Renault's Duster to spark the battle in the Mini SUV Segment

Launching its fourth offering in the Indian market - Duster - the French auto major Renault has carved a new mini SUV segment in the Indian market. It has been seen that the SUV segment has continued to grow even during the times when the other segment have fallen in overall volumes. However, it is not Renault alone that is interested in this segment. There are names like Mahindra, Maruti, Hyundai and Ford that are expected to join the fray soon with their products. While Mahindra is expected to launch the Mini Xylo by end-July, Ford will be coming up with its EcoSport in January 2013. Companies like Maruti and Hyundai also showcased their products namely XV Alpha and HND-7 respectively at the Auto Expo 2012 and it is expected that these giants would leave no stone unturned in order to ring them to market as early as possible. 


The journey for the compact SUV segment started with the production of Premier Rio but the segment took shape with the launch of Maruti Suzuki Ertiga. In fact, it is the Ertiga that has broken the mindset barrier of the consumer to be able to hift directly to a compact SUV from a hatch rather than going for a sedan. Will Renault Duster be able to carry this momentum forward...well, only time will but it is expected that it will be a blockbuster product for Renault in India. 

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Honda plans to become the #1 two-wheeler maker in India by 2020. Will it be able to do so?

Honda has had a long association with India. In alliance with its erstwhile partner Hero (then Hero Honda), Honda has been operating in the Indian two-wheeler business since the 1980s. However, it was only in 2001 that the company launched its standalone subsidiary Honda Motorcycles & Scooters India (HMSI) with a view to expand its presence in the domestic circuit. Now that Hero & Honda are all in the solo drive mode after the JV broke up in 2010, HMSI is gunning for the #1 spot in the Indian two-wheeler market by 2020. According to HMSI officials, the company plans to take the India contribution from 13% currently to 30% by the end of 2020. However, it is easier said than done.
Undeniably, HMSI has learned a lot about the Indian market with Hero but it still has to work on building a strong dealer network in India. HMSI currently has 1,500 touch points in the country and plans to expand it to 2,000 at the end of 2012. This is not even half of the market leader Hero MotoCorp's 5,000+ touch points. Additionally, the recently launched Dream Yuga is still expansive than its close rivals like Splendor by Hero and Discover by Bajaj Auto (second largest 2-wheeler maker).
While HMSI has been able to close in the gap with Bajaj Auto for the #2 position and even became the second largest for a month in March but the #1 position is still far from sight. The only opportunity HMSI has if Hero is unable to get the technology arrangements right post the transition phase for Honda end in 2014 (which is a rare chance considering the huge cash reserves with the company). Honda will certainly be able to give a tough chase to both Bajaj Auto and Hero MotoCorp but the #1 position by 2020 is still too much to ask for.

Fiat to part ways with Tata Motors for car sales, Finally!

While the Italian auto major, Fiat has always been desperate in gaining a decent ground in India for the past many years, sales and service has been one of the major hurdle in its growth. Be it its alliance with Premier Automobiles during the 90s with products like Uno, 1100 and 124, its attempt to go solo or its recent alliance with Tata Motors, Fiat has struggled to keep the consumer happy and create a large enough loyal consumer base in the country. However, the company is finally taking the much-needed corrective measures.


As per a joint statement from Tata Motors and Fiat, the duo are ending their distribution agreement, while the manufacturing accord will continue. For the record, the marketing agreement between Tata and Fiat allowed the Italian auto maker to use the Indian firm’s distribution network in the country. However, as per the recent announcement, distribution will now be handed over to a separate Fiat group-owned company which will be headed by Enrico Antanasio.


The reason for such a move is obvious. For the past many months, there has been dissatisfaction both from Fiat's and Tata's end regarding the performance of the JV. In addition, the sales haven't been able to challenge the allegations either. For FY 2011-12, Fiat sold 16,073 units falling by  23.87%  as compared to the last fiscal. 


To start with, Fiat will encourage the 178 existing Fiat-franchised Tata dealers in 129 cities to build a strong foundation for this future network but it is expected that it will take close to two years to bring this network on its feet. It may be noted here that the company has not shared the exact dates of this transition phase but it is expected that it will start very shortly.


