HINDUSTAN MOTORS

Hindustan Motors Limited (HML), India's pioneering automobile manufacturing company and

Flagship Company of the C.K. Birla Group, was established in the year 1942 at Port Okha in

Gujrat.

Hindustan Motors which is known in the country for its most popular product Ambassador,

fondly called "The king of Indian roads”, is also involved in the manufacturing of heavy

engineering equipments, other passenger cars, trucks, Multi utility vehicles, Power Shift

Transmission Products which it sells in the domestic as well as foreign markets.

HM continued to be the leading automobile manufacturer in the country till 1980s when the

Indian Automobile Industry was opened from protection, thereby permitting the entry of foreign

players.

HINDUSTAN MOTORS LIMITED

# PLANTS STATE YEAR

STARTED

COLLABORATION PRODUCTS

1. Uttarpara

(Kolkata)

West

Bengal

1948 - Passenger

Vehicles

(Ambassador)

2. Pithampur

(Indore)

Madhya

Pradesh

1987 Isuzu Motor

Company,

Japan

OKA

Motor

Company,

Australia

Fuel-efficient

engines and

transmissions;

RTV trucks

3. Tiruvallur

(Chennai

Tamil

Nadu

1998 Mitsubishi Motors Japan Mitsubishi

Lancer, Pajero,

Outlander,

Montero.

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RANKING AND MARKET SHARE OF HM

Once the leading automobile manufacturer of the country, Hindustan Motors sales figures for

FY2009 have been around 11,000 when compared to the total sale of 14,30,000 passenger cars in

the country, around the same period which comes to a meager 0.77% market share. These figures

clearly reiterate the urgent need for HM to revamp its products and come up with something that

appeals the tastes of its customers.

0.77%

99.23%

Market Share

HMCompetitors

Figure 1: Market share of HM in FY2009

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PESTEL ANALYSISPOLITICAL :

* Govt. policies lay emphasis on R&D activities carried out by companies in India

by giving a weighted tax deduction of up to 150% for in house research and R&D

activities.

* It assists in the development of vehicle propelled by alternate energy source.

* Auto policy of Indian govt. allows automatic approval for foreign equity

investment up to 100% with no minimum investment criteria.

* Auto fuel policy has been formulated to ensure availability of adequate amount of

appropriate fuel to meet emission norms.

* Auto policy also aims at establishing an international hub for manufacturing

small, affordable passenger cars as well as tractor and two wheelers.

* It ensures a balanced transition to open trade at minimal risk to the Indian

economy and local industry.

* Govt. emphasis on mass rapid transport system.

ECONOMIC :

* The manufacturing sector has grown at 8-10 % per annum in the last few years

* Govt. has granted concessions, such as reduced interest rates for export financing.

* Weighted tax deduction of up to 150% for in-house research and R & D activities.

* Several Indian firms have partnered with global players. While some have formed

joint ventures with equity participation, others have also entered into technology

tie-ups.

* Establishment of India as a manufacturing hub, for mini, compact cars

and for auto components.

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SOCIAL :

* Since changed lifestyle of people, leads to increased purchase of automobiles, so

automobile sector have a large customer base to serve.

* The average family size is 4, which makes it favorable to buy a four wheeler.

* 85% of cars are financed in India i.e. obtained at loans from the various Financial

and Non Financial organizations

* Cars priced below Rs6,00,000 account for nearly 80% of the passenger

automobile market.

* Indian customers are highly discerning, educated and well informed. They are

price sensitive and put a lot of emphasis on value for money.

* Preference for small and compact cars. They are socially acceptable even amongst

the well off.

* Preference for fuel efficient cars with low running costs.

TECHNOLOGICAL :

* More and more emphasis is being laid on R & D activities carried out by

Companies in India.

* Weighted tax deduction of up to 150% for in-house research and R&D activities.

* The Government of India is promoting National Automotive Testing and R&D

Infrastructure Project (NATRIP) to support the growth of the auto industry in

India.

