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The Product Lifecycle Concept is well known for a long time both in studies of general economy and management. As per the concept; every product launched has a predictable lifecycle and it goes through 4 stages – introduction, growth, maturity and decline. Each of these stages corresponds with a different amount of sales. While marketers attempt to capture high revenues at all of the stages, they alter their sales techniques noticeably throughout the product life cycle. Some economists believe that somehow sales of a new product can be predicted – right from the moment of its entry to its withdrawal from the market. The prediction is basis the stage the model/product is in.
We will assess if the PLC (Product Lifecycle Concept) makes sense in the Indian Automobile Industry and will showcase the Lifecycle Analysis of the models sold by various OEMs in India. Will start with the nation’s largest car maker – Maruti Suzuki.
We shall first state the specific reasons to undergo this analysis:
Every New Model launched by the Car Makers involve a lot of investment. The price tag to develop a new vehicle starts around $1 billion. According to John Wolkonowicz, Senior Auto Analyst for North America at IHS Global, “It can be as much as $6 billion if it’s an all-new car on all-new platform with an all-new engine and an all-new transmission and nothing carrying over from the old model.” (Source)
Considering the huge investment; the model has sell a specific number of units in the mentioned timeline to make profits for the carmaker. An early death for a model shall convert into heavy irreparable losses. It is crucial that a model/platform sells minimum units to work profitable to the OEM.
An OEM having models with longer PLCs acts as a strategic advantage as the respective OEM not only makes more money out of it; but would be building customer base as well.
The Product Lifecycle also defines on how fast the OEM will need to work either to upgrade the model or bring the next model in the pipeline. Agility of the carmaker will make all the difference here. OEMs who can assess the market condition well in advance and are able to upgrade/launch a new model will have higher chances to gain market share.
Lets see how Lifecycle of Maruti Suzuki’s Models –
Maruti Suzuki has introduced almost 26 models in the Indian Market since 1983.
Out of these 26 models; 12 models has seen the end of its lifecycle and has either exited the Indian market or discontinued globally.
As on date; 14 models are in sale in the sub-continent and with this Maruti Suzuki commands >50% market share. (Source)
The Discontinued Maruti Suzuki models list and their age –
Omni & Gypsy served Maruti Suzuki in India for almost 35 years! Both the models were discontinued owing to tighter emission and safety norms. With near to 35 years of sales in the Indian market, Maruti Omni probably shall be the second longest production car in India, next only to Hindustan Ambassador! In today’s world; who can imagine producing a car for over 30 years in any market? (and that too with minimal updates / changes).
Maruti 800 was actually the first offering from Maruti Suzuki India and is widely regarded as the most influential automobile in India – About 2.66 million Maruti 800s were sold in India during its lifetime!
Another cult hatch – Zen survived for over 20 years in India. Zen was Maruti India’s first world car and was exported to Europe as early as 1994. Besides being exported to Europe from 1994 to 2004, it has also been exported to several other countries. The Zen also quickly became a hit with the Indian Racing Scene with highly modified versions of the 993 cc G10B engine topping 100+ Bhp.
Esteem was Maruti’s attempt to cater the executive sedan segment and could sell for almost 10 years here.
List of Maruti Suzuki models currently on sale in India –
Wagon R has an enviable performance in the Indian market. The model has sold 24,14,328 units in the past 20+ years in India! The model still doesn’t show sign of ageing and has sold 1,56,724 units in the last Financial Year (FY20). Which analyst/economist can guess on which stage of product lifecycle Wagon R is in?
Another blockbuster model from Maruti’s stable – Alto has been in the Indian market for over 19 years! Still Alto commands the title as one of the best selling models in India. The model has sold 39,78,285 units and is definitely the best selling hatchback in India’s history. The model was also India’s highest selling car for FY20 with sale of 1,90,814 units. We don’t know how to categorize it in the product lifecycle.
Maruti has found stellar success in India and the life of its models has always been much higher than its peers. No wonder Maruti models command the best resale value in India and still its so called aged models has high demand. Though Maruti had its fair share of not so successful models (Esteem/SX4/A-star); Majority of Maruti’s models have been bestsellers in its segment and are still seeing demand irrespective of the age. Maruti has also been aggressive in bringing out relevant updates on its models to renew the demand over time. This has ensured that Maruti Suzuki makes enough profits even though the models are priced extremely aggressively and the ticket price is smaller too.
Hope you found the article interesting and we shall bring the analysis of other OEM models too in coming days.
We will be covering interesting facts of the world’s largest automobile manufacturer ‘Toyota’ in this post.
1. Toyota Motor Corporation started in 1937 as a division of Toyoda Automatic Loom Works. While the Toyota Group is now best known for its cars, they are still in the textile business as well.
