35

CHEPTER IV

CARS IN INDIA 36

4.0. INTRODUCTION:

Scope of my research is to studyjhe problem being faced and expected 4n-tite^rea or marReting of radial car tyres used for passenger vehicles and the prospects of the radial car tyres in India. I have made the study by dividing the problem into two parts: - i.e. Car and tyres.

Tyres being the consumables for Cars, in absence of proper understanding of the Car, it is not possible to get the correct picture of the tyres usage. Development of cars has come a long way. Cars we see today were not there few decades ago and may not remain the same in next three or four decades. Technological development coupled with the changing requirements of the customers and number of other factors lead to the change in the product development.

In this chapter, I have tried to study the development of cars worldwide followed by the development of cars in India and the current market scenario. This will give an insight Into the process of change that has taken place in the car industry.

4.1. HISTORY OF CARS

4.2. ADVENT OF CARS IN INDIA

4.3. EVENTS AND MILESTONES OF CARS IN INDIA

4.4. MAJOR CAR MANUFACTURERES IN INDIA 37

4.5. CAR MARKET SECNARIO IN THE YEAR 2000

4.6. CLASSIFICATION OF INDIAN CAR INDUSTRY

4.1.HIST0RY0FCARS:

With the invention of the wheel in 4000 BC, man's journey on the road of mechanized transport had begun. Since then he continually sought to devise an automated, labour saving machine to replace the horse.

Innumerable attempts reached conclusion in the early 1760s with the building of the first steam driven tractor by a French Captain, Nicolas Jacob Cugnot. He built the first self-propelled car in 1769, which could attain speeds of up to 6-kms/ hour. In 1771 he again designed another steam-driven engine, which ran so fast that it rammed into a wall, recording the world's first accident. In 1807 Francois Isaac de Rivaz designed the first internal combustion engine. He too developed the world's first vehicle to run on such an engine, one that used a mixture of hydrogen and oxygen to generate energy, subsequently used this.

This spawned the birth of a number of designs based on the internal combustion engine in the early nineteenth century with little or no degree of commercial success. In 1860 thereafter, Jean Joseph Etienne Lenoir built the first successful two-stroke gas driven engine. In 1862 he again built an experimental vehicle driven by his gas- 38

engine, which ran at a speed of 3 kms/hour. These cars became popular on the roads.

The next major leap forward occurred in 1885 when the four-stroke engine was devised. Gottlieb Damller and Nicolas Otto worked together on the mission till they fell apart. Daimler created his own engines, which he used both for cars and for the first four-wheel horseless carriage. In the meanwhile, unknown to them, Karl Benz was in the process of creating his own advanced tri-cycle, which proved to be the first true car. This car first saw the light of the day in 1886

It was then that the petrol engine was introduced, which made the car a practical and safe proposition. The cars in this period were more like the cars on our roads today. With cars came the era of speed.

The season of experiments continued across the seas in the United States where Henry Ford began work on a horseless carriage in 1890. He went several steps forward and in 1896, completed his first car, the Quadricyde in 1896.

This was an automobile powered by a two-cylinder gasoline engine. The Ford Motor Company was launched in 1903 and in 1908 he catapulted his vehicle, Model T Ford to the pinnacle of fame. Continuing with his innovations, he produced this model on a moving 39

assembly line, thus Introducing the modern mass production techniques of the automobile industry.

The modern car therefore comes from a long list of venerated ancestors, and its lineage will, hopefully grow longer as we progress!

The first ever land-speed record was established about 100 years back, in 1898. Count Gaston de Chasseloup- Laubat of France drove an electric car (in Acheres near Paris) at a speed of 39.24 miles per hour. This flagged off the era of 'wheels racing', which lasted till 1964, after which jet and rocket -propelled vehicles were allowed then onwards, it has been one big journey...on the roads.

4.2.ADVENT OF CARS IN INDIA:

From the singsong rhythm of the bullock cart to the jet- age, India has traveled a long way. An average Indian's dream car may not be the design-savvy Honda or the stately limousine, but he sure can dream, and afford, the Maruti now.

It was in 1898 that the first motorcar rode down India's roads. From then till the First World War, about 4,000 cars were directly imported to India from foreign manufacturers. The growing demand for these cars established the inherent requirements of the Indian market that these merchants were quick to pounce upon. 40

In the 50s, the Government of India granted approval to only 7 car dealers to operate in India - HM, API, ALL, SMPIL, PAL, M&M and Telco.

The protectionist policies continued to remain in place. The 60s witnessed the establishment of the two-three- wheeler industry in India and in the 70's things remained much the same.

Since the 80s, the Indian car Industry has seen a major resurgence with the opening up of Indian shores to foreign manufacturers and collaborators.

The 90s have become the melting point for the car industry in India. The consumer is king. He is being constantly wooed by both the Indian and foreign manufacturers. Though sales had taken a dip in the first few months of 1999, it is back to boom time. New models like Maruti's Classic, Alto, , and Ford's Ikon, the new look Mitsubishi Lancer are all being launched with an eye on the emerging market.

In these last years of the millennium, suffice it is to say that Indian cars will only grow from strength to strength. 41

4.3.EVENTS AND MILESTONES OF CARS IN INDIA:

A behind- the- scenes look into the making of one of India's most vibrant industries. The landmarks along the way.

1928- the first imported car was seen on Indian roads

1942- Hindustan Motors was incorporated.

1944- Premier automobiles was started.

1948- First car was manufactured in India.

1953- The Government of India decreed that only those firms, which have a manufacturing program, should be allowed to operate.

1955- Only seven firms, namely, HM, API, ALL, SMPIL, PAL, M& M and TELCO received approval.

1960-1970-The two, three wheeler industry established a foothold in the Indian scenario.

1970-1980- Not much change was witnessed during this period. The major factors affecting the industry were the implementation of the MRTP Act (Monopolies and Trade 42

Restrictive Practices Act), FERA (Foreign Exchange Regulation Act) and the Oil Shock of 1973 and 1979.

1980-1990- The first phase of liberalization was announced by the Govt. -With the liberalization of the Government's protectionist policies, the advantages hitherto enjoyed by the Indian car manufacturers like monopoly, oligopoly, slowly began to disappear.

This period is also marked by the entry of a large number of firms in the market. 4 Japanese manufacturers entered the Commercial Vehicle and Two-Wheeler market.

The Government agreed to the demand for allowing foreign collaboration in the automobile sector.

The industry witnessed resurgence due to major policy changes like relaxation in MRTP and FERA, delicensing of some ancillary products, broad banding of the products and modification in the licensing policy. Also, the concessions it gave to the private sector and the new foreign collaboration policy all resulted in higher growth and better performance of the industry than in the earlier decades.

The Government of India tied up with Suzuki Inc. of Japan, which produced India's most successful car- the Maruti. 43

1991- Under the Govt.'s new National Industrial Policy, the license raj was dispensed with, and the automobile industries were allowed to expand freely.

1993- With the winds of liberalization sweeping the Indian car market, many multinationals like Daewoo, , General Motors, Mercedes-Benz and Fiat came into the Indian car market.

1997- The National Highway Policy was announced which will hopefully have a positive impact on the automobile industry. The Government also laid down the emission standards to be met by car manufacturers in India in the coming millennium. There were two successively stringent emission levels to be met by April 2000 and April 2005, respectively. These norms were benchmarked on the basis of those already adopted in Europe, hence the names Euro I (equivalent to India 2000) and the Indian equivalent of Euro II.

