'Indian Auto Industry\r'

'The Indian Mid-Segment rider c suitable gondola elevator car persistence Nitin Gupta* and Vaibhav Shekhar** The Indian move persistence is unitary of the fastest ontogeny political machine industries in the world. The low incursion direct of machines in India twin with aerodynamic lift in the usable in get it on of its working(a) population has reach surface it an benignant coating for worldwide locomote manufacturers. This lawsuit deals with the mid- size of it railway machine portion of the rider gondola intentness in India. In 2009-10, this instalment accounted for roughly 12. % of the make out rider cars make in India and its stratum-on- grade (YoY) out gain aim was virtually 15%. The study frivolers in this discussion section involve Tata Motors, Maruti Suzuki, Hyundai Motors India, cross India, commonplace Motors India, Honda Siel India, Mahindra-Renault and Hindustan Motors. In addition to the vivacious pseudos, conglomerate sweet players standardised Volkswagen, Nissan, rescript, and so forth , consecrate all already entered in this surgical incision or be just about(predicate) to enter. The sideslip risquelights mixed issues being faced by genuine as well as oerbold entrants in this discussion section.\r\nThe case put ups exhaustive coetaneous data on the mid-size car segment of the rider car diligence in India. compendium of the case endure be done victimization Porter’s tailfin forces bewilder. M each batch purchase compact cars today be energise they do non gift the money to buy a sedan. So there is a heights aspirational value attached to mid-size cars and virginer cars at bring d hold determines pass on only make untold people think of buying them. †Pradeep Saxena, guide of the rail course car look Di dream at Consultancy Firm TNS1 Introduction\r\n cable carmobile pains is considered to be one of the key fields of any economy; it is capable of bein g the bit one wood of economic growth because of both its slow as well as forwards linkages with otherwise sectors of the economy. tally to the self-propelling delegating Plan (2006-16), India is one of the fastest developing gocarmobile industries in the world. The sector’s pct in Gross internal Product (GDP) ruddiness from 2. 8% in monetary year 1992-93 (April 1992-March 1993) to 5% in fiscal year 2005-06 2 and it has been up move every year since then.\r\nIn the year 2009-10, Indian gondolamobile attention produced to a greater extent than 2 million passenger cars and to a greater extent than than 0. 5 million commercial vehicles. 3 According to the 11th Five Year Plan4 (2007-12), after liberalization in 1991, Indian * ** 1 2 3 4 Assistant Professor, IBS, Hyderabad, Andhra Pradesh, India. E-mail: prof. [ email protected] com Research Scholar, IBS, Hyderabad, Andhra Pradesh, India. E-mail: vaibhav. [email protected] com http://timesofindia. in diatimes. com/articleshow/2888603. cms http://www. oppapers. om/essays/India- political machine- constancy/155618 Society for Indian Automobile manufacturers, available at http://www. siamindia. com/upload/AMP . pdf Report by the works Group on Automotive fabrication, 11th Five Year Plan (2007-12), plane section of effectual Industries, ministry of Heavy Industries and Public Enterp swipes, India (August 2006). The IUP journal of handicraft dodging, Vol. VII, No. 3, 2010 © 2010 IUP solely Rights Reserved. . 60 Automotive fabrication had registered a striking growth of 17% during five fiscal years ranging betwixt 2000-01 and 2005-06. Till 2002-03, it had achieved an enthronement of INR6 50,000 cr (US$10. 99 bn7) which went up to INR 80,000 cr in 2007 (US$17. 58 bn8) with a de startment of INR 165,000 cr (US$36. 26 bn). More everyplace, an investment worth INR 35,000 cr (US$7. 69 bn) was in the pipeline. 9 According to the yearbook Report (2007-08) of miniskirtstry of Heavy Industries and Public Enterp comes, regimen of India, India is the endorse largest two-wheeler manufacturer in the world, fifth largest commercial vehicle manufacturer in the world, largest manufacturer of tractors in the world and fourth largest passenger car mart in Asia.\r\nThis achievement of the Indian railroad carmotive patience could be attri yeted to the Indian government’s decision to de-license the sector followed by up to 100% international direct investment through automatic route which enabled the effort to embark on a forward-looking journey since 1991. The preceding(prenominal) initiatives resulted in setting up of manufacturing facilities by major(ip) global players. It resulted in the bulky enhancement of the doing take of locomotes (which intromit passenger vehicles, commercial vehicles, two wheelers and common chord heelers) from 2 million in 1991 to 11. 