Passenger Car Makers in India

Mass Market OEMs in India

In 2017, there were almost 16 brands of passenger vehicle on sale in Indian mass market, including Chevrolet which got discontinued in mid-2017. Still Indian market is highly skewed with top two players commanding 67% market share. Several global giant are still fringe players in India and struggling. Unlike global market where market leader has share of roughly 10%-30%, 50% of market share of Maruti Suzuki in India is staggering.

Market Share Trend of the OEMs 

There could be several reasons why global giants are sitting on fence and watching Indian car market action, like –  lack of attention of parent group, fail to read the consumer need, too slow to react and adapt, flawed product strategy or execution etc. Biggest mistake MNCs make, is to consider India as price conscious market (Nissan decided to launch cheap Datsun Products), whereas, Indian buyers are more value conscious, which can be easily explained with Toyota’s product portfolio. Build to cost Etios and its derivative Liva performed poorly in comparison to premium priced Innova and Fortuner.

Performance of luxury car makers has been in line with the global order.

Performance comparison of Luxury OEMs (Indian v/s Global market)

(The article is written by Rohan Rishi. You can connect with him at

Santro: Hyundai’s Trump Card in India!

Post Globalization, Global MNCs were allowed to set up shop in the sub-continent. While many MNC OEMs entered into the Indian market, only a few could make a significant impact in the overall sales. Maruti Suzuki has been a forerunner in the Indian Passenger Car Market and challenging it’s dominance in the highly monopolistic and government-regulated industry during the late 1990s was an impossible feat. However, only 1 OEM could present a tough fight to the leader – HYUNDAI. And the product that led Hyundai’s onslaught was Santro! This so called ‘Small Car’ made such a big impact that it helped Hyundai achieve over 10% Market Share right within the first year of Hyundai’s operation! It not only helped the Korean Auto Major achieve record breaking sales, but also strong profitability at an unprecedented pace.

Maruti v/s Hyundai in past 19 years (since the inception of Hyundai)

Recently, we went through the book written by the veteran BVR Subbu (Santro – The Car That Built A Company) and got to know several interesting trivia about the Indian Auto Industry. Mr. BVR Subbu is known as the face of Hyundai in India and has been regarded as the architect of the group’s phenomenal success in India. He built the Hyundai brand in India from scratch and spearheaded the success of the Santro. Before talking more about Santro, lets look at the interesting bits from the book:

The incidents that led the road for Maruti’s dominance in the late 1990s –

  1. Tata Motors turning down a government offer to produce a small car in 1965
  2. Government rejecting Tata Motors’ proposal in 1985 to ‘manufacture’ cost-competitive, technologically advanced cars in a JV with Honda Motors, Japan
  3. Mercedes-Benz dropping out of a JV plan with Tata Motors in the 1990s to develop a compact car

Reasons for Hyundai’s instant success in the Indian Market –

  • While other Global OEMs were focusing on bringing in their sedan-based lineups into the Indian market, Hyundai’s understanding of the Indian market was better and launched the entry segment car Santro which helped it gain significant volumes right from the launch.
  • While Global biggies Ford, GM & Honda had largely assembly operations in the 1990s; Hyundai  made huge investments to set up ‘integrated manufacturing’ operations with localisation levels of over 80% in the first year itself!
  • Hyundai has also been known to offer latest technologies & features since day 1! Technology such as multi-jet fuel injection (vs. prevalent carburettors), Euro-2 compatible models, and power steering (prevalent only in high-end models then) was offered from Santro itself.
  • Hyundai also started with a relatively large network of 75 dealers, covering 90% of the market (by volume) by reducing its outlet size to lessen the upfront investments required and ensure dealer viability.
  • Hyundai’s decision to go solo (as against opting for JV partnerships with Indian houses as others did) together with strong and quick support from all global departments (R&D, finance, marketing, etc) facilitated the company’s keen focus, and organisational speed and agility in India.
  • Vendor development strategy on two specific planks – a) to commit single-source procurement in order to provide economies of scale, and b) to use well-developed existing Indian suppliers as far as possible. In other cases, Hyundai facilitated partnerships between its Indian and Korean vendors to ensure seamless transfer of quality processes and working methods.