1999- The Hon'ble Supreme Court passed an order directing all car manufacturers to comply with Euro I emission norms (India 2000 norms) by the 1st of May 1999 in National Capital Region (NCR) of Delhi. The deadline was later extended to 1st June 1999. 44

4.4.MA30R CAR MANUFACTURERES IN INDIA:

4.4.1. HINDUSTAN MOTORS LIMITED (HMU:

Hindustan Motors was the first Indian Car Company to start production In India In 1942. HM concentrated on auto components and could produce their first car only in 1949.Since then, it has become a vast company, manufacturing cars like the sturdy Ambassador, the elegant Contessa, and in collaboration with Mitsubishi of Japan now manufactures the new Mitsubishi Lancer.

It started production of the Landmaster in 1954, and in 1957 began the production of the Ambassador. Later tie- ups with General Motors Corporation of USA, Vauxhall Motors, UK, Marion Power Shovel Co, USA led to new products being launched. In 1963 commenced the production of the Ambassador Mark 2. Later versions and more forays in related vehicle segments followed.

At present, it is a one billion-turnover company manufacturing Passenger Cars, Utility Vehicles, Power Products and Earthmoving Equipment. The manufacturing facilities of the company are spread across India: Uttarpara in West Bengal, Pithampur in Madhya Pradesh, Thiruvallur and Hosur in Tamil Nadu, and Pondicherry. The latest model, Mitsubishi Lancer, is manufactured in 45

their state - of - the - art manufacturing facility at Thiruvaiiur, Tamil Nadu.

Increasing rivalry and dropping sales figures made the company look out for newer models, and hence the new Ambassador Nova was brought out in 1990, and in 1993 was launched the Ambassador 1800.

Though the sturdy Ambassador does not find many takers in India, with people looking to more fancy cars, its export has been steadily increasing, mainly in the British and Japanese markets. Trucks are being exported to Bangladesh, Egypt, New Zealand, Sri Lanka and Mauritius. The Earth moving Equipments are being exported to Oman, Jordan, Iraq, Bangladesh, Mauritius and Libya.

All the cars manufactured by Hindustan Motors conform to Euro - lemission norms. This has been achieved by the upgrading of the Ambassador 1800 with multi - point fuel injection. The Ambassador was always in conformance with these norms.

4.4.2. PREMIER AUTOMOBILES LTD:

In 1944, Premier Automobiles Ltd., (PAL) was established to manufacture automobiles in India. Premier Automobiles Ltd., (PAL) produced the first car in India in 1946. A joint venture between PAL and Automobiles Peugeot, France in 1994 in which each of them holds 46

31.7%. Became a Public Ltd company in 1995. The company started off in 1994 by acquiring the Kalyan plant of PAL for manufacturing 118NE and 1.38 D at the initial stages and Peugeot 309 at the later stage. The diesel version of Peugeot 309 received a favorable response and was able to make a mark. The company has reached dead-end following break-up with Peugeot, France. Initially it attracted attention from new entrants in the car segment who were planning to set up manufacturing facility in the country. But till today no bail out offer has been made for PAL Peugeot.

The company is clearing all inventories of completely built cars at a hefty discount ranging from RsO.lmn to RsO.lSmn. The existing owners of Peugeot will also face difficulty in obtaining spare parts for the car.

4.4.3. MARUTI UDYOG LIMITED fMULh

Maruti Udyog Ltd (MUL) is the largest car manufacturer in the country with a market share of over 50 per cent in the car industry. It is a joint sector corporation setup by the Government of India and Suzuki Motor Corporation, Japan. Although the company is a clear leader, it faces threats from new entrants into car industry.

The company was incorporated in 1981.In the year 1982; the government signed a joint venture agreement with Suzuki Motor Corporation of Japan. 47

First car was produced & delivered to the customer on 14.12.1983.

The commercial production of Maruti 800 was started in the beginning of 1984. In 1985, the all-terrain vehicle Gypsy was launched and Maruti sold its 50,000th vehicle. The Maruti 1000 was launched in 1990 and the Zen in 1993.

The company manufactures passenger cars at its factory in Gurgaon, Haryana. Its installed capacity of 350,000 vehicles is expected to rise to 450,000 in the year 1999. The company's models include the 800cc small car, Esteem, Zen and Gypsy.

In the car segment. It had a market share of 83% in Pr'98, with sales of 345,303 cars. For the period April '98 to January '99, MUL car sales have dropped by 6.4% to 263,681 compared to 281,697 cars for the corresponding period for FY98.

The company is a significant exporter with exports to over 50 countries. During FY98, exports also witnessed a drop of 26.87% to 24,757 cars. For the period April '98 to January '99, MUL car exports dropped by 10% to 17,155 compared to 19,054 cars for the corresponding period in FY98.

In August '98, the company launched the diesel version of the Zen, which is powered by a 1527 cc engine 48

supplied by Peugeot Citreon Motors, France. The company also intends to launch a diesel version of the Gypsy and a new model in the 800 cc segments.

The company is known for its strategy of value-for- money pricing which has been made possible due to the high levels of indigenisation of its vehicles. While the Maruti 800, Zen, Esteem and Omni are indigenised to the extent of over 90 per cent; the Gypsy is indigenised to the extent of 82 per cent and the export version of the Zen called Alto to the extent of 76 per cent. Maruti has a vendor network of about 375.

The company has several joint ventures with some of these vendors to source its raw material requirements. On the sales and marketing side, Maruti has a network of 112 dealers and sales outlets in 86 locations across the country. It also has a 1,010 strong service workshop network covering 412 locations in the country.

MUL plans to launch Baleno in the luxury car segment and Wagon R in mid-size car segment. Baleno will be powered by a 1.8 litre, 16-valve powerplant. Initially they will be produced at the new plant from CKD/ SKD kits imported from Japan.

In December '98, MUL slashed the prices of its 800cc and Zen cars by about Rs24,000 and Rs51,000 respectively. This has helped MUL to restrict the slide in its market share, due to entry of new car manufacturers. 49

For FY99, MUL's total income dropped by 4.2% to Rs81.2bn. The decrease in prices of 800cc and Zen was reflected in a drop of 20% in net profit to Rs5.2bn compared to Rs6.5bn In FY98.

Volume targets were routinely exceeded, and in March 1994, MUL became the first Indian company to produce over one million vehicles, a landmark yet to be achieved by any other car company in India. Maruti is the highest volume car manufacturer in Asia, outside Japan and Korea, having produced over 3.5 million vehicles by December 2001.

Maruti is one of the most successful Old war-horse Maruti Udyog Ltd (MUL) has achieved a landmark it is proud of. It has crossed the 400,000 units mark for both production and sales for FY2000. With this it becomes the first company in the history of Indian automobiles to achieve this feat. The company went on the aggressive mode by increasing capacity and shedding its earlier resistance in introducing new technology in its models. With an enviable sales/service network, which spreads across the country, Maruti's position looks strong. But everything is not as hunky dory as it seems. Though it has taken advantage of the market expansion in cars, its earlier dominant position in the market share has come under threat. With around 86% of the market share a year ago, the levels today are at an alarming 62%. 50

Company sources point out to the fact that a fall in nnarket share is bound to happen as a nnarket share of plus 80% is not sustainable in the long term. This might be true. But certain hard facts should hit MUL on its face. We will mention two of these. Take the recent sales performance of the Maruti's bread-and-butter model 800 for instance. Sales have slowed down significantly since August 1999. In the last six of FY2000, average monthly sales of the model touched 14,647 units, a good 13.2% lower than the first half average of 16,883 units.

