A TERM PAPER ON

FACTORS AFFECTING FOUR WHEELER INDUSTRIES OF INDIAN MARKET

(A SURVEY)

MRINAL BOHRA Department of Management Studies, Jai Narain Vyas University, Jodhpur Rajasthan, India. E-mail: mrinalbohra@yahoo.com

Abstract
Indian automobile industry embarked on a new journey in 1991 with subsequent opening up for 100 percent FDI through automatic route. In view of this, the survey attempts to estimate the economic performance of Indian automobile industry in terms of capacity utilization at an aggregate level. It estimates econometrically rate of capacity utilization in the industry at aggregate level and analyses its trend during the post liberalization period, 1991-92 to 2010-12.The survey also tries to assess the impact of various factors influencing capacity utilization. The result shows that capacity utilization has been improved after the path breaking economic reforms initiated in 1991

at the rate of around 5 percent per annum but capacity grows more rapidly than output growth. In view of identifying several factors that influence 4wheeler utilization, result suggests that coefficient of export-intensity variable, import penetration ratio are negative which indicate that capacity utilization was relatively lower in firms belonging to industry characterized by high exportintensity and import penetration. A positive relationship is found between size and capacity utilization and similarly between market share and capacity utilization. Key word: Liberalization, Capacity Utilization, Automobile Industry.

CONTENTS

Introduction Plotted Summary Characteristics of the Patients Involved Statement of the Problem Purpose of Study Scope of Study Objectives of the study Response Rate Indian Automobile History

Industry Investment Why India? Information seeking preference of car buyers Current market scenario Factors Affecting Automobile Industry TRADITIONAL FACTORS MODERN FACTORS

Questionnaire Pilot Study Data Collection Method Respondents Profiles Research Results Findings Suggestions Conclusion Bibliography

Introduction
Indian automobile industry went aboard on a new journey in 1991 with rising of the 4-wheeler sector and subsequent opening up for 100 percent FDI through automatic route. Since then, almost all the global majors have set up their facilities in India taking the level of production from 2 million in 1991 to 9.7 million in 2012[SIAM, 2010-11].The growth of Indian middle class with increasing purchasing power along with strong growth of economy over a past few years have attracted the major auto manufacturers to Indian market. Increase in income level, decline in tax and interest rates have helped to increase in personal disposable income .Change in mindset leading to changing investment / spending pattern from two wheeler investment to increasing consumerism, explosive growth in communication have led to urbanization of rural consumers attitude and has increased the propensity to purchase 4-wheelers.Therefore, increased disposable income and fast changing spending habits have led to the increased consumerism of automobiles product for human comfort.The market linked exchange rate and availability of different models at competitive cost have further added to the attraction to Indian automobile market. The automotive sector is one of the core industries of the Indian economy. Indian Governments impatience to the industry by allowing continuous economic liberalization since 1991 has made India one of the sought after destination for many global automotive players. The automotive sector in India is growing at around 18 per cent. Indian Auto industry has seen a phenomenal growth in the last 20 years. This is due to the convergence of a lot of positive factors. This article aims to examine at some of the affecting factors to understand the situation better. The sales trajectory of automobiles has witnessed a sharp increase since 2004. Automobile industry has greatly benefitted from a sharp increase in demand and has added extra capacity, better research and development

facilities and technological advancement and distribution setup across the country. The convergence of government policies, economys growth, peoples purchasing power have all contributed to the phenomenal growth of Indian Auto industry. Rise in the industrial and agricultural output indirectly helps Indian Auto industry Industrial and agricultural output increase has reflected in higher GDP and overall growth of the economy which is about 9% in the last three years.

Plotted Summary
This summary analyses the determinants of competitiveness and the factors affecting the Indian auto industry. It is based on a field survey and a quantitative analysis of secondary data. The field survey covers 5-10 firms in Jodhpur, of which 3 are auto-component firms and 7 are Original Equipment Manufacturers (OEMs). From 2001-02 to 2010-12, the Indian automobile sector has grown at an average annual rate of over 18 per cent in terms of value of output at constant prices and the auto-component sector has grown at about 26 per cent. Vehicle exports at constant prices have grown at an average annual rate of more than 55 per cent from 2001-02 to 2010-12, while autocomponent 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 2010-11, 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 cases/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 imported tariff for the assembled vehicles is 60 per cent. 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. The government must also ensure that the large infrastructure deficit faced by this important sector is addressed urgently so that any adverse impact of macroeconomic policies is avoided.Materials cost is the major component in production cost and its share is increasing. Policy measures to reduce domestic indirect taxes on all inputs for the auto industry would be a welcome step to enhance competitiveness. One of the major constraints for the smaller auto-component manufacturers in increasing their scales of production is lack of credit availability at interest rates comparable to other countries. Indias current levels of tariff on capital goods are higher than those in the ASEAN and China. Thus, these tariffs should be brought down further to enhance competitiveness. The Indian auto industry does not possess good design facilities. The Government needs to significantly strengthen non-proprietary R&D and design capacity that has strong connections with research institutes like IITs. This could be used by all the players in the industry to develop new models, reduce material costs and become more competitive. Skill shortages and skill mismatches have emerged as a major constraint. To address this critical concern, the proposed National Auto Institute should be quickly established with active participation of private industry players. Labour reforms, aimed at more flexibility, are widely considered among the industrialists as an essential step. This will encourage firms to employ and retain more permanent workers and improve learning and raise productivity levels. National level Automotive Institute for training on automobile has been proposed in Automotive Mission Plan. This should preferably be established in all major auto hubs in India. In addition to regular long-term courses such as diplomas and degrees, it should also provide shortterm specialized training programmes for personnel already working in the auto

industry. It is important to recognize that labour reforms are expected to increase overall employment in the auto sector and will also help firms in the organized sector to scale up. Hence, policy measures are required to incentivize these smaller firms to use power and fuel more efficiently, by adopting better technologies and taking steps to minimize wastage. The currently prevalent region-specific fiscal concessions are creating the unsustainable location distortions in the industry. The government must, however, ensure comparable, if not preferential, market access to domestic firms in partner countries, especially in the Asia-Pacific region, while negotiating FTAs .The principles pertaining to the rules of origin have to be strictly implemented. ______________________________________ Key Words: Indian Auto Industry, Competitiveness, Efficiency and Indian Auto Policy.