Role of luck in Santro’s/Hyundai’s launch success – 

  1. Every product requires a little bit of luck to achieve success. The Santro received it in the form of a Supreme Court order that effectively allowed only Euro-2 vehicles to be registered in the NCR, effective June 1999. As the technology was available with its parent, HMI moved swiftly to showcase its technological advantage in the market as “Engineered for Euro-2”.
  2. Even after massively slashing the price of the Maruti Zen post the Santro’s entry – had created enough pricing headroom for a highly localized manufacturer to attain at least break-even pricing even at the product launch stage.
  3. A tussle between Suzuki Corporation and the government of India over the sale of stake in Maruti during late 1990s (which also allegedly delayed the launch of the Wagon R, which was introduced as a competitor to Santro) and manufacturing-quality issues that plagued Tata Indica, which had received strong customer response, also contributed to the success of the Santro.

Maruti had almost bought Hyundai India operations – 

  • Hyundai group had faced an existential crisis during the Asian meltdown. Indian government regulations requiring Hyundai India to have a significant portion of their debt locally also proved a challenge, as global banks were unwilling to lend to the Indian subsidiary.
  • While the Indian team did eventually secure finance from local Indian banks, continued stress on the parent company along with investment requirements at Hyundai almost forced the former to sell its India operations to Maruti. The parent and its banks retained Hyundai India only due to their inability to secure a fair price for the operations back in the day.
  • Moreover, Santro’s sales picked up significantly once Euro-2 vehicles were made mandatory. This ensured strong profitability and liquidity for the company, and it did not looked back again.

So, how did Santro actually contribute to Hyundai’s volumes –

Santro’s volume trend in it’s 17 years existence in the Indian market
Santro’s contribution to Hyundai India’s volume over the years
  • Over 13 Lakh Santro’s were sold in 17 years!
  • Santro is based from Global Atos hatch. In 2003, the first generation (Zip) was replaced with the second generation Atos Prime, marketed in India as the Santro Xing, which enjoyed great sales success.
  • In its final few years, Santro had become a popular option as a hatchback taxi, and the car was still selling close to 30,000 units per year when Hyundai made the decision to discontinue production.
  • 16,838 was the highest volume Santro had achieved in a specific month (March 2006). Co-incidentally, Hyundai sold the highest number of Santro’s in the year 2006!
  • Santro single handedly managed Hyundai’s volumes in India. In the first 10 years (i.e. 1998-2017); 76% of Hyundai India’s sales was contributed by Santro! (out of 11,40,116 Hyundai’s sold, 8,62,428 cars were Santro’s)

The first brand ambassador for both Hyundai India & Santro was Shahrukh Khan. The first Hyundai product that Shah Rukh advertised for was the Santro hatchback, which turned out to become Hyundai’s most successful product in India. It is also one of the longest Carmaker-Brand Ambassador partnerships yet!

One of the first Hyundai-Shahrukh Ad:

Product TVC:

The Czech Attack!

Skoda Auto is all set to revive its operation in the Indian market and has a plan to invest Rs.8,000 crore in the Indian sub-continent. ‘India 2.0’ is the term used internally for the Revival plan! The VW subsidiary will utilize the investment to launch high volume models (particularly small & mid-sized cars) using the MQB platform. It shall also come up with a new Engine plant using the investment. It will also spawn Skoda-specific models and shall refrain from ‘badge-engineered’ products (like the Skoda Rapid & VW Vento). Skoda Auto shall have its own models and will carry no resemblance with the products in its sibling VW’s portfolio.

Skoda entered the Indian market way back in 1999 and has been trying to get a considerable pie in the sub-continent. Though it initially established itself as a premium brand and launched the likes of Octavia & Superb (which were adored by the consumers) – poor service quality & customer experience proved detrimental to the brand. The tank like body and eye-pleasing European design were the USPs of the offerings from Skoda – However, inconsistent product quality & high cost of ownership made it difficult to earn volumes over the years.