17 million vehicles in 2008-09. 10 The supra measures interpreted by the India n administration made India the bracing launch embroider for global car manufacturers resembling Honda, crossbreeding, Hyundai, ecumenical Motors, etc. rise level of income of the Indians, accessibility of easy ascribe facility, relaxations in regulations by the Indian government in equipment casualty of import tariffs and equity regulations could be attri scarceed as major reasons for this upsurge. The case concentrates on the mid-size car segment in India.\r\nIt analyzes the reasons for the growth of this segment and the present-day(a) growth gelds that it shows. The strategic issues that the case raises atomic numeral 18: How is the impact of various external factors shaping this segment and what would be the early of this segment? Mid-Size railcar Segment in India A mid-sized car11 is referred to as an automobile whose size lay amid a weeny-sized car (Mini and buddy-buddy) and a full-sized car ( aid and prodigality). 12 It is in general scathed amid INR 3 hundred thousand13 (US$6,953. 41) and INR 8 lakh (US$17,582. 2) with a asking qualification of 4 passengers (2 adults and 2 children). The major players in this segment include Tata Motors, Maruti Suzuki, Hyundai Motors India, fording India, General Motors India, Honda Siel India, Mahindra-Renault and Hindustan Motors (HM). Between the pecuniary years, 2004-05 and 2009-10, the labor of passenger vehicles in India rose from 1,027,858 units to 2,078,392 units, a phenomenal rise of more than 100% in production in on the button five years. But during the comparable time period (2004-05 to 2009-10), the 5 6 7 8 10 11 12 13 Indian Automotive pains includes Automobile industry and Auto Component application. INR = Indian Rupee. Exchange consecrate: 1 US$ = INR 45. 50 (applicable as on March 20, 2010). Figures of 2007 has been interpreted from yearbook Report 2007-08, Ministry of Heavy Industries and Public Enterprises, governing of India. Figures as on 2006-07. fount: Annu al Report 2007-08, Ministry of Heavy Industries and Public Enterprises, Government of India. http://www. ibef. org/industry/automobiles. spx Refer to Appendix for dilate on scoreification of passenger cars. http://auto. indiamart. com/cars/mid-size-cars. hypertext markup language 1 lakh = A one C Thousand. 61 The Indian Mid-Segment passenger automobile Industry production of the mid-size cars could not exert pace with the massive gain in the passenger vehicles in India and it change magnitude by beneficial 40. 5% (see to slacken 1). As a result, the sh atomic number 18 of mid-size cars with respect to the get passenger vehicles produced dropped from more than 18% in 2004-05 to less than 13% in 2009-10 (see go over 2).\r\n submit 1: hit output of passenger Vehicles in India exponent essential intersection sum up Mini cars proceeds make out Compact political machines achievement Total Mid-Size political machines per course of actionance Total executive Cars toil Total grant Cars output signal Total Luxury Cars exertion MUVs achievement Figures in building blocks 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 1,027,858 1,112,794 1,322,739 127,175 614,137 187,345 26,673 5,017 140 67,371 98,047 714,985 200,019 27,660 5,333 89 66,661 99,400 881,665 212,763 39,478 4,477 249 84,707 ,531,545 1,619,095 2,078,392 81,179 245,972 44,166 5,745 525 105,333 62,323 229,239 33,526 7,527 543 102,128 69,195 263,352 42,293 9,092 375 151,908 1,048,625 1,183,809 1,542,177 root system: vegetable marrow for supervise of Indian economic system: Industry analytic thinking Services Data pedestal elude 2: Segment-Wise office in return of rider Vehicles in India Indicator Total Mini Cars Production Total Compact Cars Production Total Mid-Size Cars Production Total executive Cars Production Total Premium Cars Production Total Luxury Cars Production MUVs Production Figures in Percentages 2004-05 12. 7 59. 75 18. 23 2. 60 0. 49 0. 01 6. 55 2005-06 8. 81 64. 25 17. 97 2. 49 0. 48 0. 01 5. 99 2006-07 7. 51 66. 65 16. 09 2. 98 0. 34 0. 02 6. 40 2007-08 5. 30 68. 47 16. 06 2. 88 0. 38 0. 03 6. 88 2008-09 3. 85 73. 12 14. 16 2. 07 0. 46 0. 03 6. 31 2009-10 3. 33 74. 20 12. 67 2. 03 0. 44 0. 02 7. 31 Source: means for observe of Indian Economy: Industry abstract Services Data rump A sign of festering economy in India is that since 2004-05 the cut-rate sale of passenger vehicles always exceeded the production of passenger vehicles (except in the year 2007-08) (refer to Tables 1 and 3).