A REPORT ON

AUTOMOBILE INDUSTRY

MASTER’S IN BUSINESS ADMINISTRATION

(2019-2021)

SUBMITTED BY-
GROUP 2
DIVYANSH KAUSHIK (501904011)
IPSA JAIN (501904020)
SAHIL BATRA (501904051)

LM THAPAR SCHOOL OF MANAGEMENT

DERA BASSI,CHANDIGARH
SUBMITTED TO

DR. PIYUSH VERMA

1
TABLE OF CONTENTS

TOPICS DISCUSSED PAGE NO.

INTRODUCTION OF THE PROJECT 3

AUTOMOBILE INDUSTRY OVERVIEW 4

PORTER’S FIVE FORCES ANALYSIS 5

INTRODUCTION OF MARUTI SUZUKI 8

MICRO ECONOMIC FACTORS 10

MARKETING STRATEGY 13

INTRODUCTION OF THE PROJECT

2
The motive of this project is to give clear information about the Automobile industry in India.
The first part of the project focuses on the macro analysis of the industry where an overview of
the history, present scenario and the financial performance of the past years will be analyzed and
compared. The analysis will also include the use of Porter’s five forces model and the changing
trends in the industry. The vital impact of the Automobile industry on the growth of the indian
economy will also be studied.
The second part of the project will focus on the market leader of the industry i.e. Maruti Suzuki.
The micro analysis will begin with the background and the introduction about the company. The
micro economic factors will be discussed through the Maruti Suzuki perspective under which the
consumer surplus, producers surplus, elasticity,type of market and the profit and loss in the short
and long run will be used to analyze the company.
Detailed company analysis and market analysis through strategies, competitors will be done.
Company will be analysed through the help of SWOT analysis, BCG matrix and we will find out
the marketing mix of the company and the various strategies implemented by the company which
made them the market leader.

3
AUTOMOBILE INDUSTRY: AN OVERVIEW
The automobile industry with the inclusion of the auto components industry, is one of the core
industries in India. A well developed and organized transportation system plays a key role in the
development of an economy. Automobile is one of the largest industries in the global market due
to its strong forward and backward linkages with several key segments of the economy.
Automobile Sector occupies a prominent place in the working of Indian Economy. Automobile
sector is a leader in product and process technologies in the manufacturing sector. It has been
recognized as one of the key pillars of economic growth and the domestic automobile industry is
believed to be the measurement tool of the economy. There is such a belief that in most mature
economies the automobile industry’s performance is showcased as a reflection of the economy’s
health. This sector has emerged as the sunrise sector in the Indian economy.

The Indian automobile market can be divided into many different segments viz., two-
wheelers (motorcycles, mopeds, geared and ungeared scooters), three wheelers, commercial
vehicles (light, medium and heavy), passenger cars, utility vehicles (UVs) and tractors.

PERFORMANCE OF INDUSTRY

 India is a prominent auto exporter and has a strong export growth expectations for the
future. Automobile exports grew 14.5 percent during FY 2019. It is expected to grow at a
CAGR of 3.05 per cent during 2016-2026.
 Overall domestic automobiles sales increased at 7% CAGR between FY13-18 with 25
million vehicles getting sold in FY18. Automobile sales in July 2018 witnessed a year-on-
year growth rate of 7.9% across segments, driven by 46.2% growth in three-wheeler sales
in terms of percentage.
 Sales of electric two-wheelers are estimated to have crossed 55,000 vehicles in 2017-
18.
 The Indian automobile industry became the 4th largest in the world with sales
increasing at 9.5 per cent year-on-year to 4.02 million units (excluding two wheelers) in
2017.India was the 7th largest manufacturer of commercial vehicles in 2018.
 The Two Wheelers segment dominates the Indian market in terms of volume owing to
a growing middle class and a youth dominant population. Moreover, the growing interest
of the companies to explore the rural markets further helped the growth of the sector.
 In addition, there have been several initiatives by the Government of India and the
major automobile players in the Indian market are expected to make India a leader in the
two-wheeler and four wheeler market in the world by 2020

4
PORTER’S FIVE FORCE ANALYSIS OF AUTOMOBILE INDUSTRY
A Porter's Five Forces Analysis explores five principal industry factors which determine the
attractive of a given industry in a particular market. This five forces model applies to every
Indian car manufacturer.
In any Five force analysis, the factors to be analyzed are the following:-
1. The threat of new entrants
2. The bargaining power of buyers/customers
3. The threat of substitute products
4. The amount of bargaining power suppliers have
5. The amount of rivalry among competitors