A brief on the History of Skoda Brand –

Skoda as a brand is over 150 years old! Skoda was founded way back in the year 1859 by Waldstein family that used to be the royal family of erstwhile Austrian empire. Emil Ritter von Skoda a Czech Engineer bought the factory from Waldstein family in1969 after working nearly for three years with the company.It used to be the machine factory.In 1869. In 1886 he provided railway facility to the company and in the year 1890 he added an arms factory to the company. The arms factory produced machine guns for the Austro Hungarian army.In 1899 he incorporated his holdings as the Skoda Works which produced locomotives,aircraft,ships,machine tools,steam turbines and power utilities.In  1895 Vaclav Laurin and Vaclav Klement  founded the company Laurin and Klement. The company first started making bicycles and then moved to motorcycles.The first motorcycle skoda created was called the motorcyclette and was powered by an engine mounted on the handlebars. It did ,however,prove extremely dangerous and was shelved.

The origins of what became Škoda Auto go back to the early 1890s when, like many long-established car manufacturers, a company started manufacturing bicycles. Škoda (then Laurin & Klement) factories were founded in 1896 as a velocipede manufacturer. By 1905 they started manufacturing cars ,making it the second oldest car manufacturer in Czech lands after Tatra. The first model was the Voiturette A  which was an instant hit.

Skoda under Volkswagen

The split of Czechoslovakia due to communism led to many changes in the automotive industry. Most  of the industries were now open  to  privatization and Skoda was part of it.A joint venture was made in 1991 between Volkswagen and Skoda and Volkswagen  took 30 % share in it. In 1995 the share was raised upto 70%. Skoda engineering improved greatly by Volkswagen inputs.

The present day Skoda

Skoda has gone from strength to strength. From a small player to a highly regarded brand, Skoda consistently stays at the top when it comes to customer satisfaction surveys globally. Skoda recently revealed the concept of their electric lineup like Vision X concept in  Geneva motor show. They are also going to release the plug in version of present lineup. Initially the company was meant to serve the role of VW Group’s entry brand. Over time, however, the Škoda brand has progressed upmarket, with most models overlapping with their Volkswagen counterparts on price and features, while eclipsing them on space.

Skoda Auto in India –

Sales Trend of Skoda India

  • Skoda India sales has been operational since November 2001 and has been able to sell over 2.5 Lakh units in past 17 years!
  • Just to highlight the sales volume – Skoda in its entire term in India would have sold less than what Maruti Suzuki would have sold in same market in 2 months!
  • Skoda India saw the highest rise in sales post the launch of its sedan – ‘Rapid’. The highest volume was recorded in the month of June 2012, where Skoda reported a sale of 4,923 units (in which Rapid sales was 3,246 units).
  • Even as on date, Rapid’s contribution to Skoda’s sales is phenomenal – Rapid contributed ~70% of Skoda’s volumes in the year 2017!
  • To increase sales in India, Skoda may bring back the Fabia hatch! Owing to poor sales and high assembly cost, Fabia had been discontinued in 2014.
  • In the fresh lineup from Skoda, expect a mid-size SUV to be launched which shall be pitched against the likes of Hyundai Creta! The Design cues shall be taken from the Vison X concept –
Source: Autocar

Will Skoda’s efforts help it revive the ailing sales volume? Shall ‘India 2.0’ be effective for the Czech major? We expect Skoda to strengthen its dealer network in terms of providing a standardized customer experience and also bring much more reliable cars in the future. There is a lot of brand repair that needs to be initiated prior to running behind the volumes. Hope the OEM takes the right steps and march past the expected market share.

(This article is written by  Gourav Saksham, a dentist by profession and a Petrohead by passion. You can connect with him at

Is KUV 100 (Trip) new Indica (taxi)?

“Mahindra has launched a new variant of the KUV100. The KUV100 Trip, as it is called, is aimed at fleet operators.” – Media report (13th March 2018)

This product strategy sounds similar to Maruti Dzire Tour and Hyundai Xcent Prime, where mainstream product got an update and older version or generation was stripped down and relegated for fleet operators.

