IMPACT OF NANO ON TWO WHEELER MARKET IN MUMBAI

SECTION I INTRODUCTION

1.1 Rationale For The Study

Since the first car rolled out on the streets of Mumbai (then Bombay) in 1898, the Automobile Industry of India has come a long way. During its early stages the auto industry was overlooked by the then Government and the policies were also not favorable. The liberalization policy and various tax relief by the Govt. of India in recent years has made remarkable impacts on Indian Automobile Industry. Indian auto industry, which is currently growing at the pace of around 18 % per annum, has become a hot destination for global auto players like Volvo, General Motors and Ford.

A well developed transportation system plays a key role in the development of an economy, and India is no exception to it. With the growth of transportation system the Automotive Industry of India is also growing at rapid speed, occupying an important place on occupancy of Indian economy. Today Indian automotive industry is fully capable of producing various kinds of vehicles and can be divided into three broad categories: Cars, two-wheelers and heavy vehicles

India has always been a lucrative market for Automobile Manufacturers. Indian economy is continuously growing and attracting more and more Foreign Automobile Manufacturers in India.

The aim of this study is to discuss the impact created by TATA’s upcoming Rs.one lakh Car “NANO” on Two wheeler manufacturers and in India. One of the major driving factor for the success of Nano will be Prize Conscious mentality of Indian Customers.

A car priced between a high end two wheeler and a low end four wheeler have a potential to explode the small car segment. Some 7 million two wheelers and 1.4 million passenger vehicles (including cars and utility vehicles) were sold in 2006-07. (Source: FADA). That apart, an estimated six lakh second hand cars were bought every year. While the existing car buyers, who were willing to fork out at about 2.5 lakh for a four wheeler, might not be the potential customers, but out of the six million two wheeler

1 buyers one million two wheeler individuals will be probable customers according to Mr.Ratan Tata. (Source: Indian Automotive Industry by T.P.Rajmanohar)

Owning a car is status symbol for Indian consumer rather than a bike. This further creates car market in India more and more attractive. Also the government policies in India are favoring to car manufacturers. Government is charging less excise duty on car manufacturers who making car below 1200 cc.

The huge untapped potential for cheap cars along with challenges to two wheelers market rationalize the need for study this topic. Besides my personal interest and inclination towards Automobile industry motivates me to choose this subject.

2 1.2Objectives of the study

The purpose of the study is:

1. To understand the consumer’s attitude towards Nano car in Mumbai region.

2. To analyze two wheeler market in Mumbai.

3. To discuss impact of nano on two wheeler market.

4. To analyze the Scope for nano in Mumbai market supported by Primary Research.

3 1.3 Research Methodology to be used

Taking into account the objective of the study, the nature of research shall be “Exploratory Research”. The research methodology is detailed as under.

I. Literature Review

All Literature on the proposed study available from library and web sites shall be examined to get acquainted with the topic of the study. Press release by  SIAM (Society of India Automobile Manufacturers),  FADA (Federation of Automobile Dealers Associations)  Economic Survey of India- 2007  Survey of India Automobiles Industry-2007  Bike Manufacturers in India,  Car Manufacturers in India.  Automobile magazines such as Motoring, Autoindia, Autocar, Top Gear

II. Research Design and Hypothesis

The hypothesis of the study shall be as under.

H0: Null Hypothesis – “Launch of Nano will affect two wheeler market in Mumbai.”

III. Period of study

The period of study shall cover the period 1st September 2008 to 28 February 2009.

4 1.4 SAMPLING

Sampling Universe

The sampling universe shall consist of individuals in Mumbai. Sampling universe is the total theoretical population. Since there are geographical limitations and covering whole of India would not be feasible covering Mumbai is the possible solution for carrying out the survey.

Sample Size

The size of the sample shall be 93 individuals.

Sampling Technique

The sampling technique to be used for the proposed study shall be Non Probability Systematic Sampling.

Sampling is the use of a subset of the population to represent the whole population. Probability sampling, or random sampling, is a sampling technique in which the probability of getting any particular sample may be calculated. Non Probability systematic sampling does not meet this criterion and should be used with caution. Nonprobability systematic sampling techniques cannot be used to infer from the sample to the general population. Any generalizations obtained from a non probability systematic sample must be filtered through one's knowledge of the topic being studied. Performing non probability systematic sampling is considerably less expensive than doing probability sampling, but the results are of limited value.

5 1.5 DATA:

Types of Data

Primary data as well as secondary data shall be used for the proposed study.

Primary data: The method used for collecting information from a number of respondents i.e. the respondents who would respond to the survey.

Secondary data: The information collected through various books, Publications, Newsletters, Newspapers and Magazines on Compensation Management.

Data Sources

The data for the proposed study shall be sourced from,

 Publication and news letters of Business Today, DNA newspaper

 Business newspapers such as Economic Times, Mint, Business Line, Business Standard

 Automobile magazines such as Motoring, Autoindia, Autocar, Top Gear

 Websites of the magazines such as,

www.autocarindia.com www.autox.in www.indiacar.com www.automobileIndia.com www.indiaon2wheels.com www.autozmag.com

6 Methods of data collection

Questionnaire Method shall be used for the purpose of data collection

Questionnaire is a set of questions logically arranged presented to the respondents to answer.

Quantitative and Qualitative Data collection methods

The Quantitative data collection methods rely on random sampling and structured data collection instruments that fit diverse experiences into predetermined response categories. They produce results that are easy to summarize, compare, and generalize.

Quantitative research is concerned with testing hypotheses derived from theory and/or being able to estimate the size of a phenomenon of interest. Depending on the research question, participants may be randomly assigned to different treatments. If this is not feasible, the researcher may collect data on participant and situational characteristics in order to statistically control for their influence on the dependent, or outcome, variable. If the intent is to generalize from the research participants to a larger population, the researcher will employ probability sampling to select participants.

7 1.6 Tools and Techniques of Analysis

1. Hypothesis Testing will be carried out.

2. Statistical and graphical analysis of the data collected shall be carried out.

3. The stated comparison shall be presented using tables and graphs.

The data collected from the survey of the individuals carried out during the course of the proposed study as mentioned, would be represented in a graphical form.

Graphical analysis shall be used because it is easier to understand any data in a diagrammatic form, graphical pictures

The comparisons made shall be represented using tables and graphs because it is always easier and effective to see graphs and tables rather than reading too much of matter about the same.

Diagrams wherever essential shall be used to make the presentation of the project report effective and simple to understand.

8

1.7 The limitation of proposed study

 Due to time constraint number of individual interviews conducted will be limited.

 There is 60% of Indian population being middle class the out come of study will deviate to some extent.

9 1.8 Expected Contribution From the Study

The expected contributions from the proposed study are as under,

1. Possible out come the study will give us clear idea as to how & to what extent the launch of Nano(People’s car) which is about to be launched by TATA Motors will affect the Two Wheeler Market scenario in Mumbai.

2. It will also excepted put a light on how the price sensitive middle class behave (Attitude) towards launch of Nano.

10 1.9 Direction for future Research

In future the performance of Nano will be considering the main parameter for growth in automobile sector.

There can be a future study conducted on FUEL CRISIS that will be arising on account of success of Nano.

There can be also future study conducted on TRAFFIC & SPACE MANAGEMENT that will be arising on account of success of Nano.

There can be also future study conducted on CUSTOMER SATISFACTION regarding Nano.

11 SECTION II FUNDAMENTAL CONCEPTS RELATED TO THE TOPIC

2.1 INTRODUCTION TO AUTOMOBILE INDUSTRY The origin of automobile is not certain. In this section of automobile history, we will only discuss about the phases of automobile in the development and modernization process since the first car was shipped to India. We will start automotive history from this point of time.

The automobile industry has changed the way people live and work. The earliest of modern cars was manufactured in the year 1895. Shortly the first appearance of the car followed in India. As the century turned, three cars were imported in Mumbai (India). Within decade there were total of 1025 cars in the city. The dawn of automobile actually goes back to 4000 years when the first wheel was used for transportation in India. In the beginning of 15th century Portuguese arrived in China and the interaction of the two cultures led to a variety of new technologies, including the creation of a wheel that turned under its own power. By 1600s small steam-powered engine models was developed, but it took another century before a full-sized engine- powered vehicle was created. The actual horseless carriage was introduced in the year 1893 by brothers Charles and Frank Duryea. It was the first internal-combustion motor car of America, and it was followed by Henry Ford's first experimental car that same year. One of the highest-rated early luxury automobiles was the 1909 Rolls-Royce Silver Ghost that featured a quiet 6-cylinder engine, leather interior, folding windscreens and hood, and an aluminum body. It was usually driven by chauffeurs and emphasis was on comfort and style rather than speed.

During the 1920s, the cars exhibited design refinements such as balloon tires, pressed- steel wheels, and four-wheel brakes. Graham Paige DC Phaeton of 1929 featured an 8- cylinder engine and an aluminum body. The 1937 Pontiac De Luxe sedan had roomy interior and rear-hinged back door that suited more to the needs of families. In 1930s, vehicles were less boxy and more streamlined than their predecessors. The 1940s saw features like automatic transmission, sealed-beam headlights, and tubeless tires. .The year 1957 brought powerful high-performance cars such as Mercedes-Benz 300SL. It was built on compact and stylized lines, and was capable of 230 kmh (144 mph).

This was the Indian automobile history, and today modern cars are generally light, aerodynamically shaped, and compact.

12 AUTOMOBILE INDUSTRY IN INDIA In India, as in many other countries, the auto industry is one of the largest industries. It is one of the key sectors of the economy. The industry comprises of automobile and the auto component sectors and encompasses commercial vehicles, multi utility vehicles, passenger cars, two-wheelers, three-wheelers, tractors and related auto components. The industry has shown great advances since delicensing and opening up of the sector to foreign direct investment (FDI) in 1993. It has deep forward and backward linkages with the rest of the economy, and hence, has a strong multiplier effect. This results in the auto industry being the driver of economic growth and India is keen to use it as a lever of accelerated growth in the country.

In India, since the early 1940s when the auto industry rolled out first passenger car, its significance in the economy has progressively increased. However, from its early days until the mid-1980s for two-wheelers and LCVs, and until the early 1990s for passenger cars, the focus of development of the automotive industry has been on import substitution. The current low penetration levels in India in all three segments of the industry, namely commercial vehicles, passenger cars and two wheelers and under- exploitation of the potential of this industry to foster the growth of the economy have resulted in the auto industry contributing a relatively low (nearly 5 per cent) share of industrial output in India compared to the 8-10 per cent range in other developing countries such as Mexico and Brazil and much higher (15-17 per cent range) in developed countries such as the United States and Germany. Even the share of employment is low at 2.5 per cent for the auto industry in India compared to 3-7 per cent in developing countries and around 15 per cent in mature economies. During last decade, conscious efforts have been made to fine-tune state policyperspective in a manner that this industry realises its full potential in the economy. With this, the industry has shown great advances since abolition of licensing in 1991 and automatic approval permitted up to 51 per cent foreign investment in priority sectors that included the automotive industry, except passenger car manufacture. Motorcar manufacture was freed from licensing in April 1993. Public policy dispensation requiring new joint venture car manufacturers to commit certain levels of phased indigenisation, minimum investments in manufacturing facilities, neutralization of foreign exchange on imports with the exports of cars and components, etc., was withdrawn in September 2001 as a major initiative to bring policy framework in step with WTO requirements. The quantitative restrictions on imports were removed with effect from 1st April 2001.

