Prospecting of MUV's Market Potential in Indian Automobile Industry

PROSPECTING OF MUV’S MARKET POTENTIAL IN INDIAN AUTOMOBILE INDUSTRY

Submitted by

Visal Varghese

Under the Guidance of

Prof Divakar G.M

Associate Professor

Dept. of MBA, Christ University, Bangalore

A Thesis Submitted in Partial Fulfilment of the Requirements for the Award of the Degree of Master of Business Administration

Bangalore, India 2012

DECLARATION

I, Visal Varghese, hereby declare that the dissertation entitled Prospecting Of MUV’s Market Potential In Indian Automobile Industry has been undertaken by me for the award of Master of Business Administration. I have completed the study under the guidance of Prof Divakar G.M, Associate Professor, Dept. of MBA, Christ University, Bangalore.

I also declare that this dissertation has not been submitted for the award of any Degree, Diploma, Associate ship or Fellowship or any other title in this University or any other University.

Place: Bangalore Visal Varghese

Date: 29/02/2012 Register No: 1020239

CERTIFICATE

This is to certify that the dissertation submitted by Visal Varghese on the title Prospecting Of MUV’s Market Potential In Indian Automobile Industry is a record of research work done by him during the academic year 2011-2012 under my guidance and supervision in partial fulfilment of the requirements for the award of the degree of Master of Business Administration. This dissertation has not been submitted for the award of any Degree, Diploma, Associate ship or Fellowship or any other title in this University or any other University.

Place: Bangalore Prof Divakar G.M.

Date: 29/02/2012

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ACKNOWLEDGEMENT

I am indebted to many people who helped me complete this dissertation.

First, I thank the Vice-Chancellor Dr. (Fr.) Thomas C. Mathew and Pro Vice-Chancellor Dr. (Fr.) Abraham V.M of Christ University for giving me the opportunity to do this research.

I thank Fr. Thomas T. V., Director, Christ University Institute of Management for his kind support. I thank Prof Divakar G.M. for his support and guidance during the course of my research. I remember him with much gratitude for his patience and motivation, but for which I could not have submitted this work.

I thank my parents for their blessings and constant support, without which this dissertation would not have seen the light of day.

Visal Varghese

TABLE OF CONTENTS

DECLARATION ii CERTIFICATE iii ACKNOWLEDGEMENT iv TABLE OF CONTENTS v LIST OF TABLES vii ABSTRACT viii

CHAPTER 1 INTRODUCTION 1.1 PROJECT TITLE 2 1.2 SCOPE OF RESEARCH 2 1.3 OBJECTIVE OF THE RESEARCH 3 1.4 RESEARCH METHDOLOGY 3 1.5 SIGNIFICACE OF RESEARCH 4

CHAPTER 2 REVIEW OF LITERATURE 2.1 INTRODUCTION 6 2.2 IMPORTANCE OF REVIEW OF LITERATURE 6 2.3 HOW THE LITERATUE REVIEW HAS BEEN DONE 6 2.4 WORK DONE 7

CHAPTER 3 RESEARCH METHODOLOGY 3.1 PROBLEM STATEMENT 18 3.2 SCOPE OF THE RESEARCH 18 3.3 OBJECTIVES OF RESEARCH 18 3.4 DATA COLLECTION 18 3.5 TARGET PROFILE 18

3.6 SAMPLE SIZE 18 3.7 SAMPLING METHOD 19 3.8 FORMULATION OF HYPOTHESIS 19 3.9 DATA ANALYSIS 19 3.10 VARIABLES OF THE RESEARCH 20 3.11 LIMITATIONS OF THE RESEARCH 21 3.12 SCHEMATIC REPRESENTATION OF THE RESEARCH DESIGN 22

CHAPTER 4 INDUSTRY PROFILE 4.1 OVERVIEW OF INDIAN AUTOMOBILE INDUSTRY 24 4.2 MULTI UTILITY VEHICLES 30 4.3 MULTI UTILITY VEHICLE MODELS 31 4.4 MULTI UTILITY VEHICLE STATISTICS 32

CHAPTER 5 DATA ANALYSIS AND INTERPRETATION 5.1 QUESTIONNAIRE ANALYSIS 35 5.2 RESEARCH HYPOTHESIS AND USE OF STATISTICAL TOOLS 49 5.2.1 FACTOR ANALYSIS 49 5.2.2 REGRESSION AND ANNOVA TABLE - I 53 5.2.3 REGRESSION AND ANNOVA TABLE - II 55

CHARTER 6 FINDINGS AND CONCLUSION 6.1 FINDINGS 58 6.2 CONCLUSION 58

BIBLIOGRAPHY 59

ANNEXURE 61

LIST OF TABLES

SL NO: PARTICULARS PG NO:

Table 4.1 : Total Production of Passenger Vehicles in India 27

Table 4.2 : Segment Wise Share in Production of Passenger Vehicles in India 27

Table 4.3 : Total Sales of Passenger Vehicles in India 27

Table 4.4 : Segment Wise Share in Sales of Passenger Vehicles in India 28

Table 4.5 : Company Wise Production of Mid-Size Cars in India 28

Table 4.6 : Company Wise Share in Production of Mid-Size Cars in India 29

Table 4.7 : Company Wise Sales of Mid-Size Cars in India 29

Table 4.8 : Company Wise Share in Sales of Mid-Size Cars in India 30

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ABSTRACT

Multi-utility vehicles (MUVs) as the name suggest, are the vehicles with multi usage capabilities. Popular especially with the large families, the concept of a multi-utility vehicle no doubt has many takers in India. That is why, all the leading automobile players in India, including the indigenous ones such as the Tata Motors, Hindustan Motors, Mahindra & Mahindra (M&M) as well as the foreign ones expanding their presence, are all in the MUV segment of Indian automobile market

Prospecting market potential of such a category of automobiles in India is very essential as the market is now lean towards more use of family cars than using for individual purpose. With the auto customers going for a family vehicle demanding more space and comfort rather than the performance and other utilities along with the price affordability MUV has been always in the top of customer mind space when looking for a family vehicle. As the segment is only newly formed in India with only few players like Toyota Innova, Tata Aria, Mahindra Xylo etc, there’s a need of market research which can capture the customer wants and demands also perceptions. The factors and the various attributes of the automobile which influences and motivates the customer is the prime area of research

Primary research was done through questionnaire, for which the response was collected from the prospective customers of MUV. The results are recorded through Google docs. Results are interpreted using MS Excel and SPSS software, using various statistical tools like Annova Table, Regression and Factor Analysis

Research had given the results which were helpful and useful in prospecting future potential of MUV’s in India. Personal experience being the influencing factor in making a decision on Family vehicle and Passenger space the motivating factor for the customer to buy a MUV were the research conclusions.

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CHAPTER 1

INTRODUCTION

Multi-Utility vehicle (MUV) or Multi-purpose vehicle (MPV) is a type of vehicle which has a body that resembles a van, but which has rear side doors, rear side windows, and interior fittings to accommodate passengers similar to a station wagon. MUVs are higher than normal sedans, compacts and station wagons, and are designed for maximum interior room; minivans often feature three seat rows and can seat 7 people or more. The very first MUV was known as the Brubaker Box. This was a custom car designed in 1972 and produced in limited numbers by Curtis Brukbaker, a designer and car enthusiast. It was built on the Volkswagen Beetle chassis and included an original fiberglass body. There was a sliding door on the passenger-side of the vehicle.

MUVs in the Asian market

In the ASEAN nations and India, because of the wide geography of the region, MUVs tend to be smaller cars that can cope with uneven terrain. Among these MUVs are the Chevy Tavera, Toyota Innova,Tata Aria Mahindra Xylo and Sumo Grande

In the ASEAN nations and India, MUVs vary widely in configuration. Whilst some MUVs might be carbon-copys of MPVs in Europe (such as the European Ford Fusion) or even minivan-looking (like the Toyota Innova), in some cases MUVs are similar to minibuses (such as the Chevrolet Tavera and the Maruti Versa)

1.1 PROJECT TITLE

Prospecting Of MUVs Market Potential in Indian Automobile Industry

1.2 SCOPE OF RESEARCH

The study will provide an insight into the most potential automobile segment of Indian market: MUVs. From the study it is possible to extract the data which is relevant for prospecting the potential in the Indian market for the MUVs in future as per the customer sees the particular segment 2

1.3 OBJECTIVES OF THE STUDY

 To determine the motivating factor that contribute for the purchase decision of MUV in India  To find the future market potential of the MUVs in India based upon the survey

1.4 RESEARCH METHDOLOGY

Why is the research being made?