Next take the mid-sized offering from MUL - the 'Esteem'. This model has been the segment leader for a long time. But since September 1999, its sales have also taken a beating (except for December 1999) and upstarts like Ford's 'Ikon' and Hyundai's 'Accent' has come to occupy the space left by it. Sales for the last six months of FY2000 were 13% lower at 8,607 units as compared to 7,492 units in HI FY2000.

MUL is an automobile joint venture, and has made profits every year since inception till 2000-01. In 2000-01, although they generated operating profits on an income of Rs. 92.5 billion, high depreciation on new model launches resulted in a book loss.

4.4.4. HYUNDAI MOTORS INDIA LIMITED:

Hyundai Motor India Ltd was established in 1996, and is a subsidiary of the giant South Korean multi national, the 51

Hyundai Motor Company. It is Korea's top automobile manufacturer, witli it sales revenue touching $ 8.24 billion in 1997. The Santro is steadily capturing the Indian market, and giving a strong competition to its rivals in the same segment. Its success story is an example of a profitable Indian - Korean partnership where Indian skills and workmanship combine with Korean design and technology to produce one of the best cars.

The Hyundai Santro has been designed and developed in India at the integrated auto-manufacturing unit at Irrungattukatoi near Chennai. This plant is capable of producing 1,20,000 cars and 1,30,000 engine and transmission systems annually. It also has in built facilities for the manufacture of critical components. It is planned to invest another $1 billion in this facility by the year 2001.

The Company has set up more than 70 dealer workshops that are equipped with the latest technology, machinery, and international quality press, body and paint shops, across the country, thereby providing a one-stop shop for a Hyundai customer. Hyundai also has a fleet of 78 emergency road service cars - specially equipped Santro that can provide emergency service to all its customers anytime, anywhere.

The latest model to hit the roads is the Hyundai Accent, has unveiled at the Frankfurt Motor Show. It is a mid - 52

Sized, front wheeled drive, four door saloon with a four cylinder, 12 valve, 1495 cc, MPFI, petrol engine. It has an independent suspension and also McPherson struts with coil springs and stabilizer bar at front.

Hyundai hopes to increase its presence in the Indian market with conning up with more new models to cater to the growing and differing needs of the market.

4.4.5. DAEWOO MOTORS INDIA LIMITED:

Daewoo Motors India Limited is a part of the Korean multinational Daewoo Group with an annual turnover of 65 billion US dollars and with a diversified presence in 123 countries. Its annual production capacity, worldwide, is over 1.7 million units. It produces an entire range of automotive products including sedans, buses and trucks.

Despite the single largest investment in the Indian auto industry, Daewoo has not achieved the kind of success it had hoped to. The price slash boomeranged on it. It had an adverse affect on sales, raising questions regarding quality of the reduced price model.

The company launched 'Matiz' in the high selling small car segment in October 1998 and a mid-size car 'Nexia' in April 1999. Its old 'Cielo' model was also upgraded during the year. FY2000 started well for the company thanks largely to the fact that the market gave an encouraging response to Matiz. Extending its presence in 53

the higher reaches of the passenger car segment, DMIL has introduced Nexia, which has also been well received in the market. The company also has a minor presence in the (LCV) market.

The company is the one of the leading carmakers in the world and had a share of 0.6% (3.1mn cars) of the world market. However, in recent years, with the South Korean economy passing through difficult times, the group has seen its debt burden rise to a huge US$27bn. These developments have been responsible for the company's low valuations. The group is on a restructuring course with its stake in DMIL getting transferred to Daewoo Motors. The management at DMIL has come out with products, which have been received well in the market. Its strategy of focusing on exports will pay in the long run as the Indian market gets more and more competitive.

4.4.6. TELCO LIMITED ( LIMITED):

It has been a long and accelerated journey for TELCO Ltd., India's leading automobile manufacturer.

TELCO is India's largest private sector company with an annual turnover of Rs. 101.3 billion. It is also India's largest commercial vehicle manufacturer with a market share of 31.2% in the multi-utility vehicles segment and 6.4% in the luxury car segment. Worldwide it is ranked among the top ten in the manufacture of vehicles in the 54

range of 5-15 tones. It manufactures heavy commercial vehicles (HCV), light commercial vehicles (LCV), passenger cars and multi-utility vehicles.

One of India's premier automobile companies, it was established in 1945 to manufacture steam locomotives.

A tie-up with Daimler-Benz to produce medium commercial vehicles, first vehicle rolled out in within six months of the contract. The tie-up lasted from 1954 to 1969, by when Telco was in a position to independently design and manufacture commercial vehicles. It ventured into the production of other engineering equipment before it finally settled down to automobile and construction equipment machinery. In the year 1977 first commercial vehicle was manufactured.

In the year 1994 TELCO launched the Multi Utility Vehicle. In the same year joint venture agreement was signed with M/s Daimler-Benz/ Mercedes Benz for manufacture of Benz passenger cars in India. Mercedes Benz car E 220 was launched in 1995.

1998 saw the launch of Tata's foray in passenger car segment. Indica, India's first fully indigenous passenger car launched. In the year 1999, 115000 cars were booked against full payment within a week of bookings. 160 Indica were exported to Malta in year 2000. In the same year Tata's MUV with Euro II engine was launched and Indica with Bharat stage (Euro II) compliant engine 55

was launched, Indica 2000 (Euro II) with MPFI petrol engine was launched. Indica V2 - 2"" generation Indica was launched in 2001. Indica's 100,000'^ unit rolled out. Indica with CNG was launched. This year Indica V2 becomes India's number one car in its segment. With all this developments Tata' decided to exit from the joint venture with Daimler Chryler.

In the year 2002 Indica rolled out 200,000*'' unit. Sumo's '+' Series was launched in the same year. was also launched. TELCO signed a product agreement with MG Rover of the UK.

2003 was a happening year for TELCO. On 29'^ July, J.R.D. Tata's birth anniversary, Tata Engineering becomes Tata Motors Limited. First City Rover rolled out. Tata Motors singed MOU for acquisition of Daewoo Commercial Co. Ltd., Korea. In 2004 new India V2 was launched.

Export for the year 1997-98 totaled Rs. 600.78 crores with its major export markets being Middle East, Asia, Africa and Europe. Telco has 4 modern manufacturing plants: at Jamshedpur in Bihar, Pimpri and Chinchwad in Pune (Maharashtra) and Lucknow in Uttar Pradesh.

Tata has entered into several collaborations with different companies. Tata Cummins Ltd. is a 50:50 venture with Cummins Engine Company, USA for the manufacture of 56

fuel-efficient, low emission, environment-friendly diesel engines. A joint venture with Daimler Benz/ Mercedes Benz A.G. produces the 'E-Class' Mercedes Passenger Cars and it is also in collaboration with Holset Engineering Company, U.K. for turbo chargers to be used in the diesel engines manufactured by Tata Cummins Ltd. and other OEMs.