Thus, industrial licensing and foreign investment regime in the country has been progressively liberalised. The freeing of the industry from restrictive environment has on the one hand helped it to restructure, absorb newer technologies, align itself to the global developments and realize its potential, on the other hand, this has significantly increased industry’s contribution to overall industrial growth in the country.

13 There are at present 13 manufacturers of passenger cars and multi utility vehicles, 7 manufacturers of commercial vehicles, 11 of 2- or 3-wheelers and 10 of tractors besides 4 manufacturers of engines. The industry has an investment of a sum exceeding US$ 10 billion. During 1999-2000 the turnover of the automotive industry as a whole was US$ 12.5 billion approximately. The industry employs 500,000 people directly and more than 10 million people indirectly and is now inhabited by global majors in keen competition.

The arrival of most international automotive giants in India has set the stage for an exponential growth in the component industry’s levels of technology, quality and competitiveness. At the same time, the arrival of new and contemporary models has stimulated demand for vehicles in the market. The auto industry has achieved a cumulative annual growth rate (CAGR) of 22 per cent between 1992-1997 (or approx. 13 to 14 per cent in real terms) outstripping industries production growth by about 30 per cent. This has led to an increase in its contribution to industrial output from 4.3 per cent in 1992-1993 to 5.4 per cent by 1996-1997. The component industry in the same period has grown by a CAGR of 28 per cent. With this the contribution of automobile industry to the GDP has risen from 2.7 per cent of GDP in 1992-1993 to 4.5 per cent by 1996- 1997. However, with a worldwide economic slowdown, auto industry’s growth pattern has shown a downward trend in last two years.

The Indian automobile industry is going through a technological change where each firm is engaged in changing its processes and technologies to sustain the competitive advantage and provide customers with the optimized products and services. Starting from the two wheelers, trucks, and tractors to the multi utility vehicles, commercial vehicles and the luxury vehicles, the Indian automobile industry has achieved tremendous amount of success in the recent years. The automobile industry had a growth of 15.4 % during April-January 2007, with the average annual growth of 10-15% over the last decade or so. With the incremental investment of $35-40 billion, the growth is expected to double in the next 10 years.

Consistent growth and dedication have made the Indian automobile industry the second- largest tractor and two-wheeler manufacturer in the world. It is also the fifth-largest commercial vehicle manufacturer in the world. The Indian automobile market is among the largest in Asia.

The key players like Hindustan Motors, Maruti Udyog, Fiat India Private Ltd, Tata Motors, Bajaj Motors, Hero Motors, Ashok Leyland, Mahindra & Mahindra have been dominating the vehicle industry. A few of the foreign players like Toyota Kirloskar Motor Ltd., Skoda India Private Ltd., Honda Siel Cars India Ltd. have also entered the market and have catered to the customers’ needs to a large extent.

Not only the Indian companies but also the international car manufacturing companies are focusing on compact cars to be delivered in the Indian market at a much smaller

14 price. Moreover, the automobile companies are coming up with financial schemes such as easy EMI repayment systems to boost sales.

There have been exhibitions like Auto-expo at Pragati Maidan, New Delhi to share the technological advancements. Besides, there are many new projects coming up in the automobile industry leading to the growth of the sector. The Government of India has liberalized the foreign exchange and equity regulations and has also reduced the tariff on imports, contributing significantly to the growth of the sector. Having firmly established its presence in the domestic markets, the Indian automobile sector is now penetrating the international arena. Vehicle exports from India are at their highest levels. The leaders of the Indian automobile sector, such as Tata Motors, Maruti and Mahindra and Mahindra are leading the exports to Europe, Middle East and African and Asian markets.

The Ministry of Heavy Industries has released the Automotive Plan 2006-2016, with the motive of making India the most popular manufacturing hub for automobiles and its components in Asia. The plan focuses on the removal of all the bottlenecks that are inhibiting its growth in the domestic as well as international arena.

15 Category –Wise Market Share in 2007-08

Domestic Market Share for 2007-08 CVs 5.05% Total Passenger Vehicles 16.4% Total Two Wheelers 75.13% Three Wheelers 3.78%

16 2.12 Two-wheelers Manufacturing Companies in India:

 TVS Motors

TVS Motor is a leading and trusted two wheeler company began with the version of TVS Scooty. The founder of the Sundaram Clayton Group, was the late T.S. Srinivasan - 'to design, develop and produce an affordable moped for the Indian family.' This vision was realized in 1980 when TVS 50, India's first two-seater moped rolled out of the factory at Hosur in Tamil Nadu, Southern India. The company has been known for its ruggedness and reliability. TVS 50 was successful and it has smoothened the way for many successes for TVS Suzuki even before its launch in the market. The TVS 50 XL is especially designed for individuals who want economy fused with sporty looks. Recently new XL Super with a 70 cc high-tech Power Pack is all set to redefine the category of mopeds in the country. The Suzuki Samurai was launched for the time conscious urban commuter. The Max 100 R was engineered for those who demanded strength and ruggedness. Along with them all, Suzuki Shogun was for those who wanted raw power. TVS Motor has continually worked on innovating the motorcycle segment along with two wheeler range. The Suzuki Shaolin, developed by TVS Suzuki is India's first 5 speed, 140 cc motorcycle. Another example of the company success is TVS Scooty, a 60 cc Scooterette which keep one step ahead of its time in India. TVS Motor has been coveted 2 IT awards, one of them is bagging the SAP ACE 2008 award for Customer Excellence and the other one is 2008 Symantec South Asia Visionary Award. Along with this, it is the first company in the world to be honored with The Deming Prize for Total Quality Management. In September 2008, the company has got 19% growth for registering total two wheeler sales of 137,246 units. The company is the third largest two-wheeler manufacturer in India and ranks among the top ten globally. The company was the first in India to launch 2-seater 50cc moped and 100cc Indo-Japanese motorcycles. At present TVS Apache, TVS Victor, TVS Scooty, TVS Centra and TVS Fiero are the popular bikes in Indian market. In all, team TVS has triumphed each and every race and rally in the country from the road to racetrack, with each of the TVS bikes being a winner. And each time the 'Team TVS' has won on the track or off it, our customers have secured a better product for their personal transportation.

TWO WHEELERS

17 >> MOTORCYCLES

Suzuki Hayabusa 1300 Suzuki Intruder M1800R Suzuki GS 150R

TVS Scooty Streak TVS Centra TVS Fiero  TVS Fiero F2

 TVS Fiero FX

Suzuki Max 100 Suzuki Max 100R Suzuki Samurai

Suzuki Shogun Suzuki Shaolin TVS Flame

TVS Victor TVS Star TVS Apache RTR FI  TVS Victor GLX  TVS Star  TVS Victor GX  TVS Star City  TVS Victor Edge

>> SCOOTERETTES/MOPEDS

TVS Scooty TVS Spectra DX/AX TVS XL  TVS Scooty ES  TVS XL Super  TVS Scooty Pep  TVS XL Super HD  TVS Pep Plus

TVS XL Super TVS XL Super HD Scooty Teenz Electric

TVS Apache RTR

AWAITED MODEL

TVS Taurus Fiero F3

 Hero Honda Motors Ltd.

Hero Honda Motors Ltd. is a result of the joint venture between India's Hero Group and Japanese Honda Motors Company in the year 1983. This joint venture has not only created the world's single largest two wheeler company but also one of the most successful joint ventures worldwide. Hero Honda is globally known of being the most fuel-efficient and the largest CBZ selling Indian Motorcycle Company. This is a relationship so harmonious that Hero Honda has managed to achieve indigenization of over 95 percent, a Honda record worldwide.

18 The company is committed to provide the customer with excellence. A rich background of producing high value products at reasonable prices led the world's largest manufacturer of motorcycles to collaborate with the world's largest bicycle manufacturer. During 80s, Hero Honda became the first company in India to prove that it was possible to drive a vehicle without polluting the roads. The company possess three manufacturing units based at Dharuhera, Gurgaon and Haridwar are capable to produce 4.4 million units per year. They introduced new generation motorcycles that set industry benchmarks for fuel thrift and low emission. The unique features like fuel conservation, safety riding courses and mobile workshops helped the group reach in the interiors of the country. Well-entrenched in the domestic market, Hero Honda Motors Ltd. turned its attention overseas, and exports have been steadily on the rise. Over the years, the Company has received its share of accolades, including the National Productivity Council's Award ( 1990-91), and the Economic Times - Harvard Business School Association of India Award, against 200 contenders. The gross sales of Hero Honda by March end'2008 was 33,371,43 Crores

TWO WHEELERS

>> MOTORCYCLES

Hero Honda Achiever Hero Honda CD Dawn Hero Honda CD Deluxe

Hero Honda CD 100 Hero Honda CD 100 SS Hero Honda Glamour

Hero Honda Glamour Hero Honda Splendor Hero Honda Passion Plus  Glamour  Splendor +  Super Splendor  Glamour - FI  Splendor NXG

Hero Honda Sleek Hero Honda CBZ X-TREME Hero Honda Karizma

Hero Honda Hunk

>> SCOOTERETTES/MOPEDS

Hero Honda Pleasure Hero Ankur Hero Gizmo

Hero Panther Hero Puch Automatic Hero Sakhti 3G

Hero Stepmatic Hero Street Hero Winner

Hero Winner Hero Puch Automatic Hero Sakthi 3G

 Yamaha Motors India Pvt. Ltd.

19 Situated at Faridabad, Haryana, Yamaha Motor India Private Limited is a 100% owned subsidiary of Yamaha Motors Company Limited of Japan. Total employee strength of the company is more than 3000 people. The company has opened "Yamaha One"- a branded dealership at Delhi and plans to open more in the future. Along with this, Japan has also set up another subsidiary-Yamaha Motors India Sales Pvt. Ltd.(YMIS) that deals with the sales and after sales services for Yamaha brand of bikes. It is located at Surajpur, outside Delhi with an employee strength of 120. Yamaha's association with India began in 1985 for the first time when it provided technical assistance to the Escorts Group in manufacturing of motorcycles. On July 1, 1955, Yamaha Motors was founded as a motorcycle manufacturer which builds products that stand out for their quality wherever they are sold. In the year 1960, the company began manufacturing powerboats and outboard motors. In June 2000, the equity holdings were revised and company acquired 74% of the share. The company has its manufacturing unit in Faridabad and Surajpur, which supports the production of motorcycles for domestic as well as overseas market. Considering environment sensitive issues, Yamaha Motors also goes into the concept of environment friendly technology that brags of effluent treatment plant, rain water - harvesting mechanism and a motivated forestation drive. The company believes in taking care of not only customers motoring needs but also the needs of future generations.