MUV being one of the high selling automobile segment in India, a deep study is essential for knowing the factor that influence the decision making of the family vehicle. Its also essential that the automobile manufactures know the motivating factor that brings the customers towards the MUV as a choice for the automobile over the other segments like SUV, Sedan, hatch back, premium sedan etc. The factors and the effect of factors on the purchase decision making can also be a great insight to automobile companies

What is the research about?

Research is about prospecting the MUV market potential in India.

Where will the research be carried out?

The study will be conducted in banks with in Bangalore, Karnataka.

What type of data is required?

Primary data will be required which will be obtained by using questionnaires from prospective customers. Secondary data will be also used for the purpose of the study other data which will be obtained from CMIE data base and PROVESS. Other related data will be collected from other websites.

What will be the sample design?

The population size of the study will be the population portion of India who all can afford a automobile for their family. The stratified sampling method will be chosen, as the total sample will be heterogeneous. For this purpose, the sample size will be 173.

Data Analysis

The data is analysed with the help of Google docs and SPSS where Annova table. Regression and factor analysis will be performed, MS Excel for correlation matrix, graphs, pie charts and tables to diagrammatically represent the tables.

Plan of the Report  Introduction (statement of the problem, research issues, objectives, hypotheses, methodology, limitations of the study, chapter scheme)

 Review of Literature  Research Design, data Collection and Analysis  Conclusion and suggestions Limitations

 The study will be restricted to Bangalore district, in Karnataka. The study will be conducted from a sample size of 173 prospective customers  Biased information from the part of respondents will be a big barrier for the study.

1.5 SIGNIFICACE OF RESEARCH

The research will help the Automobile companies to better position their MUV‘s in the customer minds of India. And to stress on various factors that can help them to bring customer delight. The factors that the customer likes to see in a MUV would be valuable information for them.

CHAPTER 2

REVIEW OF LITERATURE

2.1 INTRODUCTION

Review of literature is the process of reading, analyzing, evaluating, and summarizing scholarly materials about a specific topic. The results of a literature review may be compiled in a report or they may serve as part of a research article, thesis, or grant proposal.

A literature review may be purely descriptive, as in an annotated bibliography, or it may provide a critical assessment of the literature in a particular field, stating where the weaknesses and gaps are, contrasting the views of particular authors, or raising questions. Such a review will not just be a summary but will also evaluate and show relationships between different materials, so that key themes emerge. Even a descriptive review however should not just list and paraphrase, but should add comment and bring out themes and trends.

2.2 IMPORTANCE OF REVIEW OF LITERATURE

There are many reasons why literature review is rendered as a significant part of any research or dissertation paper. You may ask what makes it as such if it is only supposed to contain titbits of other related works. Literature review is the part of the paper where the researcher will be given the opportunity to strengthen your paper for you will be citing what other reliable authors have said about your topic. This will prove that you are not just writing about any random subject but that many others have also poured their thoughts on the topic. Literature review is also unique from the rest of the paper. While you have to fill most of the paper with your own analysis, in a literature review alone, you will have to write purely about related works of other people.

2.3 HOW THE LITERATUE REVIEW HAS BEEN DONE

It is a paper the main purpose of which is to annotate and/or critique the literature in a particular subject area. It can either be:

 A selective bibliography providing advice on information sources 6

 Comprehensive, covering the main contributors to the field with an exploration of their views.

2.4 WORK DONE

1) The Indian Mid-Segment Passenger Car Industry

(Nitin Gupta, Vaibhav Shekar, 2009)

Indian automobile industry was one of the fastest growing automobile industries in the world. The low penetration level of cars in India coupled with rise in the disposable income of its working population had made it an attractive destination for global automobile manufacturers. This case deals with the mid-size car segment of the passenger car industry in India. In 2009-10, this segment accounted for approximately 12.7% of the total passenger cars manufactured in India and its YoY (Year-on-year) growth rate was approximately 15%. The major players in this segment included Tata Motors, Maruti Suzuki, Hyundai Motors India, Ford India, General Motors India, Honda Siel India, Mahindra-Renault and Hindustan Motors. In addition to the existing players, various new players like Volkswagen, Nissan, Fiat etc. had either already entered in this segment or were about to enter. The case highlights various issues being faced by current as well as new entrants in this segment. Analysis of the case can be done using Porter‘s five forces model.

2) Korean auto producers: Asia's next major force in Europe

(McDermott, Michael C, 1997)

The Korean auto industry of less than ten years ago was quite different from today. Then it relied heavily on technology and one company, selling one model in one export market. Today, the market concentration strategy has been abandoned and the international business strategy is in a period of transition. Once overlooked, Europe is now a priority market. Korean auto companies have increased their commitment to developed country markets, and especially to the EU. In this their policy is totally consistent with their unambiguous strategic intent to become major global players. During the first half of the 1990s the European car

market has been in recession. Nevertheless, manufacturers of all nationalities clearly recognize its vital importance and are taking steps to enhance or to maintain their competitive position in this market. The emergence of Korean producers is a serious threat to the overseas sales of Continental European manufacturers as well as those from Eastern Europe. Korean producers are honing in on the UK market

3) Chrysler and J. D. Power: Pioneering Scientific Price Customization in the Automobile Industry (Irina Ionova, Alexei Khavaev, Deirdre Borrego, 2007)

Pricing is a critical component in the marketing-mix plans of automobile manufacturers. Because they tend to keep their manufacturer‘s suggested retail prices (MSRPs) and wholesale prices fixed throughout the model year, they customize pricing to reflect supply and demand by using incentives; in the US market, they represent approximately $45 billion per year. In addition, variations in capacity utilization have immediate and substantial effects on profitability. This, together with legacy costs and inflexible labour contracts, makes the effectiveness and efficiency of price-customization decisions particularly vital for the industry. Chrysler, a pioneer in using science in its pricing decisions, engaged J. D. Power and Associates (JDPA) to implement an incentive planning model. The approach used is based on a random-effects multinomial nested logit model of product (vehicle model), acquisition (cash, finance, lease), and program-type (e.g., consumer cash rebates, reduced interest-rate financing, cash/reduced interest-rate combinations, lease-support) selection. The model uses sales transaction data that are collected daily from approximately 10,000 dealerships. It uses a hierarchical Bayes modelling structure to capture response heterogeneity at the local market level. This specification allows users to apply the model to pricing decisions at the local, regional, and national market levels. Based on implementing this model, Chrysler learned that, for any given price level, the pricing structure (e.g., a combination of retail price, interest rates, or rebates) is important. The set of the most efficient pricing structures for each price level constitutes an efficient frontier; efficient pricing structures vary across products, price levels, and markets. The system provides three

alternative approaches to identify efficient (and effective) pricing programs: (a) what-if- scenario simulations, (b) a batch scenario generator that allows users to identify and examine the profit-share/volume efficient frontier, and (c) an optimizer that, given an objective and a set of constraints, allows users to search for incentive programs rapidly. The Chrysler Corporate Economics Office estimates that Chrysler‘s annual savings from implementing the model are approximately $500 million.

