Mahindra War Room 2016

AFS - Powertrain Caselet

MAHINDRA AUTOMOTIVE & FARM SECTORS:

POWERTRAIN BUSINESS: MARKET STRATEGY CASELET
Mahindra Automotive & Farm Equipment Sectors (AFS) consist of businesses ranging
from Automotive (including Cars, UVs, Trucks and Buses), Farm Equipment (including
Tractors), Agri-business (including Seeds, Crop Care and Applitrac equipments),
Construction Equipment and Powertrains (Engines, Transmissions & Gensets). This
caselet pertains to the Powertrain Business, and is independent of other caselets
pertaining to Automotive, Trucks, Farm Equipment and Agri-business.
BUSINESS BACKGROUND
Mahindras entry into the Diesel Generator business is a story of transforming crisis into
opportunity. During the peak of the Industrial downturn in 2001-2 period, post the dot
com bust worldwide, Mahindras then Farm Equipment Sector was brainstorming on
different ideas that would increase utilisation of invested assets and the value chain,
while opening new revenue streams. Thus was born the idea of a rugged and fuelefficient diesel generator, derived from the engine that goes into tractors, as a motive
power source for various industrial applications. Branded Powerol, Mahindras Diesel
Generator was the right product at the right time - bridging the ever-growing gap
between the supply of, and the demand for, power in India.
The inception of Powerol also coincided with the opening of Indian Mobile Telephony
market for private Telecom operators. In a race to match customers aspirations for
seamless connectivity, Telecom operators were looking for reliable and agile partners
for power back-up solutions while expanding their Tower network. Mahindra Powerol
seized this opportunity by creating Contract Manufacturing Setup plants based on its
unique Lean Asset Model for matching the varying demands of the Telecom operators.
To offer high levels of equipment availability, Mahindra created a country-wide network
of Service dealers known as Mahindra Authorised Gensets and Industrial Engine
Center, usually abbreviated as MAGIEC. Being in the right place at the right time,
Powerol has rapidly grown to be among Top 3 players in the Indian Diesel Generator
industry.
Emboldened by the rapid success of Powerol, Mahindra consolidated the business with
Swaraj Engine Business and Mahindra Engines Business, creating the Powertrain

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Mahindra War Room 2016

AFS - Powertrain Caselet

Division. Powertrain Division caters not just to captive customers, but also the Global
OEMs for Engines as well. The Powertrain Technology Centre and Advanced
Engineering Centre are located at Mahindra Research Valley in Chennai, offering
advanced research & development capabilities. Propelled by these facilities, Mahindra
Powertrain systems - comprising Engines and Transmissions - have become cleaner,
more fuel efficient and future ready, over the last few years. Powerol was also
recognised as a SuperBrand in 2015, with the management practices recognised by
Deming Award committee in 2014.
LIVE CHALLENGE: STRATEGY TO ENHANCE BRAND & MARKET POSITION
A Diesel Genset, (DG set), is a capital equipment used as primary power back-up
across various consumer and industrial segments. DG set prices usually start at INR. 1
Lac, and go up as the kVA rating goes up. In a DG set, the diesel engine drives the
alternator to generate electricity, which is supplied to residential or industrial
establishments when the main power fails. The DG set is offered in a weather-proof
canopy designed to suppress noise levels within regulatory limits, and is operated
through a control panel for manual or automatic operations. As a product, DG sets often
become a customers productivity lifeline, giving them freedom from the vagaries of
power supply, and control over their business and life.
The size of the Indian DG set industry in the 4-3000 kVA range is around 125,000 units.
Of these, Telecom segment would constitute ~15,000 units in the 5-62.5 kVA range. All
other end application segments are collectively called as Retail segment. In the Retail
segment, smaller DG sets with rating less than or equal to 75 kVA are required for
applications like Infrastructure sites, Fuel stations, Banks, Restaurants, schools,
colleges and homes. These are clubbed as Retail Lower kVA (Retail-LkVA) segment.
Larger DG sets of over 75 kVA rating are required for applications like Business
establishments, Manufacturing plants, Real Estate projects, Hospitality, and Healthcare.
These are clubbed as Retail Higher kVA (Retail-HkVA) segment. Mahindra Powerols
products range up to 200 kVA, and Powerol holds the 2nd position in the Retail LkVA
segment, while holding the 4th position at the Retail HkVA segment.
In India, the opportunity for off-grid power solutions arises from two economic factors:

