Product Life Cycle – Automotive

Does Product Life Cycle means anything in the Indian Automotive Space?

‘Tried & Tested’ – the most important attribute affecting the purchase decision of Indian consumer. Don’t believe me? – have you ever seen the santros, the indicas, the altos and the boleros proudly plying on Indian roads and with increased numbers everytime you step on road. Maruti 800 still is sought after by many Indian homes and we do not see any automobile replacing its legacy.

Product Life Cycle defines that at a certain age the product grows to its peak, later it reaches saturation level and after some time it slowly phases out of the market. When you analyse this theory in the Indian automotive industry, you surely would be amazed by the uniqueness – consider Mahindras ‘Bolero’ which was launched over 12 years back still manages to easily outperform its young competitors. The story ain’t very different in case of Maruti’s Alto as well – launched way back in 2000 and emerges as the world’s best selling car in 2011!

I have seen a person purchase a Hyundai Santro 3 times in his life! Every time he liquidates his old Santro – no other brand makes space in his consideration set else than a Santro again. And this ain’t a special case – many Indian households have the same story.

But anythings changed recently? With over 30 new launches in past 2 years and many international OEMs jumping the bandwagon – has given a plethora of choices to the Indian consumer. Gone are the days where we had only padmini’s, 800’s or amby’s available in the kitty. You and me are now spoilt for choices – and boy we love new cars! The younger generation is demanding freshness and novelty – this would spark and make the game more competitive. Can this change the nature of the Indian automotive scenario? – I say YES. 

Channel Strategy

When asked to any commodity selling enterprise on what is the most important enabler for the growth – the answer has always been – “Channel Partners”. Name the topmost Cement, Cola, FMCG or Retail Company – you would see one thing in common that they have the best channel & distribution network. The funda remains much similar in case of Automobile OEMs – Hero Moto Corp & Maruti Suzuki have over 4000 and 5000 Sales Touch Points and they are the numero uno Bike & Car OEM in India. Garnering a network this huge is a gargantuan task and thus emerges as the USP of the OEM.

Ever wondered on the investment required to open a full fledged dealership (3S)? In a current scenario and considering the OEM quality benchmark the investment can soar upto minimum Rs. 8-10 crores. And the amount of time taken to establish a greenfield dealership could be anywhere between 8 to 12 months. All this investment has now taken a very strategic turn. OEMs need to be much industrious in enabling the profitability of its channel partners and expand productively. With ever increasing competition and razor thin margins, even Auto dealers are becoming much more choosy and wary before zeroing down on the investment – this makes a whole lot difficult for the new OEM entrants to exponentially expand in the market.

A look on how the OEM volumes co-relate to their Channel numbers –

Note: Number of dealers indicate independent dealers and not sales/service points.

In the above data it could be easily implied that the sale of a dealer is directly proportionate to its dealer network. VW & Toyota – It is imperative for you guys to understand that to emerge as a no.1 OEM, you need to hit this nail right on its head.

Channel expansion is the key – with rural markets growing then ever and less susceptible to economic vulnerability – Reaching Out will decide the fate of these OEMs. 

Indian Car Sales Figures – April 2012

April 2012 Sales Figures – Pan India

HIGHLIGHTS:
1)”When Maruti sneezes, the auto industry catches cold” – the statement stands true in any season! Maruti’s figures were the true reflection of the industry’s performance for April 2012. The Indian Auto Industry degrew by over 22%(Month-on-Month) whereas Maruti has de-grown by 20%. The reason still remains Maruti’s dominant market share and sheer size of its numbers (Maruti’s volume was an average 83000/mth in F12!).  

·        2) Alto’s numbers was at an all time low in past 6 months – with 17842 offtake. Alto had been the unbeaten no.1 of the charts since ages. A dip of 49.37% in Alto volumes M-o-M seems very gullible. The new king of the ring is the most loved Indian hatchback – Swift. With rationalized productions Maruti is not only earning volumes, but also finding place in many awaited Indian households. Seldom did anyone believe when Maruti had announced receiving more than a lakh bookings during its refresh launch. But the numbers speaks for itself.
·        3) Maruti did Dzire again! With a shorter boot, attractive price and the fact of being a 3-box car is working wonders for the brand. We Indians just love VALUE; we never get tired/bored with the same food being offered in different plates – IF it is ‘Value for Money’. With a number of 15510 figures, Dzire is whopping 9259 numbers ahead than the next highest selling sedan (i.e. Verna – 6251 nos).
·        4) ‘The era of sedans is over’ – suddenly the fastest growing segment of the industry falls on its foot. These figures would need no explanation to prove the aforementioned point – Tata Indigo+Manza: 3669 nos. (degrowth of 55.76% m-o-m) & many more:

·        5) Nissan now loses its ‘Sunny’ side and ‘Micra’ doesn’t seem to do wonders as well. Rather its distant sibling Pulse has been able to steal Micra’s prospects for its more modern look and appeal. Renault’s small distribution network remains a concern and only an explosive expansion strategy could place it at a respectable position in F13.
·        6) People just seem to ‘LUV’ the new Ertiga (stands tall at 16th spot with 5464 nos.). With over 15k bookings, and dynamic production line Maruti has created a whole new segment itself! If you thought that these figures would disturb Innova numbers, then you were totally wrong! The existing MPVs (Innova & Xylo) did their normal run without any dent on their numbers. The effect was rather seen on C-segment sedans.
·        7) Bolero – 6th highest selling passenger car! (8205 nos.) We would get tired discussing its success; but the brand does not! Such a consistent performance is never seen in Automotive history. Even Nostradamus would fail predicting Bolero’s business cycle. Similar is the case with Maruti’s Omni – feat of 7321 offtake achieved just by selling a petrol variant! These old war horses have turned out to be cash cows for these OEMs.
·        8) Eon evolves as Hyundai’s top selling brand – a sweet spot for the OEM. But the purpose would be achieved, only when it matches Alto’s volumes – a distant dream, but quiet possible.
·        9) Rapid consistently overtakes Vento volumes. VW would surely not be happy with this.
·         Hyundai again rules the C+ segment with its Verna. It plans to extend its success with the new Sonata(but the volumes of 66 nos doesn’t speak so).
·        10) Fortuner – 1270 nos, XUV 500 – 3403 nos; I wonder how we manage to sell these with such ease. The volatility of Indian market amazes me with what it has to offer. And the love for SUV’s just seem impregnable.
·         Any predictions for May’12 ???  

A list of Top 20 Brands of the month –