1. The threat of new entrants

In most of the other markets, the capital and expertise which are needed to set up an automobile
or parts manufacturing facility would be a significant barrier to entry to prevent many new
entrants from setting up.
However, given India's incredible growth forecasts, infrastructure growth, and ever-increasing
financing options to rural residents, the market has become very attractive. As such, the threat of
new entrants is high.
Result: Unfavorable

2. The bargaining power of buyers/customers.

Buyers in India have a high amount of choices while buying a product. There are more than 20
foreign car manufacturers selling in India. There are also a plethora of incredibly cheap choices
available to the customers.
Result: Unfavorable

3. The threat of substitute products

India is famous for its two-wheelers (bikes and scooters) and also three-wheelers. Auto
manufacturers face a stiff competition and threat from them.
Result: Unfavorable

4. The amount of bargaining power suppliers have

It is likely that the suppliers to the manufacturers have a considerable bargaining power. They
are not held ransom by one single manufacturer as they can sell and market their products to any
of the others in India.

5
Result: Unfavorable

5. The amount of rivalry among competitors

High level of rivalry among the competitors. The industry is not yet in its shake-out phase and is
still struggling to find the up-and-coming stars and possibly overtake the leaders.

Result: Unfavorable

PASSENGER VEHICLES MARKET SHARE OF 2018

 The leading automakers include Maruti Suzuki, Hyundai Motor and Mahindra &
Mahindra.
 In 2018, FCA, Toyota, and Ford were among the non-domestic car manufacturers to see
the highest growth rates.
 However, FCA India sold a low 18,400 vehicles to Indian customers in 2018.
 Maruti Suzuki’s Alto was India’s bestselling automobile in the 2017-18 season.
 Passenger vehicles are ranked as the second most important motor vehicle segment in
terms of sales, while two-wheelers continue to be India’s bestselling vehicle segment.

6
MARKET LEADER OF THE INDUSTRY

7
INTRODUCTION OF THE COMPANY
Maruti Suzuki India Limited (MSIL) in not a new name in the market. The old name of Maruti
Suzuki India Limited (MSIL) was Maruti Udyog Limited an automobile manufacturing in India.
MSIL was established in February, 1981 and production of vehicles started in 1983 with the
“Maruti 700” which was 100% localized product made and then the second model ‘ Maruti 800
DX ‘ which was based on the ‘ Suzuki SS80 ‘ was imported from Japan car manufacturing
plant . MSIL headquarter is located in New Delhi and it was founded as joint venture between
Suzuki Motor Corporation, Japan and the Government of India. At the present scenario of four
wheelers in India, MSIL is a leading manufacturer in the market. As of July 2018, it had a
market share of 53% of the Indian passenger car market. MSIL has three manufacturing facilities
in India and manufactures and sells popular cars such as- Vitara Brezza, Celerio, Ignis, S-cross,
Baleno, Ciaz, Ertiga, Alto 800, Alto K10, Swift, Dzire, Wagon R, Ritz and Omni.
The three manufacturing plants are –
(i) Gurgaon Manufacturing Plant
(ii) Manesar Manufacturing Plant
(iii) Gujarat Manufacturing Plant.
All plants have a combined production capacity is around 17 lakh Vehicles per year. In which
15lakh Vehicles are the production capacity of Gurgaon Manufacturing Plant and Manesar
Manufacturing Plant together whereas 2 lakh Vehicles per year are the production capacity of
Gujarat Manufacturing Plant. According to the company, the new plan is to increase the total
production capacity of all three plants from 17 lakh Vehicles per year to around 22 lakh Vehicles
per year by 2020 to meet the rising demand of the Indian and the foreign market.
(i) Gurgaon Manufacturing Plant - Gurgaon Manufacturing Plant has three fully integrated
manufacturing plants and is spread over 300 acres). This plant also manufactures 2,40,000 K-
Series engines per year which are used to run the cars. The Gurgaon Manufacturing Plant
manufactures the- Alto 800, Wagon R, Ertiga, S-cross, Vitara Brezza, Ignis and Eeco.
(ii) Manesar Manufacturing Plant – Manesar Manufacturing Plant was inaugurated in
February, 2007 and is spread over 600 acres . Initially it had a production capacity of 1,00,000
Vehicles per year but this was increased to 3,00,000 per year in October, 2008 and again
increased to 5,50,000 Vehicles in March 2014. The Manesar Manufacturing Plant produces the –
Alto 800, Alto K10, Swift, Ciaz, Baleno, and Celerio.
(iii) Gujarat Manufacturing Plant – Gujarat Manufacturing Plant was inaugurated in February
2017. Paper plant current production capacity is 2.5 lakh Vehicles per year. But the new plan is
to increase the production capacity of this plant up to 7.5 lakh Vehicles per year by 2020.

