Acknowledgement

“Success is not a destination, but a journey”. While I reach towards the end of this journey, I realize I may not have come this far without the guidance, help and support of people who acted as guides, friends and torch bearers along the way.

The selection of this project was in the mind based on the study of various publications but it gained this shape by the proper and timely guidance of our teacher and colleagues.

I feel great pleasure to express my sense of gratitude to my project guide Mr. Sanajay Saxena, Branch Manager of Maruti Udyog Limited, Rampur and my faculty supervisor Ms. Sugandha Tiwari for the available guidance and keen interest which took in the completion of the project.

I take this opportunity to express my deepest and most sincere thanks to all senior executive and every associate of Maruti Udyog Limited, Rampur for helping me and providing me useful information. Interacting with them I learnt basic of the Automobile Industry and I am sure the knowledge imparted will go a long way in enriching my carrier.

I also owe a great deal of thanks to my parents who always boosted up my morale and encouraged me during the suggestion period of the project.

Last but not the least I am grateful to all the other people who co-operated with me in giving their valuable and precious opinion and time.

ISHAN SAXENA

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Research Methodolgy

Data has been collected from reputed magazines and various websites.For analysis purpose, statistical methods have been used like: Demand and Supply analysis, Sales analysis.

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The Indian Car Industry

The Indian car industry can be classified on the basis of price, into lower end small car or economy segment, higher end of the economy segment (Rs0.25-0.45mn) mid-size segment (Rs0.45-0.8mn), luxury/premium car segment (above Rs0.8mn). The lower end of the economy segment includes cars like Maruti 800, Maruti Omni and Premier Padmini. The higher end will include models like Maruti Zen, Matiz, Hyundai Santro and Telco Indica. The mid-sized segment currently includes models like Ford Ikon, Hyundai Accent, Maruti Esteem, Cielo and Honda City. The luxury segment of the car market includes such models as Mitsubishi Lancer and Mercedes E220.

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The demand for passenger cars can be segmented on the basis of the user segment as taxi operators, government, non-government institutions, and individual buyers. A major portion of the demand in India accrues mainly from personal vehicle owners. Lately, the Indian car market has seen a lot of action with a number of new entrants wanting a share of the pie. With individual incomes on the rise and finance being easily available, aspirations have also grown to include a car among a family’s prized possessions. With the Indian buyer still being price conscious, all these factors have contributed to the rising sales graph in the small car market.

The multi-utility vehicle (MUV) is used in transporting smaller loads over medium and small distances, providing low fixed and operating costs in comparison to LCVs. It can be used for transporting both goods and passengers. Apart from these it can be converted into an ambulance, a minivan, a pickup van or leisure vehicle. The MUV per se is a rugged vehicle. The high steel body, tough parts and brave interiors make it amenable to rough handling. The high ground clearance and high power delivery make it suitable for driving over rough terrain places, hilly regions, deserts etc. Till the early nineties, the Government of India was the largest MUV buyer and continues to be the single largest segment. It is used in police, paramilitary, defense, Public and Works Department (PWD), public sector organizations etc

The boom of 2004 can be surpassed in 2005 if the government introduces VAT and lowers excise.

Its been a landmark year for the Indian auto industry. For the first time, total sales (exports and domestic) of passenger vehicles — cars, utility vehicles and multi-purpose vehicles — in the country exceeded the 1-million mark. Sales grew 32.20 per cent in 2003-04 to around 1.03 million units. This comprised 9,00,752 units in domestic sales and 129,316 units of exports (source: Society of Indian Automobile Manufacturers {SIAM})

Market Structure

Market Structure (also known as market form) describes the state of a market with respect to competition.

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Perfect competition , in which the market consists of a very large number of firms producing a homogeneous product.

Monopolistic competition , also called competitive market, where there are a large number of independent firms which have a very small proportion of the market share.

Oligopoly , in which a market is dominated by a small number of firms which own more than 40% of the market share.

Monopoly , where there is only one provider of a product or service.

Type of Market Structure influences how a firm behaves:PricingSupplyBarriers to EntryEfficiencyCompetition

Determinants of Market StructureFreedom of entry and exitNature of the product – homogenous (identical), differentiated?Control over supply/outputControl over priceBarriers to entry

Types Of Market Structure

Perfect competition

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Perfect competition is an economic model that describes a hypothetical market form in which no producer or consumer has the market power to influence prices. According to the standard economical definition of efficiency (Pareto efficiency), perfect competition would lead to a completely efficient outcome. The analysis of perfectly competitive markets provides the foundation of the theory of supply and demand.

