C-seg heating up with Logan launch....

Here comes Logan. This is from the stable of joint venture of Mahindra and Renault. For Mahindra this is the second attempt in this segment. First attempt it made with Ford way back in 1998.

For Renault this is the first attempt. Renault is the market leader in France. France is the number 2 manufacturer of cars in Europe after Germany.

Let us see which models are going to get affected most with this launch. This model has been very competitively priced at Rs. 4.28 lacs (starting). Hence it is going to give Esteem run for its money. Esteem is going to suffer maximum. Unfortunately, lately we are witnessing poor advertising for Esteem. In fact Maruti has to tell the customers openly in their ads, what is the meaning of "esteem" (assuming that the customers don't know it).

Indigo will be another casualty because of Logan. Tata's have never been able to give a good quality product. It is better to not talk about their horrible services.

C-segment is the fastest growing segment in passenger cars. Swift volumes may not suffer much due to Logan, but now it depends on the marketers, how they are planning to position Logan.

Ford Fiesta may also suffer. Fiesta was available in Diesel Segment, and with Logan in Diesel also, it may lose its market share. Similarly Hyundai may also witness further decline in the market share of its Accent.

Here comes competitor to Tata's ACE

Piaggio, Italy just announced its plans to invest Rs. 350-400 Crores in the next 2-3 years to add new facility in Pune to make 4-wheelers.

Piaggio is already a hit in the market with their 3-Wheelers in the Cargo segment. Their Ape is successful since its launch as Piaggio was able to create a clear segment in the Indian auto industry.

However, lately Tata's have dented its market with its state-of-the-art designed ACE four wheeler. ACE offered better tonnage for the hub and spoke model and higher esteem to the owner who now sees himself as the truck owner not a 3-wheeler owner.

But Piaggio's new plans of entering this segment will certainly make this segment highly competitive. Though many others like Mahindras, Force Motors, Bajaj's have announced their plans for this me-too type product, but none is able to dent the market of Tata's.

Piaggio is different from others. It is the well-entrenched player of this segment and hence Tata's should fear them most.

New Indian Avtaar...

Hero Honda new advertising campaign says it all.

Naye Indian ki Nayi Deluxe Bike.

This positioning of CD Dawn Deluxe does the psycho graphic segmentation of the market. The ad catches the growth boom of Indian Market and highlights:-

Stronger Foundation
Better Opportunities
Wider Horizons
New Wave of Prosperity
New India

Once again this shows that today all the fun is not in leaving the country and settling abroad for the sake of all this. When all the above is experienced by our country, then why to leave it at this time.

Nice way of attaching the product with the emotions....

Why Tata Cars Are Lagging in Quality

Every month Tata Cars are making news by zooming past the last months sales figures. However, where is the quality in their products like Indica or Indigo. Sales figures of Indigo are struggling.

Why is this happening to Tata. Are their customers satisfied. The buyers of Indigo are facing problems from the very first day. Trouble in starting, noisy engine, poor quality of accessories and so..on..

Tata team is hardly convinced about the deficiencies. They have the whole world's reasons to justify. The users opinion is that this is not a finished vehicle. It has been launched mid-way.

Or this could be because of the obsession of Tata Motors with the cost of components. (Please read my earlier article on this).

Whatever is the reason, if customer's voice is not listened the product may not survive long in the market.

If GM Chevy Spark will suffer from Zen Estilo

Maruti made a master stroke by launching Zen Estilo.

Estilo seems to be the blend of Matiz and WagonR. Matiz is still regarded as technologically advanced vehicle and WagonR has proven its performance in the market.

Further Maruti capitalized on the looks of Matiz and highjacked the same .

Now when GM will launch Spark, shape wise it won't be much different from Matiz. Hence, it will fail to come up to the expectations of the customers since the looks would have already been associated with Estilo.

This can be a big setback to GM, who took years in launching the once most successful brand in the Indian Market.

Further, Maruti is always having the advantage, to improve the competitiveness of its brands, of launching the Diesel versions, once the engine is out in the market.

It seems that GM will be struggling to create a position in the market with its Chevy Spark when it will be launched in the market in Apr-07.

This is a classical case of marketing in which Speed is another important Marketing Mix element, which can be ignored only on the expense of losing competitiveness of the brand in the market.

Vrooo..ooming Car Sales in Feb-07

It is really great to note the growth figures witnessed by automobile players in Feb-2007. Maruti sales grew by 60%+, Hyundai grew by 70%+, GM growth was 80%+, Ford statistics was 60%+.....and so on..

