1 Introduction

Since 2012 the Indian automobile industry is going through a tumultuous period. Worsening macro-economic conditions within the country, high interest rates and rising input costs are fast eroding the profitability of most of the car manufactures. Despite price cuts and other incentives, car sales in India remained sluggish. Analysts are pointing to a second straight year of declining sales in what was one of the worlds fastest growing auto markets. The slowdown in the overall automobile demand in the country was a concern for the product managers of Renault. Though amidst all the gloom, Renault had some reasons to cheer. Since its launch in summer of 2012, Renaults compact SUV Dusters market performance had been far beyond the expectations of the Renault management. After a string of unsuccessful partnerships and product launches, the product managers at Renault had finally managed to launch a product which struck a chord with the Indian consumers. The fact that SUVs have been registering good growth in an otherwise somnambulistic car market has clearly helped the Dusters cause. Yet, there was tremendous hard work put in by the Renault India team to get everything right -- from the features and mileage to the final price. Now amidst all the economic gloom and slew of fresh competition posed by new launches by Ford and Maruti, the coming year appears to be a much more challenging proposition. Product management team of Duster was poring over the market reports and surveys to figure the next move.

2 Renaults story in India

Renault is a French multinational vehicle manufacturer established in 1899 by Louis Renault and his two brothers. The company produces a range of cars and vans, and in the past, trucks, tractors, tanks, buses/coaches and autorail vehicles. In order to better scale up globally and to cross leverage the R&D expertise, Renault and Nissan forged a strategic alliance in 1999. The Alliance is a strategic partnership based on the rationale that, due to substantial crossshareholding investments, each company acts in the financial interest of the otherwhile maintaining individual brand identities and independent corporate cultures. Renault currently has a 44.4 percent stake in Nissan, and Nissan holds a 15 percent stake in Renault (non-voting, giving Renault effective control). The car group sold 8.1 million cars worldwide in 2012, behind Toyota, General Motors and Volkswagen for total volume.

1 Product Management Project Report on Renault Duster

Renault entered the Indian market much later than the other global competitors. At the time of its entry the Indian market was primarily dominated by small and compact hatchbacks offered by Korean and Indian companies. Maruti along with the Hyundai were the top two manufactures within the country offering slew of models in between the 3-5 lacks segment. Poor road conditions along with the cost conscious customer base posed a significant design and marketing challenge to the car companies to package the right features at an affordable price. In order to crack the Indian auto market puzzle, Renault decided to enter the Indian market in partnership with Mahindra. Together the partner launched Logan which received Logan which met with a mixed response from the Indian market. Logan failed to attract consumers due to its length of fractionally more than 4 meters that required a factory gate duty of 22% compared to 10% for the less-than-4 meter cars. The Logan was criticized for its boxy looks and awkward ergonomics. Due to uncompetitive pricing, Logan struggled to sustain volumes and was soon confined only to Taxi segment. After constant tussle between the two partners, Mahindra and Renault decided to cancel their unhappy marriage. Renault temporarily dabbled with the idea of the partnering with Bajaj for a low end car, and then finally decided to go all out alone in the market. In March 2010, Renault India and Nissan India opened a production facility in Chennai. Established with an initial investment of 45 billion (US$760 million), the plant has a combined annual capacity to produce 400,000 vehicles. Each partner is entitled to half the production capacity. Since the start of its own operation Renault has launched the following models. Model Fluence sedan Koleos SUV Pulse hatchback (version of Nissan Micra) Duster mini SUV Scala (version of Nissan Sunny) Year of launch May 2011 September 2011 January 2012 July 2012 August 2012

3 Indian car industry growth post liberalization

During the 1980s and early 1990s the consumer mindset was of caution and savings orientation. People could not aspire beyond one house, and spent their entire life paying for it. Owning a vehicle was of low priority and absence of easy, low cost finance was a further dampener. Post
2 Product Management Project Report on Renault Duster

the liberalization all the car manufactures focused on low cost entry level hatchbacks. Fuel efficiency, minimalist no frills design and low cost were the primary design objectives of the manufactures. The turn of the century however brought about a big swing in the consumer mindset. Higher disposable incomes, the development of the urban modern lifestyle, and an increase in consumer awareness have affected buyer behavior- in cities, towns and even in rural areas. Buying power has expanded to new consumer segments- be it youth or the urban women. The vast hinterland, flush with expanding rural income is opening up new vistas for higher quality premium products. The auto segment has also benefitted greatly from this upswing in consumerism right across the country. Easy availability of finance coupled with higher social acceptance of debt has encouraged the consumers to stretch their spending power. While the lower car segments have grown at the fastest clip, the higher price segments have also shown robust growth. One car segment in particular which has been most impressive is the SUV segment.

3 Product Management Project Report on Renault Duster