKETING MANAGEMENT, IMS DAVV
  15. 15. Brief Background Eicher Motors Ltd. is one of the leading engineering companies in India engaged in the following businesses: • Commercial Vehicles • Engineering Components • Engineering Services • Motorcycles The Group was established in 1959 with the roll out of India’s first tractor. Diversified company engaged in the business of commercial vehicles, motorcycles, automotive gears and components, engineering solutions. Significant player in automobile sector having turnover of more than INR 22000 Million (USD 549 Million) for the year ended 31st March 2007. Having 4 manufacturing facilities with more than 2600 permanent manpower. State of the art manufacturing facilities and lean management systems Recently acquired Design Intent Engineering and Hoff Associates Inc. - engineering design companies based in Michigan, USA Sold Tractors and Allied Divisions in FY 2005 -06 to focus on current businesses. 15 MBA MARKETING MANAGEMENT, IMS DAVV
  16. 16. Eicher Motors Businesses 16 MBA MARKETING MANAGEMENT, IMS DAVV
  17. 17. COMMERCIAL VEHICLES The Commercial vehicle division was established in 1986 in collaboration with Mitsubishi Motors Japan and is one of the leading manufacturers of commercial vehicles in India having capacity of manufacturing 38,000 Commercial vehicles. The Product range includes 5 ton, 7 ton, 9 ton, 11 ton, 16 ton & 25 ton GVW categories trucks, tipper, trailers; Bus range includes City buses, School bus, luxury coach, Intercity CWC, Nova 200; Ready-To-Use application vehicles - Around 85 RTU built vehicles to suit a diverse range of applications. The manufacturing plant equipped with state-of-art facilities with stringent quality control norms - practices like Kaizen, Just-in-time, TQM and TQC etc. and State of the art R&D set up helping the commercial vehicles unit to serve their customers better. 17 MBA MARKETING MANAGEMENT, IMS DAVV
  18. 18. EICHER’S CV BUSINESS Eicher is the third largest player in the Indian Commercial Vehicles market: – It leads in the LCV segment with 27% market share in domestic 5-12T cargo segment in FY 07. – It is gaining momentum in the HCV segment with successful launch of 16T, 25T, Tipper and Passenger segments and 1.8% domestic cargo market share in FY 07 implying a growth of 32.9% in sales volume over FY 06. Eicher’s CV business is well positioned to tap the incumbent growth in the CV industry owing to its: –Established track record and stronghold in LCV segment –Strong brand equity, an established Marketing and Distribution Network and cost competitive R&D and manufacturing base providing a ready platform for foray in HCV segment. Eicher – the third largest player in the industry – is well set to leverage its dominant presence in LCV segment to gain significant market share in the fast growing HCV Segment With the introduction of new products and upgrading of existing products across the range, Eicher poised for higher volumes. 18 MBA MARKETING MANAGEMENT, IMS DAVV
  19. 19. EICHER CV BUSINESS – AN OUTLOOK Industry on Fast Track • CV industry (5T & above) has grown by 25.4% with 355,761 vehicle s sold in FY 07 over last year. • Improving road infrastructure creating market opportunities for high performance products. Strong Position in LCV Segment • Strong position in LCV segment with market share of 27% in 5 -12T domestic cargo segment. • Absence from Sub 5T category leaves significant room for further expanding the product portfolio. • Established track record and Brand Equity, recognized for superior product quality/specifications. Ready Platform for Successful HCV Foray • Successfully launched 16T, 25T, Tipper and Passenger segments wi th an indigenously designed product range. • Various success stories in segments and geographies, that would be replicated pan-India with expanding sales & marketing infrastructure and focused marketing push. 19 MBA MARKETING MANAGEMENT, IMS DAVV
