Brand Image – Which OEMs can command PREMIUM in the Indian market?

Brand Image and Perception have a huge impact on consumer behavior and it in a way defines the extent a customer is ready to pay a particular brand’s product. Ex: A customer easily pays over ₹50k for an Apple Mobile phone; whereas he/she may not shell the same amount of money for a Mi phone. The primary reason is that Apple has over the years established its brand image as a tech innovator and customers perceive the quality of Apple products to be Top notch as well. So which automobile brand can command premium like Apple does in Cell Phones?

We have calculated the models sold by the respective OEMs in the Indian market and bifurcated it into different price range (0L-5L; 5L-15L and >15L).



  • Do note that India’s biggest car maker Maruti has never been able to make a mark in ₹15+ Lakh price segment. Earlier Maruti did try to venture in premium segment with products like Kizashi and Grand Vitara; but both the models proved to be a dud. While Kizashi could sell only 785 units in its overall lifetime; Grand Vitara could sell 1,694 units over years of existence in the Indian market.
  • Even in 2019; 100% of the portfolio of Maruti Suzuki were less than ₹15 Lakh price point and 36% of the cars sold by Maruti fared in ₹0L-5L price range.
  • Maruti did try to command premium by launching a new channel ‘Nexa’; but surprisingly not a single model was launched through the channel which was priced over ₹15L!
  • With success of Kwid and Triber, Renault has moved into high volume and low margin segment, major downside of this strategy could be brand image, free cash flow generation, dealer profitability and pricing power in long term.
  • Renault had a promising launch in the Indian market where its first launch ‘Duster’ sold in good numbers. However; its decision to venture into entry-hatches (Kwid) proved an un-viable decision. While Duster’s brand equity dropped over years; the higher priced products like Captur failed to make an impact.
  • Hyundai has been time and again trying to bring in premium products namely Elantra, Santa Fe, Tucson; etc but has faced limited success till date. However; both in terms of attempt & success – Hyundai fared better than Maruti.
  • Mahindra, Tata & Ford have been able to sell butch SUVs in the ₹15+ L price range. However; the volumes as such needs to pull up to make a significant case.
  • VW & Honda looks like they’ve lost the path. Honda had launched iconic products like Accord, Civic, CR-V in its yesteryear; but on the pursuit for volumes it lost the ‘premium’ tag that the brand commanded. While Accord, Civic & CR-V were blockbuster models when they were launched initially – it could not find buyers when they were relaunched recently. Starting with Brio in 2011, low cost-mass market driven strategy has costed Honda its premium sheen it use to enjoy a decade back with cars like Jazz, City, Civic, Accord & CRV
  • Similarly VW seems to have lost its mojo – Only 5% of the cars it sold were in >₹15L price range.
  • Despite Tata Nano inspired cheap products, like Etios & Liva, Toyota never lost its premium luster, it seems Corolla, Fortuner and Innova have had firmly rooted Toyota’s premium image in India – quite an interesting consumer behavior

(The article is written by Rohan Rishi. You can connect with him at emailrohanrishi@gmail.com)

81% cars sold in Indian market in the Year 2019 were having a price tag of under ₹ 10 Lakhs!

We believe that a customer first decides the budget and then decides the segment/model of the car that he or she shall purchase. Hence a consumer having a budget of ₹10 Lakh may purchase either an i20 (Premium Hatch), Brezza (Compact SUV), Honda City (Executive Sedan), Kia Seltos (Mid SUV) or any other model/variant which shall fit in the budget. Gone are the days where consumers would first decide the segment and then the model – It is more of deciding the budget now and then the model is finalized irrespective of the segment basis the customer’s taste.

The Price Range Sales shall give a detailed insight on what price bands found highest number of customers. It shall also give us a glimpse on what amount the customer is ready to shell out to purchase a vehicle.