Dzire is one of the best-selling cars in India, also very popular among fleet operators. So, Maruti has launched older version rechristened as Dzire Tour to protect the brand image of mainstream Dzire, by not letting it get a Taxi Tag. However, case of Hyundai Xcent Prime is different. Sales started flagging due to competitive heat, so, Hyundai found a way to prop up the sales numbers and save the initial investment by selling vehicle where demand is – Fleet operators. Sales number suggests KUV 100 story is similar to Xcent and not Dzire.

KUV 100 was launched in December 2015 and was pitted against Swift and Grand i10. But sales were nowhere close to segment bestseller. It couldn’t even reach 5000 per month mark, so Mahindra quickly tried to address the concern by launching refreshed version within 2 years of launch (generally it happens after 3 years) followed by grand advertisement campaign. As a first ground up attempt from Mahindra to develop a hatchback, it has few rough edges. Apart from quirky side profile design, it isn’t that refined and buyers are spoilt for choice with refined products since long time.

Tata is silently phasing out Indica and Bolt (modified Indica Vista). Former was a fleet operator’s favorite, later was deliberately targeted at fleet operators, however, due to pricing debacle it was never able to catch up. Also, Tata is not letting Tiago go the Indica way. So there is little likelihood that the vacuum created by Indica might get filled up by KUV 100 Trip. Well they have some similar attributes, like – undercutting segment leader’s price by huge margin etc.

It’s a belief, that if product is introduced to or adopted in the commercial segment, it loses aspirational value, Toyota Innova is an exception. Notion is, several personal car buyers have stayed away from Tata Indica for very same reason. However, Mahindra is overlooking this notion. Possible reason could be lower than initially expected volumes, flagging sales number in past 2 years and initial product development investment of ₹ 1000 Crores.

So, we did a very conservative estimate of product’s profit center, for illustration purpose only, based on certain very broad assumptions. Actual figures can be on higher or lower side (may have wide variation).

For illustration purpose following are the assumptions :

  • Revenue : base price (excluding GST/Excise/VAT/Dealer Margin) is considered and Petrol/Diesel volume split is factored in
  • Depreciation and amortization (D&A) rate for product development cost is considered at 20% per annum. So every year fixed cost of ₹ 200 Crore will hit the product’s profit center
  • Other fixed cost is not taken into consideration which could only inflate the cost
  • Variable cost at 75% of revenue is considered
  • Annual volume follows a downward trajectory, in 2018, sales dip to 20,000

If sales dip further, forget operating losses, company will not be able to recover the initial product development investment in full product life cycle run (Industry average is roughly 6 years).

One way to prop up volume is offering discount, but again in long term, it hurts the bottom line badly. Moreover, discount’s effect could be inconsistent if product falls short to meet the need of consumer. For sustainability, one possible way is to find new revenue stream for existing product, thus comes fleet segment into picture.

It seems, in Mahindra’s automotive dictionary, letter ‘R’ section starts with the word “ruggedness”, which is proven with abuse friendly products like Bolero. However, for hatchback segment they need to adopt the word “refinement”.

(The article is written by Rohan Rishi. You can connect with him at


Indian Passenger Car Sales – 2017


  • India was the world’s fifth biggest vehicle market behind Germany and ahead of the United Kingdom
  • Passenger car sales totalled 3.23 million units, up by 7.7%
  • For the first time, SUVs counted for more than 20% of the market

Solid 2017 for the Indian vehicle industry as new car and light commercial vehicles sales soared by 8.8% to a record of 3.61 million units. Therefore last year’s results broke the last record achieved in 2016 when 3.32 million vehicles were sold. Good economic conditions along with better deals and more cars to choose boosted sales and allowed India to keep its key position in the global ranking. It was the third year in a row of growth, and at the same time the highest percentage growth since 2012.

India was the world’s fifth largest vehicle market getting very close to the Germany, in the fourth position, as the gap between them reduced from 287,000 units in 2016 to only 96,200 vehicles last year. This encouraging results were possible thanks to a solid volume growth which was the world’s second largest after China. Both passenger cars and light commercial vehicles drove the growth with increases of 7.7% and 19.2% respectively.