2. The founder of Toyota Motor Corporation actually spells his name T-O-Y-O-D-A. Kiichiro Toyoda, to be exact. The spelling of the company name was changed to Toyota because when it is written in Katakana (a Japanese script) it only takes 8 strokes to write, and 8 is a lucky number in East Asian culture.
3. Kiichiro Toyoda, son of the founder of Toyoda Automatic Loom Works, got ideas for the first Toyota cars from the United States. He traveled to the US in 1929 to investigate automobile production because Japan needed to start producing domestic vehicles due to their war with China. Early Toyota’s bear a striking resemblance to the Dodge Power Wagon and Chevrolet.
4. Even though Toyota started in Japan, the company has created more than 5 Lakh jobs in the United States alone!
5. The Korean War in a way saved Toyota. While the company was on the verge of bankruptcy, and produced only 300 trucks in June of 1950. In the first initial months of the Korean War, the US ordered more than 5,000 vehicles from Toyota, and the company was revived!
6. Toyota first ventured into America in 1957.
7. In the year 2019, Toyota was ranked as the second largest car manufacturer in the world, just marginally short of the Volkswagen Group. (Source)
8. Toyota is the world’s leading manufacturer of hybrid vehicles, and there are more than 15 million Toyota hybrids on the road right now! (Source)
9. Toyota invested over $22.3 billion dollars in research and development worldwide. Close to Apple & Google.
10. In the US; Eighty percent of Toyotas sold 20 years ago are still on the road today!
11. A Toyota is best known for its long-term durability, quality & reliability.
12. Eighty percent of cars sold in Africa are Toyota’s.
13. Fastest Selling Car – Since 1966, Toyota has been manufacturing and selling Corolla every 37 seconds on average. As of 2013, the rate has gone much faster at every 27 seconds on average. The sales have hit an unprecedented 40 million, which is mind-boggling.
14. It is the Leading ‘Green’ Brand. Toyota was the first auto manufacturer to sell a hydrogen fuel-cell vehicle commercially!
Source: Wikipedia, Toyota of Orange and Daves Ultimate Automotive
MG India President, Rajeev Chaba recently disclosed to Livemint that MG are investing in local battery production. According to the source, this should allow them to bring an EV between Rs. 12-15 lakh. The ZS will also soon get an upgrade to get its range to 500km. That will make it the longest-range electric vehicle in the country. The Hyundai Kona’s 452km range is currently the best you can get here.
MG ZS EV
Here’s the statement:
“This is our mid to long term plan. We want to double our bets on electric vehicles in the medium to long term and want to be the leader (in the EV space). That’s why we will come with a battery with 500 kilometres range to show our intent.
Even in 2021, everyone is talking about 8% GDP growth because the base will go down in 2020. So, 2022 will be a good year and all these plans are lined up for then. The battery assembly will happen in our plant but whether it will be done by us or a vendor that has not been decided.”
The MG Hector Plus looks like it’s done testing and is ready to hit the showrooms. A 6-seat version of the Hector Plus was roaming around Gurugram with a Toyota Innova. This car had a captain seat layout in the second row.
2020 Hector Plus Spotted – Rear
The Hector Plus will also get a 7-seat version with bench in the second row. According to ACI, Hector Plus will go up against the Toyota Innova. It’ll challenge Innova’s reliability with a 5-yr unlimited km warranty, more features and a lower price tag. About Rs. 3.0 lakh lower than the Innova Crysta for the Hector Plus is enough to convince Innova buyers to at least take the Hector Plus for a test drive.
After ruling for over a decade, poor Innova is facing competition left and right. Mid- to full-size 7-seat SUVs like XUV500 and VW Group’s Tiguan Allspace and Kodiaq are taking small slices from the Innova’s pie. Meanwhile, the Kia Carnival is also posing a serious threat with a lucrative price tag, luxurious features and some serious road presence.
Say what you will about the Chinese roots of MG, but their strategy and focus have worked well so far. And their commitment to make in India also shows intent to stay here and help the Indian economy. Right now, the slowest to adapt are the Japanese veterans – Toyota and Honda.
Dealers Accepting Bookings For 2020 Mahindra Thar
2020 Mahindra Thar (Camo)
According to a TeamBHP report, Mahindra dealers are taking bookings for the next-generation Thar. According to the source, the car could go on sale in August. Mahindra officials had earlier confirmed that the Thar would be the first new car after the lockdown ends.
Powertrain options for the 2020 Thar could include 2.2-litre turbo diesel and 2.0-litre turbo petrol.