Examples

Some agricultural markets, with numerous suppliers and almost perfectly substitutable products have been suggested as approximations for the perfect-competition model. The extent of its applicability may be dependent on the market in question. Agricultural policies in many countries undermine the requirements for complete Pareto efficiency to apply.

Perhaps the closest thing to a perfectly competitive market would be a large auction of identical goods with all potential buyers and sellers present. By design, a stock exchange resembles this, not as a complete description (for no markets may satisfy all requirements of the model) but as an approximation. The flaw in considering the stock exchange as an example of Perfect Competition is the fact that large institutional investors (e.g. investment banks) may solely influence the market price. This, of course, violates the condition that "no one seller can influence market price".

eBay auctions can be often be seen as perfectly competitive. There are very low barriers to entry (anyone can sell a product, provided they have some knowledge of computers and the Internet), many sellers of common products and many potential buyers.

In the eBay market competitive advertising does not occur, because the products are homogeneous and this would be redundant. However, generic advertising (advertising which benefits the industry as a whole and does not mention any brand names) may occur.

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Monopolistic Competition

Monopolistic competition is a common market form. Many markets can be considered as monopolistically competitive, often including the markets for restaurants, cereal, clothing, shoes and service industries in large cities.

Monopolistically competitive markets have the following characteristics:

There are many producers and many consumers in a given market.Consumers have clearly defined preferences and sellers attempt to differentiate their products from those of their competitors; the goods and services are heterogeneous, usually (though not always) intrinsically so.

There are few barriers to entry and exit.

Producers have a degree of control over price.

Oligopoly

An oligopoly is a market form in which a market or industry is dominated by a small number of sellers (oligopolist). The word is derived from the Greek for few sellers. Because there are few participants in this type of market, each oligopolist is aware of the actions of the others. Oligopolist markets are characterized by interactivity. The decisions of one firm influence, and are influenced by the decisions of other firms. Strategic planning by oligopolist always involves taking into account the likely responses of the other market participants. This causes oligopolist markets and industries to be at the highest risk for collusion.

Monopoly

A monopoly (from the Greek language monos, one + polein, to sell) is defined as a persistent market situation where there is only one provider of a product or service, in other words a firm that has no competitors in its industry. Monopolies are characterized by a lack of economic competition for the good or service that they provide and a lack of viable substitute goods.

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A government-granted monopoly or legal monopoly is sanctioned by the state, often to provide a greater reward and incentive to invest in a risky venture. The government may also reserve the venture for itself, which is called a government monopoly.

Quick Reference to Basic Market Structures

Market Structure

Seller Entries

Seller Number

Buyer Entry Barriers

Buyer barriers

Perfect Competition

No Many No Many

Monopolistic Competition

No Many No Many

Oligopoly Yes Few No ManyMonopoly Yes One No Many

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Oligopoly

An oligopoly is a market form in which a market or industry is dominated by a small number of sellers (oligopolists). The word is derived from the Greek for few sellers. Because there are few participants in this type of market, each oligopolist is aware of the actions of the others. Oligopolistic markets are characterised by interactivity. The decisions of one firm influence, and are influenced by the decisions of other firms. Strategic planning by oligopolists always involves taking into account the likely responses of the other market participants. This causes oligopolistic markets and industries to be at the highest risk for collusion.

In an oligopoly, firms operate under imperfect competition and a kinked demand curve which reflects inelasticity below market price and elasticity above market price, the product or service firms offer, are differentiated and barriers to entry are strong. Following from the fierce price competitiveness created by this sticky-upward demand curve, firms utilize non-price competition in order to accrue greater revenue and market share.

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Market Players 

MUL

For a long time since the country’s independence in 1947, India had a protected market, divided between two players, Hindustan Motors and Premier Automobiles. Customers had little choice in what was an extreme version of a sellers’ market.  In the 1980s, India’s top politicians felt the need to produce a small car which would be within the buying reach of the Indian middle class. It was Suzuki with whom the Indian Government tied up a much smaller company. Suzuki’s small car capabilities probably influenced this decision. Suzuki formed a joint venture with the Indian Government, which was called Maruti Udyog Ltd (MUL). It launched a small car with an engine capacity of 800 cc, targeted at the masses, known as the Maruti 800. Subsequently, in spite of price hikes from time to time, it  remained within the reach of India’s upper middle class and became a runaway

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success. Later, MUL also launched Zen, and followed it up with a 1000 cc engine model for the luxury segment. MUL also launched two utility vehicles, the Omni and the Gypsy.   Currently, MUL sells about 15,000 units of Maruti 800 per month.  Till date, it has sold more than 1.5 million units of this model and does not face  any direct competition worth mentioning.  The Zen, MUL's second best selling car, faces competition from Santro (Hyundai), Matiz (Daewoo) and Indica (Telco). With the entry of other MNCs, especially the Koreans, both the Zen and the Esteem have been facing stiff competition in recent times. 