YAMAHA MOTORCYCLES MODEL CAPACITY

Rajdoot Excel-T 173 CC

Yamaha RXZ 132 CC

Rajdoot Deluxe 173 CC

Rajdoot Standard 173 CC

Yamaha Enticer 123.7 CC

Yamaha Escorts Ace 173 CC

Yamaha RX 135 132 CC

Yamaha YBX 125 125 CC

Yamaha Gladiator 123.7 CC  Gladiator Std

 Gladiator DX

Yamaha Libero G5 106 CC

Yamaha Crux 106 CC

Yamaha Gladiator Type JA 123.7 CC

Yamaha Alba 106 106 CC

Yamaha YZF R1 1000 CC

20 Yamaha MT 01 1670 CC

Yamaha YZF-R15 150 CC

FZ 150 150 CC

YAMAHA SCOOTERETTES/MOPEDS MODEL CAPACITY

Toro Rosa 100 CC

Toro Jazz 109.7 CC

 Kinetic Motor Co. Ltd.

Established in year 1970, Kinetic Engineering Ltd. is the reliable and trusted manufacturer and exporter of 2-wheelers. Born of the vision of the late Shri H. K. Firodia, Kinetic Engineering Ltd. has produced useful, heart - winning products for over two decades. Kinetic Engineering Ltd. (KEL), manufactures a vast variety of scooters, motorcycles and mopeds which are well recognized and popular for their fuel economy, quality and reliability in whole country. The company advanced manufacturing set up has enabled them to reach high quality standards. Its three manufacturing plants are located at Ahmednagar (for scooterettes and mopeds), Pitampur (Indore, for scooters) and Goregaon (Pune, for motorcycles and step-thrus)) with the capacity to manufacture 4 lakhs vehicles per year. Along with this, KEL export these vehicles to various countries like USA, Canada, Sweden, Latin America, Denmark and the Middle East. Kinetic Honda Motor Ltd. is the joint venture of Kinetic Engineering and internationally known Honda Motor Company of Japan. Most famous bike among two wheeler motorists in the country is Kinetic Honda – 100cc bike. Strong service network set up in India is the backbone of KEL. Always been conscious of quality and customer oriented production, the company has been a trendsetter in the Indian two-wheeler industry. The company sales recorded in June'08 is around 23.66 crores. By the end of this year KEL will invest up to Rs 30 crores in Mahindra Two Wheelers Pvt. Ltd to buy 2.95 crores equity shares of the latter.

TWO WHEELERS

>> MOTORCYCLES

Kinetic Aquila Kinetic Velocity Kinetic Challenger

21 Kinetic Comet Kinetic Stryker Kinetic GF  GF Laser  GF 170

 GF 125

Kinetic Boss  Boss

 Boss 115

>> SCOOTERETTES/MOPEDS

Kinetic 4S Kinetic Honda Dx/Zx 100 cc Kinetic Honda Marvel

Kinetic K4 100 Kinetic Kine Kinetic Luna Super

Kinetic Luna TFR Kinetic Pride FX Kinetic Style

Kinetic Zing Kinetic Zoom Kinetic Flyte

Kinetic V2 Range Kinetic Nova Kinetic King 100  V2  Nova 135  King 100  V2 XL  Nova EX  King 100 Dlx  V 2 80

>> SCOOTERS

Kinetic Blaze

 LML India

One of the highly acclaimed name among scooter manufacturers in the country is LML India. LML India has its 30% market share in volume terms with its popular scooter brand "Supremo". In monetary terms, the company turnover has grown from Rs.209.05 crores in 92-93 year to approx. Rs.832.71 crores in Sept '98. Net sales have declined to around Rs. 648.00 crore in year 2007. It plans to assist authorized dealers with a WAN (wide area network) and sell spare parts through the Net. The company is also working towards setting up five training schools (one each in Mumbai, Kanpur, Bangalore, Calcutta and Noida), to train mechanics and service personnel. In the first phase of 1999, LML India has started with 120 people and hopes to build up a base of 20,000 trained mechanics over time. Alongside, its 300-dealer strength is to be over 500 soon.

22 LML Limited is the company that changed the face of scootering in India in collaboration with Piaggio. Now, this company has entered motorcycle market in collaboration with Daelim of Korea. LML has just launched whole line of motorcycles to magnify its freedom. Despite, LML scooters are no longer branded as Vespa they continue to provide the same high quality scooters under the LML name. The company has its marketing and exporting network in various countries like in Italy, UK, USA etc. LML India production is mainly in the metal body geared scooter with models like NV Xpress, Star Xpress, Select II, Pulse and the Sensation, which observed decline in 2006. In order to recover its eminence in the automotive industry, company has launched two- stroke metal body geared scooters, comprising two and four-stroke plastic bodied gear less scooters, both in geared and gear less versions.

TWO WHEELERS

>> SCOOTERETTES/MOPEDS

Trendy

>> SCOOTERS

NV Spl Select II Sensation

Supremo Star Xpress

>> MOTORCYCLES

LML Beamer LML Energy FX LML Graptor

LML Adreno FX LML Freedom  Freedom DX  Freedom Prima 110

 Freedom Prima 125

 Freedom Topper

 Bajaj Auto Ltd.

Established in 1945, Bajaj Auto Ltd. was incorporated as a trading company. Till 1959, they imported scooters and three-wheelers from Italy and sold them in India. The company got a production license in the year 1959 and fastened a technical collaboration with Italian PIAGGIO in 1960. Bajaj Auto Ltd. is one among India's top ten companies in terms of market capitalization and among the top five in terms of annual turnover. The company started producing scooters in the year 1961 and followed three-wheelers production in 1962. Its collaboration with Piaggio expired in 1971 and since then, their scooters and three-wheelers are being sold with the brand name “BAJAJ”.

23 Maharashtra Scooters Ltd., a Company with 24% equity participation by the Company and 27% participation from Maharashtra State Government's Western Maharashtra Development Corp. was formed in the year 1975 under the "Horizontal transfer of technology" policy. The first production unit is located at Satara, Maharashtra. The unit continues to collect scooters from CKDs supplied by the Company. These scooters are marketed through the Company's distribution network and under the Company's brand name. In 1984, the second production plant was set up at Aurangabad, Maharashtra. This plant started scooter production in 1986, three-wheeler production in 1987 and scooterettes and motorcycle facilities were commissioned in 1990 & 1991 respectively. Today, the company has become a market leader with annual production in excess of 1.35 million units which was about 4000 units in 1961. These days, Bajaj Auto Ltd. has started offering products in all segments (mopeds & scooterettes, scooters, motorcycles, three wheelers).

TWO WHEELERS

>> MOTORCYCLE

Bajaj Avenger 180 CC

Bajaj CT 100 99.27 CC

Bajaj Discover DTSi 135 CC

Bajaj Kawasaki Caliber 111.6 CC

Bajaj Kawasaki Boxer 111.6 CC

Bajaj KB 125 123 CC

Bajaj 4S Champion 99.35 CC

Bajaj Platina 99.27 CC

Bajaj Pulsar DTSi  Pulsar 180 DTS-i UG 180 CC  Pulsar 150 DTS-i UG 150 CC  Pulsar 200 Cc 200 CC 220 CC  Pulsar 220 DTS-Fi

Bajaj Wind 125 124.6 CC

Bajaj XCD 125 CC

>> SCOOTERS

Bajaj Bravo 145 CC

Bajaj Chetak 145.45 CC

Bajaj Classic SL 145.45 CC

Bajaj Legend 150 CC

24 >> SCOOTERETTES/MOPEDS

Bajaj Blade DTSi 100 CC

Bajaj Cagiva CRX 145 CC

Bajaj Fusion 145 CC

Bajaj Kristal DTSi 100 CC

Bajaj M 80 Electronic 74.08 CC

Bajaj Rave 74.08 CC

Bajaj Saffire 74.4 CC

Bajaj Spirit 100 CC

Bajaj Sunny 59.86 CC

Bajaj Sunny Spice 59.86 CC

Bajaj Wave DTSi 109.7 CC

AWAITED MODELS

Sonic DTSi Motorcycle

 Royal Enfield Motors Ltd.

Established in 1955, Royal Enfield was the brand of the Enfield Cycle Company. Royal Enfield is one the oldest bike on the road. The company is well known for producing motorcycles, but they also produce bicycle, stationary engines, lawnmowers and rifle small parts for the Royal Small Arms Factory in Enfield. Royal Enfield Motors Ltd. has its headquarter situated at Thiruvottiyur, Chennai, Tamil Nadu, India.

In 1990, Royal Enfield entered into a strategic alliance with the Eicher Group, and later merged with it in 1994. The annual turnover of the company is Rs.10 billion. The Eicher Group has a range of interests in the automotive industry, including small trucks, tractors, exports, automotive gears, management consultancy and cartography.

The corporate philosophy of Royal Enfield Motors Ltd. is built around quality and unflinching loyalty to the customer, a few reasons why the legendary Bullet is not just a bike but a motorcycling icon. The ruggedness and reliability of the bike is endorsed by

25 the army, the police, the paramilitary forces and over 500 institutions which form part of the die-hard customer base of the Bullet, dubbed the "Rajagadi", or royal vehicle.

The innovative ideas of the Royal Enfield -Eicher nexus are exhibited in the new line of Enfield bikes and the global technological tie-ups.

Royal Enfield has existing technical tie-ups with:

- Criterion Engineers, UK for a new 5 speed transmission system.

-DB Designs, UK for styling.

- AVL, Austria for new engines.

- FW Egli for high power engines for 535cc and 624cc.

Royal Enfield Motors Ltd. operates out of 12 area offices, 16 depots, over 250 dealers and 150 authorized service centers in India. The company also exports its products to over 20 countries including Canada, France, Japan, USA, Germany and UK.

TWO WHEELERS

>> MOTORCYCLE

Bullet 350 Bullet 500 Enfield Diesel

Bullet Deluxe Bullet Electra Bullet Machismo  Bullet Electra

 Bullet Electra 5S

Bullet Machismo 500 Bullet Std 12V Lightning 500

Taurus Thunderbird Twinspark

2.13 EFFECT OF GLOBALIZATION

Sixty years ago, the manufacturing of automobiles commenced in India. Since then, the journey of the Indian Automotive industry can be classified into three main phases. The first phase till mid 1980s could be termed as one of PROTECTION for the Indian automotive industry. There were restrictions on the manufacturing and import of automobiles and the Indian automobile market was a seller’s market. The second phase, post 1991, could be termed as a phase of LIBERALIZATION as the Indian automotive

26 market was the beneficiary of the opening up of India’s economy. This phase was marked by the entry of foreign automobile players and increase in the availability of automotive financing. The Indian automotive market became a buyer’s market during this phase. Coinciding with the second wave of liberalization, the third phase from early 2000 till date could be termed as a phase of GLOBALIZATION of the Indian automotive industry. This phase has been marked by the removal of most import controls, entry of many more foreign players in the Indian automotive market and Indian companies gaining a global identity and acquiring foreign companies.

