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SVKM’s Narsee Monjee Institute of Management Studies – Hyderabad

 

 

Post Graduate Diploma in Management 2017-19

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Industry Analysis – Automobile Industry

Company Name – Maruti Suzuki

 

 

 

 

 

 

 

 

Guided By – Dr. Kavita Kulkarni                                          Created By – Neer Chhajer

Assistant Professor (Marketing)                                     SAP ID –
80303170018

NMIMS Hyderabad                                                           
Batch – 2017-19

Table of Contents

 

S. No.

Particulars

Page No.

1.

Key Objectives

 

2.

Introduction

 

3.

Industry and Competition: Market Size and
Characteristics

 

4.

Industry and Competition: Market Trends

 

5.

Industry and Competition: Market Structure

 

6.

Characteristics of Competitors

 

7.

Behavioural Traits of each Major Competitor

 

8.

Industry Analysis – Metrics

 

9.

References

 

 

 

 

 

 

 

Key
Objectives:

 

In
today’s competitive era, the word “Analysis and Strategy” is very crucial for
all business organizations. The organizations have started realizing that
customer centric and aggressive marketing strategies play vital role to become
successful market leaders.

Despite
of the fact that globalization has opened the doors of opportunities for all
the industrial sectors, automobile sector is the one that is maximum exposed to
some known, unknown risks and a lot of competition. It is because of this
competition that we consumers end up getting the maximum advantage.

To
obtain a unique and differential advantage, any organization has to be creative
in it’s various marketing strategies. Today it’s due to these innovative
marketing strategies, Maruti Suzuki has become the leading and largest seller
of automobiles in India. The company has been a leader in adopting various
brand positioning, advertising and distribution strategies to capture the
market.

The
objective of this report is to do a comprehensive analysis of consumer
four-wheeler industry with major focus on Maruti Suzuki India and its
competitors.

 

 

 

 

 

Introduction:

While
the automotive industry in India started developing in the 1940s, distinct
growth rates started only in the 1970s. Cars were considered ultra-luxury
products, manufacturing was strictly licensed, expansion was limited and there
was a restrictive tariff structure. The decade 1985 to 1995 saw the entry of
Maruti Udyog in the passenger car segment in collaboration with Suzuki of
Japan, and Japanese manufacturers in the two-wheeler and commercial vehicle
segments. After economic reforms took place in India in 1991, it is only in the
mid-1990s, that the automotive industry started opening up.

Thus,
the mid-1990s are characterized by the entry of global automotive manufacturers
through joint ventures in India. Till the 1990s, the automotive industry in
India was primarily dominated by Maruti Suzuki, Tata Motors, Hindustan Motors
and Premier Padmini in the passenger car segment. Ashok Leyland, Tata Motors
and Mahindra & Mahindra dominated the commercial vehicle segment while
Bajaj Auto dominated the two-wheeler segment. After the year 2000, further policy
changes were introduced and focus on exports in the industry started
increasing.

Evolution of the Indian Automotive Industry

Following
that, the Core Group on Automotive Research & Development (CAR) was set up
in the year 2003 to identify priority areas for Research and Development
(R&D) in India. Turnover of the automotive industry in the year 1998–1999
was Rs. 360 billion and the industry provided employment to over 10 million
people directly and indirectly. The contribution of the automotive industry to
the GDP during the same period was 4 per cent rising from 2.77 per cent
recorded in the year 1992–1993.

The
average rate of growth of freight and passenger transport on the road was the
highest compared to other means of transport such as rail, air and sea
throughout the 1990s. Even in terms of absolute volume, traffic handled by
roads was the maximum among the other means. This partly explains the rise in
growth of the automotive industry especially since the 1990s.

 

 

 

 

 

 

 

 

 

 

 

Industry
and Competition: Market Size and Characteristics

The
Indian auto industry is one of the largest in the world. The industry accounts
for 7.1 per cent of the country’s Gross Domestic Product (GDP). The Two
Wheelers segment with 80 per cent market share is the leader of the Indian
Automobile market owing to a growing middle class and a young population.
Moreover, the growing interest of the companies in exploring the rural markets
further aided the growth of the sector. The overall Passenger Vehicle (PV)
segment has 14 per cent market share.

Bifurcation of Indian Automotive Industry

 

India
is also a prominent auto exporter and has strong export growth expectations for
the near future. In April-March 2017 exports of PV and Commercial Vehicles (CV)
registered a growth of 16.20 per cent and 4.99 per cent respectively, over
April-March 2016. In addition, several initiatives by the Government of India
and the major automobile players in the Indian market are expected to make
India a leader in the 2W and Four-Wheeler (4W) market in the world by 2020.