  20. 20. • New products on the verge of being launched, providing significant opportunity to capture wider spectrum of the market and expanding customer segments. • Incumbent Brand Equity to facilitate successful foray into lucrative HCV market. Sales and Marketing Infrastructure • Strong dealer network in West, Central and South India • Strengthening the dealership network, primarily to increase geographical coverage • Sales & Marketing setup was historically more focused on LCV. Significant progress made to gear up the same to cater to HCV segment Low Cost Manufacturing and Product Development • Established R&D infrastructure and proven skill set. • Proven capability to develop new products in short timeframe and at minimal development cost, giving crucial time to market and cost advantage. • Constantly evolving supply chain management with robust supplier base. • Optimized manufacturing set-up with a good mix of “Make and Buy”. Management and Engineering Skill Set • Qualified and motivated management with established track record of change management, business integration and new product development. • Strong engineering and product development skills. 20 MBA MARKETING MANAGEMENT, IMS DAVV
  21. 21. BOARD OF DIRECTORS S. No. Name Designation 1 Mr. S. Sandilya Chairman & Director 2 Mr. P. N. Vijay Director 3 Mr. Priya Brat Director 4 Mr. M. J. Subbaiah Director Bankers State Bank of India State Bank of Indore Canara Bank State Bank of Mysore Centurion Bank Limited Registered Office, Factory & Marketing Head Office 102, Industrial Area No.1 Pithampur, District Dhar, Madhya Pradesh – 454775 Group Office Eicher House, 12 Commercial Complex, Greater Kailash - II (Masjid Moth) New Delhi - 110 048 Official website: 21 MBA MARKETING MANAGEMENT, IMS DAVV
  22. 22. PROMOTORS/OWNERS Statement showing Shareholding of persons belonging to the category quot;Promoter and Promoter Groupquot; Shares as a percentage of total number of shares Name of the Number {i.e., Grand Total (A)+(B) Sr. No shareholder of shares +(C) indicated in Statement at para (I)(a) above} 1 EICHER ltd 9279835 33.03 EICHER 2 GOODEARTH 6950429 24.74 LIMITED EICHER GOODEARTH 3 56388 0.20 HOLDING PVT LTD EICHER 4 INVESTMENTS 13200 0.05 PVT LTD MITSUBISHI 5 MOTORS 1000000 3.56 CORPORATION SIDDHARTHA 6 3240 0.01 VIKRAM LAL TARA VIKRAM 7 13000 0.05 LAL SIMRAN 8 13120 0.05 VIKRAM LAL EICHER 9 HOLDINGS PVT 21720 0.08 LTD TOTAL 17350932 61.77 22 MBA MARKETING MANAGEMENT, IMS DAVV
  23. 23. Statement showing Shareholding of persons belonging to the category quot;Publicquot; and holding more than 1% of the total number of shares Shares as a percentage of total number of Name of the Number shares {i.e., Sr. No Category of shareholder shareholder of shares Grand Total (A)+ (B)+ (C) indicated in Statement at para (I)(a) above} ARISAIG PARTNERS (ASIA) PTE 1 LTD A/C 2376503 8.46 ARISAIG INDIA MUTUAL FUND RELIANCE CAPITAL TRUSTEE CO. 2 LTD A/C 300000 1.07 RELIANCE REGULAR SAVINGS FIDELITY TRUSTEE CO. 3 PVT. LTDA/C 443543 1.58 FIDELITY EQUITY FUND RELIANCE CAPITAL TRUSTEE CO. 4 LTD.A/C 1659957 5.91 RELIANCE TAX SAVER FUND TOTAL 4780003 17.02 23 MBA MARKETING MANAGEMENT, IMS DAVV
  24. 24. Financial Performance EICHER MOTOR LTD. is the 3rd largest Commercial vehicle manufacturer in India and the leader in Light Commercial Vehicle (LCV) Segment. The growth of EICHER MOTOR LTD. can be observed the way their profit has increased since last 10 years. By analyzing EICHER MOTOR LTD. annual reports since 1996-97, the growth of the organization can be analyzed from the following graph showing the Profits (After Tax) in millions: Financial Year Profit after Tax 1996-97 116.793 1997-98 37.98 1998-99 78.23 1999-00 158.759 2000-01 235.3 2001-02 184.75 2002-03 374.6 2003-04 336.2 2004-05 588.5 2005-06 2168.8 Source: Annual reports Note: For Chart showing growth, refer Appendix A2 24 MBA MARKETING MANAGEMENT, IMS DAVV
  25. 25. Market Share Analysis 25 MBA MARKETING MANAGEMENT, IMS DAVV
  26. 26. Source: SIAM and other sources By analyzing the above figures, TATA MOTORS has undoubtedly been the leader in Medium and Heavy Commercial Vehicles with an average of 50 – 57 % of market share. And Eicher is not far behind having a market share of approx. 8 – 20 % in HCV segments. However, as far as LCV segment is concerned, according to the sources, the leader by far is EICHER MOTOR LTD. with a share of 27%. Eicher’s market share in Domestic 5-12T cargo segment has increased from 23.7% in FY 2006 to 27.0% in FY 2007. 26 MBA MARKETING MANAGEMENT, IMS DAVV
  27. 27. Eicher enjoys the dominant position and high market share in 5 – 12 T cargo segment. Analyzing the market for LCV segment in India: FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 INDUSTRY 8740 9745 12166 18129 20339 EML 980 1716 2088 2017 2619 Note: For the market share chart refer Appendix A2 27 MBA MARKETING MANAGEMENT, IMS DAVV