Today, the Indian automobile industry is ranked first in the world in the production of three wheelers, second in the production of two wheelers, fourth in the production of commercial vehicles and ninth in the production of passenger vehicles. With a production of nearly 10.8 million vehicles in FY07-08, the Indian automotive industry has shown an outstanding resilience after the last down cycle about a decade back. In the last few years, the Indian automotive industry has grown at a healthy rate by reducing costs and improving efficiency. With its new found confidence, it has gone beyond the shores of India and is creating a noteworthy footprint in different geographies in the world. The Indian automotive market with a healthy growth rate of 13% in the last 7 years was a source of attraction to many foreign automobile companies whose entry in the Indian market not only increased competition, but also raised customer expectations about product quality and reliability. This forced the Indian companies to introduce new and interesting products and innovation has now become a notable feature of the Indian automotive industry. The innovation story of the Indian automotive industry would not be complete without mentioning the NANO, which has evoked worldwide interest, curiosity and confidence in the competency of Indian talent. It has not only brought the automobile industry, but also India into focus. The NANO and other similar products have the potential to change the paradigm of the automotive industry worldwide.

To maintain a high rate of growth, retain the attractiveness of the Indian market and to further enhance competitiveness in the market place, the Indian automotive industry has been working in a collaborative manner with the government and has drafted an Automotive Mission Plan 2006-16. Some of the key initiatives which have been pursued as per the Automotive Mission Plan include: Establishment of National Automotive Testing and R&D Infrastructure development Project (NATRIP) Initiatives for creation and fulfillment of automotive demand Initiatives towards the betterment of society and the environment, and Initiatives to become a catalyst for generating an additional 25 million jobs

In the last five years, sales in various segments of the Indian automobile market have grown at a healthy rate of 15% to 27 %. This growth provided encouragement to various players and nearly Rs. 78,000 crores of investment has been planned, out of which more than 50% has already been committed. However, today the Indian automotive industry is facing unprecedented challenges. On one hand, demand is shrinking because of the lack of availability of consumer finance, high interest rates and the high cost of fuel, and on the other, cost of input materials has witnessed massive increases. e.g. in the last two

27 years, steel price has increased by almost 40%, copper prices are up by 45%, natural rubber has risen by 40% . The impact of steel price increase alone on various segments of automobiles is quite significant.

These factors are having a catastrophic impact on the bottom line of the Indian automotive industry and are resulting in withdrawal, scaling down or deferment of capital investment which would hurt the objectives of the Automotive Mission Plan in the long run. Challenges faced by the Indian automotive industry are climate change due to global warming which would have an impact on all. Contribution of carbon dioxide emissions giving rise to global warming by various sectors are -

Public Electricity and Heat Production: 53% Manufacturing Industries & Construction 21% Internal transportation (Road,rail,air) 12% Others 14%

(Source: International Energy Agency-2005 Report based on 2001 data for India)

Reduction in carbon dioxide emission would require a holistic and an integrated approach. However, the automotive industry is aware of its 10% contribution and is conscious and 0determined to pursue initiatives to reduce the same. This could be implemented by adopting an integrated and a partnership approach. Some of the initiatives that would reduce carbon dioxide emissions include introduction of new and more fuel efficient vehicles, a mandatory inspection and maintenance regime, the removal of old vehicles as they contribute to a larger portion of carbon dioxide emissions, efficient traffic management, use of alternative fuels like CNG, LPG, bio-diesel etc and the introduction of electric vehicles / hybrid. Indian automobile industry is working with nominated agencies to finalize a long term glide path for the reduction of CO2 and for the improvement of fuel efficiency. Starting from Jan’09, all SIAM members would begin the process of displaying, at the point of sale of passenger cars and two wheelers, fuel consumption consumer information, and this would be supplied to all customers of this product along with the documentation of the vehicle. This process would be completed by April 1, 2009. SIAM has also prepared a fuel economy information brochure. These actions are a firm indication of the Indian automotive industry’s commitment to play a proactive role in this area.

Production: India as the manufacturing hub India with its rapidly growing middle class, market-oriented stable economy, availability of trained manpower at competitive cost, fairly well-developed credit and financing facilities and local availability of almost all the raw materials at a competitive cost has emerged as one of the favorite investment destinations for the automotive manufacturers.  Japanese auto major, Nissan Motor Co, has identified India as one of the five low- cost countries to manufacture its new generation compact cars, including the Micra.

28  Hyundai has made India its global hub for manufacturing small cars. It will invest US$ 1 billion in its second plant in Chennai by 2013. In addition, it is also investing US$ 40 million in its R&D facility in Hyderabad.  General Motors has so far invested about US$ 1 billion into its Indian operations. It has already started production of its small car, Spark in its new Talegaon factory in Maharashtra, which has been set up with an investment of US$ 300 million.  Mercedes-Benz will invest about US$ 64. 21 million in its plant at Chakan near Pune, which would begin operations in February-March next year. The plant would have a production capacity of 2,500 trucks and buses and 10,000 cars over two shifts per year.  Renault has entered into a 50:50 joint venture with Nissan Motors and together they have set up a manufacturing facility near Chennai at a cost of US$ 901.35 million to deliver 400,000 cars annually.  Skoda Auto plans to make India its regional manufacturing hub. It will start producing cars in India by 2010 with a manufacturing target of 50,000 units. Besides the domestic market, these will also be exported to neighbouring countries like Nepal, Sri Lanka, Burma and Bangladesh. . Domestic Market

According to the Society of Indian Automobile Manufacturers (SIAM), the Indian auto industry recorded a production growth of 8.39 per cent during the current fiscal year till October 2008, over the same period in the previous fiscal. Sales The growth of the passenger vehicles segment during April–October 2008 was 4.87 per cent over the same period, the previous year. Passenger cars grew by 3.51 per cent, utility vehicles by 6.33 per cent and multi-purpose vehicles by 18.15 per cent in this period. However, cumulative sales of commercial vehicles segment registered a decline during the period. The segment registered a decline of 2.97 per cent during April–October 2008 as compared to the same period last year. In the three-wheelers segment, passenger carriers grew by 19.64 per cent during April-– October 2008. Two-wheelers registered a growth of 6.65 per cent during April–October 2008. Mopeds, motorcycles and scooters grew by 4.77 per cent, 6.59 per cent and 6.79 per cent, respectively. Electric two-wheelers segment also grew by 54.25 per cent.

India as the Export Hub

In terms of manufacturing excellence and availability of low-cost quality components as well as a fast expanding domestic market, India is all set to become the global export hub of the automobile industry. The exports markets have helped carmakers such as Maruti Suzuki and Hyundai Motor India post greater sales overseas than in the domestic market. According to the figures released by SIAM, the period from April–October 2008 saw automobile exports registering a growth of 29.36 per cent with all segments except commercial vehicles registering positive growth.

29 Passenger vehicles and two-wheelers segment grew by 59.21 per cent and 28.49 per cent, respectively. Three-wheelers exports grew by 3.47 per cent in this period. However, exports of commercial vehicles declined by 3.39 per cent during the period. As the world moves away from big cars to smaller makes, owing to high fuel costs and general recessionary trends, the small car advantage presents a huge business opportunity for car makers in India. The Indian car market accounts for 71 per cent of small cars, while in China it accounts for 33 per cent. Home-grown auto major, Maruti Suzuki, the country's largest car maker, currently exports Alto, M800, Omni, Wagon R and Zen Estilo to non-European markets such as Chile, UAE, Algeria and East Africa. The Japanese car maker, which exported 53,000 units in 2007–08, will up it to 200,000 units by 2010. Korean car maker Hyundai exports 40 per cent of its small car production, primarily 'i10' and 'Santro', which sells as 'Atos' in 97 countries across the world. The sales of its newly- launched compact car ‘i10’ touched 106,749 units in the overseas markets within seven months of being launched in December 2007. As a part of its strategy to make India an export hub for compact cars, Hyundai Motors has raised production to 0.6 million units per annum. The latest addition to the list is Nissan, which plans to buy 50,000 A-Star compact cars from its rival Maruti Suzuki and export to markets in Europe as well as make small cars in India and start exporting it to Latin American and African countries by 2010. The car makers in the markets like Latin America and Europe too have ramped up sourcing orders of small cars from Indian companies.

FDI, Mergers, Acquisitions and Joint Ventures

In sync with the dynamics of an open market, mergers and acquisitions and joint ventures have continued to be the driving force in the Indian automobile industry. Leading Japanese, Korean, European, French, Italian and American automobile companies have either set up their own manufacturing base in India or have tied up with Indian automotive firms to roll out new products from Indian market. The list includes Toyota, Nissan, Renault, Fiat, Honda, Kawasaki, Cummins and many more. On the other hand, Indian companies have also been bullish in acquiring foreign automobile companies to reinforce their presence in the global market. The biggest acquisition in the first half of 2008 has been the Tata Motors' acquisition of Jaguar-Land Rover from US automobile firm for US$ 2.3 billion. During this period, another auto major, Mahindra & Mahindra has acquired three Italian companies - G R Grafica Ricerca, Metalcastello and Engines Engineering. Another event is Daimler AG's acquisition of 26 per cent stake in Sutlej Motors. The prominent private equity deals in the first half of the year include Golbot Holding's (a Goldman Sach arm) 3.68 per cent stake in M&M for US$ 175 million, AIG Global Investment's US$ 20 million in Uniparts, AIG's 14.5 per cent in Kinetic Engineering and Phi Advisors' 10 per cent in M&M's subsidiary First Choice

Emerging Trends: Small Cars, Hybrid Cars

30 One of the innovative cars which is prominent in existence in the southern zone of India is the electric car, Reva. Reva has now begun to capture other markets too, with emphasis shifting to saving fuel. Other carmakers such as Hero Electric and M&M are coming out with electric versions. Recently, after the launch of Nano by Tata Motors, the global automotive market has shifted its focus on the huge potential of small car segment. The landmark innovation has shed light on a vast market of potential consumers who were hitherto unable to afford a car. The Invest India Incomes and Savings Survey 2007, by IIMS Dataworks, and another study by CRISIL Research suggest that there is a huge demand base for entry level cars in India. The immediate potential demand base for a car of 1.6 million units, according to the former, is based on the respondents, who do not own a car at present but aspire to own one in the next 12 months. Nearly all automotive giants have geared up towards leveraging the prospect of this segment. Quite a few of Indian auto-makers—Maruti-Suzuki with its 'Splash' and 'A Star', Hyundai with 'i20', Fiat with 'Grande Punto'—plan to roll out new small car models by the end of 2008. General Motors plans to roll out its new mini car next year from its Talegaon plant, near Pune. This will be followed by the launch of a sedan category car named Cruz by 2010. Tata Motors is also set to offer an all-new version of its Indica, which has lured the Indian auto consumer segment for the last many years. Many new players would also make an entry into the small car segment. Honda, with its much-awaited 'Jazz', and Volkswagen, with an Indianised version of its popular 'Polo compact', are among the prominent ones. Global biggies like Toyota and General Motors are also expected to join the bandwagon by 2010. Apart from that it is the hybrid car that has caught the attention of the Indian auto manufacturers. India's first hybrid car, Honda's 'Civic' sedan has been launched in June 2008. Following the precedence, homegrown majors like, Tata Motors and Mahindra & Mahindra are developing hybrid cars. Even BMW is planning to introduce its hybrid car to India within two years of its global launch due in the next 18 months. Maruti Suzuki India plans to launch a fully made-in-India car in the next four years. The car will be conceived, designed and manufactured in India.