* Technological solutions helps in integrating the supply chain, hence reduce losses

and increase profitability.

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* Customized solutions (designer cars etc.) can be provided with the proliferation

of technology

* Internet makes it easy to collect and analyze customer feedback.

* With the entry of global companies into the Indian market, advanced

technologies, both in product and production process have developed.

* With the development or evolution of alternate fuels, hybrid cars have made entry

into the market.

* Major global players like Audi, BMW, Hyundai etc have setup their

manufacturing units in India.

* Technological solutions helps in integrating the supply chain, hence reduce losses

and increase profitability.

ENVIRONMENTAL :

* If there is good availability of roads or the roads are smooth then it will affect the

use of automobiles (reduce maintenance costs).

* Environmental pollution is a growing cause of concern because of the internal

combustion engines which work on fossil fuels and generate considerable

amounts of CO and CO2 gases.

LEGAL :

* Legal provision relating to environmental pollution by automobiles.

* Legal provisions relating to safety measures.

* Indian governments auto policy aimed at promoting an integrated, phased and

conducive growth of the Indian automobile industry.

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Hindustan Motors: SWOT Analysis

STRENGTHS :

1. First Indian car company to start automobile manufacturing in India in 1942.

2. Company was the largest manufacturer of cars in India before Maruti Udyog Limited

entered during the 1980’s.

3. Manufacturer of ‘Ambassador’ which is widely used by the Indian government both

state and central government level.

4. The ambassador’s testing by the people of India has made it the true Indianised car.

WEAKENESS :

There has been no fundamental change in the design of the cars that have been manufactured by

the Hindustan Motors like Ambassador, which some critics feel has been a major factor behind

retarding its demand.

1. The company i.e. Hindustan Motors diversified very lately which is with the launch of

new vehicles after entering into Joint venture with different foreign companies.

2. There are strict emission norms that are being enforced by the government.

3. The company is having a very niche market which mostly related to government vehicles

or as city cabs.

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OPPORTUNITIES :

1. Adapt to the market demands and come up with products aimed to strengthen its position

in the Indian Automobile Sector, in collaboration with the expertise from reliable partners

like Mitsubishi.

2. Make use of the rapidly growing Indian Automobile customer base and try to develop

products that appeal to the masses and hence be able to tap the market resources.

3. The technology available is quite advanced so it can help both the company and the

industry to have a good growth.

4. The growing market also provides an opportunity for the industry to raise their sales.

THREATS :

1. Due to stringent Government norms regarding emission control there is a threat that has

been posed before the industry.

2. The rise in the prices of the fuel also acts as a threat for the company to manufacture

better mileage vehicle.

3. Stiff competition from existing players

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Indian Automobile Industry analysis using PORTERS FIVE FORCES

ENTRY BARRIERS:

- High Capital Expenditure Required.

- Knowhow of the latest technology a must to create a name in the intense competitive market.

- Product must appeal to the masses and be produced in bulk so as to bring down the production costs and make it more affordable.

- Production unit be set in a location where the factors of production are easily available and at low prices.

- Stringent Govt. emission and safety norms.

- Well laid distribution network require

CONCLUSION: Entry Barriers are pretty HIGH, hence attractive.

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BARGAINING POWER OF SUPPLIERS:

- Started basically as a monopoly player but failed to retain its position resulting in a Large

No. of Suppliers (Automobile Manufacturers).

- Size of suppliers is big.

- Switching cost is high

- Unique Product Availability (Electric Powered Vehicles) strengthens the supplier’s

position.

- The EV industry still being in the nascent stage, availability of substitutes is negligible.

CONCLUSION: Bargaining power of Suppliers is medium, hence attractive

THREAT OF SUBSTITUTES:

- The options available for EV (Electric Vehicles) at present are very less, hence very

limited (negligible) substitutes available.

- The available substitutes are high on Cost and low on Performance, which further reduces

the substitutability of product.

CONCLUSION: Threat of Substitutes is low for this new product category, hence attractive.