  28. 28. COMPETITIVE STRUCTURE The major players in the Commercial Vehicle Segment are Ashok Leyland Ltd, Hindustan Motors Ltd, Telco, Volvo India Pvt. Ltd, Bajaj Tempo Ltd, Eicher Motors Ltd, Mahindra & Mahindra Ltd, Swaraj Mazda Ltd with almost half of the M&HCV players also being in the LCV segment. ASHOK LEYLAND LTD. Ashok Leyland Ltd (ASL) was initially known as Ashok Motors. With participation from British Leyland in 1954, it was renamed Ashok Leyland. In 1987, the Hinduja group took over controlling stake from Rover. It is based in Chennai and is the 2nd largest truck and bus manufacturer in India. The company is in the business of manufacturing Commercial vehicles (CV). The company also manufactures vehicles for defense and special applications and engines for industrial, Gen – set, Marine requirements and automobile spare parts. It also makes double – decker bused in India. The major part of the revenues comes from the M&HCV segment. In the FY 2007, ASL had a total Domestic sales of 77,069 (both CV Trucks and Buses included) which is 36% more than previous FY 2006. ASL also observed an increase in its Exports from 6025 to 4879 an increase of 24% as compared to last FY 2006. The company has a strong presence in the south. It has been successful in improving its market share in the north by 3.7 percentage points in FY04. New models were introduced by the company that enabled it to improve its market share by 2.7 percentage points in the multi-axle segment that constituted about 38% of the total M&HCV trucks. 28 MBA MARKETING MANAGEMENT, IMS DAVV
  29. 29. SWARAJ MAZDA Swaraj Mazda Ltd. deals with the manufacturing of Light Commercial Vehicles. They mostly manufacture buses, trucks, police personnel carrier, ambulance, water tankers and special vehicles. The company was formed in 1983 and production started from 1985. Promoted 1984 in technical and financial collaboration with Mazda Motor Corporation and Sumitomo Corporation, Japan for manufacture of Light Commercial Vehicles (LCVs), Swaraj Mazda represents two powerful brands: Swaraj-Symbolizing best Indian technology and engineering. Mazda- Symbolizing R&D and innovation edge on global scale. Presently manufacturing vehicles for goods and passenger applications. Over the years it has built up a wide product portfolio covering regular as well as niche segment needs. Swaraj Mazda Vehicle population today stands over 1,00,000. Note: For growth chart of Swaraj Mazda, refer Appendix A2 TATA MOTORS Tata Motors is one of the most important fore runners of the Indian automobile industry. They believe in focus and state-of-the-art facilities. They probably have the best infrastructure required for the assurance of manufacturing quality vehicles. They deal with M&H Commercial Vehicles, Intermediate Commercial Vehicles, Light Commercial Vehicles, Small Commercial Vehicles, Utility Vehicles Etc. In the Commercial Vehicles segment, they mostly manufacture buses and trucks. They even have a good range of passenger vehicles as well. TATA Motors dominates over 60% of the Indian Commercial Vehicle Market. It is also the world’s 5th largest medium and heavy commercial vehicle. HINDUSTAN MOTORS LTD Hindustan Motors Ltd is one of the oldest car manufacturing company of India. It was founded in 1942. It manufactures a wide range of vehicles from cars to trucks to school buses to trekker to porter. However, it is more popular for one of its particular car model called the Ambassador. But, at the same time it does manufacture a lot of Commercial Vehicles as well. It was one of the leading players in cars till the early 80's but could not maintain its position after globalization came into effect and the markets were opened. It has its manufacturing plants in Uttarpara- West Bengal, Pithampur- Madhya Pradesh, Thiruvallur- Tamil Nadu and Hosur- Tamil Nadu. 29 MBA MARKETING MANAGEMENT, IMS DAVV