GROWTH OF AUTOMOBILE SECTOR Union budget is very favorable for the automobile sector in India. The union budget shows the decrease in excise duty in the sector. i. The CEN-VAT is also reducing and now it is 14% previously it was 16%. The Finance minister has declared that the excise duty for small cars, two-wheelers and three-wheelers are decreased by 4%. Now it is only 12% instead of 16%.

31 ii. Another declaration given by FM is, there should be levy of extra (additional) tax 14.35% per liter on petrol (without brand) and Rs.4.60 per liter on diesel. iii. Another amendment is announced by the FM that excise duty on hybrid cars to be deducted and fix @ 14% presently it is 24% (Till today the hybrid cars are not in the market). Due to changes in excise duty the producer has to pay less duty as compare to previous duty what he paid. So the cost of cars to be decreased by Rs.7,000/- to Rs.16,000/- which results benefit to the customers of 2008 year.

EFFECT OF REDUCTION IN EXCISE DUTY: i. Hyundai Car Company has declared that they are ready to provide benefits to their customers. They have announced that they are reducing the price of SANTRO car by Rs.12,000/- to Rs.16,000/- ii. The General Motor Company is also reducing its prices. They announced that they are reducing the prices of their small cars like SPARKE and OVIO UVIO by Rs.7,500 to Rs.14,000/-. iii. In the two wheeler segment TVS Motor has declared that they are going to decrease the price of their models by Rs.1000/- to Rs.2,000/-.

CUSTOMER CATCHING CONCEPTS (3-Cs) OF AUTOMOBILE SECTOR 1. CASH DISCOUNT & FREE INSURANCE: Now one has to forget the hike in prices of the small cars. If we want to buy a car we are always gainer and not looser. Now one can rush into the showroom for new purchase because car companies are offering good and very attractive discount facility to the customer's point of view. The car company Maruti Suzuki, while prices hike on the model Wagon R petrol version was only Rs.2,000/- and dealers are offering on attractive discount of Rs.20,000/- which is cash discount plus one year Insurance. It means: (Hike in prices + cash discount + free insurance = Customer's benefit) i. In case of Zen Estilo the price is increasing only Rs.1,000/- and cash discount facility is available fro the customer is of Rs.25,000/- + one year insurance cover. ii. When we are considering the Maruti Alto car which is one of the largest volume model in the Indian domestic market, it too is offering the discount of about Rs.11,000/- (includes free insurance plus Rs.3,000/- cash discount).

32 iii. Hyundai is also offering free insurance on SANTRO that is now position entry level vehicle translating into saving of roughly Rs.10,000/- for the customer. 2. LOYALTY PAYOUT: Some companies are offering to customers exchange bonus or loyalty payout where customers can get the additional discount for trading old car for the new one. 3. FINANCE PAYOUT: Another customer catching concept being employed by the automobile sector is finance payout to their customers i.e. around 4% of the loan taken for the purchase of vehicle.

OVRALL AUTOMOBIL SGMENT i. At present the two wheeler segment's market grew by 13.6% with 7056317 units against 6209765 units in the year 2004-05. ii. Motorcycles had a growth of 17.1% in the domestic market by touching the 5815417 units against 4964353 units in the year 2004-05. iii. The scooter segment of automobile sector grew by 1.5% and fell down at 908159 units against 922428 units in the year 2004-05. iv. In the three-wheeler segment the sales of three-wheelers rose by 17% and increased 52325 units as compared to units of year 2004-05. v. The small commercial vehicle segment of the automobile sector achieved the growth of 19.4% and increased the production which is 23313 units more than 2004-05. vi. While medium and heavy commercial vehicles attained a growth of 4.5% only.

33 IN TWO-WHEELER SEGMENT Two-wheeler segment growth during the month of May, 2008 i. The monthly sales of Hero Honda increased by 9.54% compared to the same period of last year to 3.12 lakh units. ii. The sales of Bajaj Auto also increased by 7.57% to 1.79 lakh units. iii. While the TVS Motor has attained 4% rise with a side of 1.12 lakh units

2.14 AUTOMOBILE SECTOR - HURDLES: Inflation, Interest Rates and Liquidity The key challenge currently facing the Automobile industry is the high inflationary pressure in the economy. Inflation has had an uninterrupted run from the lows of 3% in 3QFY2008 to the current 13-year high of 11.42% (for the week ended 27 June, 2008), which is much above the government's and RBI's comfort level of 5%. The RBI, on its part, has reacted by effecting a 50bp hike in the Repo Rate to 8.5% and 50bp hike in the cash reserve ratio (CRR) to 8.75%. In the last three months, the RBI has hiked CRR by 125bp and Repo Rate by 75bp. Auto sector will languish under near-term pressures with inflation expected to continue to remain high in the ensuing months.

High Interest Rates v/s Dwindling Volumes

Impact Analysis: Following contraction in the availability of finance, conversion ratio (loans approved to loan applied) have dropped by around 45% over past 4-5 months and is expected to

34 remain at lower levels in the near future. Lending rates have also moved up by 250bp till June 2008 and are expected to further expand by another 25-50bp due to the recent CRR and Repo Rate hikes announced by the RBI. The loan to value ratio has also declined from around 85% to 70% levels in this period, which further impacted affordability of the customers. The long-term trend indicates a negative correlation between the finance rate and Auto volume growth. Auto volumes decline when interest rate goes up and vise a versa.

Fuel Price hikes

Global crude oil prices, have risen several times over the last five years, and are now breaching their all time high day-by-day. This has led to a similar impact on the prices of its derivatives like Petrol and Diesel in the international market. India, which imports 75% of its crude requirements, has had to resort to different measures to deal with this climb in the crud oil price. The government announced Petrol and Diesel price hikes by Rs7/litre and Rs4/litre Year To Date in 2008 including the recent 10% hike in June 2008. This is expected to directly impact the ownership cost, freight operator's profitability and volume growth of the Auto sector Fuel Price Trend

Impact Analysis: A major part of the rise in the cost ownership was on account of the fuel price hike. Fuel cost accounts for almost 25% and 50% and 40% of the ownership cost for passenger vehicles (PVs), commercial vehicles (CV) and two-wheelers, respectively. Hence, an almost 15% Year to Date hike in the fuel prices in 2008 sent the industry into a tailspin. Further, the ambiguity surrounding the certainty and timing of the government's decision to control fuel prices has posed another treat to the industry, which could worsen if the global crude oil prices do not cool off.

35 Soaring Raw Material prices Escalating raw material prices is another threat looming large over the industry, which is affecting the players on the margin front. The players are not able to fully pass on the rising Costs owing to the uncertain scenario. As far as the raw prices are concerned, in 2008 Year to Date, the cost of steel especially spiked a substantial 21%, aluminum prices increased 16%, rubber moved up 17% while plastic touched 24%. ALL raw material prices hit their peak and are still trading at high levels

Raw material cost structure and Price movement

Impact Analysis: Raw material costs, which account for almost 70% of the total cost for the Auto manufacturers, have been on a continuous upward trend since the last two years and have been impacting their Margins. Till last year, the manufacturers struggled to maintain their Margins by adopting cost cutting measures on modest demand. Players hiked the product prices in the last few quarters, though they could not fully pass on the hike in the raw material prices. However, going ahead players would find it tough to absorb further spurts in the raw material prices. Hence, the companies would either have to take a hit on their Margins or pass on the costs to customers, following which the demand is likely to shrink.

Large capacity expansion to take a toll on Earnings

36 Most of the Auto companies, Indian and Global, have lined up aggressive capacity expansion plans for the next 2-3 years, which would add substantial capacities over the mentioned period. Investments have grown at a CAGR of 20% over 2004-2007. Further, the capacity expansion figures announced by the Auto majors in the recent past suggests that investment would further increase at a better rate (at least 25% CAGR) over 2008- 2010. The domestic players are likely to incur capacity expansion of over Rs25,000cr in the mentioned period.

Auto Sector Investments

Impact Analysis: This aggressive capacity expansion plans announced by the companies would be funded through a mix of debt and equity. Increase in interest costs would have a negative impact on the Bottom-line of these companies on account of high capacity expansion funding and working capital expenditure thereof. Depreciation costs are also likely to increase in the initial period, which would take out an additional portion from Net Profit. Overall, either the companies will have to take a hit on returns for 2-3 years or will have to postpone their investment plans in the medium term. As of now, none of the players have formally announced any changes in their investment plans, which could impact their Return ratios in the near term. Perhaps, the investment rate might decline due to the negative effect on consumption.

37 2.15 EMERGING TRENDS IN AUTOMOBILE SECTOR:

Globalization is pushing auto majors to consolidate, to upgrade technology, enlarge product range, access new markets and cut costs. They have resorted to common platforms, modular assemblies and systems integration of component suppliers and e- commerce. The component industry is undergoing vertical integration resulting into emergence of ‘systems and assembly suppliers’ rather than individual component suppliers. Thus, while most component suppliers are integrating into tier 2 and tier 3 suppliers, larger manufacturers and multinational corporations (MNCs) are being transformed into tier 1 companies. Environmental and safety concerns are leading to higher safety and emission norms in the country. India has already charted out a road-map for reaching EURO-II norms across the country by the year 2005. Seven metropolitan cities of India would simultaneously move to EURO-III norms in 2005. Most vehicle manufacturers are already producing EURO-II compliant vehicles in the country to meet special requirements of capital city of New Delhi where the Supreme Court verdict has already necessitated this. To meet the concomitant testing and certification activities relating to higher safety and emission norms, testing infrastructure in the country is being overhauled. A substantive state funding is being planned in upgrading the testing infrastructure with participation of industry. Environmental pollution and the need to conserve existing supply of fossil fuels have led to search for alternative fuels. In addition to supporting greenfield research in this area, an 55 ambitious phased programme to upgrade carbon fuel quality commensurate with higher emission norms is also being undertaken. Foreign direct investment norms have already been considerably relaxed. Unhindered import of automobiles, including new and second hand vehicles, has also been permitted. Most non-tariff barriers have also been relaxed or removed. The Government has moderated and lowered taxes and duties on automobiles, including customs duty. Value Added Tax (VAT) is also proposed to be introduced across the country from 1 April 2001. The Government has also allowed private sector participation in the insurance sector. Norms guiding external commercial borrowings (ECBs) have been liberalized and lending rates within the country have also been reduced further strengthening the environment of investment. An ambitious programme to upgrade the quadrilateral of highways in the country, the Government is laying an eight-lane expressway linking all metropolitan and several important capital towns across the country paving the way for movement of heavier haulage vehicles.