4) Institutional Change in the Automotive Industry Or how fuel cell technology is being institutionalised

(Robert van den Hoed,hilip J. Vergragt, 2006)

In the automotive industry the fuel-cell vehicle (FCV) is increasingly seen as the sustainable alternative to internal combustion engine (ICE)-based vehicles. The growing popularity of FC technology in the automotive industry provides an interesting case. Where one would expect the mature automotive industry to dismiss FC technology in order not to jeopardise its ICE technology, several billions of dollars have been spent on the development of FCVs by automotive firms. And, although FCVs are not yet available on the market, the auto industry continues to be optimistic about their prospects. Therefore, we are potentially on the forefront of a major technological change. Given the need for change in order to achieve sustainability, FC technology provides an interesting case to study why the industry has come to adopt this technology, and how FC technology is in the process of becoming institutionalised. Using institutional theory, this paper endeavours to unravel the forces and mechanisms that have shaped the popularity of fuel-cell technology in the automotive industry

5) Not Your Father's Auto Industry? Aging, the Automobile, and the Drive for Product Innovation (Coughli, Joseph F., 2005)

Distinctly American business, the automobile industry produces a product that is more than transportation—it is a lifestyle. It is a lifestyle defined by fashion, speed, mobility, comfort, and, above all, individual choice. The car became a physical extension of how the vast

majority of Americans, regardless of age, have chosen to live. Similar to other business sectors, the automobile industry grew dramatically after World War n. Young GIs coming home to begin new families in new suburbs became the growth platform for car companies. The resulting baby boom not only picked up where the now-aging World War II generadon left off, it perpetuated and cultivated a youth culture around the car for nearly sixty years (Flink, 1975). Our fathers' auto industry catered to a seemingly endless market of young (mostly male) buyers far more numerous than their parents to build the nation's largest industry

6) China’s Automobile Industry and Cleaner Vehicle Technologies (Jimin Zhao, 2006) The recent shifts in China‘s auto industry policy from development only,through development with emission control, to development with cleaner vehicle technology demonstrates that China is attempting to balance the challenges of economic development, environmental protection and energy security. National policies and programmes have played a major role in implementing this shift, but the greening of the auto sector is challenged by major obstacles, such as the high cost of manufacturing cleaner vehicles and building new infrastructure, and the low immediate economic benefits to consumers and producers. It is unrealistic to expect China to limit vehicle production or to transition to hydrogen vehicles quickly. However, China can move to cleaner vehicle technology by implementing both short- and long- term policies that reduce individual conventional vehicle emissions by strengthening vehicle emission standards, advancing fuel quality, promoting hybrid vehicles together with other alternative fuel vehicles, and preparing for an eventual transition to hydrogen vehicles. The government should also establish incentive policies for cleaner vehicle production and purchases, promote investment in infrastructure, strengthen partnerships between government and industry, disseminate information to raise public awareness, and encourage multinationals to use China as a testing ground for innovative hybrid and hydrogen vehicles.

7) The Evolution of the U.S. Automobile Industry and Detroit as its Capital (Steven Klepper, 2001) In its first fifteen years the U.S. automobile industry was characterized by a great deal of entry and the number of firms exceeded 200. Despite robust growth in the market for 10

automobiles, the industry subsequently sustained a prolonged shakeout in the number of producers and evolved to be an oligopoly dominated by three firms. The industry also evolved to be heavily concentrated around Detroit, Michigan, which not only was home to its top three firms but most of its other leaders. A model of industry evolution characterized by heterogeneous firm capabilities, increasing returns associated with R&D, and a birth and inheritance process governing entry is developed to explain these patterns. Predictions of the model concerning entry and firm survival are tested using data on the origin and years of production of every entrant into the industry. The shakeout is shown to result from a process imparting strong advantages to early entrants, and the geographic concentration of the industry is attributed to the success of four early entrants around Detroit, who in turn spawned a large number of successful firms in the Detroit area that together dominated the industry

8) Indian Auto industry (OICA (The International Organization of Motor Vehicle Manufacturers 2010 Statistics), 2009) India became the sixth largest motor vehicle/car manufacturer in the world in 2010 and is expected to rise to the fourth position by 2014. Indian auto manufacturers produced a record 14.82 milion motor vehicles in 2010. 3.54 m (million) cars and commercial vehicles were produced in 2010¹ out of which 2.81 m were cars. Domestic passenger vehicle sales hit a new record in 2009-10 (Apr-Mar) when over 1.95 million vehicles were sold. India is the largest manufacturer of three-wheelers (444,000 in 2009-10) and the eighth largest commercial vehicle (0.53 m in 2009-10). India is also the largest tractor manufacturing country (around 1/3 of global output) having produced around 370,000 units in 2009-10. The luxury car segment grew at 76 % in 2008 over the previous year although actual sales figures were still very low at around 8,000 units. India's automobile exports in 2008-09 (1,530,660 units in total) included 331,539 passenger cars and 1,004,174 two-wheelers. India is the second largest motorcycle (6.54 m produced in 2007-08) and the fourth largest commercial vehicle manufacturer in the world. India's auto industry produced a total of 14.1 million motor vehicles during 2009-10. Auto exports amounted to almost USD 2.3 billion in the year 2005-06. Over 13 million people work directly or indirectly in the auto industry. Indian car exports have increased at a rapid pace

reaching 210,088 units (mostly Maruti-Suzuki and Hyundai models) during the first half (Apr-Sep) of 2009-10, well ahead of China. The size of the Indian automotive component industry is estimated to be approx. USD 21 billion. Auto ancillary exports increased to USD 3.6 bn in 2007-08 while the total turnover of India's vehicle tyre industry amounted to an estimated Rs 142.5 bn in 2005-06. The total number of registered motor vehicles on Indian roads is approx. 100 million. Established auto manufacturers and new entrants in the Indian auto market are expanding their production capacities on a large scale. Companies undergoing expansion include Maruti-Suzuki, GM, Tata Motors, VW Group, Toyota, Honda and Hyundai. The Renault- Nissan Alliance's new auto plant near Chennai commenced production in 2010. Peugeot- Citroen is planning a comeback to India and Mazda is entering the Indian passenger car market. Cars have till now been affordable to only a fraction of India's over 200 m households. With the advent of the Tata minicar, the Nano, which received top marks for its styling and design, retails for approx. USD 3,000 (Delhi on-road) and therefore has created a completely new segment in the car market and made autos within the reach to a substantial segment of the approx. 50 million current 2-wheeler owners and first time car buyers. The market for cheap minicars seems to be a lot smaller than what was earlier projected. Sales of the Nano model have decreased substantially towards the end of '10 but witnessed a rebound during December when sales reached 5,784 units.

9) Indian Passenger Vehicle Industry: Growth Momentum to Continue (ICRA Rating Feature, 2009) -With expected sales of ~2.5 million passenger vehicles in FY11e,India‘s passenger vehicle market ranks as world‘s seventh largest; larger than markets like United Kingdom, France and Spain by volume - India has been one of the few markets globally to buck the recessionary trend and record a strong 25.6% volume growth in FY10. The growth momentum continues to be on track with first eleven months of FY11 registering a growth of 29.8% over the corresponding period in the previous year - Strong economic growth, rising disposable income levels, favourable demographics, easy financing environment and relatively low car penetration have been the prominent growth drivers for the industry 12

- While at the one end, the growing domestic market is attracting foreign OEMs, on the other, established players are positioning themselves as strong contenders to offer low-cost car manufacturing capabilities to the world - So far, most foreign car makers, barring Hyundai have focused on the sedan and premium segment cars, shying away from the highly competitive small-car segment; with these players now launching small-cars that too designed keeping in mind specifically the Indian consumer, the small-car segment, which has so far been dominated by three players commanding over 80% of the volumes is likely to see increase in competitive intensity - Some of the newly launched models have had good initial response and have been aggressively priced, indicating new entrants‘ strategy to grab market share while sacrificing profitability - Superior small-car portfolio, a wide distribution and service network and competitive pricing on the back of locally sourced auto components are going to be the key factors in determining the success of a foreign OEM in the Indian market While competitive pressures are likely to intensify, strong GDP growth, rising disposable income levels, easy availability of finance and more particularly Indian consumers‘ aspiration to own cars, especially given the state of public transport, would ensure that the industry will experience strong growth in the foreseeable future - Its estimate the Indian passenger vehicle industry will reach ~4.85 million in annual sales by FY16, representing a growth of 10.8% CAGR over the next five years - Notwithstanding the strong long-term outlook, the industry faces certain near term challenges in form of rising commodity prices, interest rates, tightening liquidity scenario and increased competitive intensity - Rising labour costs is also likely to see cost increases across the supplier network, though it is likely to be mitigated by greater scale economies and higher degree of automation - Within the lower priced segment (mini/compact), the price band is widening, with higher priced but better value products achieving higher volumes than some of the lower priced models. The price range may widen further depending on the success of the ‗Nano‘ segment

10) A new era Accelerating toward 2020—An automotive industry transformed

(Deloitte, 2007) For the past few years, automotive leaders and observers have witnessed an industry in peril. A slowing global economy, coupled with declining consumer confidence, has translated into dismal new car sales in most markets. But the slump has masked many outstanding industry advancements. Standards of quality and productivity, for example, have been raised without a corresponding increase in price. Cars today are safer, more fuel efficient, and more technically advanced than ever. And, the automotive workplace has evolved from an image of ―dark, dirty and dangerous‖ to an environment of high skills, advanced technologies, and dynamic change.