Clearly, it is the need of the hour for Fiat but will these independent showrooms be able to solve its woes in the Indian market? Certainly not alone. The company will also need a more aggressive product line-up to back the dealers. Hopefully, this time Fiat will be able to change the consumer perception. But obviously, it is easier said than done. 

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Hyundai's domestic sales up 10.9% for April 2012

Hyundai Motor India Ltd (HMIL), the country’s second largest car manufacturer today reported a 10.9% growth in domestic sales for the month of April 2012. For the record, Hyundai registered domestic sales of 35,070 units last month as compared tot he 31,636 units sold in the corresponding month last year. It may be noted here that the aggregate sales touched 54,606 units (52,057 units) up 4.9 % for the same period.

Commenting on the April domestic sales, Arvind Saxena, Director, Marketing and Sales, HMIL said, “Consumer confidence continues to be weak, prices went up following the excise hikes in the Union Budget and interest rates are yet to come down. Given the present conditions it’s a challenging market.”

HMIL Sales	April 2011	April 2012	Growth%
Domestic	31,636	35,070	10.9
Exports	20,421	19,536	- 4.3
Cumulative	52,057	54,606	4.9

The segment-wise cumulative sales for April 2012 are: A2 segment 44,891 units (Eon, Santro, i10, i20); A3 Segment  9,579 units (Accent and Verna); A5 segment 66 units (Sonata); SUV 70 units (Santa Fe).

Traffic Jam!

Traffic Jam

Product and Brand Clutter is Forcing Auto Companies to Rethink Marketing Strategies

In one of the first few marketing campaigns of significance in the history of the Indian automobile industry, Maruti Suzuki tried to position Omni as a passenger vehicle. Executed by Hindustan Thompson (now JWT) in 1989, the campaign – which was shot in Maruti’s factory premises in Gurgaon and featured the then renowned model Malvika Tiwari – focused only on the print media. The company found that the looks and size of the product were giving it a rather commercial appeal and hence, decided to come up with this campaign. However, many in the industry opposed the idea of a marketing campaign, as there was no real competitor for the company then. 

With over 19 passenger vehicle manufacturers operating in the country today offering over 135 products to the Indian consumer, the industry has transformed both in terms of volumes and stature. The competition has increased by manifolds compared to the days when Maruti 800 was the only practical choice available to the consumer. Just three years back in 2008-09, Maruti Suzuki held over 52% share. But its market share has since come down to 42% in the passenger car segment. Players like Ford, Volkswagen, GM, Nissan, Renault, Honda and Toyota have launched a muliti-pronged attack on Maruti’s bread-and-butter small car segment in the recent past. Last year’s SIAM report also reveals that market share of small cars was 47% of the total market in 2011; making it the first year when small cars accounted for less than 50% of total passenger car sales; showing the extent to which market dynamics have shifted. 

The new players have already announced their bullish plans for the Indian market, hinting towards the intense dogfight for market share that will be seen in coming times. This is reflecting in advertising spends as well. As per the Adex report for January-September 2011, the automobile sector was the sixth largest spender on TV advertising with a 4% market share and cars were the fifth largest product category with a 2% market share. As far as print is concerned, the segment grew by 36% during January-September 2011. Cars ruled the charts as compared to other product categories in the industry with 67% market share followed by two-wheelers with 13% market share. 

While the 1980s didn’t need marketing, the current decade demands that players not only have a marketing strategy, but also keep it sharply focussed with the customers and the competition in mind. Otherwise, the margins for error are lower than ever before and one can easily get caught in the great Indian traffic jam – that is, in a clutter where prospects for growth are seriously compromised. 4Ps B&M analyses some contemporary out-of-the-box innovations by Indian auto majors and why the new paradigms being witnessed are set to reshape auto marketing in the years to come. 