38 2.2 Regulatory Aspects

Society of Indian Automobile Manufacturers (SIAM)

SIAM is the apex Industry body representing 44 leading vehicle and vehicular engine manufacturers in India SIAM is an important channel of communication for the Automobile Industry with the Government, National and International organizations. The Society works closely withy all the concerned stake holders and actively participates in formulation of rules, regulations and policies related to the Automobile Industry

SIAM provides a window to the Indian Automobile industry and aims to enhance exchanges and communication expand economics, trade and technical cooperation between the Automotive Industry and its international counterparts.

With its regular and continuous interaction with international bodies and organizations it aims to facilitate up gradation of technical capabilities of the Indian Industry to match the best practice worldwide.

39 SIAM also interacts with worldwide experts to assess the global trends and developments shaping the Automotive Industry. It has been actively pursuing issues like Frontier Technologies viz. Telematics: Promotion of Alternative Fuels including Hydrogen Energy for automotive use through cell vehicles and Harmonization of Safety and Emission Standards etc.

Automotive Research Association of India (ARAI )

ARAI was established in year 1966 at Pune, Maharastra. The Automotive Research Association of India (ARAI) has been playing a crucial role in assuring safe, less polluting and more efficient vehicles. ARAI provides technical expertise in R&D, testing, certification, homologation and framing of vehicle regulations.

ARAI is a co-operative industrial research association established by the automotive industry with the Ministry of Industries, Government of India. It works in harmony and complete confidence with its members, customers and the Government of India to offer the finest services, which earned for itself ISO 9001, ISO 14001, OHSAS 18001 and NABL accreditations.

ARAI is well-equipped with state-of-the-art infra-structural facilities and highly qualified manpower.

Federation of Automobile Dealers Associations (FADA)

The Federation of Automobile Dealers Associations (FADA) is an apex national body representing Automobile Dealers of India. It was founded in 1964 by four regional Auto Trade Associations to protect and promote the Indian retail automobile market. It is now a registered body under the Companies Act 1956.

The four founder members of FADA are:

▪ The Automobile Dealers Association of Maharashtra, Mumbai ▪ The Motor Industries Association, Kolkata. ▪ The Automobile Traders Association, Delhi. ▪ Motor Vehicles & Allied Industries Association, Chennai.

FADA has as its members - dealers of passenger cars, commercial vehicles and two/three wheelers. These members deal in sales, servicing of vehicles and sale of spare parts as well. They also arrange finance and trade-ins. In some cases they also sell used cars.

Other than automobile dealers, FADA has representatives of vehicle manufacturers, tyre manufacturers, insurance and finance sectors and other allied industries and trade, as

40 supporting members.

Objectives of FADA

▪ To develop a progressive mindset to face the threats and challenges in the auto business. ▪ To work towards boosting Dealership profit and improve management skills professionally. ▪ To develop training and consulting services that benefit the Dealers for healthy growth. ▪ To meet Customer needs in a knowledgeable and professional manner. ▪ To increase public awareness of improved customer satisfaction. ▪ To become a forceful advocate of Dealers’ interests to the State and Central Governments, Industry and the Media. ▪ To address issues of national concern, such as pollution from automobiles, road safety, traffic congestion, taxation policies, etc. related to auto dealers, from a common platform. ▪ To develop and maintain an atmosphere of trust between Dealers and Principals to usher in a new culture of Collaboration.

2.3 Tata Nano

41 The Tata Nano is a proposed city car — a small, affordable, rear-engined, four-passenger car aimed primarily at the Indian market — first presented by India's Tata Motors at the 9th annual Auto Expo on January 10, 2008, at Pragati Maidan in New Delhi, India. Tata targets the vehicle as the least expensive production car in the world — aiming for a starting price of 100,000 rupees or approximately $2000 US. Newsweek identifies the Nano as a part of a "new breed of 21st-century cars" that embody "a contrarian philosophy of smaller, lighter, cheaper" and portend a new era in inexpensive personal transportation — and potentially, "global gridlock". The Wall Street Journal confirms a global trend toward small cars, which includes the Nano. The prefix "Nano" derives from the Greek root 'nanos', meaning dwarf — as with nanometre. "Nano" also means "small" in Gujarati, the native language of the Tata family, founders of the Tata Group.

The introduction of the Nano received media attention due to its targeted low price. The car is expected to boost the Indian Economy, create entrepreneurial-opportunities across India, as well as expand the Indian car market by 65%. The car was envisioned by, Ratan Tata, Chairman of the Tata Group and Tata Motors, who has described it as an eco- friendly "people's car". Nano has been greatly appreciated by many sources and the media for its low-cost and eco-friendly initiatives which include using compressed-air as fuel and an electric-version (E-Nano). Tata Group is expected to mass-manufacture the Nano in large quantities, particularly the electric-version, and, besides selling them in India, to also export them world-wide.

42 Critics of the car have questioned its safety in India (where 90,000 people are killed in road-accidents every year according to surve of Times Online), and have also criticised the pollution that it would cause (including criticism by Nobel Peace Prize-winning scientist, Rajendra Pachauri). However, Tata Motors has promised that it would definitely release Nano's eco-friendly variants alongside the gasoline-variant.

Due to opposition to Tata's Singur car-factory by Mamta Banerjee, Tata Motors decided to cease operations in Singur on 2 October 2008 and started manufacturing Tata Nano at its Sanand Plant in Gujrat as well as it’s Pantnagar plant. On her protests and the consequent pullout, the media heavily critcised her and The Telegraph even said: "India is being raped by those who profess to be her soldiers, the guardians of peace." Financial Times reported: "If ever there were a symbol of India’s ambitions to become a modern nation, it would surely be the Nano, the tiny car with the even tinier price-tag. A triumph of homegrown engineering, the $2,200 (€1,490, £1,186) Nano encapsulates the dream of millions of Indians groping for a shot at urban prosperity. That process has stalled.No big economy has prospered without undergoing a huge, often brutal, shift of labour from the countryside to cities and from farms to factories.There is a yawning gap with China. India’s information technology and service sector, no matter how dynamic, simply cannot absorb enough labour. To truly shine, India will need millions, perhaps tens of millions, more manufacturing jobs."

Currently, Tata Motors is reportedly manufacturing Nano at its existing Pantnagar (Uttarakhand) plant and a mother plant at Sanand Gujarat. The company is hoping to produce 50 Nanos per day in Pantnagar by January–March 2009. Ratan Tata has said that Nano will be brought within set timelines. Not many dealers will be appointed till March 2009. The company will bank on existing dealer network for Nano initially. The new Nano Plant could have a capacity of 5,00,000 units, compared to 3,00,000 for Singur. Gujarat has also agreed to match all the incentives offered by West Bengal government.

Technical Specification of Nano

Engine: 2 cylinder petrol with Bosch multi-point fuel injection (single injector) all aluminium 33 horsepower (25 kW) 624 cc (38 cu in) Value Motronic engine management platform from Bosch 2 valves per cylinder overhead camshaft Compression ratio: 9.5:1 bore × stroke: 73.5 mm (2.9 in) × 73.5 mm (2.9 in) Power: 33 PS (33 hp/24 kW) @ 5500 rpm [68] Torque: 48 N·m (35 ft·lbf) @ 2500 rpm Layout and Transmission Rear wheel drive 4-speed manual transmission

43 Steering mechanical rack and pinion Performance Acceleration: 0-70 km/h (43 mph): 14 seconds Maximum speed: 110 km/h (68 mph) Fuel efficiency (overall): 20 kilometres per litre (5 litres per

100 kilometres (56 mpg-imp/47 mpg-US)) Body and dimensions Seat belt: 4 Trunk capacity: 15 L (0.53 cu ft) Suspension, Tires & Front brake: disc Brakes Rear brake: drum Front track: 1,325 mm (52.2 in) Rear track: 1,315 mm (51.8 in) Ground clearance: 180 mm (7.1 in) Front suspension: McPherson strut with lower A arm Rear suspension: Independent coil spring 12-inch wheels

Supplier Product

Gasoline injection system (diesel will follow), starter, Bosch alternator, brake system

Caparo Inner structural panels

Continental AG Gasoline fuel supply system, fuel level sensor

Delphi Instrument cluster

Denso Windshield wiper system (single motor and arm)

FAG Rear-wheel bearing

Ficosa Rear-view mirrors, interior mirrors, manual and CVT

44 shifters, washer system

Freudenberg Engine sealing

GKN Driveshafts

INA Shifting elements

ITW Deltar Outside and inside door handles

Johnson Controls Seating

Mahle Camshafts, spin-on oil filters, fuel filters and air cleaners

Saint-Gobain Glazing

TRW Brake system

Ceekay Daikin/Valeo Clutch sets

Vibracoustic Engine mounts

Visteon Air induction system

ZF Friedrichshafen AG Chassis components, including tie rods

Behr HVAC for the luxury version

45 Variants of Nano

Besides the regular and conventional gasoline-variant (expected to be released in 2008 alongside the electric-variant (E-Nano) , the following variants are also expected:

Diesel

Together with Diesel Engine specialist FEV Tata Motors is developing a 684 cc diesel engine for the Nano. It was earlier reported by media that Tata was producing an 800 cc Common Rail diesel engine. Diesel Variant will be available in September, 2009. Diesel variant Nano will sell for Rs2 lakh (200,000 rupees). Nano will have the smallest Common Rail Turbocharged Diesel engine in the world and is expected to deliver steering fuel economy figures.