In the recent past, MUL’s market share has declined from 64% (in 1999) to 52% (in 2000).  Profits have also slid from Rs 522 crores in 1999 to Rs 330 crores this year.  MUL is also waking up to the changing profile of the Indian car market which has seen faster growth in the Zen-Santro-Indica-Uno-Matiz segment2 than the bread and butter Maruti 800 segment which it has totally dominated till date. Another problem that MUL faces is largely of its own making.  It had left the basic 800 model unchanged for over 15 years, leading to a growing consumer perception that it was offering only older models unlike its competitors. Recently, MUL has launched two new models, Wagon R and Baleno. MUL hopes that with a more complete product range, it will not only be able to attract new customers, but also hold on to existing customers. If MUL has to implement its plan of launching one new model, every 6-12 months, it will need an estimated Rs. 2500 crores over the next three years.  Till now, MUL has financed most of its expenditure through internal accruals, but borrowings have now become inevitable. 

Even though MUL's market share has fallen sharply in recent times, some analysts feel that the company's strengths should not be underestimated.  According to consultant1, Arindam Bhattacharya of A.T. Kearney, "As long as Maruti's own growth targets are being met, it doesn't really matter whether the market share is falling."  With annual sales of 406,574 vehicles and a total income of Rs 9,673 crore in 1999-2000, MUL's might is still formidable.  As Bhattacharya argues2, "The Maruti 800 is a great product.  No other car in the world can match its functionality and price even with the high duty incidence of 60 per cent in India.  There is need for such a car, which competes not with other cars but two wheelers."  In mid 2000, MUL's fixed investment in assets totalled Rs. 3500 crores, including a depreciated component of Rs. 1200 crores. With a production capability of 450,000 cars, trained manpower, vendor and service network and dealership, MUL feels its replacement cost is in the range of Rs. 10,000 crores, a figure which will be daunting even to

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global players. MUL has also been proactive in cutting costs.  It is working with its vendors on various value engineering projects Currently, MUL procures about Rs. 5000 crores of components every year.  Even a 5 percent cut can lead to cost savings of Rs. 250 cores. 

Hyundai

Unlike most other MNCs, Hyundai of South Korea decided to enter India with its small car model, Santro, which it priced attractively at about $7000.  Hyundai chose to set up a fully owned subsidiary and hired some of the most reputed executives in the Indian  automotive industry.  Hyundai also invested heavily in a modern car plant near the city of Madras, in the southern part of India. The facility can manufacture 130,000 engines, transmission sets and components per annum. According to Business India1, “What makes HMI’s (Hyundai Motor India) progress even more impressive is that the Sriperambadur plant is not another knocked down (KD) operation but an integrated manufacturing facility.  The Santros that will roll out of this plant will be manufactured from day one and not merely assembled.  This is a historic achievement.  No company has begun operations in this manner, not even Maruti Udyog, which initially imported CKD kits for the Maruti 800... The very essence of Hyundai’s strategy is to localise heavily from day one to give it a very early cost advantage, the number one priority in this highly price sensitive market.” The Santro has been a major success.  Though not very elegant looking, the car has enough leg and head room. Hyundai sold more than 75,000 vehicles during the period April 1999 - March 2000 and looks set to cross the 100,000 figure in the current year.  During the period January-June, 2000, Hyundai sold 45,513 units, against 21,884 in 1999. Encouraged by the success of the Santro, Hyundai launched the up market Accent model.  A major worry for Hyundai is that it has just one small car in its stable.  Hyundai is pinning its hopes on luxury models such as the Sonata, priced at around Rs 12 lakhs, but as the company's senior executives themselves admit, such models are unlikely to sell more than 250 units per month.  Hyundai is also vulnerable because of its relatively small size, when compared to global majors such as Ford, General Motors, Toyota, Daimler Chrysler, Volkswagen and Honda.  

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Telco

Founded in 1945, the Tata Engineering and Locomotive Company (Telco) is one of the leading players in the Indian automobile industry.  In its early years, Telco manufactured only commercial vehicles, through a technical collaboration with Mercedes Benz of Germany.  Starting with the 1980s, Telco has moved into light commercial vehicles, pick-up trucks, multi-utility vehicles, large cars and finally, small cars.  The Tata Mobile pick-up truck launched in 1988 was probably a turning point in Telco’s history.  The model failed to build volumes, but gave Telco engineers confidence in their design capabilities.  Telco then launched its big cars, Tata Sierra (1991) and Tata Estate (1992).  Both these cars have been more or less phased out, as Telco decided to take a plunge into the mass market small car segment1. 