Experience Counts

Over the past few years, the ways to communicate with the consumer have changed. With new channels like social media and experiential marketing, automakers are trying to make the consumer experience more engaging and interactive to build a stronger brand connect, rather than going for just plain vanilla TVCs and print advertising. “Usage of such platforms makes the consumer experience with the brand more engaging and interesting. The Ford stall at the Auto Expo used various interactive applications to create an impact, which is remembered by the consumer,” affirms Michael Boneham, Managing Director, Ford India. These efforts were visible during the recent Auto Expo. Apart from Ford, Mahindra, Hyundai, Maruti, Land Rover and Renault among others also used experiential media integrated with social media at the event with a view to build a strong connect with the consumer. “The idea of executing a successful experiential marketing campaign is to make the experience of the consumer more engaging and at the same time, ensuring that the message of the brand doesn’t gets diluted,” adds Marc Barrett, CEO – Asia Pacific, Imagination, an agency that has created experiential campaigns for companies like Ford, Land Rover and Renault in the recent past. Players like Maruti Suzuki, Hyundai and Volkswagen are spending 8-10% of their marketing budgets on digital media alone and are looking for newer and better ways to engage. “Each and every market is unique in its very own way and India is no less. In fact, the ways to communicate with consumers change with the media consumption pattern of every market apart from many other things. For instance, Indian consumers are very much available on mobile and the market is way ahead as compared to many markets in terms of mobile penetration,” says Christopher Dahlin, Director-Marketing, Volvo Car Corporation.

It is not only digital, which is changing. Even traditional mediums like TV, print and OOH are witnessing a change in the kind of advertising being done. Volkswagen’s roadblock in the Times of India, the speaking newspaper, Polo cut and other clutter-breaking campaigns have pushed up brand engagement to impressive levels in a short span of time. The ‘Swap your drive’ campaign from Ford India is another brave campaign, which encouraged Indian customers to swap their car for a Ford car for a week and then give detailed feedback on their experience with the car. Companies are willing to take the unconventional routes more often than not. “Our marketing strategy is very different. We make a nation-wide impact via print and then go selective on the TV part complemented by OOH and digital. Our marketing budgets are not huge, although they look like they are. We are not even in the top 10 spenders from the automobile category,” clarifies Lutz Kothe, Head – Marketing, Volkswagen Group Sales. There is a clear need to refine strategies for product launches too. Normally, awareness and recall is at its peak during the launch phase of the product. But it goes down with the falling interest of the consumer. Rather than focusing only on the short span in the pre and post launch period, auto marketers are ensuring that media spends are evenly distributed over a long period of time towards different channels to ensure high recalls & sales. Ford has been adopting this approach of late globally and the results have even surprised their top brass. 


Product of good hope!

The launch of Hyundai Eon was one of the most-anticipated in the Indian automobile industry before the product finally hit the roads in October 2011. Carrying an 800cc engine at its heart, the company tried to position the car as a product that will change the landscape of the Indian market. Though it was tagged as the Alto killer, the comparatively high price band was ‘red’ flagged by a few industry experts. However, the South Korean giant ensured that the car went on to become one of the best launches in the history of the industry; getting over 13,000 bookings in just the first five days of its launch. “The most important thing that we learned with the Eon was that even when it comes to an entry-level car like the Eon, Indian consumers are looking at design and advanced features – something unimaginable even a decade back,” said Arvind Saxena, Director – Marketing, Hyundai Motor India.

Other automakers like Volkswagen and Ford have also launched India-specific features. For instance, the consumer can get only the metal sheet replaced in case his Ford Figo meets with a minor accident, rather than getting a new door altogether. “Ford has been considered as a brand whose products demand high maintenance. We were able to shatter this perception with the launch of Figo as the components were sourced locally,” comments Boneham. Similarly, Volkswagen has added features like the option to adjust the front seat of the pillion from the back seat. Nissan was able to create a buzz by launching its ‘Made-in-India’ car – Micra – with many features like the push button start that were firsts for its segment.