Sector Composition

Despite a head start, the
passenger car industry in India has not quite matched up to the performance of
its counterparts in other parts of the world. The primary reason has been the
all-pervasive regulatory atmosphere prevailing till the opening of the industry
in the mid-1990s. The various layers of legislative Acts sheltered the industry
from external competition for a long time. Moreover, the industry was
considered low-priority as cars were thought of as “unaffordable luxury”.

The following table
presents a comparative view of the extent of motorization in India vis-à-vis
certain other countries in the world:

Market Overview:

·      
The automobile manufacturing industry comprises the
production of commercial vehicles, passenger cars, three and two wheelers.

·      
25 million automobiles produced in FY17.

·      
The total production volume grew at a CAGR of 5.56 per
cent between
FY12-17 and increased 9.36 per cent year-on-year in April-November 2017.

·      
Automobile exports from India increased 11.94 per
cent
year-on-year in April-November 2017.

·      
During the same period, two and three wheelers exports
increased 17.48 per cent and 21.29 per cent respectively.

·      
The sales of two wheelers is expected to grow 8-10 per
cent in FY18.

·      
Further, the overall automobile sales increased 24.05 per
cent
year-on-year to 19,39,671 units in November 2017.

·      
Two wheelers and passenger cars accounted for 79 per
cent and 15 per
cent of
production volume in FY17 respectively.

·      
Over 67 per cent of the export volumes comprised of
two wheelers, followed by 22 per cent for passenger cars.

 

 

Maruti Suzuki – A major player in the passenger vehicle category

Maruti Suzuki India
Limited (MSIL), formerly known as Maruti Udyog Limited is a subsidiary of
Suzuki Motor Corporation of Japan. Maruti Udyog Limited was incorporated in
1981 under the provisions of Indian Companies Act, 1956. In 1982, a joint
venture was signed between Government of India and Suzuki Motor Corporation. It
was in 1983 that India’s first affordable car, Maruti 800, a 796-cc hatch back
was launched. It was through this car the company went into production in a
record time of 13 months. Today, Maruti Suzuki makes 1.5 million cars per year
which accounts to one car every 12 seconds. The company manufacturers full
range of cars – from entry level Alto to stylish hatchback Ritz, Swift, Wagonr;
sedans such as Dzire, SX4 and sports utility vehicle Grand Vitara and Brezza.

Suzuki’s technical
superiority to pack power and performance into a compact, lightweight engine
that is clean and fuel efficient has made their cars extremely relevant to
Indian customers. Also, with product quality, safety and cost consciousness
embedded into their manufacturing process, they ensure to continue as market
leader. It is India’s largest passenger car company, accounting for about 47%
of the domestic car market.

Source:https://auto.economictimes.indiatimes.com/news/passenger-vehicle/cars/passenger-vehicle-manufacturers-report-card-market-share-analysis/58610826

 

Maruti Suzuki has two
state-of-the-art manufacturing facilities in India. It’s first facility is at
Gurugram spread over 300 acres that houses three fully integrated plants with a
total installed capacity of 350,000 cars per year. The other facility is at
Manesar spread over 600 acres.

 

 

 

Porter’s Five Force Framework Analysis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industry
and Competition: Market Trends

The major trends in the Indian car
market are as follows:

 

·      
Growing Demand:

There
is a strong growth in demand due to rising income, middle class and a young
population. India, also being amongst the world’s top five auto manufacturers,
a growth in export demand is set to accelerate. Government has also taken
initiatives to set up manufacturing plants throughout India via Make in India
policy. The domestic sales of passenger vehicles are expected to increase at a
CAGR of 12.87 percent between 2016-26. Also, the utility vehicle sales
increased at 19.95 percent year-on-year in April-November 2017.

Source: http://www.oica.net/category/production-statistics/2016-statistics/

 

 

·      
Rising Investments:

India
has significant cost advantages with auto firms saving 10-25 percent on
operations vis-à-vis Europe and Latin America. A large pool of skilled manpower
and a growing technology base induces greater investments. Cumulative FDI
inflow of around US$ 17.91 billion was there in the sector between April 2000 –
September 2017.

·     
Innovation Opportunities:

Innovation
is likely to intensify among engine technology and alternative fuels. The focus
is shifting on electric cars to reduce emissions. Further, the Government aims
to build India into an R hub.

·      
Policy Support:

The
Automotive Mission Plan 2016-26 targets a fourfold growth in the automotive
industry. The government aims to develop India as a global manufacturing
centre. Adding to that, reforms such as GST help in boosting the sectoral
growth.