  30. 30. TELCO Telco deals with Heavy Commercial Vehicles, Light Commercial Vehicles, Multi-Utility Vehicles etc. Telco was set up in 1945 to manufacture steam locomotives. Now it's the largest private sector company in Commercial Vehicle manufacturing. The four manufacturing plants of Telco are located in Jamshedpur in Jharkand, Pimpri and Chinchwad in Pune ( Maharashtra) and Lucknow in Uttar Pradesh. It has a market share of 31.2% in Multi Utility Vehicle Segment. FORCE MOTORS LTD. (PREVIOUSLY KNOWN AS BAJAJ TEMPO LTD) Force motors Ltd. (Previously known as Bajaj Tempo Ltd) is a promising company in the Commercial Vehicle segment. The company is now working on the project of introducing state-of-the-art range of trucks. The company has different technological collaboration with many international giants. Hence, it has an upper edge with new and modern technology. They are also working on eco friendly CNG bus engines. They are the only company to have a full range of Commercial Load carrying vehicles. 30 MBA MARKETING MANAGEMENT, IMS DAVV
  31. 31. ENVIRONMENT ANALYSIS COMMERCIAL VEHICLES – INDUSTRY DRIVERS Growth in CVs is fuelled by Several Drivers: 1. Favorable Demand Supply Scenario • Total available capacity in the road freight industry grew at 12 % CAGR over FY02-06 to 1486btkm (billion tonne km), with the total freight movement by road growing at 12.4% CAGR to 921btkm. • Consequently, there has been an increase in capacity utilization level over the last few years – inching up from about 60% in FY02 to 62% in FY06. 2. Freight Outlook remain Buoyant • CV sales are correlated with the state of the freight industry, with growth in CV sales (MHCV trucks) closely tracking freight industry changes. • Strong economic activity in the country, especially in sectors like cement, mining, steel production, automobiles, consumer durables, food processing and food grain production, leads to in creased demand for freight movement by road. • This is likely to lead to an 11.5% CAGR in total freight transport and a higher 12.5% CAGR in road freight transport. 3. Improved Profitability of Fleet Operators • Truck operators’ profitability is most sensitive to freight rates and fuel price s (60-65% of the total cost). • Continued strength in freight rates in the last 12 -15 months (up ~5%) and the 12% cut in fuel prices since Nov -06 have adequately compensated for increased cost pressures owing to inflation and rise in interest rates • Continued profitability is expected for truck operators with dem and for freight transport expected to remain strong and freight rates holding strong. 4. Favorable Regulatory Environment • Regulations discourage the use of old, polluting and uneconomical vehicles • The SC ban on overloading has lead to incremental volumes (~700,00 units since the ban was imposed) and a transition to more economical MAVs and Tractor Trailers. 31 MBA MARKETING MANAGEMENT, IMS DAVV
  32. 32. • Proposed phase-out of CST by 2010 will boost the organized logistics players and in turn the CV manufacturers. 5. Shrinking Replacement Cycle • The proportion of trucks under five years of age rose from about 34% in FY02 to nearly 45% in FY06. • Strong freight availability, changes in emission norms, introduction of more economical and fuel -efficient vehicles, the Supreme Court ban on overloading and strict restrictions impose d by cities on vehicle age. 6. Improving Road Infrastructure • Indian Government’s initiatives to significantly improve the road infrastructure, including the Golden Quadrilateral, the NSEW corridors and port connectivity projects, will allow more efficient Cargo movement thereby driving CV demand • Indian Railways has proposed several initiatives like dedicated freight corridors and introduction of new high capacity wagons to re-capture the market share it is losing steadily to road transport. However, these initiatives would likely take at least five years to get implemented and hence do not offer any significant threat to the fleet operators in the medium term. Several Factors are expected to boost CV demand both for New as well as Replacement demand resulting in Sustained Growth in coming few years. NEW DEMAND + REPLACEMENT DEMAND  SUSTAINED GROWTH New Demand due to: - Higher Freight Rates - Strong Economic Growth - Easy Availability of Finance - Thrust on Development of Road Infrastructure Replacement Demand due to: - Availability of more rated payload and profitable vehicles - Faster Replacement - One Time Factors (ban on overloading, emission norms etc…) 32 MBA MARKETING MANAGEMENT, IMS DAVV