11) Managing Socio-technical Change in Indian Automobile Industry (Dr. Rajiv Kumar Garg, 2006) Management of change has assumed a great deal of importance in Indian automobile industry. Managing change is posing a big challenge to Indian firms in the wake of globalization and liberalization. Successful change demands that all major areas of an organization are kept in focus concurrently. These areas are technology, structure, systems, people and culture. It is seen that all these areas are interwoven and cannot be emphasized upon in isolation. This paper presents the current status of socio-technical change in Indian automobile industry. The study has been made through survey in Indian automobile companies using a specially designed questionnaire.

12) Determinants of Competitiveness of the Indian Auto Industry (Badri Narayanan G, Pankaj Vashisht, 2008)  This study analyses the determinants of competitiveness in the Indian auto industry. It is based on a field survey and a quantitative analysis of secondary data. The field survey covers 45 firms all over India, of which 31 are auto-component firms and 14 are Original Equipment Manufacturers (OEMs).  From 2001-02 to 2005-06, the Indian automobile sector has grown at an average annual rate of over 18 per cent in terms of value of output at constant 1993-94 prices and the auto-component sector has grown at about 26 per cent. During the same period, in terms of

domestic sales in numbers, two-wheelers have grown at over 13 per cent per annum; three- wheelers at more than 15 per cent commercial vehicles at about 25 per cent per annum and the number of passenger vehicles by 17 per cent per annum.  Vehicle exports at constant 1993-94 prices have grown at an average annual rate of more than 55 per cent from 2001-02 to 2005-06, while auto-component exports have grown at 21 per cent. Two-wheeler exports have seen an annual average growth rate of 27 per cent; passenger car exports have grown at 80 per cent; and commercial vehicles at about 55 per cent.  The effective rate of protection on automobiles is much higher than on components. For example, during 2006-07, while nominal custom duties were 60 per cent for automobiles (other than commercial vehicles), 12.5 per cent for commercial vehicles and 12.5 per cent for auto-components, effective rates of protection were 183.5 per cent, 12.5 per cent and 10.1 per cent, respectively.  With the higher countervailing duty and other cesses/levies, the effective rate of protection for automobile sector would be even higher.  This differential rate of effective protection distorts resource allocation and investment pattern in the industry.  The auto-component sector has much higher employment-generation potential and export- intensity than the auto assembly segment of the sector. The component manufacturers are now globally competitive and are also maintaining reasonable profitability levels despite a tariff protection of only 7.5 per cent.  The import tariff for the assembled vehicles is 60 per cent. Given the low level of protection both for the auto components and CKD/SKD kits, this clearly reflects a policy bias in favour of auto assemblers.  The reduction in import duties on assembled units may be undertaken in a phased manner and after ensuring that Indian automobile companies get comparable access to ASEAN and Chinese markets.  The anti-dumping mechanism should be strengthened to prevent the dumping of vehicles in the Indian market.

13) Changing Features of the Automobile Industry in Asia: Comparison of Production, Trade and Market Structure in Selected Countries (Biswajit Nag, Saikat Banerjee, Rittwik Chatterjee, 2006) The global automotive industry, increasingly characterized by global mergers and relocation of production centers to emerging developing economies, is in the grips of a global price- war. The industry is subject to imperfect competition which has resulted in too much of everything — too much capacity, too many competitors and too much redundancy and overlap. The industry is concerned with consumer demands for styling, safety, and comfort; and with labor relations and manufacturing efficiency. In this context, the study examines the growth patterns, changes in ownership structures, trade patterns and role of governments o f selected Asian countries (viz. China, India, Indonesia and Thailand) in the automobile sector. Thailand is a major automobile exporting country from Asia. The sector is mainly driven by Japanese FDI. Chinese automobile sector is growing very fast and is poised to make its dent in the international trade arena very soon, with a particularly strong position in the component sector. India, on the other hand, is consolidating its position with strong domestic and external demand. The Indonesian automotive industry is essentially an assembly industry dominated by the major Japanese car manufacturers, but also increasing its exports.

CHAPTER 3

RESEARCH METHODOLOGY

3.1 PROBLEM STATEMENT

Prospecting Of MUVs Market Potential In Indian Automobile Industry

3.2 SCOPE OF RESEARCH

3.3 OBJECTIVES OF THE STUDY

 To find the consumer perception on the buying behaviour of MUV segment in India  To study the attributes and the factors which influences the buying nature Family vehicle of the customers in India  To determine the motivating factor that contribute for the purchase decision of MUV in India  To find the future market potential of the MUVs in India based upon the survey

3.4 DATA COLLECTION

Includes secondary research i.e websites , journals, books etc and primary research i.e. consumer survey using questionnaire method

3.5 TARGET PROFILE

Prospective buyers of MUVs and other substitute Cars falling in the age group of 18-45

3.6 SAMPLE SIZE

173. The sample will include users of local car brands, that is Hindustan Motors, Tata Motors and Mahindra and Mahindra, and the users of Global car brands, that is Hyundai, Honda, 18

Toyota, Maruti Suzuki, Volkswagen, Nissan, Renault, GM, BMW, Fiat and Ford. The segment covered in the research will be Hatch back, Sedan, SUV, Premium Sedan and MUV‘s

3.7 SAMPLING METHOD

Stratified sampling is been used for data collection

3.8 FORMULATION OF HYPOTHESIS

1) Hypothesis to find the factor that influence the decision about the preferred family vehicle by the customer

 Research Hypothesis/ Alternative Hypothesis (H1) : Factors like advertisements, Personal Experience, Word of Mouth, Family & Friends, other Attributes have a significant effect the MUV buying behaviour

 Null Hypothesis (H0) :

Factors like advertisements, Personal Experience, Word of Mouth, Family & Friends, other Attributes doesn‘t have a significant effect the MUV buying behaviour

2) Hypothesis to find the factor that motivates most the customer to by MUV

 Research Hypothesis/ Alternative Hypothesis (H1) : Factors like Family Income, Societal Status, Passenger Space Available, Single Usage, and Family Size have a significant effect the MUV buying behaviour

 Null Hypothesis (H0 ):

Factors Family Income, Societal Status, Passenger Space Available, Single Usage, Family Size doesn‘t have a significant effect the MUV buying behaviour

3) To find the group / cluster of factors that are important in purchase decision making of automobile for family use

 Research Hypothesis/ Alternative Hypothesis (H1) : There is significant correlation between the 10 different factors (Price , Fuel economy, Service Facility Available, Performance and engine specs, Utilities and Goodies, Safety, Maintenance Cost, Resale value, Brand Image, Passenger Space Available) chosen , which customer consider when making a purchase decision

 Null Hypothesis (H0) : There is only correlation with the same factors and no correlation between the factors

3.9 DATA ANALYSIS The data is analysed with the help of Google docs and SPSS where Annova table. Regression and factor analysis will be performed; MS Excel for correlation matrix, graphs, pie charts and tables to diagrammatically represent the tables.