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BARGAINING POWER OF CONSUMERS:

- No of buyers is less

- Buying volume is less

- Price elasticity is more because the sales figures are low if cost is high

- Incentives-Govt. has set up the National Manufacturing Competitiveness Council

(NMCC) specifically for promoting the use of electric powered small sized vehicles in

the country and can very well come up with Tax reductions which may lead to reduced

prices for EV customers.

Brand Identity- People using the tech-savvy, environment friendly EV’s will be looked

up to, in the social circles.

CONCLUSION- Bargaining power of customers is moderate.

COMPETITIVE RIVALRY:

- Heavy investment required to set up production facilities- so exit barriers are high

- Good Quality product with niche features required to create a name and every player is

trying to create a niche for itself by means of some innovation in terms of pricing or

performance.

- product switching cost would be high

- Diversity of competitors is less

CONCLUSION- Very high level of competitive rivalry, hence Unattractive.

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Solution to the Problem being Faced By Hindustan Motors

‘Environmental Pollution’ is amongst the biggest concerns of almost all the countries in the

current times. With growing concerns over environmental deterioration, increased levels of

pollution, Carbon Footprint Reduction happens to be in the Prime Agenda of almost all the

Economies.

In the developing countries like India, extremely high levels of pollution in almost all the major

cities, caused by the usage of fossil fuels, increased road clutter caused by oversized vehicles,

coupled with spiraling Fuel prices has made motoring on the busy lanes in the Indian Metros, a

menace to the multitude of urban office goers.

It is high time we start thinking about ways which can help in reducing the carbon footprint.

However the entire idea becomes all the more exciting when apart from benefiting the society at

large, the measures also benefit your pockets.

Puzzled???

Well, its no rocket science, we are just talking about the way in which you commute to and fro

your workplace, your child’s school or simply the neighborhood grocery shop. The idea of

operating your four wheelers on electricity, The Electric Vehicles (EV’s).

Simply put, the electric vehicles are automobiles, powered by a Battery which is re-charged,

using electric power in the same way the traditional vehicles are re-filled once its fuel has been

exhausted. The EV’s are considered to be ‘Zero Emission Vehicles’ since they do not emit any

exhaust fumes arising out of fossil fuel consumption.

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PRODUCT BACKGROUND

The Indian Electric Vehicle industry, started in 2001 with the Miami Groups REVA Electric

Company limited, introducing its ground-breaking innovative product.However the industry is

still believed to be in the Nascent stage of its development.

The main reasons behind the low penetration of EV’s in India have been:

1. Lack of Infrastructure - High capacity Power Points are required on the roadways to

recharge the battery on the go.

2. Lack of Government support- Only the Delhi Govt. has allowed tax incentives on the

purchase of EV’s in our country. Tax rebates can go a long way towards reducing the

cost of the car and hence attract potential customers.

3. Lack of awareness (full information about the product) – The fact, that overall running

and maintenance cost of the electric vehicles turns out to be far less compared to that of

any traditional internal combustion vehicle, needs to be instilled in the minds of the

Indian consumers.

4. Psychological perception of Indian customers – The Indian customers perceived the EV’s

as ‘Toy Cars’ because of their physical appearance which resembled that of ‘Toy Cars’ in

the Theme Parks and hence were reluctant towards buying such products as they could

get the ‘Traditional ‘ cars for a lower cost.

The Hindustan Motors Limited intend to enter into pact with its trusted partner Mitsubishi

Motor Corporation, JAPAN in order to fill the void which exists in this highly potent industry.

Hindustan Motors shall facilitate the production and distribution of the EV’s by providing the

manufacturing plant and the distribution network for the product. While the technological know-

how shall be extended by the partner firm, Mitsubishi Corporation.

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*The product shall be named SEV1 (Save Earth Version1)

*TagLine for the SEV1 shall be, “For the Pleasure of Green Driving”.

*The product shall look similar to the existing line of ’i MiEV’ products from the Mitsubishi i.e.