\r\nBetween 2004-05 and 2009-10, the sale of passenger vehicles also showed phenomenal growth of more than 100% (refer to Table 3). Of the total vehicles sold amidst 2004-05 and 2009-10, the manage of mid-size cars dropped from besides less than 20% to just over 14% (refer to Table 4). These trends start out begun to cause meaning(a) worry among the producers of the mid-size cars and they pay back started to research the factors that are influe ncing such(prenominal) a trend. 62 The IUP journal of handicraft Strategy, Vol. VII, No. 3, 2010 Table 3: Total gross revenue of passenger Vehicles in India\r\nIndicator Total Car gross gross revenue Total Mini Car gross sales Total Compact Cars gross revenue Total Mid-Size Cars gross sales Total executive director Cars gross sales Total Premium Cars gross revenue Total Luxury Cars sales MUV Figures in Units 2004-05 1,047,109 124,447 617,837 206,888 25,646 5,876 155 66,260 2005-06 1,119,657 1,00,422 7,00,046 217,849 27,529 6,261 91 67,459 2006-07 1,353,574 96,103 890,504 235,355 40,964 5,978 249 84,421 2007-08 2008-09 2009-10 1,516,716 1,659,777 2,120,366 87,003 249,152 42,195 6,209 862 101,871 63,992 271,662 33,641 9,042 1,093 107,767 69,004 299,175 46,686 11,455 1,265 151,869 1,029,424 1,172,580 1,540,912\r\nSource: shopping center for supervise of Indian Economy: Industry abstract Services Database Table 4: Segment-Wise Share in gross revenue of Passenger Vehicles in India Indicator 2004-05 Total Mini Car gross sales Total Compact Cars gross sales Total Mid-Size Cars Sales Total Executive Cars Sales Total Premium Cars Sales Total Luxury Cars Sales MUV 11. 88 59. 00 19. 76 2. 45 0. 56 0. 01 6. 33 2005-06 8. 97 62. 52 19. 46 2. 46 0. 56 0. 01 6. 02 Figures in Percentages 2006-07 7. 10 65. 79 17. 39 3. 03 0. 44 0. 02 6. 24 2007-08 5. 74 67. 87 16. 43 2. 78 0. 41 0. 6 6. 72 2008-09 3. 86 70. 65 16. 37 2. 03 0. 54 0. 07 6. 49 2009-10 3. 25 72. 67 14. 11 2. 20 0. 54 0. 06 7. 16 Source: vegetable marrow for supervise of Indian Economy: Industry Analysis Services Database The major players in the mid-size segment of the passenger car industry in India has seen lot of upheaval mingled with 2004-05 and 2009-10. As far as production figures, in 2004-05 are concerned, Tata Motors emerged as the food grocery store leader with the production of 41,103 units. It was closely followed by Honda Siel, Maruti Suzuki and Hyundai Motors.\r\nBut, by 2009-10, Ta ta Motors not only disjointed its leadership commit, it was nowhere near the take three players as far as the production of mid-size segment passenger cars in India were concerned. With the production of 99, 877 units or well-nigh 38% of the total mid-size cars produced in India, Maruti Suzuki had interpreted over the commercialise leader’s smear in this segment. It was followed by Hyundai Motors and Honda Siel (refer to Tables 5 and 6). Sales figures of mid-size segment passenger cars showed a solely different scenario from what was seen at the production front.\r\nIn 2004-05, intersection India was the market leader with sales of 47,431 units, which translated into a market share of roughly 23%. It was The Indian Mid-Segment Passenger Car Industry 63 Table 5: Company-Wise Production of Mid-Size Cars in India Indicator Ford India Pvt. Ltd. Production Mid-Size Cars (4001-4500 mm): General Motors India Pvt. Ltd. Production (Mid-Size Cars) Hindustan Motors Ltd. Product ion (Mid-Size Cars) Honda Siel Cars India Ltd. Production (Mid-Size Cars) Hyundai Motor India Ltd. Production (Mid-Size Cars) Maruti Suzuki Ltd. Production (Mid-Size Cars) Tata Motors Ltd. Production (Mid-Size Cars) Mahindra Renault Pvt.\r\nLtd. Production (Mid-Size Cars) Figures in Units 2004-05 25596 11036 14371 33036 30712 31491 41103 NA 2005-06 25294 4202 14909 37924 42288 31062 44247 NA 2006-07 39431 10337 12456 40147 41071 30465 37625 580 2007-08 33139 5574 10797 41901 47040 50596 30272 26653 2008-09 22439 2858 6940 36840 58873 73928 12957 14404 2009-10 28062 3832 9063 45980 46741 99877 23572 6225 Source: nucleus for Monitoring of Indian Economy: Industry Analysis Services Database Table 6: Company-Wise Share in Production of Mid-Size Cars in India Indicator Ford India Pvt. Ltd. Production Mid-size cars (4001-4500 mm): General Motors India Pvt. Ltd.\r\nProduction (Mid-Size Cars) Hindustan Motors Ltd. Production (Mid-Size Cars) Honda Siel Cars India Ltd. Production (Mid-Size C ars) Hyundai Motor India Ltd. Production (Mid-Size Cars) Maruti Suzuki Ltd. Production (Mid-Size Cars) Tata Motors Ltd. Production (Mid-Size Cars) Mahindra Renault Pvt. Ltd. Production (Mid-Size Cars) Figures in Percentages 2004-05 13. 66 5. 89 7. 67 17. 63 16. 39 16. 81 21. 94 NA 2005-06 12. 65 2. 10 7. 45 18. 96 21. 14 15. 53 22. 12 NA 2006-07 18. 54 4. 86 5. 86 18. 88 19. 31 14. 33 17. 69 0. 27 2007-08 13. 47 2. 27 4. 39 17. 03 19. 12 20. 57 12. 31 10. 84 2008-09 9. 79 1. 25 3. 03 16. 07 25. 8 32. 25 5. 65 6. 28 2009-10 10. 66 1. 46 3. 44 17. 46 17. 75 37. 93 8. 95 2. 