  33. 33. Commercial Vehicle market in India is growing in a furious pace. Analyzing the volume growth over last few years in CV Industry: - CAGR for LCV (5 – 12T) is about 12.6% - CAGR for HCV is about 26% - CAGR for passenger = 17% - CAGR for Total = 20 – 22% • HCV segment has been growing fastest in overall CV industry with the following sub- segments fuelling this growth: – 25T segment has grown to 102,828 vehicles sold in FY 2007 implying a growth of 68% over last year – Tipper segment has grown to 44,362 vehicles sold in FY 2007 implying a growth of 41% over last year – Tractor/Trailer segment has grown to 25,079 vehicles sold in FY 2007 implying a growth of 107% over last year 33 MBA MARKETING MANAGEMENT, IMS DAVV
  34. 34. Commercial Vehicle Industry growth is also aided by India’s High Economic Growth. • Macro economic factors indicate that India is at the verge of a high growth period • India’s growth is driven by an interplay between three important Macro-Economic factors, viz.: – Demographics – wherein proportion of dependent to working age population is falling rapidly - Steady stream of Economic Reforms undertaken by the Government – Globalization • Approach Paper for the 11th Plan (2007/8 to 2011/12) has set a target of 9% GDP growth 34 MBA MARKETING MANAGEMENT, IMS DAVV
  35. 35. Aggregate consumption in India is likely to increase 4 times in the next 20 years owing to increasing disposable income of burgeoning middle and upper income classes. • India is emerging as the largest contributor to growing working population – This has and would continue to aid India’s growth, making it the second fastest growing economy after China. • In order to meet the 11th Plan growth estimates, the Committee on Infrastructure has estimated an investment requirement of Rs 2,620 bn over 2012 on national highways, airports and ports • Engineering and construction sector is expected to be key beneficiary (amounting to 65% of Infrastructure spend) of the Infrastructure Growth • Infrastructure improvement would foster economic growth, thereby increasing cargo Availability; Allow more efficient movement of cargo over roads. Thereby driving growth in the CV volumes. 35 MBA MARKETING MANAGEMENT, IMS DAVV
  36. 36. A Good Freight Outlook • Over the past few months, fleet operators’ costs have risen, due mainly to increases in vehicle prices by OEMs, rising tyre prices and rising interest rates. • However, a decline in diesel prices as well as rising freight rates have more than compensated for the incumbent cost pressures resulting in increased operator profitability • Interest rates have more or less peaked • Further, crude prices are expected to remain stable or decline over time • Decline in interest rates and crude prices will further aid profitability of fleet operators, boosting CV demand. 36 MBA MARKETING MANAGEMENT, IMS DAVV
  37. 37. Summarizing the Environmental Scanning • Structural changes in the underlying economy such as improvement in the road infrastructure, and strong growth in the Indian economy have fueled and expected to continue to drive growth in the CV Industry owing to: – Increased freight availability aided by investment surge in key sectors - manufacturing, construction, mining & increased foreign trade boosting containerized freight movement – Strong growth in non-bulk commodities which is leading to an increased share of freight transportation by road which is the preferred mode for non-bulk commodities • Improved profitability of fleet operators will boost overall CV demand: – Decline in diesel prices as well as rising freight rates have mo re than compensated for the incumbent cost pressures owing to increases in vehicle prices by OEMs, rising tyre prices and rising interest rates resulting in increased operator profitability • Increased replacement demand as well as shift towards heavy tonnage CVs owing to: – Strong freight availability, changes in emission norms, introduction of more economical and fuel –efficient vehicles, the Supreme Court ban on overloading and strict restrictions imposed by cities on vehicle age. – The proportion of trucks under five years of age rose from about 34% in FY02 to nearly 45% in FY06. • Significant improvement in road infrastructure will allow more efficient Cargo movement thereby boosting CV demand – Indian Railways has proposed several initiatives to arrest its steady decline in market share. However, these initiatives would likely take at least five years to get implemented and hence do not offer any significant threat to the fleet operators in the medium term. • Passenger vehicles are also expected to show significant growth with increasing demand due to rise in consumers ’ affordability resulting from strong growth in disposable income, increasing urbanization, improved road infrastructure and consumer preference for comfortable rides 37 MBA MARKETING MANAGEMENT, IMS DAVV