CHARACTERISTICS OF THE PATIENTS INVOLVED

Brand preference:

Today, the primary capital of automobiles is their brands. For decades, the brands of the company were measured in terms of its real estate, then tangible assets, plants and equipments. However, it has recently been recognized that a companys real value lies outside the brand itself, in the minds of potential buyers. For the potential customer, a brand is a landmark. Like money, it facilitates trade.Faced with a multitude of silent or hard to-read products, whose performance cannot be assessed at first glance, customer are confused. Brand and prices make products easier to read, removing uncertainty. A product price measures its monetary value, its brand identifies the products and

reveals the facts of its different functional value, pleasure value and symbolic value as a reflection as a buyers self image. One word, One Symbol. Summarizes an idea, a sentence and a long list of attributes, values and principles infused into the product or service .A brand encapsulates identity, origin and difference. It evokes this information concentrate in a word or a sign. This is why brands are vital for business exchange when faced with, say, hundreds of personal computers, a buyer can use brands to structure this selection, to segment it, helping him to decide what he wants, looking towards the products whose brand indicate that they will satisfy his expectations, needs, or wishes. The markets in which technology and fashion mean that the choice is constantly evolving, brands provide havens of stability, describing an identity and promising constant features and direction. Brands are the real capital of business, yet brand management is still in its infancy. At present, the tendency is to manage products that happen to have a name. Management is still living in the age of the products, but brand management involves other, specific approaches and principles. These are the focus of this presentation. A brand is not a product: it is the products source, its meaning, and its direction, and it defines its identity in time and space. Brand consciousness is raising new questions for mangers. Going too far can also weaken brand equity. Brands vary in the amount of power and value they have in the market place. At one extreme are brands that are not known by most buyers. Then there are brands for which buyers have a fairly high degree of brand awareness. Beyond this are brands with a high degree of brand acceptability. There are brands that enjoy a high degree of brand preference. Finally there are brands that command a high degree of loyalty.

Aaker distinguished five levels of customer attitude toward his or her brand, from lowest to highest. Customer will change brands, especially for price reasons. No brand loyalty. Customer is satisfied. No reason to change the brand. Customer is satisfied and would incur costs by changing brand. Customer values the brands and sees it as a friend. Customer is devoted to the brand.

Statement of the problem

In Indian car industry, small car segments have played a very crucial and significant role due to its economy, efficiency and effectiveness. Due to invasion of foreign cars into Indian markets, the pace of competition has hiked. This has brought into market, number of Brands and their variants competing to with each other.

Purpose of study
The purpose of the study is to know the Brand preferred by the customers and the factors affecting the automotive industry can be estimated by this study. The marketing strategies can be designed in accordance with this change. It will be helpful for the managers to make decisions. Hence, this study should be conducted.

Scope of the study

The main purpose of the study is to know the Impact of Affecting Factors in car industry with Buying Behavior of Customers in INDIAN market (Jodhpur). This study will provide solutions to the management by understanding customers feedback. Through this study Management will know: The reason why people opt four-wheeler. To know the features considered by the customers while purchasing a car. To know the most preferred brand by the customers.
The scope of the study is restricted up to the Jodhpur city.

Objectives of the study

1.

To find the factors affecting the 4-wheeler industries.

2.

To understand the Buying behavior of customers. To know the facilities/services expected by the customers from the dealer. To know the means of finance preferred by the customers. To know the reason why people opt four-wheeler.

3. 4. 5.

Response Rate
A total of nearly 100 replies were received, though due to a disproportionately high number of car owner responses, this was scaled back to 70-80 for initial analysis. The particularly high response rate (30 %+) are considered to be due to a number of factors, including: 1. The saliency of the new car purchase.
2. The use of a dealer letter head along with personalization.

3. An incentive to respond.
4. The connection with a secondary branch implying impartiality and

independence.
5. The use of a simple, well designed questionnaire. 6. A freepost return envelope.

INDIAN AUTOMOBILE HISTORY

During the 1920s, cars exhibited design refinements such as balloon tires, pressed-steel wheels, and four-wheel brakes. The origin of automobile is not certain. In this section of automobile history, we will only discuss about the phases of automobile in the development and modernization process since the first car was shipped to India. We will start automotive history from this point of time. The automobile industry has changed the way people live and work. The earliest of modern cars was manufactured in the year 1895. Shortly the first appearance of the car followed in India. As the century turned, three cars were imported in Mumbai (India). Within decade there were total of 1025 cars in the city. In the beginning of 15th century Portuguese arrived in China and the interaction of the two cultures led to a variety of new technologies, including the creation of a wheel that turned under its own power. The actual horseless carriage was introduced in the year 1893 by brothers Charles and Frank Duryea. It was the first internal-combustion motor car of America, and it was followed by Henry Ford's first experimental car that same year. The 1937 Pontiac De Lure sedan had roomy interior and rearhinged back door that suited more to the needs of families. In 1930s, vehicles were less boxy and more streamlined than their predecessors. The 1940s saw features like automatic transmission, sealed-beam headlights, and tubeless tires.

During the 1920s, the cars exhibited design refinements such as balloon tires, pressed-steel wheels, and four-wheel brakes. Graham Paige DC Phaeton of 1929 featured an 8-cylinder engine and an aluminum body.

INDUSTRY INVESTMENT
According to Commerce Minister Kamal Nath, India is an attractive destination for global auto giants like, BMW,General Motors, Ford and Hyundai who were setting base in India, despite the absence of specific trade agreements.

Current View

On the cost front of Indian automobile industry, OEMs are lying in India in a big way, investing to source products and components at significant discounts to home market.

On the revenue side, OEMs are active in the booming passenger car market in India.

Snippets

By 2015, India is expected to witness over Rs 30,000 crore of investment. Maruti Udyog has set up the second car with an investment of Rs 6,500 crore.

Tata Motors will be investing Rs 2,000 crore in its small car project.

General Motors will be investing Rs 100 crore and Ford about Rs 350 crore.

Ashok Leyland and Tata Motors have each announced over Rs 1,000 crore of investment.