36 Source: Center for Monitoring of Indian Economy: Industry Analysis Services Database 64 The IUP Journal of communication channel Strategy, Vol. VII, No. 3, 2010 followed by Tata Motors, which had a market share of 19. 5%. Honda Siel was at the ordinal position with market share of roughly 16%. Just five years d bear the line, in 2009-10, Maruti Suzuki a akink the coveted position of the market leader with mar ket share of more than 33%. Tata Motors continued to enchant the second position (market share = 19. 23%), followed by Hyundai Motors (Market Share = 16. 2%) (refer to Tables 7 and 8). Ford India tumbled from the get-go spot in 2004-05 to the fifth spot in just five years. This shows the increasingly dynamic reputation of the mid-size segment of the passenger car industry in India. Table 7: Company-Wise Sales of Mid-Size Cars in India Indicator Ford India Pvt. Ltd. Sales Mid-Size Cars (4001-4500 mm): General Motors India Pvt. Ltd. Sales (Mid-Size Cars) Hindustan Motors Ltd. Sales (Mid-Size Cars) Honda Siel Cars India Ltd. Sales (Mid-Size Cars) Hyundai Motor India Ltd. Sales (Mid-Size Cars) Maruti Suzuki Ltd. Sales (Mid-Size Cars) Tata Motors Ltd. Sales (Mid-Size Cars) Mahindra Renault Pvt. Ltd.\r\nSales (Mid-Size Cars) Figures in Units 2004-05 47,431 10,650 14,609 32,767 29,828 29,702 40,454 na 2005-06 43,154 4,710 14,893 37,586 41,683 32,006 43,363 na 2006-07 62,808 10,726 12,33 4 40,489 39,003 29,781 39,462 0 2007-08 31,569 5624 11,005 40,550 48,171 49,402 36,859 25,891 2008-09 23,927 3,010 7,098 38,284 56,538 76,039 51,732 15,034 2009-10 28,004 3,874 9,039 45,082 49,412 99,854 57,532 6,332 Source: Center for Monitoring of Indian Economy: Industry Analysis Services Database What is interesting to note is that just eight players are active in this segment, though the intense rivalry is containage to the top four or five players only.\r\nMore and more international players same Volkswagen, Renault (without Mahindra and Mahindra (M&M)), Skoda and Fiat are introducing their products in this segment. This indicates a further increase in the expect of the emulation among the existing and the new players in the near future. To survive in such a highly competitive scenario, the existing players in the mid-size passenger cars segment get out be forced to invest a considerable portion of their sales in research and development in govern to produce new an d better variants.\r\nThis will be greatly beneficial for the Indian consumers. Indian Passenger Car Industry †An Attractive Destination According to the Indian Commerce Minister Kamal Nath, India is an attractive destination for global automobile manufacturers despite not having any specific trade The Indian Mid-Segment Passenger Car Industry 65 Table 8: Company-Wise Share in Sales of Mid-Size Cars in India Indicator Ford India Pvt. Ltd. Sales Mid-Size Cars (4001-4500 mm): General Motors India Pvt. Ltd. Sales (Mid-Size Cars) Hindustan Motors Ltd.\r\nSales (Mid-Size Cars) Honda Siel Cars India Ltd. Sales (Mid-Size Cars) Hyundai Motor India Ltd. Sales (Mid-Size Cars) Maruti Suzuki Ltd. Sales (Mid-Size Cars) Tata Motors Ltd. Sales (Mid-Size Cars) Mahindra Renault Pvt. Ltd. Sales (Mid-Size Cars) Figures in Units 2004-05 22. 93 5. 15 7. 06 15. 84 14. 42 14. 36 19. 55 NA 2005-06 19. 81 2. 16 6. 84 17. 25 19. 13 14. 69 19. 91 NA 2006-07 26. 70 4. 56 5. 24 17. 21 16. 58 12. 66 16. 78 0 2007-08 12. 67 2. 26 4. 42 16. 28 19. 33 19. 83 14. 79 10. 39 2008-09 8. 81 1. 11 2. 61 14. 09 20. 81 27. 9 19. 04 5. 53 2009-10 9. 36 1. 29 3. 02 15. 07 16. 52 33. 38 19. 23 2. 12 Source: Center for Monitoring of Indian Economy: Industry Analysis Services Database agreements in this regard. 14 This is because there is an extremely low penetration level of cars in India (7 cars per thousand). 15 In addition, majority of the Indian population consists of youthfulness having a median age of approximately 25 years16 and the population that fell in the working age group is 58% (approximately) which is estimated to increase to some 60% in the future. 7 This indicates an increase in the available income, which is standardizedly to raise the penetration level of cars in India (as is evident from the current trend in the passenger car production and sales in India). These developments extradite made India an attractive destination for the global automobile companies. Auto majors18 li ke Ford, Honda, Hyundai, etc. , withdraw not only entered into the mid-size segment of the Indian Passenger car industry but has also set up their manufacturing base in India. India’s liberal form _or_ system of government in terms of regulation has get down the entry barriers for new entrants in the mid-segment of the passenger car industry.