  38. 38. The EICHER’s Advantage Analyzing the EICHER MOTOR as an organization, the advantages/strengths can be summarized under following heads: a) The “PRODUCT” advantage - Leveraging product differentiation to consolidate market share in LCV segment - Expansion of product portfolio in the HCV segment and leveraging existing brand equity to gain meaningful market share. b) The “ESTABLISHED NETWORK” advantage - Marketing and Distribution Strategy incorporates a further enhancement of the existing Distribution Network - Focused marketing team for HCV segment c) The “LOW COST MANUFACTURING AND PRODUCT DEVELOPMENT” advantage - Established R&D infrastructure and proven skill set - Proven capability to develop new products in short timeframe and at minimal development cost, giving crucial time to market and cost advantage - Constantly evolving supply chain management with robust supplier base - Optimized manufacturing set -up with a good mix of “Make and Buy” d) The “INDEGENIUS SKILL SET” advantage - Qualified and motivated management with established track record of change management, business integration and new product development. - Strong engineering and product development skills 38 MBA MARKETING MANAGEMENT, IMS DAVV
  39. 39. PRODUCT ADVANTAGE • Eicher has predominantly focused on the LCV (5-12T) segment, where it is one of the strongest players. • Eicher has increasingly started focusing on the HCV segment. • The Company is confident that its brand image and existing relationships would enable it to successfully seed the market in a relatively short period and its product performance and competitive advantages would ensure customer acceptance, resulting in a meaningful market share in near future. 39 MBA MARKETING MANAGEMENT, IMS DAVV
  40. 40. Note: For complete Product Portfolio, refer Appendix A1 40 MBA MARKETING MANAGEMENT, IMS DAVV
  41. 41. ESTABLISHED NETWORK ADVANTAGE • The sales and marketing network is continuously being upgraded. • Specific HCV focused dealerships being added • A very strong secondary service network created with Star Garage locations (51 nos.) and private Mechanic Trained locations (966 nos.) Eicher Motors Limited On comparing the Network Distribution of all three major players: TATA, Eicher, Ashok Leyland Eicher has 142 dealers and TATA and Ashok Leyland 176 and 178 resp. 41 MBA MARKETING MANAGEMENT, IMS DAVV
  42. 42. As seen from the figure above. EML has primary Service Network which includes Dealership, Service dealership, Spare parts Distributors and retailers total 631 in nos. Secondary Service Network which includes Star Garage and Privately trained mechanics 1017 in nos. Expansion of dealer network and specific focus on HCV segment is expected to facilitate high growth in volumes. Currently EML is strong in West, Central and South India. Key Products Strengths of EML can be summarized: • Provides the best value in each segment – More fuel efficient (5 to 10% better), more payload (over 15%) • Low operating cost and high resale value • Ready –to use fully built-up vehicles • Higher top speeds / Faster turn around • Comfortable cabin – less fatigue while driving 42 MBA MARKETING MANAGEMENT, IMS DAVV
  43. 43. • Creating differentiation and positioning on the basis of higher value delivery to the customers through regular product up-gradation. • Enhanced focus on safety and comfort features offering better value than competition. • Eicher products offer distinct advantages: – 10% more Fuel Efficiency – About 10% more payload – Strong and Sturdy Aggregates with better life – More engine power – Faster turnaround – Factory built cabin and cargo body with safety features STATE OF THE ART MANUFACTURING FACILITIES ADVANTAGE Eicher Motor has one of the best manufacturing facilities in India. Some salient features of EML manufacturing facilities can be observed as under: a) State Of The Art plant at PITHAMPUR strategically located at Central India. With approx. 375,000 square meter land area, the plant is the best example of Optimal Investment for Maximum Productivity. b) Integrated Manufacturing Facilities for Assembly Lines, Cabin Weld Shop with Robotic Welding, Cabin Paint Shop… c) Lines with multi model roll out capability d) Strategic Ancillaries located around PITHAMPUR 43 MBA MARKETING MANAGEMENT, IMS DAVV