The star in Telco's portfolio today is the small car, Indica, designed in Italy, but manufactured in India as an almost completely indigenous effort.  The car has a distinctive look and sufficient space but its engines can probably be improved.  At the time of launch, the Indica was plagued by quality problems.  Telco engineers, however, ironed these out in quick time.  Priced at just over Rs. 3 lakhs, the Indica offers value for money and has catapulted Telco to a position in which it is one of the few serious challengers to MUL.  In the Rs 3 - 4.5 lakh price segment consisting of the Santro, the Zen, the Matiz, the Wagon R and the Uno, Indica has a market share of 21%.

One concern expressed by analysts is Telco's staying power.  The project will not break even for some time. As Business Today2 recently remarked: "The car foray is sucking Tata Engineering into a vicious loop: as its losses keep mounting, the breakeven target keeps getting pushed back further.  As things stand today, analysts point out that to make money, Tata will have to sell close to one lakh cars, against the original target of 90,000 cars and the project cost has escalated to over Rs 2000 crores."  Some analysts even suggest that Telco should spin off its car venture and offer a stake to a foreign car major. Another worry for Telco is that it is dependent on just one model.  To be a serious player, the company needs a couple of additional models which would obviously cost money.    

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Daewoo

Daewoo entered India in 1995 through a joint venture with the local DCM group.  Japanese car major Toyota, also had a small stake in the project.  Daewoo later hiked up its equity stake to take complete control of the venture. 

Daewoo's first model for the Indian market was the Cielo.  Initially, Cielo seemed to be doing well, selling about 1000 units per month.  Later, as competing models arrived, Cielo's sales dropped sharply.  Daewoo reacted by offering major discounts.  This only hurt the car's image and did little to boost sales.  Daewoo attempted to learn from its experience, by launching its small car, the Matiz in late 1998.  Although the Matiz was initially priced high, Daewoo quickly cut the price to grab market share.  The Matiz is today priced attractively and is one of the most stylish small cars currently available in India.  Daewoo has pinned its hopes on the Matiz to make a comeback and catch up with arch rival, Hyundai.

Daewoo however faces major challenges in the months ahead.  Its parent company in Korea is in big trouble and is on the verge of being sold off.  It has only one small car model.  The company's operations in India are still to stabilize, with losses of Rs. 40.14 crore during 1998-99.  In the wake of the uncertainty over the future of its parent company,  Daewoo has postponed the launch of its luxury car models, Nubira and Leganza.

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Introduction: Maruti

Maruti Udyog Limited (MUL) was established in Feb 1981 through an Act of Parliament, to meet the growing demand of a personal mode of transport caused by the lack of an efficient public transport

system.

Suzuki Motor Company was chosen from seven prospective partners worldwide. This was due not only to their undisputed leadership in small cars but also to their commitment to actively bring to MUL contemporary technology and Japanese management practices (which had catapulted Japan over USA to the status of the top auto manufacturing country in the world). A license and a Joint Venture agreement were signed between Govt of India and Suzuki Motor Company (now Suzuki Motor Corporation of Japan) in Oct1982.

The objectives of MUL then were:Modernization of the Indian Automobile Industry.Production of fuel-efficient vehicles to conserve scarce resources.Production of large number of motor vehicles, which was necessary for growth.

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Product Lines

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Introduction: Tata Motors

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It has been a long and accelerated journey for Tata Motors, India's leading automobile manufacturer. Some significant milestones in the company's journey towards excellence and leadership

Established in 1945, Tata Motors entered into collaboration with Daimler Benz of Germany in 1954 to manufacture commercial vehicles. The collaboration ended in 1969. Tata Motors has since grown from strength to strength.

The Company has spread its manufacturing facilities across India by setting up plants at Jamshedpur, Pune and Lucknow.

This is coupled with a nation-wide sales, service and spare parts network. The Company enjoys a significant demand in export markets like Europe, Australia, South East Asia, Middle East and Africa. The Company's vehicles are seen in all the continents

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Product Line

The Passenger Car division was born out of a vision to offer the Indian customer all the comfort of a big car, at the price of a small car. The Indica was formally launched in 1998 & has rewritten the rules of the Indian car industry ever since then. The latest addition to the Tata Motors family after the launch of Indigo which is designed to deliver never-before levels in luxury, safety, power and comfort on Indian roads is the New Indica V2. Refreshingly different, with a sporty new look, stylish interiors, and more. The Indigo Marina story started two years back with the launch of the luxury sedan from Tata Motors, the Tata Indigo. There were however, a select group of people who wanted everything that came with the Indigo plus a little more space. A car that has the luxury of a sedan and the utility and convenience of a multi-utility vehicle. A car that does not compromise on power, safety and luxury. A car that has enough space to carry everyone and everything you've ever loved, right by your side, on every drive.