  • 81% cars sold in Indian market were having a price tag of under ₹ 10 Lakhs (Ex-showroom)
  • High indirect tax rate makes India a low value car market, as major chunk from buyer’s valet goes to Government(s)
  • Only 6% buyers could afford a car that cost more than ₹ 15 Lakhs (Ex-showroom)
  • This indicates low level of purchasing power, wealth growth and higher wealth concentration in hands of few

(The article is written by Rohan Rishi. You can connect with him at emailrohanrishi@gmail.com)








Capacity Utilization – Weak Link of the OEMs

India had emerged as an epicenter for Automobile OEMs to establish their manufacturing facility basis the mentioned advantages –

  • Setup cost was lower due to comparatively lower real estate value (compared to developed nations).
  • Trained Manpower Availability (easy availability of technical manpower, blue collar workers, etc).
  • Lower Manpower Cost (Manpower Cost / Hr remained one of the lowest across the globe).
  • High Vendor Base (leading to faster & lower cost availability of parts & components).
  • Government Support (Leading to lower operating & setup costs). Even government run programmes such as ‘Make in India’ attracted enough attention.
  • Growing Market & Vast Domestic Potential (India’s Automobile Market was one of the fastest growing markets in the world).
  • India can be established as an Export Base due to central location.

Basis the advantages highlighted above; almost all major OEMs set up their massive manufacturing facilities in India backed by multi billion-dollar investments. We had earlier compiled the list of automotive manufacturing plants – here. However; we have seen that the India is slowly losing the IQ (Investment Quotient) and OEMs are vary of the already heavy investment done in the sub-continent. This has led to global major like General Motors to completely exit the market and even the likes of Ford are considering the cost of their presence in India. One of the primary reasons for the lower viability of the Investment done by the OEMs is – Low Capacity Utilization.



Before going to the statistics; let us understand the number of manufacturing facilities of Mass market OEMs in India. There are collectively 25 manufacturing plants set up by 14 Passenger Vehicle OEMs in the Indian subcontinent. Presented here is the statewise manufacturing facilities established –

  • Maharashtra & Tamilnadu has over 52% of the manufacturing facilities. Pune & Chennai sector has the highest density of manufacturing plants.
  • Gujarat has gained traction and collectively has 4 plants.



Let us now assess the production capacity of the passenger vehicle OEMs and the actual capacity utilization of these OEMs:

  • Currently Maruti Suzuki has 3 plants and the capacity to manufacture 17 Lakh vehicles annualy. We have taken the average of vehicles manufactured in the past 11 months and compared with the Monthly Average Capacity. The Capacity Utilization of Maruti is as high as 94%.
  • Hyundai comes in close second with a production capacity of ~62k units per months v/s actual production of ~56k units per month and capacity utilization is as high as 90%.
  • However; OEMs like Tata, Mahindra, Toyota & Honda are operating at 1/3rd of the capacity!
  • Even Ford & RNA (Renault Nissan Alliance) operate at <50% capacity.
  • Newbies like MG & Kia are better off in terms of capacity utilization as well.
  • FCA at capacity utilization of only 8% – will be interesting to see how shall the OEM survive with such high operating costs and low volumes.

A lot of money is lost with every minute of underutilized capacity and costs billions to the respective OEMs. It is a matter of time on how these OEMs with low capacity utilization survive the tide.








All about Automobile Dealerships – Part 1

At Auto Punditz; we have extensively covered the performance of OEMs since the beginning and we now feel that somehow the frontline warriors of the respective OEMs needs to be covered as well. An Automobile Dealership, also known as a ‘Channel Partner’ is one of the most important part of the Automotive Industry and it needs to be recognized much more than it usually is. The reason the dealerships are termed as ‘Channel PARTNER’ is because they are equally responsible / partnered with the OEM to make a brand successful or not. The Channel Partners are the unsung heroes that take the brand promise of the OEM and deliver it to the end customer. The Automobile Dealerships are the link which can make an OEM’s brand image from ‘good to great’ or even make it ‘bad to worse’. Sales in today’s scenario is majorly affected by ‘Word of mouth’ and it entirely depends on the experience customer has with a particular brand. And the dealerships are the link between the Brand and the Customer which  Dealerships shall derive revenue from creation and sustenance of long-term
relationships with their customers. In automobile sales; the dealerships play an extremely vital role in delivering this ‘customer experience’.