Facts & Figures The automobile industry in India is on an investment overdrive. Be it passenger car or four-wheeler manufacturers, commercial vehicle makers or threewheeler companies - everyone appears to be in a scramble to hike production capacities. The country is expected to witness over Rs 30,000 crore of investment by 2015.Most of the companies have made their intentions clear. Maruti Udyog has set up the second car plant with a manufacturing capacity of 2.5 lakhs units per annum for an investment of Rs 6,500 crore (Rs 3,200 crore for diesel engines and Rs 2,718 crore for the car plant itself). Hyundai and Tata Motors have announced plans for investing a similar amount over the next 3 years. Hyundai will bring in more than Rs 3,800 crore to India, Tata Motors will be investing Rs 2,000 crore in its small car project. General Motors will be investing Rs 100 crore, Ford about Rs 350 crore and Toyota announced modest expansion plans.

Why India
The economy of India is emerging. The following table shows the ranking of India in the past four years. Rank 1 2 3 2012 China India Thailand 2011 China Thailand India 2010 China Thailand USA 2009 China Thailand USA

4 5 6 7

Vietnam USA Russia Korea

Vietnam USA Russia Indonesia

Vietnam India Indonesia Korea

Indonesia Vietnam India Korea

Production of 4-Wheelers

Manufacturers

2011-12 (Apr-Mar) Manufacturers In Nos. Korean OEM 572,097 44,975 41,361 11,946 670,379 Hyundai Motor India Ltd. American OEM General Motors India Pvt. Ltd. Ford India Pvt. Ltd. Total Indian OEM 9.767 1,780 Tata Motors Ltd. Mahindra & Mahindra Ltd.

2011-12 (Apr-Mar) In Nos.

Japanese OEM Maruti Udyog Ltd. Toyota Motor Pvt. Ltd. Honda Cars India Ltd. Swaraj Mazda Ltd. Total European OEM Skoda Auto India Pvt. Ltd. Daimler Chrysler India Pvt. Ltd.

260,440

30,687 26,946 57,633

449,878 128,601

Volvo India Pvt. Ltd. Tata Trucks India Ltd. Fiat India Pvt. Ltd.

1,004 125 671

Ashok Leyland Ltd. Force Motors Ltd. Eicher Motors Ltd. Hindustan Motors Ltd.

65,085 35,728 24,348 15,458 719,098

Total

13,347

Total

Organized Auto Sector in India

While the Original Equipment Manufacturers (OEMs) are at the top of the auto supply chain, it should be noted that there are a few OEMs in India which supply some components to other OEMs in India or abroad. Most of the Indian OEMs are members of the Society of Indian Automobile Manufacturers (SIAM), while most of the Tier-1 auto component manufacturers are members of the Automobile Component Manufacturers Association (ACMA). All of them are in the organized sector and supply directly to the OEMs in India and abroad or to Tier-1 players abroad. Tier-2 and Tier-3 auto-component manufacturers are relatively smaller players. Though some of the Tier-2 players are in the organized sector, most of them are in the unorganized sector. Tier-3 manufacturers include all auto-component suppliers in the unorganized sector, including some Own Account Manufacturing Enterprises (OAMEs) that operate with one working owner and his family members.Auto-component manufacturers cater not only to the OEMs, but also to the after-sales market. In the recent years, there has been a rapid transformation in the character of the automotive aftermarket, as a fast maturing organized, skill-intensive and knowledge driven activity.

INFORMATION SEEKING PREFERENCE OF CAR BUYERS

(Source: Web chutney online research)

From the above diagram it is evident that from a compilation of factors affecting, one of the basic is the consumer search behavior in the auto category (Cars & Bikes) in the last two years ( 1 1 & 12), by the Google India Auto Report, it underlines how nearly three fourth of Indian consumers are increasing ly relying on the Internet to make auto purchase decisions.

Current market scenario

As India celebrates its 68th years of independence, the passenger car industry will celebrated a centenary of its existence in India in 2014.Despite this head start, the industry has never quite matched up to the performance of its counterparts in other parts of the world. The all-pervasive atmosphere created by the government's license raj was primarily responsible for this situation. The various layers of Acts sheltered the industry from external competition and smothered the development of the Indian automobile industry. Moreover, the industry was considered low priority as cars were considered to be an "unaffordable luxury." After witnessing a downturn from FY08 to FY10, car sales bounced back to register 17% growth rate till FY12. Since then, the economy slumped into recession and this affected the growth of the automobile industry as a whole. Taking into consideration the rise in expendable income levels and necessity of personal transportation as a result of inefficient or deficient public transportation means, the demand for cars is expected to increase. FY2002 was an indicator of the growth phase to follow, registering a 20-year high growth rate of 56%. The second highest growth was recorded in 2004 at 42% when Maruti had entered the market. Riding on the popularity of the small car segment, coupled with the boost in sales of the mid size segment, total sales grew by 56%. However, such high levels of growth are highly unsustainable in the long run given the fact that there are as yet unutilized capacities in the industry. This would make the question of survival important and car makers

would have to play their cards well to remain in competition. Moreover, sales growth in FY2006 was calculated on a lower base of FY05. Keeping in mind these factors, one could predict a demand growth of 15-20% in the years to follow. Going by this trend, the demand for cars during FY2016 would be around 670,755 units. The flood of new entrants into the car industry as a result of liberalization has led to a complete transformation of the sector. The car segment is flooded with new models from new and existing players, a visible shift from a constrained supply situation to a surplus. In the last decade or so, as many as 90 models have invaded the market, making it a case of embarrassment of riches. Moreover a lot many models are waiting to hit the ramp by the end of the year. The capacity of car production has increased substantially in the last three years and is expected to grow manifold in the coming years. The capacity for car production in the country is expected to increase from around 750,000 in FY11 to 1,210,000 in FY16. The industry will, thus, witness substantial over capacity in the next few years. The car buyer will be the major beneficiary of the marketing war in the segment as they will be able to get technologically better products at good terms and conditions. But with an expected shake out, the threat of discontinuation of a model is also high. Nonetheless, times have changed significantly - the days of the customer chasing the dealer to purchase poor quality cars backed by inefficient service are history. Today, the customer dictates the terms.