Mitsubishi in-wheel Electric Vehicles.

Figure 2: An artists impression of the SEV1

Figure 3: Void Scope identified for our product

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PROCUREMENT COST(IN LAKHS)*

OPERATING COST (IN Rs)**

1 2.5

4 3

8 6

20 6.5

12 7

*Procurement Cost implies the initial cost towards purchasing the vehicles

**Operating cost implies the per KM running cost of the vehicle.

The shaded ‘Blue’ region shows the existence of a void, where we want to position ourselves, i.e.

in the ‘Sub Rupee 1’ operating cost group.

It must be noted that though the EV’s procurement costs maybe high compared to the traditional

vehicles, the extremely low running cost and next to negligible expenditure on maintenance,

results in huge savings.

For eg. If we consider a Daily usage of 100 Km at Rs50/litre of Petrol (mileage of 10km/lit) and

EV getting charged at Rs40 running for 100km:

Type of vehicle Per km running cost (approx.)

Internal Combustion Engine based vehicles.

Rs. 5

Electric Vehicles40p.

Hence for a daily travel of 100km, an EV user saves around Rs.460 per day, Rs.13800

per month and the yearly saving may reach well beyond 1.5lacs.

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SEGMENTATION TARGETING AND POSITIONING (STP)

SEGMENTATION:

1. Customers who are environmental conscious

2. Customers who desire speed and performance

3. Daily commuters who use cars for short distance travel (office, schools, shopping)

4. Small families (4 members)

5. People who are safety conscious

6. Customers who look for spacious and comfortable cars.

7. Customers who look for low procurement and low operating cost

TARGETING:

1. We are targeting young executives (Daily office-goers)

2. Emerging middle class who are ready to invest on innovative products which doesn’t

make big holes in their pockets

3. Environment conscious people who are concerned about the increasing pollution levels.

4. Middle class which is price conscious and fed up of the spiraling fuel prices every now

and then and needs a ‘Low Runing Cost’ vehicle.

5. We are also targeting the 2-car families, where both the male n female are working and

use the second car for their day-to-day city travel.

6. Older generation who are safety and environmental conscious who find it difficult to cope

with the hassles of regular maintenance

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POSITIONING:

We are going to position ourselves as innovative, environmental friendly, zero emission

low maintenance car, which goes easy on your pockets in the long run.

SEV1 is powered by electricity, hence does not depend on any form of motor spirit i.e.

petrol and diesel for its operation. It, by not using motor spirit does not emit any pollutant

to the atmosphere. Thus we are aimed at providing a zero emission and pollution free

vehicle which would be very much eco friendly. People driving it are going to join hands

in saving our planet Earth from getting deteriorating. We are positioned to make a

difference.

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PROMOTION:

*Print & Electronic Media

*Radio and TV shows

*‘Green Earth’ Campaign

PRODUCT:

*Four seater-Hatchback

*Battery Operated

*Zero emission Car

DISTRIBUTION:

*120 member strong distributor network of Hindustan Motors

PRICE:

*Rs 8,00,000 (approx)

POSITIONING:

Economical ‘Green Vehicle’

PRODUCT LIFECYCLE:

INTRODUCTION STAGE (2012 – 2016):

This stage should have a span of four years i.e. from 2012-2016. Electric car in India was first

introduced by the company REVA, but we think it has not done enough to create the required

awareness for the electric cars. Hence we will be doing our best in achieving the same through

our SEV1. To create awareness we would be taking the following steps-

Save earth campaign: We have committed ourselves to save the mother earth from

pollution. Hence we will be organizing this campaign to make people aware of the

present situation of the pollution rate in atmosphere. Under this campaign we will be

involved in tree plantation, discarding of the usage of polythene bags, etc. This will make

people conscious of our mother earth, making them take steps to save her.

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NDTV talk shows: We have planned to arrange for talk shows in NDTV on the benefits

of SEV1 over petrol/diesel vehicles. This would also lead to the creation awareness

among the people about our product. Thus NDTV would be our media partner in

propelling the penetration of SEV1 in electric car industry.