Value, not price

Against the belief that the Indian consumer is largely price-conscious, it is being seen that if the product offers high value, the Indian consumer is no longer shying away from shelling out a few bundles more. For instance, when hatchbacks like Maruti Swift, Hyundai i20, Chevrolet Beat, Ford Figo, et al made their way to the Indian market, no one was sure about their success. It seemed like harakiri to create a category within a category. However, demand in the premium small car segment has gone beyond the expectations of many OEMs. Aware of this mindset, automakers are busy investing in enhanced value propositions. For instance, when the market leader Maruti Suzuki launched the second-generation DZire with better interiors & exteriors and loaded with a host of new features, the part that surprised everyone was its pricing. The company slashed the price by around Rs.30,000 by just bringing down the length of the vehicle to under four metres, hence availing the benefit of a lower excise duty and passing it on to customers.

Similarly, when it was the turn of Honda Siel to come up with new variants of Jazz and City, the company took advantage of its high localisation to announce a price cut of Rs.1,50,000 and Rs.50,000 respectively on both products in order to make the value equation more practical for the buyer. Even going forward, while the relatively new entrants are willing to price their products competitively to gain more market share in a short span of time, the big boys will be looking to respond in kind to defend their turf. 

Power to the channel

Distribution has always been a challenge in a diverse market like India. Gone are the days when dealerships were only used for finalising the formalities before making the purchase. In today’s era of cut-throat competition, companies are using distribution as one of the major tools to push sales and as a source of competitive advantage. From the kind of glass used on the exteriors to the fabric of the shirt that the sales executive will carry and the pitch he will make, auto majors are focusing on every minor detail. In fact, brands like BMW, Fiat and Skoda have already launched boutique showrooms in the country, primarily for brand-building. And on the other end, almost every automaker has, or is in the process of changing the hardware and software end of the dealership network. Aware of the fact that today’s buyer is much more aware and has several questions to ask before making his purchase, companies are giving special training sessions to their executives. 


Secondly, it is also important for automakers to be evenly distributed in the country. The consumer is no longer willing to travel long distances to visit dealerships and it is hence important for companies to be present closer to the consumer. “As per our research, the consumer is only willing to drive for one hour to visit a dealership even in remote areas and it is therefore important to stay as close to the consumer as possible,” adds Lutz Kothe, Head-Marketing, Volkswagen India. Keeping in mind that the rural parts are still largely untapped, companies are pressing the accelerator. Even when overall sales declined by about 11% for Maruti this year, rural sales have grown by 10% yoy. Around a third of total sales came from rural markets for Hyundai in 2011. Ford garners around 50% of sales from tier II, III and IV locations. General Motors gets around 60% of sales from non-metros, with a yoy growth of 15-20%. While the dealer structure still needs more fine tuning both in the urban and rural areas from the end of the established players, it is a clear opportunity for new players to start on the right note.

In the period from April 2011 to January 2012, passenger vehicle sales have risen by just 1.45% yoy to reach 2056113 units. On all counts, this is a difficult year for the industry, but the long term prognosis for the Indian market is anything but that. For the less informed, car penetration in India stands at 15 per thousand, way behind 900 per thousand in US and 525 per thousand in UK. In fact, it’s even less than economies like Sri Lanka and Pakistan. But a large & young population, low penetration and rising incomes provide welcome succour to the long term growth story. As per a report from J. D. Power and Associates, the country is expected to become one of the three largest automotive markets in the world by 2020 with 11 million light-vehicle sales following China (expected to reach 35 million light-vehicle sales) and US (expected to reach 17.4 million). As Indian customers get exposed to newer brands and even newer ways of marketing, their experience with respect to cars is undergoing a transition phase when market positions will be drawn and redrawn consistently. Both incumbents and new entrants have to carefully monitor evolving Indian consumer behaviour and competitor strategies and keep their marketing programs with the times. Maruti is at 42% today, and the global average for a market leader is not more than 10-15%. Also, advertising spends in the auto industry in developed economies are gargantuan by Indian standards. For instance, the sector led in terms of ad spends in the US with figures of $9.9 billion for the first nine months of 2011 (eMarketer). So we have a long way to go. In the interim, one can expect market penetration as well as clutter to grow faster than before. So it is only logical for marketing teams to ensure that they embrace the new paradigms in order to surge ahead & stay ahead of the ‘traffic jam’ that’s rapidly building up!