Factors Affecting Automobile Industry

TRADITIONAL FACTORS

Demand-supply scenario

Demand

The demand for cars in the past was supply driven, as demand did not match supply. This led to high premium and long waiting periods for the cars. But change in government policies coupled with aggressive capacity additions and upgradation of models by MUL in the early nineties led to decrease in supply and subsequently increased the waiting periods for economy cars.

The demand for cars is dependent on a number of factors. The key variables are per capita income, introduction of new models, availability & cost of car financing schemes, price of cars, incidence of duties and taxes, depreciation norms, fuel cost and its subsidization, public transport facilities etc. The first four factors via, increase in per capita income, introduction of new models, availability & cost of car financing have positive relationship with the demand whereas others have an inverse relationship with demand for cars.

Supply

The supply of cars in Indian industry till 2002, was dependent upon the production capacity of individual players. The production of cars has increased from 42,475 units to 181,420 units from 2006 to 2012 respectively. The growth in production of cars has varied in the last three decades from just 1% in 200809 to 21% in 2010-11 and above 15% in 2011- 12. Benz in joint venture with Telco to manufacture E220, E250D models, Peugeot in JV with PAL to manufacture Peugeot 309L, Fiat in JV with PAL to manufacture Fiat Uno. This has helped in increasing the number of models available to the customer from 8 to 30 and hence provided a wide choice to him. This has also helped in reducing the average waiting period and premium on cars, which were a part and parcel of car cost in the eighties.
Government Policy

The liberal policy on foreign participation through technical and financial collaboration in early eighties led to substantial product up gradation and introduction of new models. But it was alleged that the policy was

discriminatory in favor of Renault, while others like Maruti, Toyota, were denied permission to produce cars in collaboration with Japanese companies. The GOI controls the car sector by way of framing policies on depreciation norms, import duty on cars and parts used in it, petrol prices and import duty of steel. The perception of a car as a luxury good lead to heavy excise duty on cars. But with the onset of the liberalization process in the early nineties the government has continually rationalized the excise duty regime. Presently, there is a duty of 40% (16% + 24%) on motor vehicles, designed for transport of not more than six persons (excluding the driver). On vehicles designed for transport of more than six persons, but not more than 12 persons, the duty is 32% (16% + 16%). Over and above the excise duty, cuss by the Central Government, states are now charging a uniform sales tax of 12%. This came in being after the 15th of May 2011. Earlier, states used to charge sales tax varying from 3 to 14%. But MUL vehicles receive favorable treatment in terms of sales tax as well.

Policy

on

petroleum

products,

auto

emission

and

depreciation
On the vehicle emission front, judicial activism has warned the government to take certain policy measures in the recent past which has led to stricter emission norms for automobiles. As per a Supreme Court judgement, banning registration of all non Euro I compliant cars within Delhi, all vehicles should become Euro I compliant by April 2016. (In the National Capital Region of Delhi, Euro II norms are now in operation) As a result, almost all the existing players and new entrants have started introducing models complying with the said norms. This development has led to an increase in the prices of cars, which by an estimate, could be anywhere between 10-15%.

 Global environment
The modern day passenger car is an economy's draught animal, driving the growth of upstream industries like steel, iron, aluminum, rubber, plastics, glass, and electronics and downstream industries like advertising and marketing, transport and insurance. The car industry generates large amount of employment opportunities in the economy. For example in the US, every sixth worker is involved in the making of an automobile.

Automotive Policy
The main proposals of this policy are:

The new ventures would have to indigenize up to 50% within 3 years and 70% by the end of seventh year of starting commercial production.

They will have to invest a minimum of $50 million as equity capital over a period of 3-4 years.

The venture will have to become foreign exchange neutral over a period of 5-7 years.

The ventures will be allowed to export components & ancillaries, apart from cars.

A moratorium of 2 years would be given to companies for meeting the export commitment.

The new policy is expected to provide development of ancillarisation and increase employment opportunities. But for some of the new car ventures, auto policy will be a speed breaker as they have to sign a new strategy with the government and make necessary arrangement to meet the new policy.
Rivalry between Established Competitors

Highly Concentrated Industry: The Indian car industry is highly concentrated with Maruti itself accounting for about 80% of all sales. The lack of competition in the economy segment to Maruti 800 has given the company considerable power. Its dominance in this segment gives it the power to cross-subsidize its models in the other segments. However, this scenario is changing drastically from last three years with a number of new models being launched to challenge Maruti 800's dominance. The scenario in the economy segment could be similar to that in the premium segment currently with intense price competition. The slashing of Duster's price by 25% has led to Ford and Opel introducing cheaper models.

Threat of New Entrants

Economies of Scale: In the automobile industry, economies of scale act as a significant entry barrier since it is a capital-intensive industry. Globally, it has been witnessed that car manufacturers with low volumes find it extremely difficult to survive given the high per unit cost. The acquisitions of Rolls Royce, Jaguar, Rover, and AMC/Jeep are a testament to this. On the other hand by entering on a large scale, one runs the risk of drastic under-utilization of capacity as observed by Daewoo's experience in India. Since the economy segment cars are expected to drive volume growth in India in the coming years, it is extremely important for a manufacturer to have a model in this segment to reduce his per unit cost.

Although liberalization of the Indian economy has reduced the impact of government policy as an entry barrier, the car industry still enjoys high entry barriers due to huge capital costs involved in setting up efficient plants and numerous cost advantages enjoyed by Maruti. The

recent

pull-out

of

Peugeot

is an

example

that

even

a global

automobile company could find it extremely difficult to operate in India if it faces labor trouble and problems with its joint venture partner. Key earning drivers

Government policy: The GOI policy will continue to dominate the

supply of cars. The different norms with great significance to the sector are import duty on CKD/ SKD kits, auto components, foreign exchange and neutralization schedule for new ventures etc.

Excise duty: The car industry had been asking for increase in excise
duty so as to increase the end prices of cars to customers and decrease the slogging demand. With continuation of liberalization and shift in the perception (of car being a luxury product) will lead to increase in duties over a period of two to three years. This will increase the prices of cars leading to further boost in demand.

Sales tax duty: The levy of uniform sales tax in all the states will have
a negative impact on the demand front, due to increased prices.