Allocation of Automobile Industries
Across India:

·      
There are 4 specific regions in the
country that have become large auto manufacturing clusters, each present with a
different set of players.

North:

Ashok Leyland

Force Motors

Piaggio

Swaraj

Amtek Auto

Eicher

Honda SIEL

Maruti Suzuki

Tata Motors

Bajaj Auto

Hero Group

Mahindra

 

West:

Ashok Leyland

Bajaj Auto

FIAT

GM

Skoda

Bharat Forge

Tata Motors

Volkswagen

John Deere

Mercedes Benz

Volvo

Renault-Nissan

 

East:

Tata Motors

Hindustan Motors

JMT

Exide

Simpson & Co.

 

 

South:

Ashok Leyland

Ford

Toyota Kirloskar

Volvo

Sundaram Fasteners

Hyundai

BMW

Bosch

Daimler

Caterpillar

Hindustan Motors

Renault-Nissan

 

Some of the
major Market Trends for Indian Markets are:

·      
The luxury car segment has seen
high growth rates and expanded at 37 percent CAGR between FY07-16.

·      
The sale of luxury cars stood at
33,279 units in 2016.

·      
The luxury market in India is
expected to grow at 25 percent CAGR till 2020.

·      
During January-September 2017,
luxury car-makers Mercedes Benz and BMW witnessed growth of 19.6 percent and
17.3 percent in India sales.

·      
With 12th largest
population of high net worth individuals, India definitely has a huge room for
this segment.

·      
Various carmakers such as BMW,
Audi, Toyota, Mercedes Benz have started providing customized finance to
customers through NBFC’s.

·      
Major multi-national companies and
Indian corporate houses are moving towards taking cars on operating lease
instead of buying them.

·      
Indian government has shifted its
focus on electric cars in order to meet the emission reduction targets.

·      
The aim is to sell only electric
cars by 2030 under the National Electric Mobility Mission Plan which was
launched in 2013.

·      
Mahindra has launched its new
electric car and Tesla motors is all set to enter the Indian markets.

·      
Suzuki Motors is setting up a
lithium ion battery plant in Gujarat.

·      
Further, electric buses from Tata
Motors are in testing phase.

·      
Ashok Leyland is planning to launch
commercial vehicle variants in FY18.

·      
In March 2017, Maruti Suzuki
launched Baleno RS, a high-performance hatchback car. In September 2017, it
brought Suzuki’s lubricant and car care brand Ecstar to India.

·      
SAIC Motors is planning to enter
the Indian market, the first Chinese automotive company to do so.

 

 

 

 

 

Overview of
Maruti Suzuki’s Performance:

Trend in
Domestic Passenger Vehicle Sales Growth (in %):

Source: https://thumbor.assettype.com/bloombergquint%2F2017-09%2F2d9c7c1b-a3f1-4f2b-a8fa-afb16b53e7d7%2FMaruti%20Sales%20Aug.jpg?auto=format&q=60&w=2048&fm=pjpeg

 

Sales Trend Analysis:

Source: http://www.autobei.com/autoanalysis/wp-content/uploads/2016/04/Maruti-Suzuki-Sales-trend-analysis-FY-2015-16.jpg

 

 

 

Industry
and Competition: Market Structure

·      
Competition:

The
market of automobiles is very competitive and manufacturers are coming forward
with the latest ideas and techniques to beat the competition and remain on the
top. There are top business giants taking lead and several other emerging
companies trying hard to come forward and stand with leading automobile
producers. The easing of the trade barriers encouraged the MNCs to invest in
the Indian market to cater to the needs of the consumers. The living standards
rose in the urban sector due to high disposable income along with the rise in
the purchasing power of the urban families which increased the sales volume of
various manufacturers in India. The large-scale companies such as Mahindra
& Mahindra, Honda, Toyota have targeted the urban consumers and have also
expanded their chain in the mid-sized cities and towns. On the contrary to
this, companies such as BMW, Mercedes Benz, Audi have always targeted the
market of urban India and focuses largely upon the value-added products for the
elite class or upper middle-class population.

·      
Branding:

Creating
strong brands is important for automobile companies and they devote
considerable money and effort in developing bands. With differentiation on
functional attributes being difficult to achieve in the competitive market,
branding results in consumer loyalty and sales growth. Leading companies like Maruti
Suzuki, Honda, Mahindra & Mahindra, Hyundai and Tata Motors which account
for almost 70 percent of industry revenues in the country, spend almost
10percent of their turnover on advertising and brand promotions. The promotion
strategy includes tying up with top actors and other celebrity brand
ambassadors, besides going in for high-profile launches at Auto Expos.