Volume of Top 10 Global Markets

Small cars continue to dominate following the government’s benefits. City-cars and subcompacts counted for almost 2 in 3 cars sold in India in 2017. However, only the subcompacts posted a positive change with volume up by 9.7% to 1.11 million units, or one of the world’s biggest market for this kind  of cars. The city-cars’ volume remained stable at 987,800 units, down by 0.4% compared to 2016 figures.

Sales Trend – 2006 to 2017

SUVs were the third largest segment with sales totalling 693,900 units, up by a massive 31.8%. India is one of the latest markets to join the SUV boom just as USA, Europe and China have done already. These vehicles counted for 21.5% of total passenger car sales, or 3.9 percentage points more than the share seen in 2016. The arrival of small, cheaper and more modern SUVs is boosting this segment as the figures by subsegment show: B-SUVs volume grew by 36.5% to 508,400 units.

OEM-wise Sales Performance

Maruti-Suzuki’s strong position was reinforced in 2017 with its market share jumping from 46.6% in 2016 to 49.6% last year. The launch of new Dzire and Ignis along with the solid growth recorded by the Vitara Brezza and Baleno, helped to increase the dominant position of the Japanese maker.

Honda did very well too thanks to impressive results of the WR-V, its smallest SUV for India. In fact, this model helped Honda to outsell Tata Group and Renault-Nissan, with the first increasing its sales by 4.2% and the latter posting a 10.9% decline.

Financial Performance of Indian Automobile Companies

Companies across the globe aspire for higher profit margins which need to be sustainable in future, but only few are able to realize that. Let us have a look at the long term financial performance of automobile companies which are listed on Indian share market (BSE/NSE).


  • JLR – Jaguar & Land Rover (a fully owned international subsidiary of Tata Motors)
  • Eicher (Royal Enfield) 2009 – Formed Joint Venture with AB Volvo of Sweden; transferred commercial vehicle business to the JV
  • Eicher (Royal Enfield) 2015 – Figures for FY16 and FY17 are as per Indian Accounting Standard, from Dec’06 – Dec’14 are as per IGAAP
  • Data Source : (standalone/non-consolidated data)


Let us consider India’s largest private sector company (in terms of revenue) – Reliance Industries Ltd. (RIL) as a reference point.

Over the same period, RIL has made almost twice the net profit (value terms) as all of these companies put together. But then, quite a few automotive companies have achieved revenue and profit growth rate far higher than RIL and some have even better profitability. Thus their combined Market Capitalization is much higher than RIL.


Maruti has not only dethroned Tata Motors (non JLR) in terms of revenue but now is far ahead with its product onslaught. Mahindra too is closing on Tata. Once Mahindra (2006) was smaller than half the size of Tata!

Net Profit

Can also be viewed as the earnings available to shareholders once all of the company’s obligations have been satisfied (e.g. to government, to suppliers, employees, utilities, lenders etc). Share Markets tends to view net profit on a per share basis, popularly known as Earnings per Share (EPS) and its derivative PE ratio (Price to Earnings). In long run, Bajaj is making very consistent net profit (value terms) in comparison to peer group.

Net Profit Margin

This figure is indicator of profitability and is good for apple to apple comparison, particularly from investment perspective.  In long run, Eicher, Bajaj, Hero and Mahindra turn out to be more profitable than the largest Indian company (RIL) and favorite of Indian stock market since 90s.

Market Capitalization

Largely depends on net profit margin and guided by future growth expectation. But there are several other factors too and sometimes mere speculation. For example, Bajaj and Eicher with highest net margin, are more valuable than Hero, which though is bigger in terms of revenue. Tesla has not had made any money (profit) till date, still it is more valuable than Ford because investors feel that it will make (colossal) money in future, will it or won’t it, is left to the future. Right now Maruti Suzuki India Ltd (MSIL) is by far most valuable Automaker in India. Tata Motor’s high valuation is because of crown jewel – wholly owned international subsidiary Jaguar & Land Rover (JLR).