This is the time our Finance Minister should have done something to add party to the figures. Industry has been demanding since long uniform excise duty of 16%. Current scenario is 16% in A and B-class segments only. For C, D and above classes this figure is 32%.

If we want Industry to grow more and exports to rise substantially I feel, this duty should be dropped to 16%. Let us see a simple logic. If the prices will be reduced, demand will increase, leading to more production, leading to more players getting attracted to produce the vehicles in the country, giving more job opportunities, leading to the country becoming a base for manufacturing, bringing in new technologies and thus the country gaining edge in the global scenario to make vehicles at competitive prices.

Whether it is because of scale of economies or it is because of the learning curve, we need to have strong domestic base before we can target overseas business. We are now producing substantial numbers in B-segment. Similarly we should produce substantial numbers in C and D class also.

Maruti's Competitive Moves against Tata Small Car

I am pleased to receive some erudite comments from one of the readers. For the benefit of all, I am giving below the comments:-

Some one told me tatas venture is nt going to b successful as
1 lac car is nt viable.. even MARUTI claimed it.. as the auto components part are a bit expensive..

y you said so that car is good for ladies nd girls.. even ladies nd girls
look for expensive cars these days..

Tata's venture will always be criticized by Maruti as for Maruti it is going to be a big forthcoming competition. They will take every step to thwart the success of Tata's small car.

Tata's are working in an unconventional manner by bringing a car around 1.0 lac rupees. To break the cost barriers, it require a real "Green Hat Thinking". They may not be successful immediately. However over a couple of years they will be able to sort out the problems (technical mainly) of the small car and then this car will be loved by everyone.

I remember once reading an interview of Mr. R.C.Bhargava (MD of Maruti). This was published in The Business Week in 1994 (when I was preparing for MBA enterance). He was asked by the interviewer what is the biggest threat to Maruti Suzuki. Mr Bhargava said it is Tata.

I was not able to digest his statement as in 1994, Tata was mainly in to Commercial Vehicles. But after 4 years in 1998, I realized the significance of his statement, when Tata introduced Indica.

Tata's have legacy of launching products which are rarely successful immediately (ACE is an exception). But after 2-3 years of struggle, they tweak their product and then it catches the market expectations. Alternatively we can say that PLC (Product Life Cycle) behaves like this only. At introduction stage, the growth is slow and then it catches with market expectations getting met.

Regarding the target segment of Tata's, I don't have any gender bias. Girls & Ladies also will go for expensive vehicles. However, since theirs will be second or third car in the family, men will compromise on their vehicle cost (sounds selfish on their part, but this is how Indian families behave).

Obsession of Automobile Players with Cost

In order to survive in the market, players like GM, Ford feel that cost is the only factor. It seems that their knowledge about Marketing is very poor.

Marketing says how to demand premium over your competitors’ products by creating brand equity.

Instead of creating equity of their brands, their full focus is only to sell their products cheap and thus counter the competition. And let us see the results – GM, Ford plants are getting closed whereas Toyota and Honda are opening new plants even in the sluggish market of North America.

To sell products cheaply, they are squeezing their suppliers to sell cheaply. GM and Ford are fond of changing their suppliers for even slightest of cost reduction. Further they show the carrot of global volumes coming to suppliers and asking for discounts over the future supplies.

Just consider the cost of Japanese players like Honda or Toyota. They have the policy of single supplier i.e. single supplier for one product. Thus no more competitive pressures on the suppliers. The supplier will not be replaced for the sake of price alone.

The results are obvious. The stocks of GM and Ford have been regarded as “JUNK” by the rating agencies. Their market shares are falling. Their customers are highly dissatisfied.

On the lighter side, Ford has recently thrown out their brand ambassador Abhishek Bachchan, whereas Toyota is still going ahead with Aamir Khan even in the wake of Aamir’s controversy.

Will Swift Diesel succeed

No.

Since this is a brand extension and hence the conventional wisdom says that Swift has already created a position in the minds of customer and hence Diesel version will dilute its equity in the market.

Contrary to the conventional wisdom, Swift Diesel is going to rock the market.

Suddenly we are going to see the shift happening from Petrol Cars to Diesel Cars in the market. Diesel cars will be preferred not only for their low running cost but also for better fuel emission norms. With the advent of Common Rail Diesel Injection (CRDI) technology, better burning of fuel is going to ensure clean gases and more power.

This is the first time we are going to witness a strong proven Diesel Engine from the stable of Fiat. Till date we had been seeing this CRDI technology only for C segment or above.