8
Maruti Suzuki Brand Analysis

Parent
Suzuki Motor Corporation
Company

Category Sedans, Hatchbacks, SUV’s

Sector Automobiles

Tagline/
Way of life; Count on us
Slogan

Maruti Suzuki has car models in every segment with a wide price range to choose from, apart from
USP
being the most reliable name in Indian automobile market

Maruti Suzuki’s STP

Segment Complete automobile segment including hatchbacks, sedans & SUV’s

Target
Indian urban, semi-urban middle class and upper middle class
Group

Positioning Maruti is India’s No.1 automobile brand with strong history

9
SNAPSHOT OF MARUTI SUZUKI ON THE BASIS
OF

MICRO
ECONOMIC
FACTORS

CONSUMER AND
ELASTICITY OF TYPE OF
PRODUCERS
DEMAND MARKET
SURPLUS

Consumer Surplus
Maruti Suzuki provides its customers with lower prices, good innovative features and best
quality and service which a general human being desires for these days. Consumer Surplus is
defined as the excess satisfaction that the consumer gets when he might be willing to pay more
for a product than he actually has to pay.

Producers Surplus
Producer surplus is the amount that the producer will be willing to sell rather than let go a sale.
Some units that can be produced at a cost that is lower than the market price, the seller receives a
surplus, or net benefit from producing those units.

10
Complements
Complements are goods / products that are consumed and used simultaneously. An increase
(decrease) in the price of one product shifts the demand curve for another product to the left
(right). Fuel and steel are complement products for Maruti Suzuki cars. If the price of fuel or
steel goes up, demand for Maruti Suzuki cars decreases and vice-versa.

Substitutes
There are many other car makers / manufacturers in Indian market which are threat to Maruti
Suzuki and are close substitutes as well. If Maruti compromises with the quality and price, then
the customers would prefer to substitute Maruti cars and buy other company cars like Hyundai,
Mahindra, Tata, etc.
COMPETITORS OF MARUTI SUZUKI-
1. Honda Motors
2. Toyota Motor Corporation
3. Nissan Motors
4. Hyundai Motors
5. Tata Motors
6. Volkswagen
7. Ford Motor Company
8. Datsun
9. Renault
10.Mahindra And Mahindra
11. Skoda

ELASTICITY OF DEMAND
Elasticity of demand refers to the relative/degree of responsiveness of the changes in demand to
the changes in the price or income or price of substitutes and complementary goods. Demand for
the vehicles is linked to growth of the economy and rise in income levels of the people. There is
an inverse relation with the interest rates and fuel prices as around 80% of the total vehicles
bought are on credit.

11
Price Elasticity:
In case of Maruti Suzuki, the price elasticity of demand is relatively elastic (e>1) because a little
increase in its price will lead to a greater decline in the quantity demanded.

Income Elasticity:
When there is an increase in income of consumers, the purchasing power of the people increases
and demand for Maruti cars increases.

Maruti Suzuki cars are now a necessity product, i.e. a product that increases in demand when
consumer income rises. Consumers now are willing to have their own cars, but due to their lower
incomes they can’t afford to buy their desired car. But if there is increase in their income they
would surely prefer to buy a Maruti for its best quality and price. Income elasticity of Maruti
Suzuki cars are elastic in nature. (e>0)

Cross Price Elasticity:

The price of Maruti Suzuki makes it a close substitute to other products in the market. If the
price of other substitutes increases and there is no change in price of Maruti cars, consumers will
definitely opt for a Maruti Suzuki.

TYPE OF MARKET:
The small car segment comprises of a few competing car manufacturers (Hyundai, Tata and
General Motors). The car products offered by them are homogeneous / differentiated. Given the
scale of production and the investment needed, barrier entry is high and very costly. Hence, this
market is a Monopolistic Market. Maruti Suzuki had created a totally new market segment which
supplied to the middle class i.e. the lower income sector.
The Maruti Suzuki is a monopolistic market which is shown using the H-Index (The Herfindahl-
Hirschman Index) which is a way of measuring the concentration of a market share held by a
particular supplier in a market. The H index is the sum of squares of the percentages of the
market shares held by the firms in a market. Maruti Suzuki can be called a monopolistic firm
because it has around 40% of the total market share. Few years back it was an oligopoly because
its share was more than 50% and according to H-Index (0.5-0.75) such firm can be called
oligopoly.