In long run they have been really good at delivering profitable performance YoY. Mahindra has most diversified automotive portfolio, from tractors to cars and have put their money behind other modes of transportation too, including aircrafts and boats. Diversified portfolio helps in mitigating risks emanating from the cyclical nature of few end markets. But buying one basket for every egg has its own share of disadvantage too. Every business line will be fighting for parent’s attention and resource, and group may lose its focus. Mahindra is #1 in tractor business but in all other segments it has to content with lower rung and sometimes bottom one too. Their 2 wheeler business is massive disappointment, adding red ink to P&L statement with reported loss of  ₹ 865 Crores (FY2016) and ₹ 692 Crores (FY2017), and virtually no sales now.


Maruti’s net profit margin could have been much higher, has it not been paying royalty to its parent Suzuki Motor Corporation Japan. Royalty payment is common practice among the MNC, for further reading, refer to the Business Standard article. Royalty payment being an expense on P&L statement, not only circumvent corporate tax liability but also lowers the dividend yield for shareholders at large.

 Tata Motors (non-JLR)

Tata Motor’s domestic business is perhaps the worst performer in terms of profitability. In over a decade, it’s the only company which has reported huge losses, twice. Tata Motor’s Chairman Mr. N. Chandrasekaran has expressed his concern in recent shareholder’s annual general meeting. He has also assured that turnaround of domestic business is in progress. However, high capital expenditure in developing new products in PV segment and upcoming BS VI up gradation in CV segment may keep cost high and profit elusive in near term. Profit from JLR is helping Tata motors to keep its head above water.

Commercial Vehicle Manufacturers

Though industry has few players, competition is intense and overall profitability is pretty low, even in long term. Ashok Leyland, Force Motors and Tata Motors having substantial revenue contribution coming from CV segment just corroborate this. By contrast, engine and allied technology providing companies like Cummins (supplies engines to Tata Motors CV division) and Greaves Cotton happens to be more profitable!

Differentiated 2-Wheeler Offerings is Real Money Spinner across the Automobile Industry!

  • Hero may be #1 in terms of volume and revenue but over the years Bajaj has consistently outperformed in terms of net profit (value) and net profit margin.
  • 80% of Eicher profit is contributed by Royal Enfield (RE), with newer, highly desirable and high margin product line, RE is fast catching up with volume players.
  • Poor profitability of TVS in long term is exception in the lot here.

In Indian market real profit is generated by differentiated 2-wheeler product line. Scion at Bajaj (Mr. Rajiv Bajaj & Mr. Sanjiv Bajaj) and Eicher (Mr. Siddharth Lal) have changed the course of their respective company by getting rid of few legacy business and products and bringing in new thinking and their ability to turn dream into reality. Whereas Bajaj Pulsar brought performance, excitement with practicality in reach of common man, Royal Enfield over the past decade has bolstered its cult following with the owners and onlookers alike. Below table shows how successful products in higher price band offers higher overall margin.

Mahindra has burnt fingers in 2W-mass market segment, and virtually no sales now. Mahindra 2W business foray began with the acquisition of Kinetic Motor’s assets (2008), from Pune-based Firodia family. Kinetic motors once had popular two-stroke scooter offering in India, till they had partnership (1984-1998) with Honda, known as Kinetic Honda. Post partnership breakup, Kinetic Motors on their own made four-stroke scooters and motorcycles, which didn’t do well, and later resulted in promoter’s partial exit from the company. Mahindra infused capital over time and introduced new product line along with rebadged Kinetic products. However, none of the product was competitive enough to bring in the expected sales volume. Product(s) having right attribute(s), that meets or exceeds the need(s) of potential consumer, positioned at right price helps to win customer, every product name ending in letter ‘O’, doesn’t!

Mahindra now want to do what Bajaj & Royal Enfield did – be a Niche or Premium 2W Player. Mahindra is back to drawing board, and has started acquiring European brands like Peugeot Motorcycles, BSA and Java.

After years of low level of profit, TVS too wants to expand profit margin. Joint venture initiative with BMW Motorrad and high performance products like Apache RR 310 seems to be a step in that direction.

(The article is written by Rohan Rishi. You can connect with him at