This is the first time B class cars are going to have proven technology and hence it is going to redefine this segment. Till date the existing diesel engines were poor in their performance. Even though there was Indica available in Diesel Engines, but because of its poor technology, it could not attract the fancy of mass segment.

But very soon, Tata are also going to launch the same Fiat Engine and then the competition will hot up. Till then Maruti is having the lead over its rivals.

Great Comments on Tata Small Car

It is great to receive some wonderful comments. Since her comments were separately sent on the mail, I am reproducing the same for the benefit of all readers. The comments are as below:-

• This is targeted for lower income bracket , more than status it’s a utility factor which will play major role
• Only focused on Young generation & Middle-middle class …could have been working women and lower middle class (which again constitutes a big percentage in India)
• It could be a stepping stone …eventually an idea got generated …and Indian market can further build up on it
• Abroad (Uk) Small cars have big share in market cars like Reva and other Renault brand are very famous …slowly this will break down the Indian market as well..more than utility its mind set which hinders Indian to reach out for diverse and adventurous ideas
• Would disagree to your comment on Maruti 800- reason being without any doubt Maruti 800 had ruled the Indian Market for good number of decades….and you could today also find people who are attached to this car.It just that consumer want/appreciate change after such long gap…every morning have a sunset same goes with Maruti 800.

And one more thing I can vouch for one thought process which I have heard from diverse group of ppl as in age and income bracket …i.e. whats the purpose of car –ensuring that all the ppl in the family can go together with decent comforts from one place to another and a vehicle which can provide some relief when its raining or when its too cold. If that car suffice this need then it would have go ahead from public.

And also am sure ample research and survey would have happened behind this launch.

I am sure these points do say that Tata's Small Car will be a success, however the extent of success may be less than the projected volumes of Tata. The company is claiming to achieve volumes of 300,00 in 1st year, 500,000 in 2nd years and 700,000 in 3rd year.

Further do we see any role of 2nd hand "B-segment" cars at the rate of Rs. 1.5 lacs to Rs. 2.5 lacs, impacting the market of Tata. Will it happen that Tata Small Car will eventually increase the sales of Maruti's products? If this price equation will be a strength or weakness in the strength of Tata Small Car (in the words of Al Ries and Jack Trout)?

How successful will be the penetration of Tata Small Car

We are waiting desperately for the small car from Tata's stable even under the constant politically vitiated business environment of West Bengal.

Questions that come to our mind - What will be the success prospects of this new small car. Will it be able to create its own position? How will people perceive it - a real alternate to bikes? Will it be able to meet the aspirations of Tata?

Let us first try to understand market. This Car is being positioned towards customers who are currently using bikes and cannot afford a 4-wheeler. Hence it is a step through. It means it is not going to address the "esteem needs" of the people. It is only going to address the "utility needs".

Hence people can never use this car as a status symbol. On the worst side, it will tag the user as a "better poor".

Let us see the bike users. One big segment is that of yuppies, young, stylish, macho image projectors, willing to flaunt their mobiles and girl friends. Will they be interested in picking "Poorman's Car".

Now there are other users of bikes as well who are needing it for "Transportation Needs" and "Safety Needs" to save their lives on unruly roads. They are the target customers. But how will this Car penetrate this market. This segment is having clear-cut need, however this segment is not going to accept any "technically incompetent" product.

This segment is exposed to the finest technology in terms of Japanese Bikes and anything that does not come up to their expectations is going to suffer. Tatas have history of launching products which are rarely technically competent (ACE is an exception).

Further product life cycle concepts says that the penetration levels are poor when the new product is launched. It does not require tremendous advertising. It requires good "word-of-mouth". Will Small Car get that word-of-mouth.

Remember, we rarely praise things and we are fond of criticizing and when we have a product which does not fulfill our "Esteem Needs", we tend to criticize that more.

If price is the only USP, why Maruti's M-800 is fairing so badly in the market.

We will discuss more on this Car. We will see what are the expectations of Tata with it and how this will fare on that.

Bye till then.

If China's cheap labour is its biggest weakness

In marketing parlance, when we have to attack the market leader, we need to find the weakness in the strength of the leader.

Today China is threatening the entire world's production capacity with its cheap labour. It is so competitive to produce auto parts in China that even in India we have started talking about level playing field. Our association bodies like ACMA are giving presentations to the finance minister to not reduce import duties any more.