Competition in the sector: With the entry of all the world majors in
the car segment, the competition is expected to heat up substantial in the next two years. This will lead to shakeout in the industry and only those companies having a backing of multinationals.

Release of new models: The loose flood of variations in existing and

new models will provide wide range of choice for the customer one year down the line. Also these new models will be able to carve a niche for themselves in the crowded market.

 Impact of advertising
While most Indians may not go out and buy expensive things they don't need merely due to subliminal media suggestions, the power of advertising can have an impact on discretionary spending and can also result in changes in value systems and personal tastes - particularly so on that small minority of Indians that has the little income to spend. For people to really enjoy the use of a personal car, a country must have enough land for wide roads and large parking lots. And that's exactly how every automobile ad in India shows off new cars. Cars for the Indian market are shown scurrying along wide and vacant highways in dreamy countryside settings, completely unrelated to the actual Indian reality or experience. After all, some of India's most scenic destinations aren't even connected by motor able roads, and virtually all Indian cities are so densely populated that even newer residential and commercial areas are planned with narrow roads and limited parking facilities. There is thus something very surreal about the Indian media's glamorization of the car.

Lack of infrastructure
A decade after liberalization, the monthly sale of cars has fallen off to about 45000-50,000 a month. Although each car may contribute 7000-8000 rupees (or more) to the national GDP - consider how so few Indians are being able to afford a car. Even assuming a car lasts for 12-15 years - it means that only 6-8

million Indians, (and still fewer households) enjoy the benefit of a private car. But imagine, if the country produced better means of public transportation. Assuming that a mini-bus costs only three times as much to produce as a car, and assuming that the average mini-bus seats about 30 people (or more) comfortably, there is a ten-fold increase in transportation options. Even discounting all the problems and headaches of owning a car in India, it is obvious that a car only raises the standard of living for a small minority. But improvements in public transport raise the standards of living across the board. However, this improvement in the overall standard of living may not show up as dramatically in the GDP numbers.

Product and service strategy

Market testing Originally, Hyundai had intended to launch accent, a 1.5- litre sedan. But market research indicated the need for a compact family car. Hyundais team approached the customer with car clinics. Organized across the country, they were meant to provide an in-depth understanding of the customer with respect to all aspects of a car, based on his experience with existing products. The findings threw up the following critical evaluation factors: price, space, performance, comfort and safety.

New-product development strategy Yet, the company observed that Indian roads were often overloaded, what with turbans and sarees to be accommodated. To find a voluminous compact car the company adopted the tall boy design of its Atoz operating in Ulsan, South Korea. It was promptly redesigned for Indian conditions, with a modified fuelinjection system and suspension. And thus, in December 1996, was born the Santro.

With consumer insights in place, Hyundai went back to the drawing board. Considering the space parameter for a small car, it concluded that the only way to make it look roomier was to increase the height. That also gave Santro a radically different look. The original Atoz grille and tail-light position, which didnt go down well with the consumer, were changed. In consonance with the poor-quality Indian fuel, Hyundai changed the MPFI (multi-fuel point injection) calibrations and reprogrammed the engine control unit. While most manufacturers are moving to four valves (for performance), Hyundai retained the three-valve cylinder to make a trade-off between power and economy.

Change in game plan

The initial strategy of Hyundai Motor was to introduce both AC and non-AC versions, with the former priced at around Rs 3 lakhs while the AC variants would be priced around the ZEN VX to encircle it on both sides, one lower than the Zen while the other would be higher. However, the company has subsequently changed the entire pricing strategy and instead reduced the price of the AC variants by over Rs 45,000 to peg the base model at Rs 2.99 lakhs. Hyundai Motor has also dispensed with the non-AC version totally. The design of the non-AC version of Santro does not allow the option to fix an AC later if the customer so wants, unless the engine is totally overhauled.

Distribution strategy
The distribution function integrates the functions of physical distribution and logistics in Hyundai. Computerized integration of order processing, warehousing, and dispatching as well as utilization of technological advances as well as the utilization of technological advances in communications are essential in the distribution strategy. The distribution strategy is decided by the

top level and kept with minimum intermediaries to keep the damage to the product minimum. The distribution channel for Hyundai is by road or rail. Exports are routed though sea. Hyundai has a criterion for selecting appropriate middlemen and guidelines for fostering channel co-operation while considering environmental factors. For the same, it has been choosing the right dealers based on set benchmarks. For example, it is imperative that the dealer builds and nurture relationships with the customer. In Hyundai they believe that technical inputs for product understanding can be taught, what is hard to inculcate is the interpersonal skills and attitudinal change in dealers. Hyundai claims that a large number of its dealers are either MBAs or engineers. It argues that this helped in providing the brand with credibility and a positive word-of-mouth. The impact is evident in the fact that almost 40 per cent of Santros sales come through referrals. It is also learnt that the existing network of 70 dealers have invested close to Rs 300 crore and transporters have added their bit to gear the supply chain to get Santro on to the roads.

Brand strategy
Trust, Indian market recognized, was one of the Indian customers major concerns. Being a barely-known Firm (often confused with sectors), it had to anchor itself in space as a dependable brands. With some dollar 613 million invested in India, Automobile sector was keen to pose as the leading alternative in India. Also, it wanted to offer technology that other carmakers had thought too advanced for slowly emerging Indian market. So in October 1999 Hyundai hitted roads with a multipoint fuel injection (MPFI) engine the first small car with this relatively fuel-efficient and eco friendly technology. The base LE model priced at Rs.3.1 lakhs was very competitive against Maruti Zen, the standard upgrade from the 800 till then.

The fancy LS model at Rs 3.7 lakhs had power steering, power windows; central locking internally operated petrol lid and other enhanced features. Most impressive of all was the manner in which Hyundai introduced this complete family car to Indian household. This was through an impressive ad campaign shot on the young and energetic Shahrukh Khan. The brand gained immensely from positive word of mouth on how trouble free the car was. This went well with the brands sporty, youthful and energetic image. Having made a dramatic entry, Santro chose to downplay its earlier advertising theme preferring to speak of technology and product features.