3.10 VARIABLES OF THE RESEARCH

Hypothesis test using Annova And Regression

Dependent Variable MUV purchase decision (preferred category)

Independent Variables

1) Advertisements 2) Personal Experience 3) Word of Mouth 4) Family & Friends 5) Other Attributes 6) Family Income 7) Societal Status 20

8) Passenger Space Available 9) Single Usage 10) Family Size

Hypothesis test using factor analysis

Factors considered

1) Price 2) Fuel economy 3) Service Facility Available 4) Performance and engine specs 5) Utilities and Goodies 6) Safety 7) Maintenance Cost 8) Resale value 9) Brand Image 10) Passenger Space Available

3.11 LIMITATIONS OF STUDY

3.12 SCHEMATIC REPRESENTATION OF THE RESEARCH DESIGN

POPULATION

PROSPECTIVE BUYERS OF MUV AND ITS S UBSTITUTES

SAMPLE

PROSPECTIVE CAR BUYERS, AGE 18-45 IN BANGALORE

SAMPLE S IZE

TOTAL SAMPLE S IZE OF 173 PROSPECTIVE CAR BUYERS

INSTRUMENT

ONLINE, TELEPHONICALLY

ANALYSIS OF DATA

DESCRIPTIVE AND INFERENTIAL STATISTICS

CONCLUSION AND SUGGESTIONS

CHAPTER 4

INDUSTRY PROFILE

4.1 OVERVIEW OF INDIAN AUTOMOBILE INDUSTRY Automobile Industry was considered to be one of the key sectors of any economy; it was capable of being the driver of economic growth because of both its backward as well as forward linkages with other sectors of the economy. According to the Automotive Mission Plan (2006- 2016), India was one of the fastest growing automobile industry in the world. The sector's share in GDP rose from 2.8% in fiscal year 1992-93 (April‘92-March‘93) to 5% in fiscal year 2005-061 and it had been rising every year since then. In the year 2009-10, Indian automobile industry produced more than 2 million passenger cars and more than 0.5 million commercial vehicles2. According to the Eleventh Five Year Plan 3 (2007-2012), after liberalization in 1991, Indian Automotive Industry had registered a spectacular growth of 17% during five fiscal years ranging between 20002001 and 2005-20064. Till 2002-2003, it had achieved an investment of INR 50,000 Crores (US$ 10.99 billion) which went up to INR 80,000 Crores in 2007 (US$17.58 billion) with a turnover of INR 1, 65,000 Crores (US$ 36.26 billion). Moreover, an investment worth INR 35,000 Crores (US$ 7.69 billion) was in the pipeline. According to the Annual Report (2007-2008) of Ministry of Heavy Industries and Public Enterprises, Government of India, India was the second largest two wheeler manufacturer in the world, fifth largest commercial vehicle manufacturer in the world, largest manufacturer of Tractors in the world and fourth largest passenger car market in Asia. This achievement of the Indian automotive industry could be attributed to Indian government‘s decision to de-license the sector followed by up to 100 % foreign direct investment through automatic route which embarked a new journey for the industry since 1991. The above initiatives resulted in setting up of manufacturing facilities by major global players. It resulted in the massive enhancement of the production level of automobiles (which included passenger vehicles, commercial vehicles, two wheelers and three wheelers) from 2 million in 1991 to11.17 million vehicles in 2008-095. The above measures taken by Indian Government made India, the new launch pad for global car

1 http://www.oppapers.com/essays/India-Automobile-Industry/155618 2 Society for Indian Automobile manufacturers 3 Report by the working group on Automotive industry, Eleventh Five Year Plan (2007-2012), Department of Heavy Industries, Ministry of Heavy Industries and Public Enterprises, India (August 2006). 4 Indian Automotive Industry includes automobile industry and auto component industry. 5 http://www.ibef.org/industry/automobiles.aspx 24

manufacturers like Honda, Ford, Hyundai, General Motors etc. Rising level of income of the Indians, availability of easy credit facility, relaxations in regulations by the Indian government in terms of import tariffs and equity regulations could be attributed as major reasons for this upsurge. The case concentrates on the mid-size car segment in India. It analyzes the reasons for the growth of this segment and the contemporary growth trends that it shows. The important issues that the case raises are – How the impact of various external factors were shaping this segment and what would be the future of this segment?

India became the sixth largest motor vehicle/car manufacturer in the world in 2010 and is expected to rise to the fourth position by 2014. Indian auto manufacturers produced a record 14.82 milion motor vehicles in 2010. 3.54 m (million) cars and commercial vehicles were produced in 2010¹ out of which 2.81 m were cars. Domestic passenger vehicle sales hit a new record in 2009-10 (Apr-Mar) when over 1.95 million vehicles were sold. India is the largest manufacturer of three-wheelers (444,000 in 2009-10) and the eighth largest commercial vehicle (0.53 m in 2009-10). India is also the largest tractor manufacturing country (around 1/3 of global output) having produced around 370,000 units in 2009-10. The luxury car segment grew at 76 % in 2008 over the previous year although actual sales figures were still very low at around 8,000 units.

India's automobile exports in 2008-09 (1,530,660 units in total) included 331,539 passenger cars and 1,004,174 two-wheelers. India is the second largest motorcycle (6.54 m produced in 2007-08) and the fourth largest commercial vehicle manufacturer in the world. India's auto industry produced a total of 14.1 million motor vehicles during 2009-10. Auto exports amounted to almost USD 2.3 billion in the year 2005-06. Over 13 million people work directly or indirectly in the auto industry. Indian car exports have increased at a rapid pace reaching 210,088 units (mostly Maruti-Suzuki and Hyundai models) during the first half (Apr-Sep) of 2009-10, well ahead of China.

The size of the Indian automotive component industry is estimated to be approx. USD 21 billion. Auto ancillary exports increased to USD 3.6 bn in 2007-08 while the total turnover of India's vehicle tyre industry amounted to an 25

estimated Rs 142.5 bn in 2005-06. The total number of registered motor vehicles on Indian roads is approx. 100 million.

Established auto manufacturers and new entrants in the Indian auto market are expanding their production capacities on a large scale. Companies undergoing expansion include Maruti-Suzuki, GM, Tata Motors, VW Group, Toyota, Honda and Hyundai. The Renault-Nissan Alliance's new auto plant near Chennai commenced production in 2010. Peugeot-Citroen is planning a comeback to India and Mazda is entering the Indian passenger car market.

Cars have till now been affordable to only a fraction of India's over 200 m households. With the advent of the Tata minicar, the Nano, which received top marks for its styling and design, retails for approx. USD 3,000 (Delhi on- road) and therefore has created a completely new segment in the car market and made autos within the reach to a substantial segment of the approx. 50 million current 2-wheeler owners and first time car buyers. The market for cheap minicars seems to be a lot smaller than what was earlier projected. Sales of the Nano model have decreased substantially towards the end of '10 but witnessed a rebound during December when sales reached 5,784 units. 6

6 OICA (The International Organization of Motor Vehicle Manufacturers 2010 Statistics) 26

Total Production of Passenger Vehicles in India7

TABLE 4.1

Segment Wise Share in Production of Passenger Vehicles in India8

TABLE 4.2

Total Sales of Passenger Vehicles in India9

TABLE 4.3

7 Center for Monitoring of Indian Economy: Industry Analysis Services Database 8 Center for Monitoring of Indian Economy: Industry Analysis Services Database 9 Center for Monitoring of Indian Economy: Industry Analysis Services Database 27

Segment Wise Share in Sales of Passenger Vehicles in India10

TABLE 4.4

Company Wise Production of Mid-Size Cars in India11

TABLE 4.5

10 Center for Monitoring of Indian Economy: Industry Analysis Services Database 11 Center for Monitoring of Indian Economy: Industry Analysis Services Database 28

Company Wise Share in Production of Mid-Size Cars in India12

TABLE 4.6

Company Wise Sales of Mid-Size Cars in India13

TABLE 4.7

12 Center for Monitoring of Indian Economy: Industry Analysis Services Database 13 Center for Monitoring of Indian Economy: Industry Analysis Services Database 29

Company Wise Share in Sales of Mid-Size Cars in India14

TABLE 4.8 4.2 MULTI UTILITY VEHICLES

Multi utility vehicles play different roles for different people and are the most widely used vehicles worldwide. As the name suggests MUV's has multi usage capabilities. With its dynamic features like high quality, ruggedness, durability, stability, reliability, looks, easy maintenance and operational economy, Multi Utility Vehicles are used extensively for private and public transport. MUV has multiple feature options that make travelling a comfortable and luxurious experience. In multi utility vehicle segment General Motors' Tavera, Toyota Innova and Mahindra Scorpio are consistently doing extremely well.