China's biggest strength is its cheap labour. But there is an inherent weakness in that. If China's entire workforce is working cheaply that means the knowledge growth is not happening. Or if it is happening it is not percolating down to the level of huge workforce. That will leave a large chunk of their population doing manual jobs and their future earning potential is limited to that only.

Alvin Tofler, the famous futurologist predicted 3 waves viz. agriculture, industry and knowledge. We first started with muscle power, then we graduated to money power and now is the era of knowledge power. This is how the power has shifted over the years.
What is happening in Singur is the perfect example of this. Singur land was snatched from farmers for the industrialization. Very soon we will be seeing industrial land being snatched by the knowledge workers i.e. IT-companies. If you go to Bangalore, the manufacturing plants in the city are not earning enough. They could earn much more if they sell out their place to IT-companies.

Power is shifting.

So, Indian BPO workers get ready for the jolt. If you are simply working as a language speaker, you may be in for a shock when the computers become smart enough to answer the queries.

Add knowledge in your skill set, so that you are always in demand.

Surprise from Subbu

What could not be done by the Auto Biggies like General Motors, Tata Motors etc., has been done by Mr. Subbu.

He has successfully acquired Daewoo Motors, Surajpur plant. This plant has the capacity of 85,000 cars per annum. And now we can see a new entry in the Cars business.

So far this business was only meant for the Corporate Biggies only. Even though Hero Honda and Bajaj Auto have indicated their interest in entering in the small cars business, however no body could make such a smart move of acquiring the assets of a ready made facility that could be made operational in next 5-6 months.

Timing is the biggest challenging component in Marketing. Hyundai has been lately losing its pulse on the market because of non-availability of the production capacity. Whereas, Maruti's timely entry into one segment after another, is making its position invincible.

Mr. Subbu after breaking his relations with Hyundai had been silent for a long time, though he indicated his plans to manufacture cars. But no body would have taken him seriously because of the kind of investment and technical know-how requirements. Now he proved that yes, this dream can also be achieved.

We may see very soon, another small car fighting the big brands in B-segment for the share of pie.

What is happening to Hyundai

Maruti launched Swift Diesel recently. Let us count the brands of Maruti - M800, Zen Estilo, Alto, WagonR, Swift P, Swift Diesel, Esteem, Omni, Baleno, Versa etc. What's about Hyundai?

Where are their new launches?

It seems that lately Hyundai Marketing team is losing out the battle against Maruti. Their new models launched last year Verna is anywhere near to be termed as success. Getz is still struggling at the volumes of hardly 1500 nos. per month. Whereas the competing models of Maruti have established their positions in the market firmly.

Is it because of the fall-out of Mr. Subbu from the marketing team of Hyundai. Or is it because of the complacency setting in the Hyundai team for reading the Indian market and anticipating the changes happening in the minds of the consumers.

Whatever is the cause, reality is definitely seeing drop in the market share.

Hyundai is already producing at the peak of its capacity of around 300,000 cars per annum. Out of which it is exporting close to 100,000 vehicles. For the Indian market it is left with vehicles around 200,000 per annum and when the market is growing at the rate of 15%, without having enough production capacity the company is bound to lose growth in its market share.

Hyundai expansion is scheduled to happen in the current year itself. However the delay in this is seeing it losing business to its competing brands. Further share once lost, is always difficult to regain and if you are determined to do that you have to spend double money on your marketing efforts.
I

If Bajaj is making right move by withdrawing Boxer

This is the maximum numbers selling bike from Bajaj stable. Will they be doing a right thing by withdrawing Boxer (100 cc platform) from the market? Will this not make the market virgin for Hero Honda CD Dawn (100 cc)?

Toyota suffered heavily by withdrawing Qualis from the market heavily. If Bajaj also is making the right move?

Apparently it seems yes, this move may be wrong, but if we explore deeper into it, we will see that this is the right move.

Today this segment of the bikes is witnessing the worst kind of competition. Margins are thinner than wafer and only selling proposition left with the marketers' is "Price". This does not add anything to the bottom-line, but it simply keeps your top-line look attractive. At the end of the year, your profitability does not improve.

When the products are being sold in the market on the basis of only one P of Marketing Mix i.e. Price, then it is no more a product. It is a commodity.

Commodities leave no scope for Branding and hence no Brand Equity. Hence Bajaj is doing the right thing by withdrawing itself from the commodity business and letting the competition spoil their bottom-lines.

The success of other brands of Bajaj, has proven their Marketing acumen. This is high time that they need to create new segments by launching new platforms and strengthen their position in the market rather than fighting a losing battle.