Rapidly growing economy with corresponding increase in demand for power:

Between FY02 and now, the Indian economy has been growing at an average

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AFS - Powertrain Caselet

of 6-7% per annum, going up to even 9% in some periods. This has increased
disposable income levels and spurred lifestyles requiring back-up power.

Inadequate and inefficient Grid Power: This results in interruptions or

occasional breakdown of grid power, driving the need for Off-Grid power
solutions. An Off-grid power solution delivers electric power for limited use and
is not connected to the electric supply grid of the Utility companies.

Powerols growth since its inception has been driven by the twin forces of power
shortages coupled with the telecom boom in India. Power shortages have since come
down from a high of 16% to less than 1.5% in the recent past. Now the DG set demand
is driven more by economic investments and is generally for Higher kVA ratings.
Retail Customers of DG Sets are often males over 35 years of age - Decision Makers,
Proprietors, CPOs, Purchase Incharge/ Managers, Architects or Consultants, belonging
to an A1 or A Socio Economic Classification. The entire journey from the point that
customer experiences a need for power back-up till placement of order may last 15
days to 6 months. In this period it is quiet common for a customer to change his/her
requirements, revise the timelines, and alter its judging criteria or decision makers/
influencers. While there may be other factors at play, its commonly believed that
customer relies on cost of ownership, brand recall, referrals, ownership experience and
technical advice while making the purchase decision. Buyers of Gensets may be
segmented as follows, based on usage patterns, customer profiles and buying
behaviours: Manufacturing Units, SSI, Real Estate - Residential & Commercial,
Infrastructure, Telecom, Home Users, Retail Outlets & Showrooms, Hospitality
Hospitals & Hotels, Services IT/ITes, Services Education institutes, Services
Banking & Financial services.
The DG sales process is mostly consultative for Higher kVA nodes while transactional
for Lower kVA segments. Brand perception plays a key role in getting the brands within
consideration sets for buying. Presently, Powerol branding efforts focus on ATL and BTL
activities and deploy conventional as well as digital channels for communication, with
modus and channel being optimally chosen to maximize the revenues per unit of
expense. Customer engagement continues round the year while campaigns are
seasonal around festivals during summers (when power deficit is at peak) or towards
the year end.

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AFS - Powertrain Caselet

Mahindra Powertrain Division has presence across all market channels Online, offline
as well as a call centre. So far, it has been growing the business through sustained
online campaigns, by expanding the dealer network, market coverage and using
promotion activities, and has been among the top three players in market. Competition
in Indian DG set industry is from Cummins, Kirloskar, Ashok Leyland, Eicher, Volvo,
Perkins and others. Of these companies, Cummins and Kirloskar are well established
players with decades of presence, while Eicher is emerging as a challenger brand.
Cummins is a global engine OEM with a product range of up to 3000 KVA, with over
50% share of the market. The second position in the market is held by Kirloskar, with
product range up to 1000 KVA. Kirloskar aims to leverage its Green brand, and leads
the market in the retail segment by volume, though Cummins is the value leader. Eicher,
a subsidiary of TAFE, is the 4th player after Powerol at the third position, offering aircooled products in lower kVA and water-cooled products at over 40kVA.
It is generally accepted that Powerol needs to strengthen its brand image and improve
its market share, to grow further. Evolve a comprehensive brand and marketing
strategy for Mahindra Powerol to capture the #2 position in the market, amidst
competition from Kirloskar and Eicher for the slot. What innovative business,
market, sales, distribution and branding strategy should Mahindra Powerol adopt to
consolidate its position as the #2 in Diesel Generators in India.

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