The only Indian company, which is equipped with crash testing facilities, servicing is never a problem with its vehicles. Service set-ups exist at every 100 kms at national highways. Besides there are 450 Service Centers across India, 24 hour ATM (Any Time Mobile) centers in Mumbai and Ahmedabad and fully functional Customer Training Cells in the Service Centers to help the customers make the best use of their vehicles.

Telco manufactures some of the most favorite vehicles of all times. Its , Tata Estate, Tata Mobile, , and the trucks and buses manufactured by it are very popular.

Tata Motors is India's only fully integrated automobile manufacturer with a portfolio that covers trucks, buses. Utility vehicles and passenger cars. It would be no exaggeration to say that Tata Motors provides the wheels for India's growth. 57

4.4.7. GENERAL MOTORS LIMITED:

General Motors Limited is the worldwide leader in car manufacture, with a 17% share in the world auto market. Its products are sold in over 170 countries, and its manufacturing base is spread across 43 countries and its annual production is roughly 83 lakh vehicles.

It manufactures a variety of vehicles: the Chevrolet, Pontiac, Cadillac, Oldsmobile, Opel, Saturn, Geo, Vauxhall, Holden and many more. At the forefront of technological innovations in the automotive sector. General Motors, since its inception in 1908, has always stood a shade above the rest. In 1911, it introduced the electric self-starter, in 1933, developed the front wheel suspension, and called the Knee - Action.

It initiated the installation of the industry's first catalytic converters in all cars sold in the US in 1975 and in 1996 delivered the first electric vehicle, the GM EVl, to consumers. The latest Is the production of the EVJ, an electric passenger vehicle.

Its tryst with India began in 1928, with the assemblage of Chevrolets in 1928. Till its closure in 1954, it assembled trucks, buses and batteries both for the Indian and export market. It has since then been in the Indian market as part of tie-ups with the Hindustan Motors to produce Bedford trucks, Vauxhall cars, Allison transmission and off-highway equipment. 58

General Motors India was fornned in 1994 as a result of collaboration between General Motors Corporation and C.K. Biria Group of Companies. Its total investment is to the tune of Rs. 300 crores, roughly equal to 70 million dollars and its Manufacturing Plant is located at Halol, 40 km north of Vadodara in Gujarat. GM India has brought the latest manufacturing processes and human factor practices to its Halol Plant and therefore is the benchmark for advanced technologies in the Indian automotive industry.

GM's operation in India combines Indian ingenuity, American management know-how and German engineering to produce premium automobiles in a world class-manufacturing environment. The Opel Astra that GM India is producing is Opel's best selling model worldwide and the third best selling car ever produced.

GM India's Dealer network and after sales support system are fully functional and provide solid backing for their customers after they purchase the product and help assure total customer satisfaction and enthusiasm. In India it manufactures the Opel Astra.

4.4.8 BAJAJ TEMPO LIMITED:

Late Shri N.K.Firodia, a Visionary Industrialist, was the Founder-Managing Director of Bajaj Tempo Limited. He established, starting in 1950, in Collaboration with Vidal & Sohn, Hamburg, Germany the import and later 59

progressive manufacture in India of the Tempo 3- Wheeler.

On 15th August 1957, Mr. N. K. Firodia signed collaboration with Vidal & Sohn Tempo Werke GmbH for phased manufacturing of TEMPO 3-WHEELER & manufacturing was started in a small plant of at Goregaon, Bombay. The initial licensed capacity granted by the government was 1000 80 vehicles per year month.

Expanding the business in 1961, the Company acquired about 150 acres of land in Akurdi near Pune. The production was transferred to Pune by the end of 1964. Ambitious plans for producing Light Commercial Vehicles for the growing industrial economy of India were drawn up. The manufacture of TEMPO VIKING 4-Wheeled Trucks & commenced in November 1964. The licensed capacity was increased to 6000 vehicles per year.

The VIKING vehicle subsequently was upgraded with a and the MATADOR was born. The production of Matador commenced in 1969. In 1975, the manufacturing capacity of Bajaj Tempo Limited was increased to 12,000 vehicles per year. In addition to 6,000 diesel engines for other purposes.

The collaborator company in Germany, in the wave of mergers during the 70's merged eventually with Daimler- Benz. In July 1982, Bajaj Temp Limited in a new 60

collaboration - with the then Daimler Benz Co.- produced the Mercedes Benz OM 616 engine under license for fitting on its line of vehicles.

The TEMPO TRAX Vehicle, specifically designed for the rough roads of rural India was developed by the Company's Research & Development department, to cater to the growing mechanisation of passenger transport in rural India.

To further modernise its LCV product range, the Company took up the production of the TEMPO TRAVELLER, under licence from Daimler-Benz. A new Plant was set up in 1987, on a greenfield site in Central India at Pithampur in Madhya Pradesh. This modern facility was developed in close co-operation with Daimler- Benz. The plant is equipped with a modern conveyorised body welding and Electrophoretic dip painting shop. The Plant has been expanded to house a new Press Shop in 1997. In 1996, Tempo introduced a new range of Three Wheelers - MINIDOR - pick up and auto rickshaw. These vehicles were completely designed in house using Tempo's modern Computer aided Design and Computer Aided Manufacturing facilities

In 1997, the company conceived a technologically superior tractor, the OX, as a diversification and the OX 45; a 45 HP tractor was introduced. The tractor was designed using Transmission technology from ZF, Germany, technical assistance for engine from AVL, 61

Austria and hydraulics teclinoiogy from Bosch. In 1999, Tempo introduced a 35 HP version of the tractor, the OX 35. Further, 25 HP and 60 HP tractors will be added to the range shortly.

In 1999, Tempo introduced state of the art Light Commercial Vehicles - The EXCEL range. These vehicles with their superb ergonomics and superior aggregates represent the latest generation of LCV's in India. The range includes Excel-4, Excel-3 and Excel-2 with a rated load carrying capacity of 3.6 tons, 3.0 tons and 2.0 tons respectively

Continuing with the efforts to introduce new products. Tempo in the year 2000 introduced two new - highly refined vehicles - specially designed for the Indian market. - Trax JUDO and Trax GAMA. Trax JUDO, with a Euro I compliant engine, all metal body. Excellent fit and finish is the "All Rounder " multi utility vehicle, with both air conditioning and power steering as standard options. Trax GAMA also features a full metal body and fine fit and finish, with a most economical DI engine. The GAMA is thus the Ideal People Carrier, for rural as well as urban transportation needs.

In the Year 2000,Tempo's Pithampur plant and its Mercedes Engine facilities received the prestigious ISO 9002 certification for quality systems. 62

Keeping in view the need to preserve the environment, all Tempo vehicles are powered by a range of environment friendly, rugged engines and high quality transmissions.

Today's Tempo - concentrating on customer satisfaction through high quality, high utility and high technology products.

The Company's product lines comprising of Light Commercial Vehicles, Utility Vehicles, Agricultural Tractors and Three-Wheeled vehicles were well received in the market during the year 2002-03. Sales Growth and Increase in the Market Share, was registered in all product categories. Greater buoyancy in the economy, improved investment climate for vehicles, as also effective product positioning and promotional policies by the Company combined, to give a substantial fillip to the Company's performance for the year under review. After several years of book losses, already during the year 2001-02 a turnaround was achieved, the year under review saw continued improvement in the Company's performance, resulting in substantial improvement both in the top line and in the bottom line performance

On the Utility Vehicles front, the Company's new offerings of highly fuel efficient and rugged 'Pickup Trucks' and large 'Personnel Carriers' have been extremely well received. The Company registered 63

significant improvement in both tfie number of vehicles sold, and also in the market share of Utility Vehicles.