\r\nThis has induced severe competition marked by high aspirations and new launches by existing players like M&M, which in tie up with french car manufacturer Renault has launched Logan. Since this offering is not doing very well in the Indian market, Renault has decided to introduce new model of cars in India on its own, without any departner. Ford India is 14 15 16 17 18 http://www. surfindia. com/automobile/industry-investment. html Auto Motive Mission Plan (ibid). https://www. cia. gov/ library/publications/the-world-factbook/geos/in. html#People http://populationcommission. nic. in/facts1. tm (Here the working age is consi dered between 15 years to 60 years), Figures as in 2001. Center for Monitoring of Indian Economy: Industry Analysis Services Database. The IUP Journal of Business Strategy, Vol. VII, No. 3, 2010 66 targeting to rectify its position through aggressive selling and by increasing its investment in manufacturing. 19 Moreover the existing players like Tata Motors, Maruti and Fiat are also provision to launch new models in this segment. 20 Intensifying the competition, Fiat India has launched Linea and Grand Punto in the Indian mid-size car segment.\r\nThe Indian nodes A study on Indian consumers, conducted by Mckinsey Global Institute, 21 discusses the income level of the Indian consumers with the growth in the Indian economy. The overlay predicts that if India’s growth continues unabated, then the rise of over 291 million people over desperate mendicancy line by 2025, will make it the fifth largest consumer market in the world. 22 Moreover, the promulgates forecast a massiv e rise in the number of Indian middle(a)-class to 583 mn by 2025. The report also discusses a rise in the mean(a) household fluid income from INR 113,744 (US$2,499. 7) in 2005 to INR 318,896 (US$7008. 70) by 2025. These results indicates a rise in the consumption level of the Indian consumers and shift in the consumption simulate from necessities towards discretionary consumption which include ingestion on conveyancing in the form of passenger cars. The findings of the report also die a change in disbursal habits of the rich urban households which converges with that of their counter split in real countries and their priority expenditure includes purchase of gull apparels, inappropriate vacations and purchase of passenger cars.\r\n different reasons (apart from economic growth) cited by the report include availableness of easy consumer financing, tendency of the people to rely more on their ad hominem vehicles and reduction in the damages of the passenger cars. world c ommission report indicates that majority of the Indian population consists of youth with increasing liquid income. 23 According to the findings of CSMM-BW Customer analyse 2006-07, Indian consumers are discerning and are of highly demanding nature, which make them a ruffianly nut to crack for the marketers. 4 The slew measures the attitude of the Indian customers towards various companies using two key dimensions viz. Customer Experience (how the customers rate the firm’s performance) and Customer Loyalty (extent of customer’s goodwill a firm enjoys) screen 16 products and supporters. The results of the survey reveal the rising expectations of the Indian consumers which the marketers are finding backbreaking to suitable on a pursuant(predicate) basis. The above result is attributed to the churn that has taken place post liberalization in the Indian economy. 19 20 21 22 23 24 http://www. hinduonnet. om/businessline/2000/06/24/stories/192402fr. htm http://auto. indiamart. com/cars/mid-size-cars. html www. scribd. com/ mendelevium/47945/McKinsey-MGI-india-consumer-full-report Desperate poverty has been defined in the study as people with an annual income of less than INR 90,000 (US$1850. 33). Source: http://populationcommission. nic. in/facts1. htm (Here the working age is considered between 15 years to 60 years), Figures as in 2001. Customer Satisfaction solicitude and Measurement (CSMM) A Specialized Unit of Market Research Firm IMRB world-wide (BW †Business World): Marketing White defy 2001-08). 7 The Indian Mid-Segment Passenger Car Industry The report also discusses about the availability of new and better choices for Indian consumers due to opening up of the Indian economy post liberalization. This development, according to the report, coupled with increase in their income level is the major reason for the rise in consumer expectations about various products and services that they purchased. The inability of the marketers to m eet their customers’ expectations and the availability of newer and better alternatives could be seen as one of the ajor reasons for the decline in consumer committedness towards various players operating in the market. Rising disposable income of the working population and increase in the number of car models introduced by different companies operating in India, has increased the array of choice for the Indian consumers. With new players entering into the lucrative Indian national market and with the current players introducing new models in different segments, the bargaining power of the Indian customers is increasing. This has resulted in a decline in consumer loyalty towards a particular player.