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Introduction: Hyundai Motors

Hyundai Motor India Limited (HMIL) is a wholly owned subsidiary of Hyundai Motor Company, S. Korea and is the second largest and the fastest growing car manufacturer in India.

HMIL s fully integrated state-of-the-art manufacturing plant near Chennai boasts some of the most advanced production, quality and testing capabilities in the country. The company is investing an additional US$ 220 Mn to expand capacity at this plant to 250,000 units a year in line with its recent designation as HMC s global export hub for small cars and to cater to its upcoming product launches India.

HMIL has sold over 500,000 cars in a record time of just over 5 years since commencement of commercial production in September 1998 and is all set to emerge as one of the largest exporters of passenger cars and components out of India.

HMIL was recently awarded the benchmark ISO 14001 certification for its sustainable environment management practices.

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Product Line

HMIL presently markets over 18 variants of passenger cars across four models, the Santro in the B segment, the Accent in the C segment, the Sonata in the E segment and the Terracan in the SUV segment. The company recorded combined sales of 150,741 units during calendar year 2003 with both Accent & Santro emerging leaders in their respective segments. In the fiscal year 2003, all Hyundai brands emerged as leaders in their respective market segments.

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Zen

Features

16*4 All Aluminum Hypertech Engine

16-Bit Microprocessor

Electronic Power Steering

Complete Safety

Smooth Driving

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Variants

ZEN VXi- a top-of-the-line variant of the ZEN World Car.

ZEN LX - Its lightweight, 1 lt. aluminium alloy engine combines with a super efficient factory fitted AC to give you phenomenal performance and unmatched driving pleasure.

ZEN LXi- is a vehicle especially meant to provide Superior Control at all speeds through its special electronic power steering.

ZEN D- is powered by one of the best diesel engines in the world: a 1527cc TUD5 engine made by global major Peugeot, with 57 BHP.

ZEN D P/S- Diesel is also available with Power steering.

Indica

The Indica was conceived as a car “with the overall size of a Maruti Zen, as much interior space as a Hindustan Ambassador and priced just as much as a Maruti 800.” It has a 1405 cc diesel engine. Its design is conceived by the Italian design house, I.D.E.A., and is based on the TUD 5 Peugeot power plant. Its tea drop highlights and bison tail lamps are its unique features. The Indica is the roomiest car in its class, with fully foldable rear-seat that allows you to accommodate extra luggage. It also has energy absorbing crumple zones, side-impact beams, a rigid mono-chrome frame and child safety locks. In tune with its reputation of a world class car, the Indica confirms to current European safety norms for frontal impact. The different Indica models are: The Standard version, DLE Diesel A/C, and Diesel DLE

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In September 1995, Ratan Tata, Chairman of Tata Motors had a dream. A dream he believed he shared with every Indian. "We'll have a car with the Zen's size, the Ambassador's internal dimensions, the price of a Maruti 800 and with the running cost of diesel."

It took an Indian to understand that the average (and not large) Indian family consisted of five members, that a rupee saved was a rupee earned, and that Indian highways called for a really sturdy car body.

In December 1998, the dream came true. And it was only fitting that a car built by Indians for Indians was called Indica. It was the first car that seriously took all Indian sensibilities into consideration.

A fact that was reflected in its sales (in 2001, the Indica became the fastest-selling automobile in Indian history when it chalked sales of 100,000 in less than 18 months.)

Features and Variants

February 2001, saw the next stage in the evolution of the diesel Indica - the Indica V2. A car that embodied everything the Indica had with several added features like a SuperDrive Engine, BlockShock Absorbers, a SmoothRide Suspension, EasyShift Gears and WideTread Tyres. It married the power and comfort of a large car with the easy maneuverability of a small one.

Within just a few months of its launch, the Indica V2 was the best-selling car in its class. Not surprising when you looked at all it offered. A 1400 cc engine that is, even today, unmatched in its class. The economy of diesel combined with the highest fuel efficiency in

its class.

Enough interior space to comfortably seat a family of five. And a reinforced, 980 kg rigid steel body for that same family's absolute safety.

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Taking off on the success of the Indica V2 diesel, the Indica V2 Petrol was launched in September 2001. It combined state-of-the-art technology with features like BlockShock Absorbers, EasyShift Gears, a SmoothRide Suspension, a SuperDrive Engine and WideTread Tyres with the smoothness of petrol.