All the products manufactured by the Company are actually ^working vehicles', and are expected to 'earn an income' for the purchaser. The acid test for success is whether they are able to offer a 'Better Business Proposition' to the customer. Each vehicle they sell actually results in the creation of a small new business for the buyer. It may well be said that Bajaj Tempo is more in the business of 'selling small businesses', rather than of'selling vehicles'.

4.4.9 TOYOTA KIRLOSKAR MOTOR PRIVATE LIMITED:

Toyota is one of the biggest vehicle manufacturers, and one of the most widely known companies, in the world today. Kiichiro Toyota laid the foundations of Toyota Motor Corporation, which was established in 1937. One of the greatest legacies left by Kiichiro Toyoda, apart from TMC itself, is the Toyota Production System. Kiichiro's "just- in-time" philosophy - producing only precise quantities of already ordered items with the absolute minimum of waste - was a key factor in the system's development. Progressively, the Toyota Production System began to be adopted by the automotive industry across the world.

Toyota has become the largest vehicle manufacturer in Japan with over 40% market share. Toyota began to 64

make inroads into foreign markets in the late 1950s. The first Crown models arrived In the USA In 1957, and by 1965, with models such as the Corolla, Toyota began to build Its reputation and sales to rival those of domestic producers. The first Toyota imported Into Europe was via Denmark in 1963. Toyota has continued to grow in Europe's sophisticated and complex market, and In 2000 the company delivered Its ten millionth car to a customer In Germany. In fact, growth Is currently one of the main words In Toyota's European vocabulary, and the company plans to reach annual sales of 800,000 In Europe by 2005. Toyota is number one for customer satisfaction in the majority of European countries and has built an excellent reputation across Europe for reliability and customer service. This enviable reputation, along with the support of a network of more than 25 distributors and 3,500 sales outlets, are important factors in supporting Toyota's European sales growth In the coming years.

As a joint venture between Kirloskar Group and Toyota Motor Corporation, Toyota Kirloskar Motor Private Limited (TKM) aims to play a major role in the development of the automotive industry and the creation of employment opportunities, not only through its dealer network, but also through ancillary industries,

TKM's growth since inception can be attributed to one simple, yet important aspect of its business philosophy- "Putting Customer First". While managing growth, TKM 65

has maintained its commitment to provide quality products at a reasonable price and has made every effort to meet changes in customer needs.

TKM firmly believes that the success of this venture depends on providing high quality products and services to all valued customers through the efforts of its team members

TKM, along with its dedicated dealers and suppliers, has adopted the "Growing Together" philosophy of its parent company TMC to create long-term business growth. In this way, TKM aims to further contribute to progress in the Indian automotive industry, realise greater employment opportunities for local citizens, improve the quality of life of the team members and promote robust economic activity in India.

4.5.0. CAR MARKET SECNARIO IN THE YEAR 2000:

4.5.1. CAR SALES IN LAST DECADE:

Before getting the details of car market scenario in the year 2000 following table gives the car sales for last decade and the month wise details of cars sale upto year 2002 that is till the completion of secondary data: 66

General Hind Honda Hyundai Fiat Ford PAL Month Daewoo Maruti Mercedes Premier Telco Motors Motors Siel Motor India India Peugeot

Mar-02 NA 1360 2532 1582 9513 4003 2501 34727 0 0 0 8769

Feb-02 NA NA NA NA NA NA NA NA NA NA NA NA

Jan-02 NA NA NA NA NA NA NA NA NA NA NA NA

Dec-01 NA 510 1150 879 7139 2623 1174 23994 0 0 0 5185

Nov-01 NA 510 1150 879 7139 2623 1174 23994 0 0 0 5185

Oct-01 NA 600 1566 740 7059 2060 803 I9S96 105 0 0 S327

Sep-01 NA 800 1630 1149 6061 1382 1151 28396 103 0 0 5408

Aug-01 NA 940 1792 913 7551 631 1088 29859 123 0 0 5164

Jun-Ol 2033 585 1768 713 8472 570 2993 26129 143 0 0 4837

May-01 2340 623 1346 710 8134 450 3475 32176 173 0 0 4775

Apr-01 2063 577 1274 617 7203 501 3536 26443 78 0 0 3258

Mar-01 2287 1056 2853 1271 10008 630 2655 38961 88 0 0 5298

Feb-01 2526 701 2099 653 6830 601 1005 30564 41 0 0 3673

Jan-01 2526 558 2363 850 9066 733 1555 35844 36 0 0 3014

Dec-00 NA 375 1,561 728 1,764 474 768 23,846 51 0 0 2,280

Nov-00 NA 446 1,865 737 7,843 716 1,112 28,253 58 0 0 2,'575

Oct-00 4,564 543 1,714 621 7,363 831 1,104 18,721 49 0 0 2,518

Sep-00 4,720 1,163 2,865 1,101 8,283 901 1,817 35,959 110 0 0 3,609

Aug-00 4,497 1,038 2,680 817 7,285 709 1,492 31,203 56 0 0 3,495

]uly-00 4,110 648 1,941 606 7,265 NA 1,502 27,665 55 0 0 3,583

Jun-00 4,702 603 2,123 801 6,146 830 1,728 15,898 47 0 0 4,096

May-00 6,033 560 2,054 903 7,561 1,101 1,592 27,533 63 0 0""

Apr-00 5,067 573 1,559 923 7,305 1,592 1,192 30,016 62 0 0 5,211

Mar-OO 6,215 758 3,451 1,311 8,425 1,602 2,114 41,766 117 0 0 7,331

Feb-00 4,453 253 2,316 1,004 7,475 1,500 1,386 32,762 28 NA NA 5,392

Jan-00 4,207 202 2,450 1,003 8,655 1,525 1,090 27,701 33 0 NA 5,830

Dec-99 4,045 133 2,343 658 6,091 1,614 1,702 31,747 19 NA NA 5,389

Nov-99 3,370 225 1,903 454 6,971 1,759 146 33,988 81 NA NA 5,266

Oct-99 3,259 168 1,809 452 6,207 1,951 180 29,126 53 NA NA 4,794

Sep-99 3,166 309 2,676 1,002 7,214 2,334 220 36,121 56 NA NA 5,089 -—- [Aug-99 2,862 251 2,213 900 7,002 2,025 NA 37,840 156 NA NA J jjul-99 2,801 220 2,038 850 4,949 1,800 302 37,404 88 NA NA 4,188

NA NA NA NA NA NA NA NA NA NA NA NA pVlay-99 liir"™"'"™' Tso""'™ 337680" NA™'""""