After the BS6 update, the fuel efficiency of the Mahindra XUV300 remains the same as before – 20kmpl. While this is low for its class, it’s worth noting that the XUV300’s diesel engine is a lot torquier than the rest. It has 300Nm of twist coming at 1500rpm. That’s 85Nm more than EcoSport, 60Nm more than Venue and 40Nm more than Nexon’s diesel engines. Hell, it’s only 60Nm less than the XUV500. With that kind of performance, a small fuel efficiency penalty should not bother the owners.
For many of us, our car is like our second home. We use our cars as essential transportation for work, dropping the kids off at school or a set of wheels for a trip. Despite spending so much time in the car, very few of us actually keep our vehicles clean and by clean we are not just referring to an external car wash. The sanitization of your car from inside is more important than many people realize.
If you believe that touching a public elevator button or sitting on a public toilet is bad and can spread diseases, the germs found at a gas pump might send shivers up your spine. Compared to other public locations where the germ count was in the hundreds, the average gas pumps measure in the millions. Some bacteria, like E-Coli & Staphylococcus, which are found in our surroundings, are responsible for a multitude of complications like skin infections, food poisoning and toxic shock syndrome.
According to a study conducted by Queen Mary University, London, it was found that a car’s steering wheel has four times more bacteria on it than on a public toilet seat.
Most of us have no idea how harmful it is to not disinfect our cars. Surface cleaning just helps in cleaning the stains and some contaminants on the outside and leads to a shiny looking car. But the microorganisms present inside the car cannot be seen. With automobiles being a confined space, it is very easy for bacteria and viruses to grow and spread. This is why a thorough disinfection of the car is very important.
As many people don’t tend to sanitize their cars, layers start to build up, and when the sun rays fall directly on the car, it warms up making the vehicle a reproducing ground for the germs and viruses. It just takes around 30 minutes at high temperature for microorganisms to multiply.
According to experts, it is stated that more than 800 types of microorganisms which include various types of deadly viruses and bacteria can grow in your car if not cleaned regularly. The air conditioner of the car acts as the breeding ground for microbes. Also the high contact zones of the car such as the steering wheel, doorknobs, gear stick and seat belts have germs and bacteria on them.
Permagard’s Antimicrobial Shield
Permagard’s Antimicrobial Shield eliminates germs, bacteria, and viruses using a highly efficient antimicrobial formulation. This technology gives protection from 99.99% microscopic organisms by creating an invisible shield which acts as a barrier for the microorganisms.
This product cleans and sanitizes your car’s interior. Lysis technology attacks and kills viruses and germs by puncturing the lipid cell membrane of the microbes destroying its structure completely.
It acts as a shield on the surface of the car’s interior so that the germs and viruses are killed as soon as the microorganism comes in contact with the molecules of the antimicrobial shield.
Some of the unique advantages of Permagard Antimicrobial Shield:
The hypo-allergenic properties of this treatment allow it to be used in confined environments such as car cabins.
By killing germs at a microscopic level, that too without using any toxic products such as alcohol, dehydration or poison.
As this product is non- toxic, it is safe for infants, adults and pets.
As it is applied through aerosol spray method, it does not leave behind any oil stains
This is a DIY (Do It Yourself) product
Once applied, your car is protected for upto 12 months.
Permagard’s Antimicrobial Shield works on eliminating Microbes, Stains, Moulds, mildew spores, virus and also bad odours.
See how beneficial is the Antimicrobial Shield
Conclusion
Covid or No Covid, one should follow the practice of cleaning the car thoroughly from time to time. It is very important to keep your car clean and hygienic to protect yourself and your family from illness-causing germs and viruses.
For the readers of https://www.autopunditz.com/, we have a special code autop10 which will give a special 10% discount on purchase of this antimicrobial.
This article shows how Automobile Dealership Business has transformed over the years – Hence the name ‘Kal’ (yesterday), ‘Aaj’ (today) and ‘Kal’ (tomorrow)
Kal (The History)
The business of automobile dealerships has been glamorous from early days. It was looked upon by rich businessmen who could get car dealerships with lot of influence, have sizeable showrooms and well known by the Who’s Who of the town. A lot of people wanted to get into this business as it had a lot of glamour with celebrities attached to new cars, international conferences, and obviously a lot of media attention. Customers had to wait for days or months to get their preferred car or bike, production was limited and the demand was higher. It was post 2002-2004 (influx of multiple OEMs in India) when a lot of people got into this business considering that they would just need to make an investment and have the right people and the business would go on and they would keep making money from it.
Traditionally a car dealership was made by investing in property and with at least 50% on working capital as getting loans was always difficult those days. But with the advent of international brands and the booming growth in India along with the buzzing real estate sector – We saw that there were a lot of new entrants in this business who are willing to take the risk by paying high rents, and where also willing to borrow their entire working capital on interest. This was when landlords and banks became sleeping partners of this business, and with the complex business that a car dealer handles it takes a long time to understand whether the losses are from the profit or from the capital.