The success story now looks set to continue with the new Indica V2. A car that will soon help Indica touch the quarter million mark. The new Indica V2 combines the best of the Indica V2 with fantastic new features that promise to make driving even more pleasurable.

Refreshingly different, with everything from a sporty new look, stylish interiors, and more. A sleek fascia with a chrome-lined grill, clear lens illumination, muscled flairs, flexible seating and electronic instrumentation with tacho, come as standard. Driven by a 1400 cc high performance petrol engine and a fuel-efficient diesel engine, even nature can't resist its fresh appeal. EVEN MORE CAR PER CAR.

Santro Xing

The origin of the Santro is Korea, and it’s designer is Park Jong - Suh, Hyundai’s chief designer. The most distinguishable feature of the Santro is its unique ‘tall boy’ feature design, which allows easy entry and exit. It has a large windshield, a high driving position  and its a pillar slope allows greater visibility. Santro runs on the 12V SOHC 1000 cc Epsilon engine and has the multi-point Fuel Injection System with dual-intake valves. Keeping in tune with its image of a family car, it provides several safety features like child safety rear door locks, crumple zone to absorb frontal impact, collapsible steering column. The different models are GLS 1 and GLS 2. GLS 1 is the usual model with the regular Santro features described above. GLS 2 is the deluxe

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model with power steering and contains several extra features like central locking, power windows etc.

Tall, wide and uniquely different, the new Santro Xing has a distinctly European styling. While it’s sleek lines and pleasing curves and contours will capture your heart. The compact outer dimensions, combined with its sporty stance, will ignite passion of driving into the sun and makes it stand out in a crowd of old hatchbacks & jelly bean shapes. So step into the Santro.

Features

4 Speed Automatic TransmissionManeuverability With Power Steering

Air Ventilation System

Anti Lock Braking System

Exterior Styling Concept

Styling

Aerodynamics

Pull type door handles

Variants

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Santro has a designer look and superb finish. The avant-garde “tall boy” design makes the car look spacious.

The first variant is the Santro Automatic. The Santro Automatic will be available with the 1.1 litre engine and features a four-speed automatic transmission. The automatic will be targeted at a niche segment of urban car buyers, who are aware of the comfort levels offered by automatic transmission. The price differential between the automatic and the manual transmission variants of the Santro is merely Rs 35,000-40,000.

By launching the Santro Automatic and offering ABS in all the Santro variants (including the manuals), HMIL is trying to demonstrate the technological capabilities that can be offered even to the small car buyer. The company is not expecting big volumes to come from the automatic. With the absence of the gear-shift and the clutch, automatics offer stress-free driving that HMIL hopes will appeal to discerning customers who are have to constantly change gears in the stop-and-go traffic characteristic of India's congested roads. The multi-functional, 999 cc Hyundai Santro, manufactured at HMIL’s plant near Chennai, will also be available in three variants — Santro, Santro DX with power windows and central door locking, and Santro DX with power steering. All the three variants of Santro have CFC-free air-conditioning as a standard feature and would be available in six colours — vivid red, neutral silver, campus blue, noble white, lively green, and bambi beige.

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Sales data of Last four Years

0

50000

100000

150000

200000

Zen Indica Santro

Zen 95326 101790 144136 186375

Indica 80205 105521 111574 144690

Santro 100017 103301 136423 171634

2003-2004 2004-2005 2005-2006 2006-2007

As we have seen in the last four year’s that sales of all the three brands have gone up, which proves that all the three companies are ploughing hard to make there share bigger in the market.

As we can analyse from the above graph and data that the initially the sales of Zen have only about 7 percent but later on when the Maruti introduced various features in the Zen model like power window, power steering and various new and attractive colours which made the customers to again divert towards its features, the sales of Zen made a remarkable expansion of around 30 to 40 percent in the year 2006-2007

Also Indica which was not that much competitive to Zen in terms of Customer awareness and brand loyalty, since till that time Maruti has already made a chunk for its products by providing the Indian automobile Industry what has been demanded. But as we all know that Indica was the first Indian manufactured car in India and it was Made in India, so Tata was able to make the customers to buy there product by implementing aggressive sales techniques.

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Finally, Santro “The Koreans Lion” which was launched in 1997 in India by HMIL (Hyundai Motor Ltd), provide the maximum mileage to the company to be able dig there feets in the Indian Industry as since after the Industrial Policy, these International were attracted towards the Asian market after analyzing the craze here for new and durable products.