  45. 45. ENGINEERING SKILL SET ADVANTAGE Eicher’s indigenous engineering and product development skill-set provides it an advantage in competitive Indian CV Market. The salient features that Eicher’s R&D focused Engineering Skill Set shows can be summarized as under: a) 140 Engineers and support of Engineering Design Division with further 200 Engineers b) Eicher owns first successful Cabin development in India meeting ECE norms c) In-house capability for Electrical & electronics integration. Complete Bus Structure, Shell & Interior trim design d) Complete Virtual vehicle integration & different simulations to carry out DFA, DFS & failures simulations 45 MBA MARKETING MANAGEMENT, IMS DAVV
  47. 47. Key Strengths for EML can be summarized as: a) Product Advantage b) Established Network Advantage c) Low Cost and Manufacturing Facilities d) Engineering Skill Set and R&D focus 47 MBA MARKETING MANAGEMENT, IMS DAVV
  48. 48. CORPORATE SOCIAL RESPONISIBILITY CSR IN EML The genesis of CSR at EML began with the growth of business. The management communicates and demonstrates support for CSR at EML. Business Units and managers are required to incorporate economic, social and environmental objectives into their business plans. The understanding of CSR is very well articulated under “Corporate Values” and thereby the actions are guided accordingly fron those values of the company. The core values are being secular, apolitical, fair, trusting, empowering of employees and adopting ethical practices. The CSR at EML is more than philanthropy. It takes care if all its stakeholders, which can be very well understood by a corporate initiative under e – motion. The CSR principles of the company are found mostly in the areas of environment, employer – employee relationship, ethics and community investments. EML is committed to be the environmental leader and puts a great deal of emphasis on environment as a priority CSR program. Company environmental commitments are reflected in its EHS policy and its environmental management system, Environmental management plan EMP at Eicher Motor is the logical conclusion of Environment Impact Assessment EIA. The EMP includes following four stages: 1) Conceptualization: Existing environmental scenario 2) Planning: detailed study of environmental impact and identifying the necessary control/mitigation measures 3) Implementation: Implementation of environmental control measures. 4) Operation: Monitoring the effectiveness of existing measures and those proposed in the EMP Some Environmental related issues initiated by EML are: a) Rain water Harvesting b) Energy Conservation – promoting non conventional green energy; natural draft cooling towers; Automatic Switch off the Power of press motor; energy efficient pumps and motors c) Fuel efficient and environmental friendly vehicle etc… Apart from environmental commitments, EML also takes a good care of its employees – providing welfare schemes for them like PF, scholarships, education to their children. Eicher as a company is committed to serve the community in its broadest sense. This commitment takes many forms with special attention to education and quality of healthcare facilities in our country. In the city of Indore, EML has taken the responsibility of road safety. The company has provided Traffic equipments and is responsible for their maintenance. 48 MBA MARKETING MANAGEMENT, IMS DAVV
  49. 49. Testimonials from few of EML’s clients will strengthen their commitment to serve their customers better. a) BHORUKAS TRANSPORTING SOLUTIONS 49 MBA MARKETING MANAGEMENT, IMS DAVV
  51. 51. c) RAGHUNATHAN TRANSPORT And many other clients of EML are much satisfied with their commitments to serve better. The company’s senior managers always meet and greet a new mechanic or new a dealer personally making the intermediaries realize they are also a part of EML. 51 MBA MARKETING MANAGEMENT, IMS DAVV
  52. 52. MARKET INITIATIVES - Improvement in customer and dealer engagement levels - Reach the Customer – Target Fastest service response - Vehicle Delivery Quality enhancement - Nurturing Trained Private Mechanics through dealership salesmen 52 MBA MARKETING MANAGEMENT, IMS DAVV