·      
Distribution Network:

With
gradual liberalisation of the automobile industry since 1991, more and more
players have set up manufacturing facilities in India. At present there are 20
manufacturers of passenger cars and multiutility vehicles, 12 manufacturers of
commercial vehicles, 14 of two/three wheelers and more than 10 of tractors. The
automobile industry tends to be located near iron and steel producing centres
because steel is the basic raw material used in the industry. The proximity of
the places producing tyres, tubes, storage batteries, paints and other
ancillary industries is considered to be an added advantage. Port cities also
find favour with this industry because of the import and export facilities
offered by such places.

·      
Top Companies:

The top ten automobile companies in
India are:

1.    Maruti
Suzuki

2.    Hyundai
Motors

3.    Mahindra
& Mahindra

4.    Honda

5.    Tata
Motors

6.    Toyota
Kirloskar

7.    Renault
India

8.    Ford
Motors

9.    Nissan
Motors

10.Volkswagen
India

 

 

 

·      
Market Share of Major Players:

Market Share of passenger vehicles
in India – November 2017

Source: http://www.theautomotiveindia.com/images/car-sales/2017/november/Market-Share.png

Market Share of two wheelers in
India – April-September 2016

Source: http://www.autocarpro.in/IMG/223/47223/2w.jpg

Market Share of utility vehicles in
India – April-September 2016

Source: http://www.autocarpro.in/IMG/220/47220/uv.jpg

 

·      
Mergers & Acquisitions:

Year

Acquirer

Target

2011

Mahindra & Mahindra

SsangYong Motors

2011

Man Truck & Bus AG

Man Force Trucks

2011

Motherson Sumi

Peguform Group

2013

Mahindra & Mahindra

CIE Automotive

2016

Ashok Leyland

Hinduja Foundries

2016

Nissan

Mitsubishi Motors

2016

Samsung

Harman International

2016

Ashok Leyland

Nissan Motor Corporation (LCV)

 

 

Characteristics of Competitors

 

Growth Drivers of Automobile Sector:

·      
Growing Demand:

Ø
Rising income and a large young
population.

Ø
Greater availability of credit and
financing options.

Ø
Demand for commercial vehicles
increasing due to high level of activity in infrastructure sector.

 

·      
Policy Support:

Ø
Clear vision of the Indian
government to make India an auto manufacturing hub.

Ø
Initiatives like ‘Make in India’,
‘Automotive Mission Plan 2026’ and ‘NEMMP 2020’ to give a huge boost to the
sector.

 

·      
Support Infrastructure & High
Investments:

Ø
Improving the road infrastructure.

Ø
Established auto ancillary industry
giving the required support to boost growth.

Ø
 5 percent of total FDI inflows to India went
to the automobile sector.

 

 

Higher Income Aids Growth in Urban and Semi-Urban Markets:

·      
Incomes have risen at a brisk pace
in India and will continue rising given the country’s strong economic growth
prospects. According to IMF, nominal per capita income is estimated to grow at
a CAGR of 4.94%.

·      
An important consequence of rising
incomes is growing appetite for premium products, primarily in the urban
segment.

·      
As the proportion of working age
population in total population increases, per capita income and GDP are
expected to surge.

·      
Per capita income in India is
expected to grow at a CAGR of 8.09% during 2015-2019.

 

 

 

In
the below section, Maruti Suzuki is compared with major competitors and
following have been the common characteristics of all the competitors:

·      
Pricing Acumen:

Any
competitor hardly gets its product pricing wrong. Each company has its products
that are typically priced towards the bottom of their respective segments and
provide great value for money to the customers. In many cases such as Grand
I10, Hyundai has not bothered to benchmark its pricing against the existing
major product in the market, preferring to create a new benchmark of its own
with the aggressive pricing.

·      
Dealer Discipline:

A
number of dealers for each manufacturer have grown with many seeing as significant
improvement in their prosperity as volumes increased. This has created a
situation where a dealer is not too tempted by poaching efforts of rival car
makers. Companies on their part have done dealer monitoring, discipline and
training and ensured that its dealers are some of the most efficient and
aggressive ones in the market. The aggressive follow-ups with prospective
customers on one hand is supplemented by well-oiled service mechanism on the other.
These factors go a long way in improving customer loyalty for each company.

·      
Ruthlessness:

Companies
are becoming more ruthless with its dealers. It wants its dealers to be loyal
to only their brand.  The dealers are not
allowed to venture into multi-brand dealerships or even float dealerships of
other brands with a different management set-up. Hyundai and Tata Motors do not
allow any such leeway to its dealers.

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