Advertisements: Apart from the commercial advertisements in televisions we will be

advertising SEV1 posters in bill boards and commercial hubs like shopping malls,

airports, railway stations, etc.

We are targeting our sales volume in the Introduction stage to be as-

YEAR SALES VOLUME

2012-2013 500 UNITS

2013-2014 1500 UNITS

2014-2015 2500 UNITS

2015-2016 5000 UNITS

GROWTH STAGE (2016 – 2022):

Growth stage is expected to commence from the year 2016 and would be ranging till the end of

2022. We are expecting that by then people would have understood the need for SEV1 and there

would be a high demand for our product. Hence, we have also planned to increase our production

capacity by setting up of new manufacturing plants. During this stage we are expecting a lot of

established players in car manufacturing industry to launch their own versions of electric cars.

Hence, we have also planned to come up with next versions of SEV1 which would be of better

quality due to technology advancements in this field. In this stage our main objective would be to

increase our base of customer loyalty. Our potential rivals during growth stage could be:

Mahindra Reva Electric Car Company

GM

NISSAN

Honda

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MATURITY STAGE (2023 - ):

Maturity stage is expected to be starting from 2023. We will have become a well established

player by now and would be generating cash. Also we would be having other potential rivals

who would also be having share in this market. In order to differentiate our product from that of

our rivals, we have planned to provide better services aimed at touching the lives of our

customers.

In order to avoid being phase out of the market on account of technological advancement and to

continue with our commitment towards providing a pollution free environment we plan to

introduce the other non polluting alternative ( viz. hydrogen fuel, solar cell, etc ) powered

vehicles in the later part of this stage.

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MARKETING MIX (4P)

PRODUCT:

SEV1 will be an electric powered car. Some of the features of SEV1 are as follows:

Body Style: Hatch Back

Seating Capacity: 4 Seater

Color Options: Ocean Blue and Forest Dew

Kilometers per charge: 160Km/full-charge

Battery: Lithium Ion batteries

PROMOTION:

We Hindustan Motors have a 120+ distributor network across the country. This will help us in

reaching out our product to the potential customers and hence boost the sales of SEV1.

*Advertisements: We plan to develop out advertising campaigns with the help of

advertising firms like OGILVY & MATHER Ltd. We also will be

advertising SEV1 in billboards in commercial hubs such as

shopping malls, airports, railway stations, etc.

*Public Relations: We will be collaborating with NDTV as our media partner. It

would provide the public with the latest updates concerning our

product, as well also help in increasing the awareness about EV’s

to the general public. We shall make use of ‘Print’ as well as

‘Electronic Media’ in order to spread the knowledge about our

product. The use of Radio Channels and Networking sites like

Tweeter and Facebook will also be made in order to reach out to

our target customers.

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PLACE: The production of SEV1 shall take place at HM’s Tiruvallur plant at

Chennai.

We intend to launch SEV1 in the four metro cities of India i.e. Delhi,

Mumbai, Kolkata and Chennai.

Apart from these places, it shall also be launched in the Tier I cities like

Pune, Bangalore & Chandigarh in the first stage of product rollout.

SERVICE CENTRES- In order to provide best in class customer services

to our esteemed customers, HM’s network of service centers shall be

upgraded, to be able to handle the ‘Green Vehicles’.

PRICE: Owing to the price conscious Indian Consumers, the product shall be

priced competitively compared to the existing market players.

Mahindra Reva NXG is expected to hit the market by 2011 with a price

tag of 9lacs while the base price for its NXR model is 16lacs.

While another major player Toyota has premium priced its hybrid

products above 20lacs.

Considering these factors and probable tax rebates and support from

Indian Govt. we have decided to price our SEV1 at 8lacs INR for our base

model.