MODERN FACTORS

Promotional strategy
Advertising The masterstroke of Hyundai during the launch was the bang-on-target advertising campaign. Saatchi & Saatchi was chosen as the official agency to communicate in an Indian context -- in 15 or 20-second commercials -- the idea that Hyundai was launching this technologically brilliant car. For short-term quick results a celebrity was the best bet. Shah Rukh Khan was the pivot in this. The celebrity route was preferred over a mere endorsement to involve the consumer to know more about the company and its offering. He was to serve as a model of Indian consumer who is as ignorant about Hyundai as any other consumer in the country.

Ad campaigns

Rs10 crore, six-month long 7 ad campaigns featured the fun-loving but mature in a serialized story of Hyundai persuading him to endorse the brand. The campaign has wide-sweeping objectives including a corporate intro, network, technology and finally the product. The teaser campaign that began in April 1999 aimed to build the corporate image for Hyundai. A series of five ads, showing the managing director of Hyundai India, Mr. Kim, introducing the company to Shahrukh and trying to get him to do the Santro ad worked with the mid-market customer Santro was targeting. The whole objective was to create a level playing ground for Hyundai. Sales force Hyundai had a professional unified 600-sales force set up before the launch with the managing director Mr. Kim, was brought back from Korea headquarter will rest of the team was assembled from the best of the country. Hyundai had B.V.R. Subbu as the director of marketing & sales at Hyundai. News conferences in different parts of the country were called during the launch of the company on the country. There were various News released highlighting different strategies of the company in different newspapers, magazines, weekly etc. The primary aim was to make the people aware of the story favoring the company and its offerings.

Marketing strategy
Positioning strategy In a market that was yet to see clear positioning, the family car position was to serve Toyota in the long stead. Maruti picked up its service network as a differentiator. Now on a fairly strong ground, Hyundai reacted with user testimonials. Matiz continues its attempt to anchor itself in customer mind space. From the day Hyundai made a mid-course correction, dumping the 1,495-cc Accent in favour of a smaller car, it was clear that its offering

had to be a complete family car. Yet, given its relative obscurity in the Indian market, it had to offer tangible differentiators. That philosophy has been translated into a superior engine and a spacious interior while airconditioning has become a standard feature in all the 5 versions of the Santro. A company can look after its customers and its changing requirements only if it makes profits. An entity with a bleeding bottom-line will find it difficult to service customers needs. This situation can be disastrous for a car manufacturer, which incidentally does not thrive so much on technology but more on customer services management. Strategy is all about common sense and understanding what the consumer wants, what is good for the customer is also good for the company. Hyundai had come a long way from the time when it needed Shahrukh Khan for recognition. The film star offered them instant recognition and helped in brand building when they were fresh entrants into the Indian market giving an example, that when he went for discussions with oil and finance companies before the launch of the product, Hyundai was almost an unknown entity in the car business. Six months after the Shahrukh campaign unfolded, the company did not need an introduction to deal with any business segment. Hyundais plan revolved around entering through the volume market and breaking even, which A is what it did by introducing Santro, the tall boy car. It then moved to the mid-range Accent to attain profitability, followed by getting a toehold into the premium luxury category through Sonata to reinforce its brand presence. Subbu mentioned that since entry price was critical, it be-came imperative to attain cost competitiveness and commit single vendor source to achieve economies of scale. High levels of world-class localization were achieved. Hyundais underlying theme was leadership through listening to the consumers.

Demand and supply In the mid 2006 the government announced ban on carbonated engines suddenly increased the demand for euro 1 vehicles. At the moment only Hyundai Santro and Maruti Swift had MPFI engine. The sudden spur in demand caused a little unrest in the company and the company had to take a decision of starting too shifts to meet the increased demand. The production, which was around 3500-4000 a year, was increased to 6000 in a span of two years. The company basically took this decision because at that the time the waiting period for Santro was 4 weeks and for which the customer had to pay a premium to get his vehicle fast. To avoid this step was taken following the company policy. Within seven months of launch in India, Hyundai Motors India (HMI) has sold 20,000 Santros. Maruti, launching its Swift in the same slot and same time, has peddled all of 5,000. And yet, Swift outsells the Atoz, the Santro's parent worldwide. So what did Swift did wrong in India? To start with, it learnt nothing from its City pricing debacle. (The City first tried to position itself in the Opel Astra/Ford Escort class with its price, before doing a volteface and dropping price to Maruti Esteem levels.) Location analysis The $13.5 billion South Korean automaker Hyundai has identified India as its most important overseas production base. The company has outlined investment of over $1.1 billion for its Indian project, which, apart from expanding an integrated production facility for various models, will also include a state-of-the-art research and development centre that will have the capability of designing and developing new models.

Effect of Liberalization and WTO

Liberalization has changed the mindset It has changed the mindset, by ushering in foreign competition. Take the car industry for instance. In the 1980s, Maruti had a monopoly over the market, by creating a strong supplier base that was supported by the government. The customer had no choice but to accept the limited range offered. Today there are lots of new players in the auto industry, both local and foreign such as the Japanese. Maruti has upgraded its models and diversified its range, in order to effectively compete with other suppliers. With the liberalization of the Indian economy, the passenger car industry was finally deregulated in 1993 and many companies, both Indian and foreign, announced their plans to enter the market.

Effect of WTO
Breathing in WTO's world The World Trade Organization (WTO) regulations, which India has accepted, provide that countries cannot discriminate against foreign goods. This could be seen as 'arbitrary' and 'unfair'. The government might not be able to impose higher custom duties, but it can ensure that this "flooding" of the Indian market with cheaper, more polluting cars will not have serious repercussions on the growing problem of air pollution in cities. This can be done through domestic

norms

and

regulations. Standards to regulate

WTO

allows

governments norms and for the

to

adopt

domestic of the

regulations, are used

and

emission

protection producers

environment and the health and safety of its people, as long as these norms both domestic foreign without discrimination. Firstly, it is important to note that under current emission norms, only Delhi is to implement EURO I norms and has moved to EURO II in April 2012 which became obsolete Europe in 2006, and it cannot stop nonEURO II compliant technology till 2009, which will become obsolete in India by 2015. Unless India upgrades its emission norms urgently and makes all of India EURO II compliant by 2015, India can become the world's biggest dump yard of obsolete and polluting technology.