Eco-friendly variants and initiatives

Tata Motors is reportedly working on some very revolutionary and eco-friendly initiatives, some of which are personally-supported and appreciated by Mr. Ratan Tata. Other than their Gasoline engine, Tata Motors will offer following options:

Compressed-air engine

Tata Motors is working with a French firm on using compressed air as fuel which is eco- friendly and revolutionary in itself for a car of such large-scale. The company has tied up with Moteur Development International (MDI) of France for this purpose:

Electric drivetrain or electric-version

Tata is also believed to be making an electric version of the Nano, called the E-Nano (reportedly with attached or sideby solar panels as well) which might prove to be a boon for the society and the world, both in terms of cost and technology, as it might well turn out to be the "world's cheapest electric car" which is more eco-friendly and has many enthusiasts and media for its support. It's supposed to be as cheap as the conventional gasoline version. Tata is making the Nano compliant with export market regulations and plans to export such a car world-wide, particularly to the UK and the rest of continental Europe, the US, and Australia.

46 Economic Times reported that the "electric Nano" "would still make good sense for economic, clean and green personal mobility in countries around the world." According to the Hamburg-based newspaper, Auto Bild, the E-Nano would be built in cooperation with the Norwegian electric car specialist, Miljoebil Grenland or Miljobil Grenland AS.

Trim levels

The Nano will be available in three trim levels

 Standard  Deluxe  Luxury

The base $2,500 getting no air conditioning. The Deluxe and Luxury variants will get AC and body colored bumpers. Luxury variant will also have alloy wheels, fog lamps and ICE. Tata Motors plans to sell more expensive version in order to keep product line profitable

47 SECTION III DATA ANALYSIS AND INTERPRETATIONS

3.1 METHOD OF DATA COLLECTION IN DETAIL THE PROCESS FOLLOWED.

Data Collection is an important aspect of any type of research study. Inaccurate data collection can impact the results of a study and ultimately lead to invalid results.

Data collection methods for impact evaluation vary along a continuum. At the one end of this continuum are quantitative methods and at the other end of the continuum are Qualitative methods for data collection.

Quantitative and Qualitative Data collection methods

The Quantitative data collection methods rely on random sampling and structured data collection instruments that fit diverse experiences into predetermined response categories. They produce results that are easy to summarize, compare, and generalize.

Quantitative research is concerned with testing hypotheses derived from theory and/or being able to estimate the size of a phenomenon of interest. Depending on the research question, participants may be randomly assigned to different treatments. If this is not feasible, the researcher may collect data on participant and situational characteristics in order to statistically control for their influence on the dependent, or outcome, variable. If the intent is to generalize from the research participants to a larger population, the researcher will employ probability sampling to select participants.

Primary Data:

Primary data is collected with the help of Questionnaire

Type of Questionnaires

48 Paper-pencil-questionnaires was the most extensively used method for my research. It was very convenient because it can be sent to a large number of people and also saves time and money. People are more truthful while responding to the questionnaires regarding controversial issues in particular due to the fact that their responses are anonymous.

Web based questionnaires: A new and inevitably growing methodology is the use of Internet based research. This would mean receiving an e-mail on which you would click on an address that would take you to a secure web-site to fill in a questionnaire. This type of research is often quicker and less detailed. But this method was not used by me because there are certain limitations of this method. The exclusion of people who do not have a computer or are unable to access a computer. Also the validity of such surveys are in question as people might be in a hurry to complete it and so might not give accurate responses.

Qualitative data collection methods play an important role in impact evaluation by providing information useful to understand the processes behind observed results and assess changes in people’s perceptions of their well-being. Furthermore qualitative methods can be used to improve the quality of survey-based quantitative evaluations by helping generate evaluation hypothesis; strengthening the design of survey questionnaires and expanding or clarifying quantitative evaluation findings. These methods are characterized by the following attributes:

 They tend to be open-ended and have less structured protocols (i.e., researchers may change the data collection strategy by adding, refining, or dropping techniques or informants)  They rely more heavily on interactive interviews; respondents may be interviewed several times to follow up on a particular issue, clarify concepts or check the reliability of data  They use triangulation to increase the credibility of their findings (i.e., researchers rely on multiple data collection methods to check the authenticity of their results)  Generally their findings are not generalized to any specific population, rather each case study produces a single piece of evidence that can be used to seek general patterns among different studies of the same issue

49 Regardless of the kinds of data involved, data collection in a qualitative study takes a great deal of time. The data needs to be recorded thoroughly, accurately, and systematically, using field notes, sketches, audiotapes, photographs and other suitable means. The data collection methods must observe the ethical principles of research. The qualitative methods most commonly used in evaluation can be classified in three broad categories:

 in-depth interview  observation methods  document review

In-depth interview:

This method was adopted by me so that Opinions, attitudes, beliefs, behaviors, reactions, and attributes in response to specific questions could be measured. There are quite a few advantages of using this method of data collection. This method is inexpensive. Sample can be used to provide information about a population. This method provides an opportunity for many people to be involved in decision-making process. It can also be used to record behaviors as well as opinions, attitudes, beliefs and attributes usefulness enhances if combined with other methods, i.e., observation or case study.

Observation method:

This method was used to measure particular physical and verbal behaviors and actions. This method proves to be convenient since the setting is natural, flexible and unstructured.

Document review:

In this method records, files, receipts, historical accounts, personnel records, reports, etc. were viewed to get in depth information. This method is very convenient to use because the material is readily available. It involves minimal cost. Data is available on a wide variety of characteristics. The available data can be accessed on a continuing

50 basis. The descriptive data can provide insight into program that cannot be observed in any other way.

METHOD OF DATA COLLECTION IN DETAIL THE PROCESS FOLLOWED

For this particular project the questionnaire method of data collection was followed. The sample size selected was 93 individuals.

Following is the questionnaire used for the purpose of survey.

Note: During the survey it was observed that some of the individuals were reluctant about divulging their personal details. Therefore some of the surveyed individuals filled in their personal details. Hence these questionnaires were filled on the condition of anonymity.

QUESTIONNAIRE

Name: Age: Gender:

1) Employment status

Employee Self Employment Student Retired person None

2) Income level (In Lakhs)

0 - 1.5 1.5 - 2.5 2.5 - 3.5 3.5 - 4.5 4.5 - above

51 3) What do you currently owe?

Car Bike Scooter Both (Car & Bike) None

4) Do you intend to buy a vehicle in near future? Which?

Car Bike Scooter Both (Car & Bike) None

5) If Car, What is your proposed budget? (In Lakhs)

3 6 9 12 Above

6) If Bike, What is your proposed budget?

30,000 40,000 50,000 70,000 Above

7) What is your weekly travelling? (In kms)

Less than 20 30 - 40 40 – 50 50 - 60 60 & above

8) Are you concerned about fuel efficiency of your vehicle?

Strongly Probably Yes May be probably Not Not concerned

9) Are you looking at your vehicle as status symbol?

Strongly agree Probably Yes May be Probably Not Strongly disagree

10) Do you like to carry more than two persons with you while travelling?

Always Often May be Sometimes Rarely

11) Are you planning to buy a bike for your child?

Yes Probably Yes May be Probably No No

12) Do you consider Car is safer than Bike?

Strongly agree Probably agree May be Probably disagree Strongly disagree

52 13) In city where we lack of proper roads and experience heavy traffic a bike is very much useful than that of a Car?

Strongly agree Probably agree May be Probably disagree Strongly disagree

14) Have you heard about Tata’s 1-Lakh Car NANO?

Yes Not much May be Little No

15) Given a choice would you prefer Nano car above Bike?

Yes Probably Yes May be Probably No No

3.2. METHOD OF DATA COMPILATION, TABULATION AND GRAPHICAL PRESENTATIONS.

1. Employment Status:

53 Interpretation:

The total numbers of individuals take into consideration are 93.

Employee =

22 x 100 = 23.65% 93

Self Employed= 10 x 100 = 10.75% 93

Students= 38 x 100 = 40.86% 93

Retired Person=

10 x 100 = 10.75% 93

54 None=

13 x 100 = 13.97% 93

Out of 93 respondents 23.65% are found to be Employees, 10.75% are found to be Self Employed, 40.86% are found to be Students, 10.75% are retired persons, and remaining 13.97% respondents were found to be doing nothing (i.e. they have either completed their studies or leave their studies and currently unemployed) The student respondents were high due to questionnaire was circulated in students in maximum number by observing the curiosity among the students were on high node due to mass media and print media giving more attention to TATA NANO and there issues related to Singur.

2.Income Level:

55 Income groups are found to be

Income Groups No. of respondents Percentage

0-1.5 Lakhs 60 65% 1.5-2.5 Lakhs 13 14% 2.5-3.5 Lakhs 08 9% 3.5-4.5 Lakhs 06 6% 4.5-above 06 6%

As students respondents were high in number (40.86%) among all the remaining respondents the Income Group of 0-1.5 Lakhs is dominating all the other respective groups (65%).

3.Current Ownership:

56 Current ownership No. of respondents Percentage

Car 9 10% Bike 16 17% Scooter 12 13% Both (car & bike) 13 14% None 43 46%

From the above chart The individuals who don’t own the vehicles are high in numbers (i.e. 46%) of the total respondents. This suggests that there is lot of potential market for the automobile companies in India as well as foreign automobile companies to be trapped. The second highest percentages (17%) are the individuals who own Bikes and if the automobile companies give them a good bet then there is a chance to convert that bike user segment to the probable car user segment. 4.Future Vehicle Buying:

57 Future Vehicle Buying No. of Respondents Percentage

Car 36 38.70% Bike 21 22.58% Scooter 12 12.90% Both (car & bike) 9 9.67% None 15 16.12%

From the above graph we can observe that

The number of respondents who are in favor of buying their future vehicle as Car are 38.70%. Compare to the number of respondents who plans to buy their future vehicle as bike (22.58%). If any automobile company is successful in delivering their car at a price of that of the Bike or at slightly higher than of the price of bike that company will able to convert the minds of the Bike buyers towards their offering.

5.Bike Budget:

58 Bike Budget No. of Respondents Percentage

30000 2 4% 40000 8 17% 50000 14 29% 70000 17 35% Above 7 15%

From the above chart we can observe that about 35% respondents have their bike budget Rs. 70000. Also 29% of respondents have their bike budget Rs. 50000. If any automobile company able to give their car costing at around Rs. 100000 and able to provide easy financing schemes to the buyers then there is strong probability that the respondents in the Rs.50000-70000 slab of bike buying can be converted into the buyer of Rs.100000 Car. The 15% respondents who have budget more than Rs.70000 were true Bike Lovers and if any company offers them car at the cost of their budget of bike then also they will not

59 change their mind of buying the bike. Normally this Slab of respondents consists of High Middle Class and Rich Class peoples.

6.Weekly Travelling:

Weekly Travelling (kms) No. of Respondents Percentage

Less than 20 20 22% 30-40 15 16% 40-50 16 17% 50-60 17 18% 60-above 25 27%

60 From above chart we can observe that 27% respondents are travelling 60 kms and above and about 22% of respondents are travelling less than 20 kms in week.