\r\nIn order to compete in the Indian market, car-makers need to manufacture and sell products that carry the highest customer value. To achieve this goal, they need to provide European- fibre cars at Asian monetary values. Price is cosidered as the crucial selling point in the m arket. 25 However, rise in the get power of the Indians, increasing competition in the Indian market, stress on brainish comfort and life-cycle addresss (especially costs cogitate to give the sack) are also becoming grievous factors for potential car buyers in India. The Indian Auto Component Industry\r\nThe Indian auto parcel industry, apart from IT industry, is believed to have the potential to be globally competitive. copious growth in the Indian automobile industry seems to have triggered an upsurge in the Indian auto component industry. The Indian automotive component industry verifys the automobile manufacturers by supplying them with automobile parts like engine parts, electrical parts, brakes, blade equipments, etc. It is characterized by the battlefront of around 500 organized manufacturers and 1,000 unorganized manufacturers. 6 Similar to the passenger car industry, the Indian auto component industry too has witnessed a robust growth between 1995 and 2005, which has made it one of the fastest growing industries in India having achieved a growth rate of 28% during the period ranging between 1995-98, 24% in 2003, 16% in 2004 and 15% in 2005. 27 This trend is expect to continue in the future as well. The Automotive Mission Plan (2006-16) reports that the turnover achieved by Indian auto-component industry would be over US$14 bn in 2005-06 and US$16 bn in the monetary year 2006-07. 8 The supreme competency of Indian auto manufacturers is evident, from the launch of indigenized passenger vehicles like Tata Indica, Tata Nano, Mahindra Scorpio, etc. , by various Indian automobile players. Moreover, global auto majors like Ford 25 26 27 28 Source: http://findarticles. com/p/articles/mi_m0KJI/is_3_118/ai_n16118939 Report by the working group on Automotive Industry, Eleventh Five Year Plan (2007-2012), part of Heavy Industries, Ministry of Heavy Industries and Public Enterprises, India (August 2006).\r\nAccording to ACMA †Mckinsey Vision 2015 , the industry has reported a growth rate of 20% between 2000-05. According to ACMA †Mckinsey Vision 2015. The IUP Journal of Business Strategy, Vol. VII, No. 3, 2010 68 Motors, Honda Siel, Hyundai Motors, etc. , are also setting up their manufacturing base in India. They are leveraging the support of high quality auto component supplier’s base in India in order to reduce their cost of production. 9 The presence of high quality component suppliers is one of the major reasons for global majors for setting up manufacturing facilities and make India their export hub. The potential for the Indian auto component industry, according to The ACMAMcKinsey Vision 2015 enter is estimated to be US$40-45 bn by 2015. 30 India’s auto component industry had the capability to manufacture the entire range of autocomponents, such as engine parts, promote, transmittal parts, suspension and braking parts, electrical parts, body and manikin parts, with engine parts making nearly a third of all exports.\r\nTherefore, the part made by exports is likely to play a earthshaking role in achieving the aforesaid potential, which is evident from the fact that the industry achieved growth rate (in exports) of 25% during 2000-05 and is expect to grow at 34% during the next decade. 31 Availability of a abundant Array of Choices for the Indian Customers Compact cars have emerged as a dominant player (refer to Table 4) in the Indian passenger car industry controlling more than 60% of the units sold in the extend five years. 32 The sales of the small car (particularly compact size cars) in\r\nIndia has exceeded the sales of cars in any other segment. So the biggest terror in terms of substitutes for the mid-sized cars is the small cars especially the compact size cars. With the coming of Tata Nano, which is priced at about US$2500-US$2800 per unit, the threat from the small cars was anticipate to be further magnified. The booming market of passenger cars in India was facing threat from a multitude of factors, one of them being the Multi-Utility Vehicles (MUVs) (refer to Table 9). The MUVs, as the name suggests, are the vehicles with multi-usage capabilities.