Business Transition –
The business had gone through a lot of changes with the advent of customer delight initiatives, changing technologies, fluctuating government regulations, intensive manpower orientation, factors like JD power, competition between brands to attend highest market share, lowest prices and the highest customer satisfaction. The requirement for infrastructure and new showrooms and workshops also started getting mapped with competition and aspirations of brands. Since the going was good, higher risks were taken of investing with an expectation to break even with growth in future years. We never made a provision in our thoughts or books or plans to handle any sort of situation we would not be earning for a few months for a few quarters. The question of viability and profitability shifted from actual cost and expenses to a future goal of cost and expenses.
The varying government regulations played a very important role in changing the dynamics of this business. Frequent changes in pollution norms forced dealers to sell of their stocks at low prices when the deadlines approached, the losses sometimes were five times of what the dealerships would earn on that car! The regulation by IRDA on the insurance payouts, Cost of increased manpower for complying with statutory requirements such as data entry for registration, Fast Tag, TCS (Tax Collected at Source), High Road taxes in certain states forced customers to buy or register from other states where clause were cheaper, the intervention of CCI and competition norms along with multiple dealers in cities – Discounting became rampant and again dealers started draining their margins in lieu of additional target incentives that they would achieve in future.
Automobile Dealers come under a minimum of 29 acts for statutory compliances & a lot of time & money goes in compliance of various departments & regular visits by various departments is a norm for this industry.
Demonetization brought in a sudden slowness in the business as a lot of customers especially rural started to fear to buy cars by paying in check or taking a loan, these customers where used to buying their car in cash as they were primarily agriculturists. Introduction of TCS, linking of Aadhaar to PAN card and the introduction of CIBIL ratings further slowed the process of decision making of buying an automobile. While I agree that all these developments are good for the economy and I am a firm believer that we should do clean business, but customers from different sections of the society who were used to a certain way of working from generations were finding it difficult to adapt to the new as said organised style of working!
In this journey we saw that the income sources for dealers started getting squeezed and in the journey of delighting customers and doing things differently, costs began to go up.
Just before the days of Covid19 – The Profit after Tax (PAT) of a dealership had fallen to -0.50-1% of the total turnover, which was a result of Total incomes from sales, service, other incomes & spares which was between 9-11% & the expenses were between 8% to 10% depending on location & turnover. Which means that we did not even have a cushion to survive for 25 days without running operations or even handle 3 months of slowdown of 50%.
Dealer Margins of the Automobile Brands in India (Source: FADA)
New car margins internationally are at 10-12% & interest cost in these countries is at 1%-3%; whereas in India our margins are at 2.75%-5% & interest cost is at 9%-11%.
Aaj (The Scenario as of Today)
Now with the current scenario the entire business case has gone through a change where we have restrictions on manpower due to social distancing, customers are not willing to travel, Most cities under lockdown, Interest on term loans & working capitals is piling up, Cash flows in most businesses are chocked, Dealers are still holding stocks of BS4 vehicles which are not selling & will have losses arising therefrom, Cost of sanitization has gone up & so on…
However; we need to be patient & go slow – step by step and ensure health & hygene is of utmost importance in this period.
Kal (The Way forward for Tomorrow)
The new tomorrow for this business will need dealer principal involvement to a high extent in controlling & redesigning the expense patterns of the dealership as each city/market will react differently.
Reaching a cost to income equilibrium will have to arrived after a study of the next few months & the engagement with OEMs at this stage is of utmost importance.
New ideas to generate incomes like selling health insurance, other general insurance & new streams will have to be explored.
Need to re-look at the infrastructure invested & need to trim/shut some outlets to attain cost effectiveness.
Digital initiatives are undergoing their test & results after a few months will answer whether this industry will embrace an online sale or no?, but the initial reactions of customers are that they still prefer to touch & feel the car.
We have to redesign our manpower structures which have to be top light & bottom heavy. (more productive workers & less managers)
Considering Social distancing we may have to work more shifts to ensure optimum utilization of infrastructure.
Vehicle stocks in quantity & ageing have to be on strict vigil, Spares inventory management is also a key as huge losses occur when parts get obsolete.
Restructure your loans & convert some loans to long term & ease working capital.
We need to have a strict control on credit to leasing companies, corporates, government & customers and stopping credit facility for some time is recommended under current situations.
(The article is written by Mr.Sachin Shah. He is an auto enthusiast with over 21 years of Experience in Auto Dealership Business. He has worked at all levels of a dealership – right from a Salesman to now a Dealer Principal. He has a lot of interest in the entire working process of a Dealership, Accounts, Finance & Legal. He has also been involved in various organizations like FADA, KADA & Dealer Council.)