But, consolidate growth of all three brands shows that sales of Zen has increased about 95 percent of Santro is 80 percent and of Indica is 71 percent. Which proves that Maruti instead of facing the tough competition from domestic as well as international brands, still able to maintain its biggest market share position in the Compact Car Segment.

Factors Determining the Growth of Market Share of Zen

As we can see from the above histogram, that the Zen petrol variant has been rated as one of the efficient brand in terms of cost of ownership, due to 16 valve micro processor the engine performance increases its life and as we all know that Maruti is one of the trusted brands for low maintenance cost.

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Also the cost per kilometer of Maruti’s Zen is the lowest among all the three competents, as due high fuel efficiency and around one-half times the engine life as compared to Hyundai Santro. So, due to above factors the total cost per kilometer of Zen is lowest, which is the most attractive determinant while making by Middle class Indians.

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The third determinant was problems per vehicle. Since the Maruti had a venture with Suzuki Motor Company, Japan (The compact car giant manufacturer) which is the world’s giant compact car manufacturer and having the latest technology to immediately switch over towards the change in demand, and also having interest in the Asian Market, made the Maruti Suzuki a large market share holder in the compact car segment till date.So, due to above reasons Maruti’s products are known for least problem maker machines and also durable.

As we all know that it is mainly the Quality factor which matters the most, the product can be provided by any company but the main thing is who provides it with specific and quality features. And the customers value the quality in the market while going fr a purchase. Since its launch, Tata Indica was fighting with its quality as it was continuously getting engine problem but when the company launched

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its turbo variant, the company was able to boost its sales but Zen and Santro are almost equal in providing equal satisfaction with regard to its quality factor.

DEMAND AND SUPPLY ANALYSIS

FACTORS CREATING DEMAND

FINANCING OPTIONS

Auto industry observers cite car loans as the biggest driving factor for the expansion of the Compact Car segment. At present, almost 85 per cent of all new car sales are backed by auto finance, compared to 65 per cent five years ago.

Dealers point out that 80 per cent of the CC-segment buyers opt for auto finance schemes. And HDFC Bank estimates the car loan industry has been growing at 25 per cent over the past three years.

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Interest rates on car loans have come down drastically in the past four or five years, which helps prospective buyers take the plunge. The growth of the CC-segment in the past few years can be mainly credited to factors such as rise in income levels leading to increased affordability and simultaneous reduction in interest rates leading to lower EMIs. The drop in interest rates usually helps very few people to probably shift from the base model to a deluxe model. A larger shift happens if people are willing to take long-term loans, like five years instead of the earlier three-year loans.

Perhaps that's one reason why car loan companies are offering high tenures (of up to 84 months), after an upward rate revision in December 2004 (interest rates climbed by 100 basis points). Executives at Banks claim that despite the revision, the demand for loans has not dropped since the higher tenure for loans increases affordability. Most banks claim that over the past five years there's been a dramatic change in the profile of applicants for CC-segment car loans. In 2000, applicants were typically middle or senior-level managers, now most of them are young executives and MBAs with less than five years' experience.

According to ICICI Bank, the top 15 cities contribute almost 75 per cent of CC-segment volumes.

The takeaway: the CC-segment accounts for one of every five cars sold in India, but one of every three car loans sanctioned. Those are numbers to watch out for.

ADVERTISING AND MARKETING

Due to the advertising techniques adopted by all the manufacturers in the CC- Segment the sales have risen drastically. As we have analysed the sales graph which shows that sice last two three years like looking up drastically for sales. It is all due to because the companies now a days are using even aggressive selling techniques for which they are even coping with the Film celebrities and Cricket stars, like Maruti has contracted Irfan Pathan as the brand ambassador of Zen and for Santro Hyundai has contracted for Shah Rukh Khan.

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And the companies are even trying to approach to the customer as to there demand for a vehicle at special interest loans, etc. They are using data according to the customers return and earning capacity for attracting the customers for there vehicles.

PRICE OF THE CAR

One of the major factors that affect the demand of any commodity in the market is the price of the commodity. As the law of demand also states that with an increase in price the demand of the commodity decreases and vice versa.

Since, in the compact car segment market even there are very less competitors there is stiff price competition. Like the price of Zen in 2001 was Rs. 3.93 lacs which increased to Rs. 4.01 lacs in 2005, but still the sale of the Maruti brand keeps on increasing it was due to the company’s reputation with the customers.

INCOME OF CONSUMER / BUYER

The income of the consumer or buyer of the car is a very important factor of demand. In recent time we have seen that due to increase in the Income of the general public, there has been a shift from the Lower CC-segment cars to the Upper CC-segment cars.