We shall be covering the aspects of the automotive dealerships in multiple posts and thus named this as Part 1. We will be explaining the basics of the Automobile Dealerships in this post. An Automobile Dealership is an entity that sells new or used vehicles at the retail level, based on a dealership contract with an automaker/OEM. The OEM primarily scouts for businessmen in the respective territories who shall represent them by investment to open dealerships that shall provide sales/aftersales on behalf of the OEMs. The dealership post appointment by the OEM employs automobile salespeople to sell their automotive vehicles. It may also provide maintenance services for the vehicles, and employ automotive technicians to stock and sell spare automobile parts and process warranty claims.

An Automobile (Car) Dealership in India

Automobile dealerships are usually franchised to sell and service vehicles by specific automakers. They are often located on properties offering specified space to have buildings housing a showroom, mechanical service, and body repair facilities, as well as to provide storage for used or new vehicles. While dealerships are supposed to be in the city centers to attract higher footfalls; bigger dealerships are located out of town or on the edge of city centers.

While a typical dealership associated with any OEM is supposed to have 3S facility; i.e. Sales, Service & Spare Parts – One can associate with the OEM to be only to offer authorized service centers or even become a distributor for parts. In case of 2-wheelers / commercial vehicles; one can chose to be a sub-dealer as well who are either selected by authorized dealers or even OEMs. The sub-dealer concept allows the OEM to multiply its reach much faster.

Automobile Dealerships have always attracted a lot of interest from Businessmen across India. However; we would like to highlight the challenges that any businessman needs to consider prior to investing in an automobile dealership –

  • It is an capital intensive business: Lot of initial investment/capital will required to acquire or rent properties for Showroom, Workshop and even Vehicle Stockyard. Typically it can go upward to Rs.20 cr in case of a Car Dealership. Over and above this; once the business starts huge amount of money shall be required for carrying Inventory as well. For assumption: A Toyota dealer carrying a stock of 100 Innova’s shall have near to Rs.20 cr invested in stock alone*. And if this money is borrowed from a bank; interest needs to be payed as well for the stock until its cleared.
  • Low Margin Levels: Against the popular belief that Automobile Business offers extremely high margins; the margin levels are actually one of the least one can imagine. The Industry Average is ~3.5%-4% and can be extremely straining for the business if required volumes are not attained.
  • High Manpower Requirement: The business is highly manpower intensive and Automobile Dealerships in India as a business employ one of the highest in the overall industry. The number of manpower required to operate in Sales / Finance / Accessories / Insurance / Service / Bodyshop / Used Vehicles / Parts / Stockyard / Backoffice of a respective dealership can go upto hundreds! We shall study it in detail in our later posts.
  • Complicated Business: It is neither a tech oriented business nor requires any specific expertise. Due to its complicated dependency on multiple factors (margin from sales, allied business, after sales, parts, etc) and high fixed costs; any XYZ businessman cannot find success easily.
  • High Time, Management & Process oriented: One cannot manage the automobile business without spending adequate time as timely reviews and actions are very much required at various levels of the operation. The business also requires high amount of process orientation as well – Slightest indiscipline can collapse the overall operations or have an irreparable damage to the brand.

However; owning an automobile dealerships have been a matter of pride and passion for many businessmen who have entered the industry. The ‘Passion’ for automobiles and the ‘Obsession’ to create a customer-oriented environment differentiates a particular automobile business owner to another. The OEMs who are successful in identifying such businessmen and associating with them further accentuates the brand’s motive and presence in the market.

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Petrol v/s Diesel Sales 2019 – VW & Skoda

Volkswagen:

  • 83% of the Polo’s sold in 2019 were Petrols.
  • Over 56% of Vento sales came from Diesel variants. The trend is bit different from other cars in the segment which is dominated by Petrols (City / Ciaz).
  • Also 54% of Ameo sold in Petrol Avatars.
  • VW had launched Polo & Vento in BS6 recently; but shall be available in Petrol-Only variants! VW also announced discontinuation of 7-speed DSG transmission.




Skoda:

  • Almost 60% of Skoda’s sold in 2019 had a diesel heart. It is contrasting when compared to sibling VW which had only 33% share from diesel variants.
  • While Kodiaq was available in diesel only configuration; rest Octavia, Rapid & Superb were available in both Petrol/Diesel options.
  • Skoda’s bestseller Rapid had majority of the sales coming from diesel variants.