7.Fuel Efficiency:

61 Concerned about fuel No. of Respondents Percentage efficiency

Strongly 42 45.16% Probably Yes 27 29.03% May be 5 5.37% Probably No 10 10.75% Not Concerned 9 9.67%

From above graph we can observe that 45.16% of respondents showed their strong concerned about fuel efficiency about their vehicle and around 29% of respondents insists that they too have an eye on fuel efficiency of their vehicle. Observing the trend of respondents towards fuel efficiency of their vehicle automobile companies should focus their Research & Development department to manufacture such vehicles which gives more mileage also companies should developed such vehicles which can alternately runs on petrol/diesel and CNG, or Battery powered cells, or cars which consumed Hydrogen as there fuel. These cars are also known as Hybrid Cars and Government is also keen to give some sort of tax benefits to Automobile companies to manufacture such hybrid cars. Though for such cars manufacturer companies can higher cost than normal cost due to uniqueness of their technology but if Automobile companies can able to give these cars at a price of a normal petrol/diesel car then a large number of people will buy these cars.

62 8.Vehicle as Status Symbol:

Vehicle as Status Symbol No. of Respondents Percentage

Strongly agree 52 55.91% Probably Yes 18 19.35% May be 7 7.52% Probably Not 10 10.75% Strongly disagree 6 6.45%

From above graph it is observe that

63 55.91% of respondents considers their vehicles as Status Symbol, also 19.35% of respondents are somewhat considers their vehicles as Status Symbol. In Indian continental normally Car is considered as a Status symbol though Bike is also considered as status symbol but if it cost more than Rs.100000 so it is not possible for middle class families to purchase a bike worth of Rs.100000. But if a car costing Rs.100000 is available in market then certainly automobile company can create desire in minds of the middle class people to buy that car.

9.Carrying Capacity (more than 2 persons):

64 Carrying Capacity (more No. of Respondents Percentage than 2 persons)

Always 8 8.60% Often 12 12.90% May Be 17 18.27% Sometimes 17 18.27% Rarely 39 41.93%

From the above chart we can observe that 41.93% respondents were rarely travelled with more than two persons along with them. While 18% respondents have responded that they sometimes travelled with two or more than two persons with them. Observing this trend of people used their car most times on holidays otherwise they prefer to travel alone, Automobile companies should manufacture cars in such a way that there look will be small & compact. For example, when Volkswagen launches BEETEL in United States at that time people used to believe that Big is Better, but after launching of BEETEL people have change their minds and the rest was history.

10.Safety:

65 Safety No. of Respondents Percentage

Strongly Agree 44 47.31% Probably Agree 31 33.33% May Be 11 11.82% Probably Disagree 5 5.37% Strongly Disagree 2 2.15%

Form above chart we can observe that, 47.31% respondents are strongly of the opinion that when compare with the bike Car is safer than Bike. Also 33.33% respondents were agreeing to the above statement. This shows that if the offering is good and economically reasonable pricing then people will definitely look car as their future vehicle.

11.Awareness about Tata Nano:

66 Awareness No. of Respondents Percentage

Yes 69 74% Not much 13 14% May be 5 5% Little 6 7% No 0 0%

From above chart we can observe that 74% respondents have knowledge about Tata Nano. This is a very good sign from the perspective of the company. When a company is able to create awareness about its offering then its offering is already in the verge of success. The Tata Nano is a first ever car worldwide which comes with a price tag of $2000. Also Tata has created lot of goodwill by their social responsibility and economical product offering. This has help Tata to create awareness about Nano. 12.Preference to Tata Nano:

67 Preference to Tata Nano No. of Respondents Percentage

Yes 31 33% Probably Yes 19 21% May Be 14 15% Probably No 17 18% No 12 13%

From the above graph we can observe that If given a choice 33% respondent will prefer Tata Nano over Bike, while 21% respondents will probably prefer Tata Nano. These preferences of respondents to Tata Nano will depend upon the safety features, availability of loan and overall market conditions.

SECTION IV CONCLUSIONS AND SUGGESTIONS

68 4.1 Summary Findings:

Out of 93 respondents 41% which were maximum in numbers are found to be students because questionnaire was circulated mostly in students. 24% were found to be employees. 11% were self employed.14% were found to be doing nothing (i.e. they have either completed their studies or leave their studies and currently unemployed) 11% were found to be Retired persons. 65% respondents were in group 0-1.5 lakhs as number of students respondents were high.

The individuals who don’t own the vehicles are high in numbers (i.e. 46%) of the total respondents. The second highest percentages (17%) are the individuals who own Bikes.

The numbers of respondents who are in favor of buying their future vehicle as Car are 40%. The number of respondents who plans to buy their future vehicle as bike 23%

27% respondents are travelling 60 kms and above and about 22% of respondents are travelling less than 20 kms in week.

45.16% of respondents showed their strong concerned about fuel efficiency about their vehicle and around 29% of respondents insists that they too have an eye on fuel efficiency of their vehicle

Around 56% respondents considers their vehicles as Status Symbol, also 19% of respondents are somewhat considers their vehicles as Status Symbol.

42% respondents were rarely travelled with more than two persons along with them. While 18% respondents have responded that they sometimes travelled with two or more than two persons with them.

47% respondents are strongly of the opinion that when compare with the bike Car is safer than Bike. Also 33% respondents were agreeing to the above statement.

69 74% respondents are very much aware about Tata Nano. 14% respondents have known about Tata Nano.

If given a choice 33% respondent will prefer Tata Nano over Bike, while 21% respondents will probably prefer Tata Nano. Also 15% respondents may prefer Nano.

4.2 Conclusion :

70 The demand for any product, including vehicles, is driven by two main factors – its price and the income of the buyer. The responsiveness of demand to each of these is known as price- and income-elasticity respectively. For most goods as incomes go up, demand goes up (these are known as ‘normal’ goods in economic jargon). Vehicles certainly come under this category. Therefore, it is inevitable as incomes go up households move up the vehicle ladder graduating from bicycles to two-wheelers and from two-wheelers to motor cars.

In addition, however, if the price were to decrease, demand undoubtedly would get a further fillip. But for an expensive product like a car, the strength of income-elasticity far outweighs that of price-elasticity, especially for marginal changes in price. The impact of the Nano on automobile demand can be viewed within this analytical framework. It has been argued that the low price of the Nano will galvanize demand.

Primary factors of preference  Price and fuel efficiency are the primary features that consumers expect today  There will be an increase in the importance of fuel efficiency in approximately Three to five years from now for consumers  Sales service, brand image/prestige, and resale value are secondary factors of choice today and will remain so for the coming three to five years  Environmental issues have yet to take root in India and do not show signs of becoming a major factor for coming three to five years

Car size  Affluence and aspiration are growing in parallel—The Indian consumer prefers a mid-size car  Our survey reveals that approximately one in two Indian consumers prefer a roomy mid-size family car

Status Symbol

Though the purchase decision for Indian buyers is primarily tied to objective matters, such as price, fuel economy, and after-sales service, there is a large part of the Indian psyche that is focused on the level of status a vehicle offers.

There is a huge appetite for such cheap car from Lower and middle class families, who would want to switch from 2 wheelers and also from first time car buyers. Especially families who wanted to buy 2 wheelers to carry their entire family of 3-5 would now switch to buy this Tata Nano car instead of 2 wheelers from Bajaj, Hero Honda. Youngsters will still prefer 2 wheelers, Because of the excitement which they derive from the speed and maneuverability unlike four wheelers. Most Respondents believe Nano’s price is very attractive and affordable. People who own entry-level cars are now thinking of going in for either one Nano in view of its fuel

71 efficiency or maybe two, which will cost the same as their existing car. So, there would be one car for the head of the family and another for the family. First, the target of four-wheeler sales is the large number of two-wheeler owners. And second, the bulk of four-wheeler sales will be small cars. A significant migration from two- to four- wheelers is expected. The two-wheeler market is composed of motorcycles, scooters, and mopeds and represents 75 percent of India’s annual new vehicle sales. Respondents believe that many of these buyers will migrate to four-wheelers not only because of increases in GDP per capita, but also because of the development of small, inexpensive four- wheelers. The expected delivery of the Tata Group’s “1 lakh car” (a price of approximately US$2,500) is the prime example to describe the potential affordability of four-wheelers and India’s developing expertise in small cars.

All of India’s manufacturers (domestic, foreign, and JV) offer a variety of small cars in different price ranges. But the “1 lakh car” is priced close to that of a high-end two- wheeler, making it easier for buyers to migrate. The competition has always been fierce in this ultra-low-price segment, with local JVs such as Maruti Udyog (the Maruti-Suzuki JV) selling the 2007 model of its very popular Maruti 800 for about US$5,000, along with three other low-priced models.

Foreign competition is also gearing up. Renault recently formed a JV with Mahindra & Mahindra to build its low-cost Logan car as well as an even less expensive vehicle. Other global manufacturers such as Hyundai already offer low-priced vehicles or are coming to India with the expressed purpose of building and selling inexpensive, small vehicles.

The demand for two-wheelers and small cars has focused Indian and foreign manufacturers and suppliers on making India the center of expertise for these small, inexpensive vehicles. Fuel-efficient, small vehicles support India’s long-term goal of energy independence, and from a safety perspective, they move people from two- wheelers, which are generally considered less safe, into four-wheelers. Smaller vehicles also typically provide a higher level of emissions control than two-wheelers. E.g. Tata Nano is equipped with EURO-IV emission norms.

But there are some potential drawbacks. The introduction of very inexpensive four- wheelers to the Indian market might trigger the migration of two-wheeler buyers to four- wheelers before the nation’s infrastructure is improved and expanded. This could cause even more congestion in the short term. Fuel consumption could also increase dramatically. And the low levels of safety and emissions equipment on these vehicles might make them attractive exports only to developing economies rather than developed economies. Exports to developed economies will face formidable competition from global manufacturers with their own inexpensive small cars.

72 Thus the Hypothesis that Launch of Nano will affect two wheeler markets in Mumbai is found to be TRUE.

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4.3 Suggestions:

Tata Motors should give more attention to the following points:

 Costs need to be contained

Tata Motors are considered as low-cost producer in the world for innovative Nano. And Tata Motors will need that advantage for some time to come. However, wages are slowly starting to rise, as are infrastructure costs like electricity and shipping.

 The supplier base needs to get stronger

Many of India’s major suppliers have world-class capabilities, but the Tata Motors needs to develop the capabilities of its entire supplier base to support improved quality and low- cost delivery throughout the supply chain.

 R&D capability needs to be strengthen

To be a global player, Tata Motors must be considered an innovative designer in the automobile industry. This is a tall order since the automobile industry today is very complex, with myriad sophisticated technologies used in the manufacturing of vehicles and in the products themselves.

 Attracting untapped buyers in India.

Teasing out the real reasons preventing qualified buyers from purchasing new vehicles will take some work because there are so many possibilities.

 Better distribution network

Tata motors should give more preference on strengthening of their distributors to give their customers better availability of Nano, because if customers don’t get product on demand then there is strong probability that they may switch to other provider.

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