Why India?
In comparison to other third world countries India is much better option due to opening up of economic reforms in 1990s. There was survey conducted in 2000-01 and the decision to enter India was taken by the authorities. The primary reasons were that India was a growing market as compared to other developing countries and in the automobile there not many players which gave them lots to scope. One more reason that supported their decision was that some countries were restricted for 100% subsidiary. They had more limitation that any country where TATA had entered they couldnt their put their foot on because they are such a huge competition that Maruti cannot counter attack them primary reason being that TATA offers products in all segments of the automobile market and all of their products at qualitatively lot more superior. So India was the country they were looking for. Second car market couldnt pose as a threat to them because Australia having almost 4 times larger organized second had market still the successfully existed and in India second hand market was completely unorganized so they could make their presence felt in the market. There were also survey

conducted to see the viability of the places for plant and the distribution network. Chennai was selected because of its proximity to the port and that that was helping them to cut cost as well as Chennai was well connected to land transport. The one more major advantage of Chennai was that the labour their understood English and there were comparatively less labour problems. They had their Korean vendor lobby and they set up their manufacturing around the plant in Chennai. Rs 2,300-crore 1.30-lakh-unit-capacity manufacturing facility at Kudankulam in Tamil Nadu is Hyundai's largest integrated unit outside South Korea. Since Hyundai makes its own engines and transmissions, its costs are more controllable than those of say, Verna, which will be importing Semi-Knocked Down kits for its brands. With an army of 60 vendors, Hyundai has already achieved a localization level of 70 per cent compared to Verna's 45 per cent. Even Maruti Udyog had a localization level of 25 per cent when it launched the 800 in 1983. Agreed K. Mahesh, the CEO of the Rs 60-crore Sundaram Brake Linings: "Localization is critical for cost competitiveness and long-term affecting strategy."

Questionnaire

Name ---------------------------------------------------------------------------------------------Occupation ---------------------------------------------------------------------------

Please supply the following details about yourself: Age: 16-34 35-54 55 and over

Sex:

male

female

Q1. How frequently you purchase a 4-wheeler? 3 years than 5 years 5 years more

Q2. How much attention you actually pay on the information about various models while purchasing a 4-wheeler? Too much ever Average hardly

Q3. Rank your preference for the product attributes in case of a 4wheeler even if it doesnt confirms to be a good brand. Brand: Price: Friends buy it: Availability: Q4. When you buy a 4-wheeler, which model do you purchase? low level middle level high end

Q5. Thinking about value for money, how would you describe the automobile product? Good reasonable bad

Q6. What improvements, if any, would you like to see in the brands of 4-wheeler on festival season?

This section is about the showrooms service and gesture. Never Most of the time some of the time

I have to queue for a long time The showroom is very clean The staff is helpful The staff is well-presented The general service is good

Are there any other comments you would like to make: About the welcome service? ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------About the staff service? ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Thank you for completing this questionnaire. Results will be treated in confidence.

Pilot Study
The pilot study will be firstly developed before the actual survey conducted by using the questionnaire. After the questionnaire completely formed the questionnaire will be sent to the expert in the area of study stated by the pilot study. To be tested and also the formed questionnaire, the expert will inspect the association between variables. After the validity of questionnaire is ensured by the expert we only can conduct the actual survey. In the process of surveying, the surveyor will distribute 50 set of questionnaire to the selected respondents. According to the questions asked in the questionnaire the 30 selected respondents are necessary to give their feedback based. The author will apply the Cronbach's Alpha approach to give evidence the internal constancy of the item, every single of the variables. The Cronbach's Alpha approach is a sufficiency form of validity or reliability evaluation to conclude the same item when measuring the same thing (Singleton & Strait, 1993).

Sampling Plan
In this study, we are investigating the factors affecting the Indian automotive industries and Indians perception towards the impact of international brand in automobile industry. Therefore, a systematic sampling approach is being used. The population of this study are the students of Universities and working adults / young executives. A total of 50 questionnaires will be distributed to collect usable responses throughout the data collection period. I believe that we will be able to obtain sufficient information with the amount of 50 respondents that required for the data analysis purpose. To avoid biases during the process of conducting the surveys, the questionnaires will be randomly distributed to the respondents.

Data Collection Method

In order to understand the factors that affecting purchase intention and Indians perception towards the impact of international brand in automobile industry, the main primary data collection method will be the questionnaires. Questionnaires are a way to obtain data needed from a large number of respondents in a specific period of time with it lesser time consuming with high response rates and an effectively and efficiently. Email is also a method that enables us to reach the respondents from the nationwide and also cost saving. The close format questions and Liker scale will be exist in the questionnaires. The Liker scales were used to identify the respondents' agreement and disagreement in the survey questionnaires while the close format questions take the form of a multiple-choice question. To be easier to calculate and analyze the statistical data we will obtain it by restricting the area of answer set. The questionnaires will record the respondent's age and genders except the respondents' personnel information; this is to help to increase the reliability and accuracy of the data collected.

Data Analysis
After received all of the completed questionnaires from the respondents, the author will be using Statistical Package for Social Science (SPSS) to analyze the data that have been collected. There are few steps taken to analyze the data. By using Descriptive statistics it is to describe the data such as frequency, percentage, average, and standard deviation. Then, examining factor analysis will be conducted on all items in the instrument. It is very important to ensure that every of the step items on the survey are

independently measured the theoretical constructs they were intended to measure. In the questionnaire, the background of the respondents such as age, gender and so on will be determined by the frequency analysis. Moreover, the standard deviation and mean of the respondents' responses towards the variables in this study will be examined by the mean analysis. Besides that, the sum effect of all independent variables on the dependent variable in the study is determined by multiple regression analysis.

Respondent Profile s
The profile of survey respondents in terms of age and sex is indicated below.

The sample was biased in favour of males,as 44% were males,compared to 33% of all INDIAN buyers.30% of respondents had one car in their household, 28% had two, while 17% had 3 cars in their household.Private buyers represented 94% of re spondents, and 61%

traded in a car when buying their new car.The new cars were purchased throughout 2011 and 2012,with 22% in December and 38% in January, reflecting th e seasonal sales peaks, as well as the dates of the circulation of the questionnaires.