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ADVANTAGES AND DISADVANTAGES

ADVANTAGES:

*No hassles of servicing, changing engine oils or checking the coolant because SEV1 does not

have an engine, clutch, carburetor or the exhaust system which are a typical features of an

internal combustion engines. Hence, Maintenance is Easy and Inexpensive.

*The other inherent advantage associated with an EV is its Non Polluting Nature. However some

people might still argue that though pollution is not caused by the EV’s while being motored, the

methods required for generation of electricity (Thermal Electricity) do generate exhaust fumes.

In that regard I would like to present the fact that even if Fossil fuels like ‘Coal’ are used to

generate electricity which powers the EV’s, the effective carbon emission is cut down by 50%

and in case other cleaner sources of electricity are being used, then the carbon emissions become

less than 1% of that of a traditional internal combustion vehicle.

*The most obvious advantage would be its Very low running costs. The EV’s running cost comes

to around 40p/ km while that of any typical vehicle would be 15km/litre which amount to more

than 3 rupee per km.

*Social status is yet another advantage that can clearly be associated with the EV, which can be

used to flaunt before your boss, peers, neighbors and as a matter of fact every onlookers eyes

follow you as you glide past them and creates a positive impression about the owner .

DISADVANTAGES:

Amongst the disadvantages are its high initial costs, lack of charging infrastructure available

across the roadways in our country which limit its usage beyond the city limits. But seeing the

initiatives being taken by the Government of India, coupled with the pressing need to switch to

alternative fuel vehicles, we can expect some favorable news for the industry in the near future.

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CONCLUSION

As per our report, An Electric Vehicle is the need of Hour for Hindustan Motors in India. The

firm has been running into losses on account of its Operational Inefficiencies, Obsolete Vehicles

Models and falling demand for its products.

However the firm has a strong point in terms of its deep rooted penetration in the Indian markets

and so it becomes important that the firm harness this ‘Resource’ in order to become profitable

and establish its presence in the Indian markets all over again.

On account of the clutter of 4 wheelers of all kinds, dumped onto the Indian roads by the

countless domestic and foreign players, it would not be feasible if HM tries to introduce ‘Just

Another Vehicle’. Instead we advise HM to have a broader perspective and consider the kinds of

market we shall have in the near future.

At the same time it is not going to be possible for the company to do independent R&D owing to

its unsound economic condition.

Hence, we advocate that HM enter into a pact with Mitsubishi Motor Corporation, Japan and

provide Manufacturing and Distribution services for a “Green Vehicle” (Electric Car).

Mitsubishi already enjoys the Technological knowledge of this concept and has a strong global

presence of its Electric Vehicles and so it cannot afford to ignore one of the fastest growing

automobile markets of the World, viz. the Indian Automobile Market.

Through this kind of arrangement both HM as well as Mitsubishi shall enjoy a Win-Win situation

as HM will gain sufficient revenues by lending its services for the SEV1 and at the same time

Mitsubishi will be saving the expenses of having to build a separate manufacturing plant as well

as establish a distributor network.

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Apart from this, one important result of this agreement would be Reduced Production Costs for

the SEV1 on account of cheap labour, raw materials being available readily.The government of

India might also bring in legislations which give incentives for R&D work over EV’s and allow

tax rebates as well, in which situation the arrangement shall become all the more crucial and

advantageous for both the firms.

We can also enter into contracts with the Leading Indian Battery Manufacturers like HBL Power

Systems, from where we would be able to avail custom built Lithium ion batteries at affordable

rates and hence the firms can also consider exporting the SEV1 to the other markets where cost

of manufacturing might be higher.

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REFERENCEShttp://www.moneycontrol.com/news/business/hindustan-motors-what-led-to-networth-erosion_455837-3.html

www.autos.maxabout.com/cars/maini-auto/

www.hind motor .com

www. reva club.com/

www. reva global.com/

www. reva .com/

www. mitsubishi -motors.co.in

www.en.wikipedia.org/wiki/ MIEV

www.mitsubishi-motors.com/special/ev/

www.reviews.cnet.com/8301-13746_7-20012152-48.html

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