^Apr-99 1,005 2()2 1,869 588 3,531 1,467 1165 31,351 l69 NA |43 1,737

SMar-99 1,159 402 2,695 1,359 14,290 [1,512 368 35,473 166 NA |54 2,342

7T3 "" |i6"o"""™""" 1,62™""™ '60T 189 22~ 67

Jan-99 926 161 1,468 750 2,753 603 130 26,413 33 8 90 312

Dec-98 NA NA 1,825 551 3,881 585 213 20,170 64 10 126 189

Nov-98 1,267 225 1,222 723 3,444 648 312 19,738 363 12 144 151

Oct-98 213 250 1,156 554 1,123 612 144 24,338 25 6 306 180 Sep-98 331 314 2,228 910 - 1,189 312 33,752 42 20 189 279 Aug-98 409 329 1,725 803 - 1,017 367 28,867 49 18 306 133 Jul-98 875 342 1,830 656 - 1,008 414 32,008 102 99 333 326 i Jun-98 851 348 1,756 1,195 - 729 368 20,914 104 72 405 354 May-98 903 357 1,282 859 - - 336 33,762 128 90 - 248 Apr-98 775 276 1,303 667 - - 180 23,719 102 99 NA 10 Mar-98 1,102 263 2,417 - - - 419 34,460 144 216 522 325 Feb-98 919 227 1,551 - - - 201 29,146 151 162 666 275 Jan-98 906 282 1,814 Ill - - 276 32,762 75 279 747 194 Dec-97 314 226 2,111 - - - 354 30,944 166 333 846 16 Nov-97 621 322 1,643 - - - 338 28,676 163 297 666 539 Oct-97 735 759 1,823 - - 532 19,760 97 603 504 341 Sep-97 931 1,101 2,084 - - - 600 32,193 360 486 837 885 Aug-97 1,060 902 1,950 - - - 594 29,486 601 360 900 988 Jul-97 817 921 1,852 - - - 1,051 33,026 487 522 1,149 415 Jun-97 606 873 2,022 - - - 738 27,393 323 684 1,613 405 May-97 806 821 1,933 - - - 671 30,658 269 459 1,705 241 Apr-97 1,291 851 1,389 - - - 677 16,799 206 900 1,214 57 Mar-97 1,613 1,223 2,370 - - - 3,606 34,596 119 1,080 2,377 782 Feb-97 740 1,127 2,584 - - - - 30,027 48 1,044 1,236 577 Jan-97 737 1,104 2,950 - - - - 32,601 54 855 1,503 605 Dec-96 710 1,360 1,850 - - - - 29,846 81 675 999 305 Nov-96 1,413 700 1,650 - - - - 24,505 132 306 866 868 Oct-96 1,402 657 1,748 - - - - 22,816 151 288 339 511 Sep-96 2,260 365 2,485 - - - - 26,796 154 - 169 768 Aug-96 1,411 623 2,183 - - - - 26,630 256 423 78 474 Jul-96 1,774 323 2,679 - - - - 29,608 230 720 197 651 Jun-96 1,400 - 1,583 - - - - 28,063 220 846 281 619 |May-96 1,946 - 1,839 - - - - 28,125 192 531 1,539 743 ^Apr-96 1,460 - 1,907 - - - - 16,801 248 891 666 472 |Mar-96 2,311 - 2,947 _ - - - 29,923 308 873 1,242 1,559 |Feb-96 1,282 2,446 26,315 79 1,031 1,818 NA

—™ pan-96 - - - 23J2T" m iDec-95 1,144 - 2,077 - - - - 25,937 801 1,782 806 iNov-95 1,039 - 2,358 - - 22,228 875 1,719 861 - |- I 68

Oct-95 1,495 - 2,032 - - - 13,603 - 630 1,800 928 Sep-95 - - 2,078 - - - - 25,033 - 747 2,007 906 Aug-95 - - 2,436 - - - - 22,131 - 540 1,719 507 Jul-95 - - 2,364 - - - - 24,521 - 1,053 2,007 904 Jun-95 - - 2,253 - - - - 23,759 - 925 1,728 979 May-95 - - 2,161 - - - - 19,582 - 801 1,305 841 Apr-95 - - 1,943 - - - - 10,466 - 1,008 1,638 651 Mar-95 - - 2,911 - - - - 26,719 - 3,006 1,038 Feb-95 - - 2,386 - - - - 19,237 - - 2,727 994

Jan-95 - - 2,518 - - - • 23,470 - - 3,507 1,212 Dec-94 - - 2,418 - - - - 17,668 - - 3,015 1,811 Nov-94 - - 2,003 - - - - 11,541 - 2,214 931 Oct-94 - - 1,790 - - 10,783 - - 2,052 1,035 Sep-94 - - 2,204 - - 15,059 - - 1,584 1,328 Aug-94 - - 2,038 - - - - 15,173 - - 2,547 1,267 Jul-94 - - 1,989 - - - - 15,110 - - 2,601 819 Jun-94 - - 2,111 - - - 15,627 - - 1,701 954 May-94 - - 1,945 - - - - 16,217 - - 1,089 658 Apr-94 - - 1,813 - - - - 12,326 - - 1,764 493 |Mar-94 - 2,731 - - - - 13,361 - - 2,619 631 |Feb-94 - 1,894 - - - - 13,544 - - 2,403 853 |Jan-94 - - 2,214 - - - - 13,676 - - 2,502 1,083

Source: SIAM

According to figures released by the Society of Indian Automobile Manufacturers (SIAM), passenger car sales fell by 13.3 per cent in 3uly 2000 to 47,375 units. The big losers were market leader Maruti Udyog Ltd (MUL) and homegrown auto major Telco. Worst hit was India's largest carmaker Maruti Udyog Ltd (MUL) that recorded a sharp dip in its brand sales across the board. In the first four months of the current fiscal (between April and July), Maruti registered negative growth with sales falling by 20.09 per cent to 1,01,112 units from 1,26,535 units 69 in the same period last year. The market leader's share fell to 58.39 per cent in July 2000 from 68.45 per cent exactly a year back. In volume terms, MUL car sales fell to 27,665 units in July from 37,404 units in July last year due to stiff competition from the two Korean chaebols Hyundai and Daewoo, both of which reported positive growth during the month. Domestic auto major Telco also recorded negative growth in car sales as the demand for Indica fell by 14.47 per cent to 3,583 units during July 2000 from 4189 units in the same month last year. In sharp contrast, Hyundai Motor India Ltd (HMIL) recorded an impressive 46.78 per cent jump to 7,265 cars in July 2000 compared with 4,949 units last year, while Daewoo Motors India Ltd (DMIL) sold 4,110 cars during the month, a rise of 46.73 per cent, against 2,801 cars in July 1999. Hyundai sold 28,277 units during the four months of the current year, up from 17,633 units last year, while Daewoo sold 1,9912 units, up from 8,640 units in the same period last year. Ford India zoomed ahead with sales of its mid-size car Ikon jumping up by a massive 397.35 per cent to 1,502 units from 302 units in the same month last year. General Motors' sales shot to 648 units, up from 220 cars in July 1999. Other carmakers like Honda Siel and Mercedes Benz, however, recorded 28.7 per cent and 37.5 per cent dip in sales during July 2000. 70

4.5.2: VOLUME SALES OF CARS:

For study, base of the car sales is considered for the year 2000 that is the time when I started this study. To have the clear trend, car sales for the previous year Is also taken into account.

In the below mentioned table status of car sales (Including Exports) of various makes in the year 2000 vis a vis year 1999.