Research Results
FREQUENTLY BUYING NATURE

Respondents were asked to state the length of time between their initial deci sion to buy a car and placing the order at the dealer. Four options were given, and the results are shown below:

Buyers of t brands w y to take n their de aking, and indeed, twi any volum s took 2 weeks or less from decision to order.

specialis ere likel longer i cision m

ce as m e buyer

Onaverage, specialist buyers took nearly 6 weeks (with one fifth t aking over 3 months), while volume buyers took around 4 weeks .Of the specialist brands, buyer s of Jaguars BMWs and Audis tended to wait the longest , , between decision to order.

 ATTENTION PAYABLE

Colour or paint type was clearly the most popular type of specifica tion change, followed by an interior option change.Respondents were also asked whether t he change mattered to some degree. The results were converted to an index, with the higher the number indicating that the change was more significant in some way.These indices a re shown on the chart

above (in blue), with a body shape change mattering the most.Respond ents who took an alternative specification to their original cho

ice were askedwhether they received some form of benefit as a fo rm of compensation, and 46% said thatthey did, with 54% saying they did not.Note that specialist buyers were more likely toreceive a benefit, with 58% saying they received a benefit, (45% for volume bu yers).

PRODUCT RANKING

Analysing information sources by age of rs (<25 years) had particularly high

respondent, young owne

propensity to use friends an

d relatives, the tv (advertisements &programmes), and the web.the highest users of the web were those aged 25 to 35, whowere als o more likely to use tv programmes as a source. Those aged over 55 had no particular predispositions to use or not use particular sources, exce pt the web, where therewas very low usage, and they were less likely t o use the tv as an information source.

 MODAL PURCHASE

76% of the sample claimed to have had their car purchased up t o one month after making the order with the dealer. Specialist brand buyers tended to wait l onger, for eample, 3% of specialist buyers waiting less than 2 weeks compared to 39% of vo lume buyers.Similarly,35% of

specialist buyers waited over 1 month compared to 23% of volume , buyers.

FINDINGS

According to survey it is found that 68% of respondents prefer Mileage as the first most crucial feature considered while purchasing a car, and Price is considered as the second considerable feature i.e. 60% and Maintenance cost is considered as the third considerable feature while purchasing a car i.e. 56%.
It is found from the survey that 64% of the respondents are willing to pay

3-4 lakhs for a new car, 20% of the respondents are willing to pay less than 3 lakhs for a new car, and 16% of the respondents are willing to pay 4-5 lakhs rupees for a new car. It is found that 84% of the respondent prefer Quick service as the most preferred facilities\services expected from the dealer and the next preferred facilities/services are one year free service i.e76% and Installment payment facility i.e72% It is found that 64% of the respondent prefer Bank loan as the most preferred means of finance.

 Maruti Alto stood first as the most preferred car among the B-segment

cars followed by Hyundai Verna and Fiat DLX stood last. It is found from the survey that 68% of the respondents are owners of Bsegment cars. It is found that 52% of customers opted car for comfort /convince rather than need and status.
It is found that 38.24% of the respondents came to know about the car

through T.V advertisements and 32.35% of the respondents came to know about the car through friends...

SUGGESTION

It is found that in this survey that the important features considered by

the customers while buying a car are mileage, price & maintenance. So manufacturer has to consider these Aspects to attract and retain customers thus making an effort to build a good brand image. Discount on accessories and spare parts also act as influencing factors for purchase decision. So dealer can give discounts on spare parts and accessories, after sales for a period of a year or two to stimulate the customers.

 Customers want service at their doorsteps but are unaware of the home delivery facility provided by the dealers. So a measure has to be taken to create awareness in this direction. Most of the customers buy cars from bank loan rather than financial companies. So the companies have to come up with attractive loan facilities to their customers. Word of mouth is effective media of communication. Hence the dealer should keep the existing customers happy by providing good service and make customers talk good about their service provided.

CONCLUSION

INDIA although a big city, is dwelled by middle and higher-class people in majority. Thus the market for four-wheeler has never been a dearth here. But of all the varieties available in this segment, small cars are most preferred. Customers in this segment want to adopt change into their life style. This has fostered entry of varieties of small cars available nation-wide to flourish in this

market. This has enhanced the competition in this car segment. But Maruti withstood this competition by retaining its market share to be the highest. The results of the survey conducted showed that Maruti Alto Brand is the most preferred car followed by Verna and it also showed the buying behavior of customers that the most of the customer purchase car based on mileage followed by price and maintenance. Government policies have significantly influenced the development of Indias automotive industry. Some of the important policies have been the ones related to the protection, indigenization, modernization and liberalization of the industry. The role of Indian government transitioned from regulatory to facilitative one as the industry progressed through successive stages of competitive development. This was in alignment to the theoretical framework, but with some deviations. However, the transitions were mainly brought about by chance events like Oil Crisis, Gulf War, etc. The government has to be at least credited for implementation.

BIBLOGRAPHY

1.www.google.com 2.www.SIAM.co.in/autoworld.in/2776

www.marutisuzukiindia.com/ aboutus/content1133

 Business today Times Of India Virupaxi Bagodi, Biswajit Mahanty, (2008) "Four-wheeler service sector in India: factors ofimportance for sustainable growth", Journal of Advances in Management Research, Vol. 5 Iss: 1, pp.21 27 3.K. Narasimhan, (2003) "Quality from Customer Needs to Customer Satisfaction", The TQM Magazine, Vol. 15 Iss: 6, pp.430 431 4.Agawam, S. and Teas R.K. (2002). "Cross-national applicability of a perceived quality model", Journal of Product and Brand Management, Vol. 11, No. 4, pp. 213-236. 5.Auto world, India Car Sales Statistic, (nod.), [online], available: <http://www.autoworld.com.my/includes/main/statistics.asp> [nod.]. 6.Barrett, J., Lye, Ashley and Venkateswarlu, P. (1999). "Consumer Perceptions of Brand Extensions: Generalizing Aaker and Keller's Model", Journal of Empirical Generalizations in Marketing Science, Vol. 4. 7.Darling, J.R. and Wood, V.R. (1990). "A longitudinal analysis of the competitive profile of products and associated marketing practices of selected European and non-European countries", Journal of International Business Studies, Vol. 21, No.3, pp.50-427. 8.parochialism", European Review Business, Vol. 14, No. 1, pp. 30-39.