Hindustan Motor's is one of the oldest auto makers in India, and has its three successful models- Trekker, Porter and Pushpak that can take on any kind of terrain. Mahindra & Mahindra Limited is a big giant in the automotive sector in India and has conquered the insurmountable feat in India's rural, semi-urban markets, with the introduction of its premium MUVs like Bolero and Scorpio. Scorpio is counted as one of the best MUV's because of its highly spacious interiors and ensures safety and reliability with its tuff interiors. Toyota Innova is an extremely spacious car and offers

14 Center for Monitoring of Indian Economy: Industry Analysis Services Database 30

comfy sitting arrangement. One can take his entire family out on outings and for long tours on the rugged roads and hilly areas. Innova is a big car and has good height to its credit which makes it easier for passengers move in and out in comfortable position.

One of the popular multi utility vehicles that is running on the road is Tavera and with its impressive features like spacious interiors, roof top-ski racks, and integrated foot-top, Tavera is perfect for the long distance group and leisure tours etc. Qualis has enjoyed the runaway success across the country and is mostly used for long-distance traveling. Its flawless condition with 8+1 seating arrangement and safety features like three point ELR seat belts and side door beams makes Qualis highly likable Mutli utility vehicle. Tata safari is another successful MUV and champ of the road. It is perfect for the long distance group and leisure tours.

Designed for functional excellence, sturdily built, fuel efficient and unmatched operational economy- Multi utility vehicles have many takers and good value for money.

4.3 MULTI UTILITY VEHICLE MODELS

Multi utility vehicles (MUVs) are also known as the Multi purpose vehicles (MPVs) and are also described by some as the poor cousin of passenger cars. The MUVs popularity however in recent times has seen a rise all around the world. In India too, the benefits of MUVs as the multi usage vehicles has caught the fancy of a good number of potential buyers. And that can be attributed to the spurt in the sale of multi utility vehicles. The car makers though not content with the increasing sale are planning for more and better models. The multi utility vehicles models awaited in the global markets are varied and many with some of them being planned to be launched in India too.

Till a few years ago, MUVs were known more as the jeeps in India. However, enhanced features and better specifications have ensured that todays MUVs are much more than mere jeeps and provide for nbetter comfort and higher levels of performance. With Mahindra & Mahindra (M&M)' Scorpio range and tata Motors Sumo, Toyota too has joined the banwagon with its qualis and Innovas.Similarly Mahindra & Mahindra and Renault have been producing various models of MUV and SUV. The multi

utility vehicles are available in different colors, shades and price ranges. A customer has the luxury of selecting an MUV with either petrol or diesel engine. Most of the latest model of MUVs is clustered with some fantastic features like electronic brake force distribution system (EBD), Anti lock braking system (ABS), fog lights, rear seats with split fold facility, air bags for all the occupants, power steering, power window, central lock, alloy wheels and many more.

You will find a number of service centers of MUV located in many parts of the country. The car manufacturing companies have even set up wide dealership network to rope in more number of customers in India. The different Models of multi utility vehicle manufactured by the auto majors like General Motors, Toyota and Ford Motors are now available in almost all the major cities in India.

4.4 MULTI UTILITY VEHICLE STATISTICS

In the last few years India has emerged as one of the major automobile producing nations. Millions of dollars have been invested in the automotive sector by a host of leading automobile giants like Ford Motors, General Motors, Hyundai, Toyota, DaimerChrystler and many more. Although these companies have marked significant dents in the present situation of automobile industry by manufacturing varied types of passenger car but the segment of commercial vehicles is still being dominated by the Indian auto firms.

Automobile companies like Maruti, Mahindra & Mahindra and Tata Motors have come up with some of the highest performance delivering multi utility vehicles or MUVs. These MUVs are designed specially keeping in view the Indian conditions and are laden with a number of advanced technical specifications. Multi utility vehicle statistics suggest that the production of these vehicles will increase at a fast pace in the forthcoming years.

Production trend of multi utility vehicles in India from 2001 to 2007

Due to their fuel efficiency and multi usage potentialities, the MUVs have become much popular in India. Over the years, the demand of multi utility vehicles has also increased. The MUVs produced nowadays are even having excellent features. The MUVs come with a cluster of numerous comfort features that ensure smooth driving experience to the users. Although the other segments of car have recorded production growth at a higher rate but the manufacture of MUVs have grown slowly. In the last decade, the domestic sale of these vehicles has seen many ups and downs. Multi utility vehicle statistics indicate that the domestic sale of these vehicles will however grow in the following years.

Domestic sales trend of multi utility vehicles in India from 2001 to 2007

Multi utility vehicles are now even exported to various nations. Multi utility vehicle statistics indicate that the exports of these vehicles will grow even more with the introduction of new models by the various car manufacturers.

CHAPTER 5

DATA ANALYSIS AND INTERPRETATION

5.1 QUESTIONNAIRE ANALYSIS

Questions in the questionnaire are analysed one by one. Graphical data for the response is being plotted and the results are interpreted

MUV prospecting is done with the help of a questionnaire and the data for the same is been considered for research Hypothesis and using the statistical tools like Factor analysis , Annova table and Regression, responses are tabulated and using Google docs and SPSS software for analysis results are interpreted

AGE OF THE RESPONDENT

AGE

18- 22 Years 23-28 Years 29-35 Years > 35 years

13% 20%

17%

50%

From the 173 responses recorded , the demographic details show that 50 % of them belong to age group 23-28 category. From the secondary data it is evident that the above mentioned category is the target segment for automobile cars and the segment with most disposable income. So the research results will be more of reflection of the population opinion and error can be maximum reduced

GENDER OF THE RESPONDENT

GENDER

Male Female

12%

88%

151 respondents out of 173 respondents are male, as the decision makers of the automobile in a family are predominantly Males. The research will be giving a close attributes of the buying and purchase decision making as a result of the demographic skewness towards the male gender

EDUCATIONAL STATUS OF THE RESPONDENT

EDUCATIONAL STATUS

Employed Student Business

16%

37%

47%

Nearly the half of the respondents of the questionnaire was students. Next big number of respondents came from the employed professionals which was 37 %

COMBINED ANNUAL INCOME OF THE RESPONDENT

COMBINED ANNUAL INCOME

upto 5 Lakhs/Annum 5-8 Lakhs/Annum 8-12 Lakhs/Annum >12 Lakhs/Annum

13%

19%

51%

17%

The response for this question was of important because this single factor mainly effects the decision making of the family vehicle. 51 % of the sample came under annual income segment of up to 5 lakhs/ annum

MOST PREFERRED AUTOMOBILE CATEGORY OF THE RESPONDENT FOR FAMILY USE

MOST PREFFERED VEHICLE CATEGORY 60 52 50 40 40 36 33 30

20 10 10

0 SUV (Sports Utility MUV (Multi Utility Sedan Hatch Back Premiun Sedan Vehicle) Vehicle)

From the response of the questionnaire we can conclude that hatch back car segment is the most preferred category, which was favoured by 52 of the respondents. Next came in the ranking was sedan and the MUV category was the third mast preferred category by the respondents.

FACTORS INFLUENCING DECISION MAKING OF THE RESPONDENT ABOUT THE PREFFERED VEHICLE

FACTORS INFLUENCING TO BUY FAMIILY VEHICLE 100 90 90 80 68 70 60 53 50 41 40 30 20 14 10 0 Advertisements Personal Word Of Mouth Family & Friends Other Experience

90 of the 173 respondents gave the factor personal experience as the factor that mostly influences their decision making in buying the family vehicle. Family and friends were the factor that influenced the decision making next to personal experience 68 respondents favoured the factor. Word of mouth, advertisements and others (which constituted of actors not included in questionnaire but mentioned by respondents) were in ranking order of its importance

HOW LIKELY THE RESPONDENT MAY BUY AN MUV IN FUTURE

PURCHASE OF MUV IN NEAR FUTURE

Least Likely 33

Less Likely 41

Neutral 49

More Likely 29

Most Likely 19

0 10 20 30 40 50 60

49 out of the 173 respondents responded that the buying likeliness in the future towards the MUV is neutral. Less likely was the category that the respondents responded next to neutral

It can be concluded from the response that the buying likeliness for a MUV is very less only 48 (29+19) were positively responded to likely behaviour in buying decision

PRICE THAT THE RESPONDENT WILLING TO PAY FOR A MUV

PRICE WILLING TO PAY FOR AN MUV

8-10 Lakhs 111 10-12 Lakhs 46 >12 Lakhs 14

27%

65%

65 % of the response went for the price range of 8-10 lakhs as the price willing to pay for MUV. As the price for the entry level MUV is around the price mentioned, there is potential for the MUV in the automobile market. Also more MUV‘s introduced in the automobile market give more buying options for the customers.