\r\n fashionable especially with the large families, the concept of a MUV no doubt has many takers Table 9: Increase in Sales of MUVs Between 2004-05 and 2009-10 Years Total Units of MUVs exchange Percentage Increase 2004-05 180,865 †2005-06 198,991 10. 02 2006-07 224,705 12. 92 2007-08 251,567 11. 95 2008-09 228,655 â€9. 11 2009-10 275,556 20. 51 Source: Center for Monitoring of Indian Economy: Industry Analysis Services Database 29 30 31 32 Ford India awarded Q1supplier consideration to 10 suppliers to help them export their products to Ford worldwide. Reported by a report on Indian automotive industry by Indian Brand justness Foundation- http://www. ibef. org/ download/Automotive_sectoral. pdf) http://www. ibef. org/industry/autocomponents. aspx According to ACMA-McKinsey visio n 2015, exports by auto components manufacturers are expected to contribute 50% of their growth (http://www. ibef. org/industry/autocomponents. aspx) Compact cars and mini cars have been taken together and are considered to be part of small cars. 69 The Indian Mid-Segment Passenger Car Industry in India.\r\nAll the leading automobile players in India, including the autochthonous ones such as the Tata Motors, HM, M&M as well as the foreign ones are expanding their presence in the MUV segment of the Indian automobile market. MUVs with their multi-usage potentiality has been able to gain immense popularity in India. In the recent years many of the automobile companies have engrossed themselves in the manufacturing of MUVs, eying the long potential market in India and abroad. Automobile firms such as the likes of Maruti Udyog, Tata Motors, M&M and HM have come up with some of the finest models of MUV.\r\nHM, one of the oldest auto makers in India, has launched MUVs like Paje ro, Pushpak, and Trekker, in the Indian market, with skillful collaboration with foreign automakers. 33 The first two could not make square(a) headway in the markets while the Trekker is acquire some semblance of popularity in the cracker-barrel pockets of the country. M&M too has come up with a range of MUVs like Mahindra Voyager, Mahindra Hard Top stretch, Mahindra CL Range and variants of Mahindra MM Range comprised the MUVs from the M&M stable.\r\nMahindra Scorpio, an SUV (Sports Utility Vehicle) that had been conceptualized and designed by automotive division of M&M, has been quite victorious not only in India but also in other countries like Russia, France, Spain, and Portugal. 34 This success could be attributed to its contemporary design and technology. An upgraded version of Scorpio known as ‘New Scorpio’ was launched with additional features. Tata Motors has also modify its versions of Tata Safari and Tata Sumo and has come up with its ow n range of MUVs. Chevrolet, Hyundai, Ford and Toyota, the foreign auto majors too have their own share of MUVs in the Indian MUV segment.\r\n other threat to the passenger car market is that international car renting firms are making a beeline for the Indian border with almost a dozen car rental brands expected to enter the market soon. 35 Several International players like Hertz, Europcar, Leaseplan and Avis among others have already established their presence in the country, while others like, Thrifty, Dollar, Enterprise and caravan’s brands like Almo and National among others are also said to be firming up their Indian plans. This sudden rush to India has been attributed to a slump in the US and European market. However, in spite of being US$2. 4 bn, car rental industry in India is highly unorganized. The market share of organized players in car rental industry is just 3%. 36 However, the industry, on the whole, has been seeing a felicitous growth of about 35-50% in th e become two years (ibid). Public transport like buses and railways also form an important means of transfer in the Indian cities especially in the urban areas. 37 Despite the growth in the number of undercover vehicle owners in middle income segments in the metro cities, a substantial number of commuters are still strung-out on the public transport. Hundred 33 34 35 36 7 Source: http://auto. indiamart. com/hindustan-motors/ http://en. wikipedia. org/wiki/Mahindra_Scorpio Source: http://www. ibef. org/artdisplay. aspx? cat_id=60&art_id=16173 http://economictimes. indiatimes. com/ news show/News_By_Industry/Dozen_car_rental_brands_to_drive_into_India _soon/ articleshow/2225650. cms http://www. urban-age. net/10_cities/07_mumbai/_reflections/india_Tiwari. html The IUP Journal of Business Strategy, Vol. VII, No. 3, 2010 70 million out of 235 million people living in the Indian cities belong to lower income segment who cannot afford to own a private vehicle.