  53. 53. EML FUTURE OUTLOOK AND CHALLENGES AHEAD EML has created the platform with strong potential for growth in HCV segment. The HCV segment is Lucrative yet Challenging. The HCV is a large size market, currently dominated by two players – TATA Motors & Ashok Leyland. EML found the HCV market very lucrative but the company found it difficult to penetrate owing to: - Highly price sensitive market - Requires India specific products - Large loyal customers with strong reliance on trust and track record of product performance. Eicher has created the platform with strong potential for growth in HCV segment. The company has successfully entered in 4 large segments: - 16T, market size 38,000Nos. - Multi – Axle, market size 100,000Nos. - 4X2 16T Tippers, market size 25,000Nos. - Passenger vehicles, market size 24,000Nos. In the process of launching: - Tractor Trailer, market size 25,000Nos. - 6X4 Tippers, market size 20,000Nos. - 16T variant with 4 cylinder engine. EML started the HCV foray by launching the base 16T product (comprising about 35% of HCV market) in Dec 2002. The company launched 25T products during following 2 -3 year period. Note: For the growth of EML HCV product portfolio, refer appendix A2 53 MBA MARKETING MANAGEMENT, IMS DAVV
  54. 54. FUTURE OPPORTUNITY IN MARKET – EICHER POSITION Discontinuity in Market emission norms would force upgrade Overloading likely to go Built up trucks and buses to become the norm Increasing focus on life cycle economies Growth in 7 – 11T Industry Growth Opportunity in new segments rapid growth in 7 – 11T HCV, Passenger passenger segment to boom Global Opportunity shift from 16T to 25T Global Norms met EICHER MOTOR LTD. Product Strength Reputation for higher quality/better economic Good response to HCV Strong in 7 – 11T 54 MBA MARKETING MANAGEMENT, IMS DAVV
  55. 55. CONCLUSION Commercial Vehicle Industry in India is been growing with Compounded Annual Growth Rate of approx. 21% with Light Commercial Vehicle growing at 12.6% and Heavy Commercial at 26%. Seeing the growing prospects of Commercial Industry in India specifically in Heavy Commercial Vehicle segment, one could say EML has done justice to their business. With leadership in Light Commercial Vehicle segment having a Market share of approx. 30%, EML has proven its core competency in LCV segment. The Product Portfolio offered by EML itself proves to be the Core Competency of the company. The fuel efficient, good resale value products available all across the country via a well Established Network makes EML a very strong player in Commercial Vehicle segment in India. Although in HCV segment, major players like TATA and Ashok Leyland has got majority of market share – TATA is the leader with a whopping 60% market share in HCV segment. Seeing the growth prospects in HCV segment – CAGR by which HCV segment has been growing is approx. 26% which is even higher than the Total Commercial Vehicle Industry as a whole – EML has decided to foray into HCV segment. However, it will be very difficult to curtail the growth of TATA and ASL. The market share of EML in HCV is just 8% as compared to TATA’s 60%. For EML to have a growth in HCV segment, company need to understand the pulse of the market and what exactly is the requirement. They have to cash their LCV leadership image in HCV segment as well. EML need to widen their Network which is a bit poor as compared to TATA and ASL. (EML has got approx. 140 dealers as compared to 178 dealers from TATA) EML must focus on their Core Competencies – Product, Network, Low Manufacturing Facilities, R&D and skilled Engineering and Management employees – to have a global presence in Commercial Industry. 55 MBA MARKETING MANAGEMENT, IMS DAVV
  56. 56. Higher Freight Strong Economic Easy Road Rates Growth Finance Infrastructure NEW DEMAND SUSTAINED GROWTH REPLACEMENT DEMAND Availability of One Time Factors Faster Replacement profitable vehicles (norms and overloading ban etc.) This shows what EML should focus on to gain leadership in HCV segment. 56 MBA MARKETING MANAGEMENT, IMS DAVV
  57. 57. However, EML should try and enhance their network in HCV segment as compared to TATA and ASL. The figure above explains the Service Dealer Network scenario for EML. One can not even compare the TATA and EML in service dealer network. Eicher Motor Ltd. presence is very strong in Central and South India. The company should try to enhance their network across India equally if they want to be the leader in HCV segment as well. 57 MBA MARKETING MANAGEMENT, IMS DAVV