MOTIVATING FACTOR THAT MAKE YOU BUY MUV

MOTIVATING FACTOR TO PURCHASE MUV 120 104 100

80 66 58 60

37 40

20 10

0 Family Income Societal Status Passenger Space Single Use Family size Available

From the observation it can be inferred that Passenger space available with the Vehicle is the most important motivating factor for MUV buying decision. Family Income and family size are the next most important factors that effects the decision making of the MUV purchase

Rating of the factors according to its importance on purchase decision making

PRICE

Most important 71

Important 80

Neutral 16

Less Important 4

Least importat 0

0 20 40 60 80 100

More respondents were considering the Price as ‗Important‘ factor on a Five point Likert scale

FUEL EFFICIENCY

Most important 79

Important 74

Neutral 14

Less Important 3

Least importat 1

0 20 40 60 80 100

More respondents were considering the Fuel Efficiency as ‗Most Important‘ factor on a Five point Likert scale

Rating of the factors according to its importance on purchase decision making

SERVICE FACILITY AVAILABLE

Most important 69

Important 70

Neutral 31

Less Important 1

Least importat 0

0 10 20 30 40 50 60 70 80

More respondents were considering the Service Facility Available as ` Important‘ factor on a Five point Likert scale

PERFOMANCE & ENGINE SPECS

Most important 35

Important 58

Neutral 61

Less Important 12

Least importat 5

0 10 20 30 40 50 60 70

More respondents were considering the Performance & Engine Specs as ‗Neutral‘ factor on a Five point Likert scale 45

Rating of the factors according to its importance on purchase decision making

ULITITIES & GOODIES

Most important 114

Important 52

Neutral 4

Less Important 1

Least importat 0

0 20 40 60 80 100 120

More respondents were considering the Utilities and Goodies as ‗Most Important‘ factor on a Five point Likert scale

SAFETY

Most important 80

Important 76

Neutral 13

Less Important 2

Least importat 0

0 10 20 30 40 50 60 70 80 90

More respondents were considering the Safety as ‗Most Important‘ factor on a Five point Likert scale 46

Rating of the factors according to its importance on purchase decision making

MAINTAINENCE COST

Most important 32

Important 84

Neutral 44

Less Important 8

Least importat 3

0 10 20 30 40 50 60 70 80 90

More respondents were considering the Maintenance Cost as ‗Important‘ factor on a Five point Likert scale

RESALE VALUE

Most important 55

Important 72

Neutral 30

Less Important 13

Least importat 1

0 10 20 30 40 50 60 70 80

More respondents were considering the Resale Value as ‗Important‘ factor on a Five point Likert scale

Rating of the factors according to its importance on purchase decision making

Brand Image

Most important 55

Important 72

Neutral 30

Less Important 13

Least importat 1

0 10 20 30 40 50 60 70 80

More respondents were considering the Brand Image as ‗Important‘ factor on a Five point Likert scale

PASSENGER SPACE AVAILABLE

Most important 72

Important 77

Neutral 22

Less Important 0

Least importat 0

0 10 20 30 40 50 60 70 80 90

More respondents were considering the Passenger Space Available as ‗Important‘ factor on a Five point Likert scale

5.2 RESEARCH HYPOTHESIS AND USE OF STATISTICAL TOOLS

5.2.1 FACTOR ANALYSIS

To reduce the 10 factors listed factors (Price , Fuel economy, Service Facility Available, Performance and engine specs, Utilities and Goodies, Safety, Maintenance Cost, Resale value, Brand Image, Passenger Space Available) to smaller number of groups and to find the correlation between the 10 different variables that were considered for the questionnaire, Factor analysis is done. Data reduction is the main objective behind the use of statistical tool

Research Hypothesis (Alternative hypothesis)

H1 : There is significant correlation between the 10 different factors chosen (The population correlation matrix is not an identity matrix)

Null Hypothesis

H0 : There is only correlation with the same factors (The population correlation matrix is an identity matrix)

KMO and Bartlett's Test (From SPSS)

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .780

Bartlett's Test of Approx. Chi-Square 260.236 Sphericity df 45 Sig. .000

INFERENCE

Since the KMO and Bartlett's Test gives ‘Kaiser-Meyer-Olkin Measure of Sampling Adequacy‘ value equals to .780 which is > .50, Factor Analysis can be applied for data Reduction Technique

CORRELATION MATRIX (From SPSS s/w)

price fuel service perfo utilities safety maintenance resale brand space Correla price 1.000 .230 .002 -.008 .019 .017 .200 .156 .068 .001 tion fuel .230 1.00 .240 .241 .149 .248 .186 .160 .034 .161 service .002 .240 1.000 .465 .358 .419 .332 .195 .064 .254 perfo -.008 .241 .465 1.000 .390 .370 .217 .199 .010 .244 utilities .019 .149 .358 .390 1.000 .294 .254 .135 .123 .331 safety .017 .248 .419 .370 .294 1.000 .186 .143 .111 .300 mainten .200 .186 .332 .217 .254 .186 1.000 .272 .197 .207 ance resale .156 .160 .195 .199 .135 .143 .272 1.000 .333 .174 brand .068 .034 .064 .010 .123 .111 .197 .333 1.000 .211 space .001 .161 .254 .244 .331 .300 .207 .174 .211 1.000

INFERENCE

From the correlation matrix, its evident that the matrix is not a identity matrix, so it can be concluded that the different factors have a correlation between them. Factor analysis can thus be applied and factors can be reduced , grouped to smaller number of factors

TOTAL VARIANCE EXPLAINED (From SPSS )

Initial Eigenvalues Rotation Sums of Squared Loadings Component % of Cumulative % of Cumulative Total Total Variance % Variance % 1 2.921 29.214 29.214 2.494 24.939 24.939 2 1.346 13.460 42.674 1.544 15.440 40.379 3 1.125 11.255 53.929 1.355 13.550 53.929 4 .833 8.328 62.257 5 .801 8.007 70.264 6 .689 6.891 77.156 7 .657 6.566 83.721 8 .619 6.190 89.912 9 .518 5.181 95.093 10 .491 4.907 100.000

INFERENCE

From the above table it can be deducted that there will be 3 components to which the mentioned 10 factors can be reduced. The criteria for selection is that the components with Eigen Values >1 are considered to be significant

SCREE PLOT (From SPSS )

3.0

2.5

2.0

1.5 Eigenvalue

1.0

0.5

0.0

1 2 3 4 5 6 7 8 9 10 Component Number

INFERENCE

From the above scree plot it can deducted that there are three significant components; criteria being Eigen value >1 and considering where the graph slope is high

ROTATED COMPONENT MATRIX (From SPSS )

Component 1 2 3 price -.164 .147 .806 fuel .330 -.051 .659 service .739 .059 .148 perfo .745 -.027 .116 utilities .653 .181 -.027 safety .675 .067 .092 maintenance .316 .416 .382 resale .132 .670 .249 brand -.008 .840 -.078 space .507 .389 -.109

INFERENCE

The grouping of the factors are done using the table

Component 1 – Service, Performance & engine Specs, Utilities & Goodies, Safety

Component 2 – Maintenance Cost, Resale Value, Brand image

Component 3 – Price, Fuel Economy

CONCLUSION

Null Hypothesis (H0) is rejected i.e. there is correlation between the 10 different factors (Price, Fuel economy, Service Facility Available, Performance and engine specs, Utilities and Goodies, Safety, Maintenance Cost, Resale value, Brand Image, Passenger Space Available) that are taken into consideration

5.2.2 REGRESSION AND ANNOVA TABLE - I

Annova Multiple Regression is done to find out the variation in the buying behaviour of MUV‘s that are accounted by the variation in various factors like Advertisements, Personal Experience, Word of Mouth, Family & Friends, Other related attributes