Apr-Mar-00 Apr-Mar-99 % yoy 1 ™ „, , Daewoo Motors 40,217 10,121 297.4

jFiat India 20,751 10,117 105.1

JFord India 8,023 3,233 148.2

General Motors 3,047 3,524 (13.5)

IHindustan Motors 26,860 20,115 33.5

IHonda Siel Cars 9,698 9,631 0.7

(Hyundai Motors 75,895 17,648 330.0

jMaruti Udyog 397,586 326,523 21.8

jTelco 55,776 4,732 1078.7

Mercedes Benz 893 1,116 (20.0) pdiers 69 3,191 (97.8)

Total 638,815 409,951 55.8

4.5.3.THE FALLING FOURTUNES OF MARUTI UDYOG:

Table on the next page gives an idea of changing fortunes of Maruti Udyog after the introduction of cars from other MNC's. Though in terms of numbers sales has 71

increased for Maruti but in terms of percentage marl

Models FY2000 Market share in FY99 Market share in respective segment (%) respective segment (%)

800 189,184 33.99 163,012 47.67

Omni 83,102 14.93 58,490 17.10

Zen 83,225 14.95 64,808 18.95

Esteem 16,099 26.61 16,800 39.24

Maruti 1000 514 0.85 448 1.05

Wagon R 5,900 1.06 - -

Baleno 1613 2.66 - -

Source: SI AM

From the table above, it is clear that all the recent entrants in the car marl

4.6. CLASSIFICATION OF INDIAN CAR INDUSTRY

Cars available In the country are divided into main two categories one based on their size, Shape, usage. Other Is based on the price. On the basis of size, shape and usage passenger vehicles can be classifies as under:

4.6.1.0: CLASSIFICATION OF INDIAN CAR INDUSTRY Ton the basis of shape, size and usaae^

On the basis of size shape and usage vehicles can be sub divided in following three categories:

4.6.1.1. Economy Size Cars 4.6.1.2. Mid Size Cars 4.6.1.3. Multi - Utility Vehicles

4.6.1.1. Economy Size Cars:

Following table gives the details about brand-wise sales of small/economy cars Month wise: for Apr 99 -Mar 2000:

Jul- lAug- ISep- lOct- iNov- Models 99 |99 99 99 199

Maruti 800 18,445 18,908118,458 15,581115,063

Maruti Zen 7,907 7,977 7,479 6,382 7,219

Maruti Onuii 7,548 7,768 7,601 5,069 |7,516

Hyundai Santro :4^949'KIwiz "HinT'E^izo^'E^ I I I „,„. I „.,..,|, Telco Indica 4,087 |4'537E()44 l4',74'4"l5,214" Daewoo Matiz 2,438 2.453 f3.165 13,259 |3.139 I y,_ ]„„. J „,J._ Ambassador i,368 |r389li,638 11,298 |i3i94 73

Fiat Uno 11,469 11,365 11,272 1,303 h,305 jl,508 ll,525 h,453 |l,264 jl,222 ll,220 jl,254 Premier Padmini P ; h r \- • [ • J; - Premier 118NE 1" 1' 1' - 12 6 |------Wagon R 1- - 11,057 |4,843

JTotal 37,862 41,109 37,243 48,045 51,355 52,113 44,065147,299 45,300 45,503 47,322 59,259

From above table it is clear that Maruti's Zen has retained its numero uno position in the higher end of the economy car segment by selling 7,565 units during the month. However, a sale of Maruti Omni was higher at 7,783 units, which is a new record and also comes as a surprise. Telco' Indica' too crossed the 7,000 mark and it seems that the model has left its earlier 'teething' problems far behind. Telco has succeeded in reaching close to its target sales figure of 60,000 Indica's for the period January 1999 to March 2000 by selling 57,160 cars. In the fiscal FY2000, the company sold 54,990 cars. The Indica has now become the second-highest selling car after Maruti 800 and Telco acquired a market share of 8.6%. Telco has averaged sales of 5,900 cars since January 1999.

After posting record sales in January, Hyundai's 'Santro' seems to have lost out. The fall in Santro sales has been attributed to the decreased production of Santro to adjust for increasing demand for Accent's. Another factor could be the fact that customers have opted for the other 'tall boy' design car -Wagon R. The Wagon-R clocked sales of 4,843 units, up from 1,057 units last month. Daewoo Motors India Ltd sales of passenger car for the month of March 2000 went up by 35.7% to 5,853 units 74

from 4,312 units in February 2000. As earlier indicated by tlie company, they have raised its monthly production levels to meet the rise in demand and clear the present backlog.

4.6.1.2. Mid Size Cars:

Following table gives the details about the Brand-wise sales of mid-sized and premium cars Month wise: for Apr 99 -Mar 2000:

Apr- May- jjun- Jul- Aug- Sep-|Ocl- Nov- Dec- Jan- Feb- Mar- Models 99 99 |99 99 99 99 i99 99 99 00 00 t I Maruti Esteem 1,241 1,455 11,330 1,596 1,464 1,521 |l,125 1,089 1,602 1,144 1,113 1,419

Honda City 588 721 750 725 900 1,002 J452 454 658 1,003 1,004 1,311

Fiat Sienna - 253 T49? 1496 720 826 |426 306 330 300 275 351 f Daewoo Cielo 251 150 |200 J200 359 365 bl6 231 218 153 141 151

Ford Escort 165 200 |I90 P02 250 22_ 0 1H8 0 146 - - - 1 Ford Ikon 1,677 1,062 1,386 |2,134

Opel Astra 202 180 1230 220 251 309 p68 141 133 202 245 |453

Hyundai Accent 1,019 - - - - - ' I' - 1,243 1,272 |2,006 Maruti 1000 62 41 38 32 49 54 22 67 "* 36 11 27 |75

Hindustan 16 26 35 20 35 12 32 10 13 31 12 Contessa

Maruti Baleno 328 656 629 • - Mitsubishi 603 671 |629 631 801 1,001 501 509 654 654 655 1,151 Lancer

306 Opel Corsa - - Total 13,128 3,671 3,890 4,231 4,814 5,333 3,202 2,975 6,337 6,113 6,805 9,998

This segment has done exceptionally well during the month under consideration by crossing the five-figure mark. Sales were also 48% higher than February 2000. The players to have done well are the recent entrants to 75

this segment viz Hyundai's Accent and Ford's II

During FY2000, sales of cars in this segment touched around 70,000 units as compared to around 52,000 units a year ago. This rise has been the result of new launches. As opposed to 8 models existing in March 1999, there are 13 models on the roads today. To give just an example. Esteem's sale during FY99 was 16,031 units or 30.8% of total segment sales. A year later, this figure has dropped to 23.9%! The space left by pre-FY99 models has been occupied by the likes of Ikon and Accent. These two models combined have come to constitute 17% of total segment sales. In fact, recent launches accounted for 26% (or 18,500 units) of segment sales in FY2000. Sales of the mid-sized segment have touched 17% of total car sales in March 2000 as compared to 8.3% in April 1999. 76

4.6.1.3. Multi - Utility Vehicles:

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 , a pickup 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.

Volume sales of multi-utility vehicles:

JApr-Mar-OO Apr-Mar-99 %yoy M&M 70,433 64,820 8.7

Telco 31,983 31,349 2.0

Maruti Udyog 8,705 7,250 20.1

Bajaj Tempo |6,133 5,379 14.0

Hindustan Motors 2,649 2,938 (9.8) j .,.„.__. iToyota Kirloskar jTotai To.T 1 Source: SI AM 77

In March 2000, sales of utility vehicles touched an all time high during FY2000 as could be expected in the last month of the fiscal. But in complete contrast to last month, the growth has not been due to the industry leader M & M. In February, M & M posted an unusual rise of 70%yoy in sales. Come March, the company recorded a drop of almost ll%yoy in sales. The star performer in March has been Telco, which saw a rise of 16.5% yoy in sales thanks mainly due to the quadrupling of exports to 828 units. In fact, Telco's case is interesting. Its domestic sales have seen a drop while its exports have risen by staggering 292%yoy to 4,294 units in FY2000. Thus, the entire 2%yoy rise in yearly sales has been due to exports. Telco's exports have been mainly of its Safari model to countries like Italy and Spain.