\r\nCurrently, many state governments have taken up various initiatives regarding improving the intra-city transportation by allowing private operators to run buses in spite of appearance the city, introducing new and better means of transportation like metro rail in Delhi, new buses, investment in road infrastructure like making new roads and widening of existing roads, etc. These initiatives, coupled with increase in the fuel prices, present a potential threat to the sales of the passenger cars. 38 The sales of luxury cars, though not significant in the current scenario, might mold a threat in the future.\r\nThe average Indian is no longer contented with the normal automobile offerings, car enthusiasts cute to feel precious and pampered and feel the need to enjoy a superior lifestyle. possibly these expectations are molding the new class of affluent Indians to possess top brand vehicles, regardless of their prices. In addition, the World wealth Report 2005-06, published by Merrill lynch and Capg emini, states that India recorded the world’s second fastest growth at 19. 3% in the number of high net-worth individuals in 2005. 39 Moreover, easy availability of assurance financing40 has led to increased demand for big and better cars.\r\nForeseeing the Indian market potential, major luxury automakers were setting up their offices in India to cater to the rich people’s fancy for trendy and luxurious cars. Mercedes and BMW have offered products at a starting price of INR 25-30 lakh (US$54,945-65,934), whereas the Maybach has lured the consumers to pay as much as INR 5 cr (US$1,098,901) to drive in the lap of luxury. Other motor giants like Volkswagen, Audi, Lamborghini, Rolls Royce Phantom, Bentley, and Porsche have already join the luxury car revolution in India. Conclusion\r\nThe mid-size passenger car segment is currently passing through a dynamic stage. Growth in the Indian middle-class and easy availability of credit coupled with new launches and attractive price by the players will ensure its availability and hence will facilitate the growth of this segment. However, what the future holds for it, only time can tell. ? 38 39 40 Figures as on November 2007. www. capgemini. com/industries/financial/solutions/wealth/wwr05_archive www. scribd. com/doc/47945/McKinsey-MGI-india-consumer-full-report 71 The Indian Mid-Segment Passenger Car Industry Appendix\r\nClassification of Passenger Cars41 subatomic Cars or Compact Cars Small cars are classified according to the price range which varies from 1 to 3 lakh. It has the capacity to carry 4 passengersâ€2 adults, 2 children. These are basically entry level cars which are preferred by service group and middle income group. These cars are construct byâ€Maruti Udyog, Tata Motors and Reva. While companies like Volkswagen, etc. , are yet to launch their models in the market. Mid-Size Cars A mid size car is an automobile with a size between that of compact and full size cars. The price range o f mid-size cars is between Rs. to 8 lakh. The mid-size cars have the capacity to carry 4 passengersâ€2 adults and 2 children. The credit of manufacturing these cars goes to companies likeâ€Fiat India, Ford, General Motors, Hindustan Motors, Hyundai Motors, Maruti Udyog, Tata Motors, etc. Executive Cars An Executive Car segment includes cars that lie between the mid-sized cars and premium cars in terms of price (range lies between Rs. 5 lakh to 10 lakh) and seating capacity. It includes cars from major manufacturers like Daimler Chrysler, Hindustan Motors, General Motors, Toyota Kirloskar, Skoda India, Hyundai Motors and BMW.\r\nPremium Cars Premium cars fall indoors the price range of Rs. 7 to 15 lakh. They have the capacity to carry 5 passengers. These cars mainly target higher income group. Premium cars were launched by Audi India, Ford Motors, General Motors, Honda Motors, Hyundai Motors, Skoda Auto, Mitsubishi and Toyota Motors. Luxury Cars Luxury cars are very dear(pred icate) and their price range is above Rs. 20 lakh. These cars are preferred by the high income group. Luxury cars have the capacity to carry at the most 6 passengers.\r\nSo far companies like BMW, Daimler Chrysler, Porsche, Rolls Royce, etc. , have introduced these cars in India. Reference # 33J-2010-09-04-01 41 www. auto. indiamart. com/cars (accessed on January 10, 2008). The IUP Journal of Business Strategy, Vol. VII, No. 3, 2010 72 Copyright of IUP Journal of Business Strategy is the property of IUP Publications and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holders express written permission. However, users may print, download, or email articles for individual use.\r\n'