Research Hypothesis (Alternative Hypothesis)

H1 : Independent variables have a significant effect on the dependent variable Factors like advertisements, Personal Experience, Word of Mouth, Family & Friends, other Attributes have a significant effect the MUV buying behaviour

Null Hypothesis

H0 : Independent variables doesn‘t have a significant effect on the dependent variable Factors like advertisements, Personal Experience, Word of Mouth, Family & Friends, other Attributes doesn‘t have a significant effect the MUV buying behaviour

MODEL SUMMARY (From SPSS)

Adjusted Std. Error of Model R R Square R Square the Estimate 1 .211(a) .045 .015 .39454

INFERENCE R Square Coefficient of Determination denotes the strength of association of Dependent variable with the Independent Variables. It varies between 0 to 1. The value here is .045 so there‘s only less variation in Y (purchase decision making of MUV)

ANOVA (From SPSS)

Sum of Mean Model Squares df Square F Sig. 1 Regression 1.184 5 .237 1.521 .186(a) Residual 25.373 163 .156 Total 26.556 168

INFERENCE Since the significance level is > .05 , the Null hypothesis is Not Rejected

COEFFICIENTS (From SPSS)

Unstandardized Standardized Model Coefficients Coefficients t Sig. B Std. Error Beta 1 (Constant) .225 .066 3.382 .001 Advertisement -.158 .076 -.172 -2.085 .039 PerExperience -.046 .066 -.058 -.699 .486 WordOfMouth .107 .068 .124 1.577 .117 FamilyNFrnds .038 .064 .047 .592 .555 Others -.172 .124 -.111 -1.387 .167

INFERENCE From the table its observed that the significance level of the Advertisement is < .05, so the particular factor is significant for the buying behaviour of MUV and the Factor is Negatively Correlated with the Dependent variable.

CONCLUSUION

Null hypothesis (H0) is Not Rejected i.e. Factors like advertisements, Personal Experience, Word of Mouth, Family & Friends, other Attributes doesn‘t have a significant effect the MUV buying behaviour From regression Coefficient table it can be concluded that Advertisement as a facto r have significant on MUV buying behaviour and factor is negatively correlated with the buying behaviour

5.2.3 REGRESSION AND ANNOVA TABLE - II

Annova Multiple Regression is done to find out the variation in the buying behaviour of MUV‘s that are accounted by the variation in various factors like Family Income, Societal Status, Passenger Space Available, Single Usage, Family Size

Research Hypothesis (Alternative Hypothesis)

H1 : Independent variables have a significant effect on the dependent variable Factors like Family Income, Societal Status, Passenger Space Available, Single Usage, and Family Size have a significant effect the MUV buying behaviour

Null Hypothesis

H0 : Independent variables doesn‘t have a significant effect on the dependent variable Factors Family Income, Societal Status, Passenger Space Available, Single Usage, Family Size doesn‘t have a significant effect the MUV buying behaviour

MODEL SUMMARY (From SPSS)

Adjusted R Std. Error of the Model R R Square Square Estimate 1 .166(a) .028 -.002 .40833

INFERENCE R Square Coefficient of Determination denotes the strength of association of Dependent variable with the Independent Variables. It varies between 0 to 1. The value here is .028 so there‘s only less variation in Y (purchase decision making of MUV)

ANOVA (From SPSS)

Sum of df Mean Square F Sig. Model Squares 1 Regression .787 5 .157 .944 .454(a) Residual 27.678 166 .167 Total 28.465 171

INFERENCE Since the significance level is > .05 , the Null hypothesis is Not Rejected

COEFFICIENTS (From SPSS)

Unstandardized Standardized Coefficients Coefficients t Sig. Model B Std. Error Beta 1 (Constant) .105 .070 1.489 .138 FamilyIncome .061 .067 .073 .910 .364 SocietalStatus .010 .078 .010 .129 .898 PassengerSpace .136 .067 .163 2.043 .043 SingleUsage .018 .134 .010 .131 .896 FamilySize -.013 .066 -.015 -.199 .843

INFERENCE From the table its observed that the significance level of the Passenger Space Available is < .05, so the particular factor is significant for the buying behaviour of MUV and the Factor is Positively Correlated with the Dependent variable.

CONCLUSUION

Null hypothesis (H0) is Not Rejected i.e. Factors like Family Income, Societal Status, Passenger Space Available, Single Usage, Family Size doesn‘t have a significant effect the MUV buying behaviour From regression Coefficient table it can be concluded that Passenger Space Available as a factor have significant on MUV buying behaviour and factor is Positively correlated with the buying behaviour

CHAPTER 6

FINDINGS AND CONCLUSION

6.1 FINDINGS

 Based upon the rise in the sales of the MUV category over the years , in future there is a great market potential for this category of passenger vehicle  At present the customers are more preferring Hatch Back for city driving and Sedan for long distance driving  Personal Experience is the factor that influences the choice of preferred family vehicle for the Indian household. Family and Friends factor comes second in ranking.  From the research, it is proved that Advertisement is the biggest influencing factor for the preference of MUV as family vehicle and the factor is negatively correlated to the Buying decision  Passenger space available is the most important factor that makes MUV as the preffered vehicle for the family  From the research it is proved that Passenger space available is positively correlated with the purchase decision of MUV

6.2 CONCLUSION

This research which is intended towards the prospecting of market potential of MUV‘s in Indian Automobile Industry had been given some very useful insights for the future marketing, promotions, design, targeting and positioning of MUV in Indian Automobile market. The potential is growing steadily for the category.

More introductions of models in the category will give more options for the customer to make a choice. Market is currently growing with models such as Toyota Innova, Tata Aria, Chevorlet Tavera, Mahindra Xylo, Tata Sumo Grande, Maruti Eco. With announcement of introduction of new models in Delhi Auto expo early this year, Indian Auto industry is to see around 4 -5 models of MUV by mid of this year such as Nissan Evalia, Ford Eco Sport, Maruti Ertiga, Renault Duster etc

BIBLIOGRAPHY

1) Badri Narayanan G, Pankaj Vashisht. (2008). Determinants of Competitiveness of the Indian Auto Industry. Indian Council For Research On International Economic Relations.

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23) AUTOCAR Magazine, April, 2011

ANNEXURE

QUESTIONNAIRE

Prospecting of MUV's Market Potential in Indian Automobile Industry

* Required

1) Name*

2) Age* 18- 22 Years 23-28 Years 29-35 Years > 35 years

3) Gender* Male Female

4) Employment Status* Student Employed Business

5) Combined Annual Income* upto 5 Lakhs/Annum 5-8 Lakhs/Annum 8-12 Lakhs/Annum > 12 Lakhs/Annum

6) According to you which is the most preffered vehicle category for your family* SUV - Scorpio, Fortuner, Endeavour etc ; MUV - Innova, Aria, Xylo, Sumo Grande, Tavera etc ; Sedan - City, Verna, Fiesta, Vento, SX4 etc ; Hatch Back - Swift, Polo, Figo, Indica etc ; Pre Sedan - Corolla, Cruze, Jetta, Civic etc

SUV (Sports Utility Vehicle) MUV (Multi Utility Vehicle) Sedan Hatch Back Premiun Sedan

7) Which of the following factor influenced your decision in the response for the question above* Advertisements Personal Experience Word Of Mouth Family & Friends Other:

8) How likely are you to buy a MUV for your Family in the near future*

1 2 3 4 5

Most Likely Least Likely

9) Price You are willing to pay for a MUV* 8-10 Lakhs 10-12 Lakhs > 12 Lakhs

10) Which is the factor that motivates you the most to purchase a MUV* Family Income Societal Status Passenger Space available 62

Single Usage Family Size

11) Rate the following factors, according to its importance on Purchase decision making*

Most Less Least Important Neutral Important Important Important

Price

Fuel Efficiency

Service Facility Available

Performance & Engine Specs

Utilities & Goodies

12) Rate the following factors, according to its importance on Purchase decision making*

Most Less Least Important Neutral Important important Important

Safety

Maintenance Cost

Resale Value

Brand Image

Passenger Space Available