Qualis has continued to perform well by clocking an average of more than 1,000 units per month. However, the introduction of the model has also meant that the market for MUV's has expanded. Sales of Tata Sumo have started picking up especially after the introduction of the economy variant. Sales of Maruti Gypsy were high during the month of March due to government purchases while the company continued to suffer from falling exports.

If the story in the MUV segment can be defined in only one word, it is 'QUALIS'. Sans this vehicle, the segment may have well posted a negative growth. Just within the first six months of its entry in the country, the company 78

has succeeded in producing its 10,000 vehicle. It seenns that the initial verdict about the model's 'boxy' looks did not hold water for long. Buyers who are going in for the vehicle swear by its driving comfort and overall look and 'feel'. For many, a Toyota Quails has as much brand value as a Honda City and Mitsubishi Lancer and also falls within a broader price range.

Feeling the heat is the market leader M & M. It has seen its sales fall every month in FYOl. Market leader M & M's fall in sales could be due to the fact that it has started feeling the heat of competition from its closest rival Telco. The latter has recently introduced six new versions of its 'Sumo' model. Each one of these models caters to various segments. One of them is called the 'Spacio'. It is priced competitively and comes with a direct injection diesel engine. This would make it a favorite in the semi- urban and rural areas, as running costs would also be low. Sumo's deluxe version has also been upgraded to match the Quails. The strategy appears to have paid off, as the sales figures of 'Sumo' would seem to suggest. During the first two months of FYOl, Sumo's sales have increased by 25%yoy to 3,584 units. On the other hand, sales of 'Safari' and 'Sierra' have posted a negative growth. To counter this, Telco has planned to launch a refurbished 'Sierra' and a cheaper version of the 'Safari'.

The only other player to remain in positive territory is Telco. It has recently introduced six new versions of its 'Sumo' model. Each one of these models caters to 79

various segments. One of thenn is called the 'Spacio'. It is priced competitively and comes with a direct injection diesel engine. This would make it a favorite in the semi- urban and rural areas, as running costs would also be low. Sumo's deluxe version has also been upgraded to match the Qualis. The strategy appears to have paid off, as the sales figures of 'Sumo' would seem to suggest. Sales of this model have risen by 18.5%yoy to 5,607 units during the three-month period. On the other hand, sales of 'Safari' and 'Sierra' have posted a negative growth. To counter this, Telco has launched a refurbished 'Sierra' and a cheaper version of the 'Safari'.

4.6.2. Cl-ASSIFICATION OF INDIAN CAR INDUSTRY (on the basis of price):

As mentioned earlier Indian car industry can also be classified. Based on the price it can be divided in four categories as follows:

4.6.2.1. Economy segment (upto Rs. 0.4mn),

4.6.2.2. Mid-size segment (Rs. 0.4-0.6mn),

4.6.2.3. Luxury car segment (Rs. 0.6-lmn) and

4.6.2.4. Super luxury car segment (above Rs. Imn).

The twin factors of rising income and finance schemes have made it all the easier to buy a car. The effect of above mentioned factor is studied and tried to estimate likely demand levels in the future. 80

For the purpose of study the period considered is from 1990 to 1996. This was the period when economic liberalisation took place. First take income levels for instance. Since 1991, the country embarked on a policy of economic liberalisation. Since then it has been seen that households have moved up the income ladder with the number of households in the lower income groups actually declining. According to the NCAER, from FY93 to FY96, the proportion of low-income households has declined rapidly than in the pre-reform period. In absolute terms, lOmn households graduated outside the low-income group. At the same time, the proportion of households in the high-income group went up. If we look at the table below, we can compare the distribution of households (%) in the various income groups in the pre- reform and post-reform periods.

Annual income (Rs)i Income group •JFY90 FY96 at FY96 prices jUrban JRural |Total Urban Rural JTotal

Less than 25,000 Lower J37.1 t67".3 p.S 27.9 I57.2 U%.9 1 \ 25,001 - 50,000 Lower Middle J34.8 |23.9 J26.9 34.9 29.0 30.7

50,001-77,000 Middle J17.9 |7.1 jlO.l 20.3 |8.6 11.9

77,001 - 106,000 Upper Middle |6.5 1.2 p.7 9.6 |3.1 5.0 i 1 More than 106,000 i High P.8 0.5 \\A 7.3 |2.0 3.5 ± L..

Source: NCAER

Assuming that a household will save 35% of its income to pay for annual loan installments, fuel and maintenance charges, then the following table suggests that the annual income will have to be around Rs260,000 for a 81

new car and Rsl50,000 for a second-hand car. According to NCAER Market Demographics Report of 1998, the number of households under these two income brackets was 1.4mn and 3.1mn respectively in FY96. These income categories grew at a CAGR of 17% and 15% between FY93 and FY96. If we assume, that the growth rate in the last two categories falls by half to 8.5% and 7.5% respectively, then the number of households affording a new car will go up to 2.1mn and those able to afford a used car will go up to 4.4mn.

Price (Rs) 1240,000 li 6,000 "1 Car finance jjgoiooo" _ 1 Down payment [6o,ooF™ Annual installment outflow |'54,6'36 0

Fuel cost (@ 10,000 kms/year) 24,570

Maintenance ^6,500 10,500

Total annual outflow J81,306 35,070 'i Annual saving for down payment J9,446 17,317 , 1 Total outflow (Rs) 190,752 52,387 \ Annual income at 35% outflow J259,291 149,677

Income bracket (Rs) |<"260,00b < 150,000

No. of households in FY93 (mn) ^3 2.0

No. of households in FY96 (mn) |1.4 1 3.1

Estimated growth (%) |8.5 7.5 T Estimated no. of households in FYOl (mn) |2.1 4.4

Note: The car is a Maruti 800 (AC). The used car is of 1996 vintage. Finance scheme is of Maruti Countrywide. 82

As and when the prices of second hand passenger cars drop, a larger number of households will become eligible for owning a car. For example, if prices come down to around Rs75,000 levels, then further Imn households will become potential customers.

In March 1998, according to ACMA, the estimated number of registered passenger cars was 3.87mn. So one can gauge the potential for car sales, which exists in this country at present. Coupled with it the fact that several financial institutions have come to offer car loans, which have been lapped up by potential customers. However, the household penetration technique has three limitations.

Firstly, the threshold income level for a household to own a car is unclear. In addition, in the context of an economy, where nearly one-third of economic activity is unaccounted, there are no precise estimates of household incomes which factor in black money.

Secondly, there are no estimates available about the pattern of car ownership, in terms of the number of cars per household. This aspect has a significant impact on demand estimate for luxury cars as such buyers normally upgrade their cars.

Thirdly, the validity of the household penetration technique is debatable given that corporate institutional 83

buyers account for a significant proportion of total car demand.

All the new generation cars are fitted with the radial tyres. It is the existing cars, which are using both cross ply or conventional tyres and radial tyres.