Due to the recent increase in the number of multinationals in India, the income level of the employees have risen drastically and has made CC-segment cars an entry level car for a lot of people. The average age of a CC-segment car owner has also dropped from 35 years to 31 years in India.

FACTORS AFFECTING SUPPLY

Lower CC-Segment

(Maruti 800, Alto etc.)

Upper CC-Segment

(Zen, Santro, Indica, Palio, Matiz etc.)

INCOME RISE

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PRICE OF THE CAR

Price of the car is one of the major factors that affect the supply as well as the demand of a car. If the price of the car is high in the market, the manufacturer or the supplier will want to supply more units in the market so he can earn more profits.

In the automotive industry where the market type is oligopoly, If one company drops its price for the car, there is a huge impact on the sales of the other cars as well as the same car. In the market the price of one car is inter-related to the price of the other cars in the same segment. The best solution is that market equilibrium should be achieved so that the amount of the quantity demanded should be equal to the amount of the quantity supplied to achieve maximum profits.

S – Supply LineD – Demand LineE – Equilibrium PointP0 – Equilibrium PriceQ0 – Equilibrium Demand

A Market Equilibrium is achieved at the point of intersection of the demand line and the supply line. The point is the equilibrium point where the quantity demanded is equal to the quantity supplied.

FACTORS OF PRODUCTION

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There are some factors of production which influence the supply of a car like

Cost of Raw MaterialLabour CostMachineryInput Cost

These factors influence the supply of a car largely. If the cost of the raw material (Steel, Spare Parts, Rubber) increases there will be an increase in the cost of production leading to decrease in profit margins. Costs like labour costs, machinery and input costs also influence the supply with the increase or decrease in these costs.

GOVERNMENT POLICIES AND TAX

If there is a change in the government policies regarding the increase in the road tax charged or the tax which is to be paid per unit sold, the supply of a car will fluctuate with the nature of the change.

Recently the government has reduced the custom duty on inputs and raw material from 20% to 15% which has increased the supply.

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Market Share in the Compact Car Segment

Market Share in FY 07

Hyundai, 22%

Tata motors, 20%

Maruti, 58%

Hyundai Tata motors Maruti

As we can analyse from here that the market share of Maruti in the Compact Car segment is larger reaching out to around 60% which makes it a king in the market. And Tata and Hyundai comprised of around 20% in the market. The causes for greater share of Maruti is that with an in-house advantage of huge volumes, Maruti holds tremendous opportunity in the used car business and also with the company’s continuous aggressive selling techniques and advertisements it is difficult for a competitor to catch up with the Maruti’s next market policy. These above data and even past few year’s findings can help us understand that inspite of facing competition from both the native country and from international brands “Maruti is trying to cope with the growing challenges”.

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Conclusion

Hyundai Motors has achieved the fastest market penetration in the Indian automotive industry. If Hyundai wants to remain competitive it will have to plan such a move to retain its position in the market as day by day new competitors are entering the market.

According to the Director General, Society of Indian Automobile Manufacturers (SIAM) is hopeful, “If you are looking to grab a share in the Indian Automotive by you need to have a small car. And, Maruti is the leader in this segment.”

So far, the company has enjoyed dominance in the huge cmpact car segment. According to market analysts, as the market shifts upwards, the market leader will get into trouble.

Since Maruti has already launched various models in various segments, but launching various segments would only refresh company’s ageing model line up. They maintain that Maruti may lose its mainstay compact segment as customers upgrade to larger cars.

At present, its close competitors are Tata Motors and Hyundai are pushing their products very aggressively. Even those competitors those who came with a history of manufacturing big cars or commercial vehicle manufacturers.

In addition to pricing of car, finance options, income of consumer/buyer, advertising and marketing, after sale service has also emerged as a major factor of demand. Prices of Fuel are now also affecting the demand. Due to increasing petrol prices a lot of middle class consumers for whom daily running cost are paramount are shifting towards the diesel cars. So, for this Maruti should try to break its limited product range barrier to maintain its share in the market in year’s to come.

But, “the biggest advantage, however, that Maruti has here is that Suzuki comes with a legacy of having mastered the art of producing small and compact cars. India has a huge potential for small cars and not big ones at the moment”

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Biblography

Research through the internetSearch Engines like google, yahoo, rediff and many more.Society of Indian automobile manufacturers.

http://www.marutiudyog.com/index.asp http://www.valuenotes.com/asp http://www.hyundai-motor.com/

Research through MagazinesIndian ManagementBusiness TodayMotor WorldEconomic Services

Showrooms of various automobile manufacturers.

NPO Customer Satisfaction Report.

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