VALUE IMPLICATION
ABSOLUTE MONOPOLY 1
PERFECT COMPETITION 0
MONOPOLISTIC 0-0.5
OLIGOPOLY 0.5-0.75

12
 MONOPOLY 0.75-1

Marketing Strategy of MSIL

Having a wide range of models in almost every segment of the Indian automobile market. Maruti
Suzuki offers 16 brands and 150 variants spanning across all the segments. Thus serving the
needs of diverse range of customers. The Brand product strategy focuses on catering to
the needs of almost all the segments from the middle class to high class income groups.
With cars in the economy segment, mid-range segment, luxury and super premium segment, the
target group for the brand includes anyone above 4 Lakh p.a. salary, people those are looking to
switch from 2-wheeler to 4-wheeler, millennials employed as professionals and managers. The
middle class, Upper middle class, High class, and people of the age bracket of 21-65 years
comprises its target group.

Marketing-mix of MSIL –
Marketing mix is a combination of factors that can be controlled by a company to influence
consumers to purchase its products.It is a foundation model and set of marketing tools that the
company uses to pursue its marketing objectives in the target market. Thus, the marketing-mix
refers to four levels of marketing decisions– product, price, place and promotion.The marketing-
mix of Maruti Suzuki India Limited is as follows.

1) Product mix of MSIL – Maruti Suzuki India Limited currently have 53% market
share in the Indian market. All the products of Maruti Suzuki India Limited are made by keeping
focus on the common man. Means the product quality is suited for the every segments of the
population either it is urban or rural segment. Different types of cars sold by them in the market
are –
● Omni Celerio X
● Wagon R Ciaz
● Swift Baleno
● Dzire Baleno RS
● Eeco S-Cross
● S-Presso Vitara Brezza
● Alto K10 Ignis
● Ertiga
● Celerio

13
2) Price mix of MSIL – Price strategy of Maruti Suzuki is as per both the penetrative
and the competitive stage. Pricing strategy of MSIL is based on many factors. It is decided after
the proper analysis of market meaning that the research team of the company analyze the current
market trends, the competition, the cost of raw materials, socio-economic factors, distribution
charges, cost of advertisement, the dealer’s profit and the profit of the company.
CAR NAMES PRICE LIST

Maruti Swift Rs. 5.14 - 8.89 Lakh*

Maruti Vitara Brezza Rs. 7.67 - 10.64 Lakh*

Maruti Wagon R Rs. 4.34 - 5.91 Lakh*

Maruti Dzire Rs. 5.82 - 9.57 Lakh*

Maruti Ertiga Rs. 7.54 - 11.2 Lakh*

Maruti Alto 800 Rs. 2.93 - 4.14 Lakh*

Maruti Celerio Rs. 4.31 - 5.48 Lakh*

Maruti Alto K10 Rs. 3.65 - 4.44 Lakh*

Maruti Eeco Rs. 3.52 - 4.66 Lakh*

Maruti S-Presso Rs. 3.69 - 4.91 Lakh*

Maruti XL6 Rs. 9.79 - 11.46 Lakh*

Maruti Celerio X Rs. 4.8 - 5.57 Lakh*

3) Place mix of MSIL –

Maruti Suzuki India Limited has three manufacturing units in India which have a combined
production capacity of 17, 62,000 Vehicles annually. It has strong dealership network across
India and has largest distribution and after sales service network. As far as the place mix of
MSIL is concerned, the company has 1,820 sales outlets across 1,471 cities in India but the
company is currently aiming to increase it to 4,000 outlets by 2020. MSIL has 3,145 service
stations across 1,506 cities throughout India and aims to touch 5,000 service stations by 2020.
The dealership network is larger than Hyundai, Mahindra, Honda, Tata, Toyota and Ford
combined. MSIL has 1,280 showrooms across 453 cities in India. MSIL transports its cars from
manufacturing plant to different dealers point across India through Car carrier (container). In
August, 2016, government of India has experimented to send the cars through ships to control
the pollution but the experiment was not successful. And then MSIL also included train racks to
transport the cars to decrease the pollution level.

14
4) Promotion mix of MSIL-
The MSIL uses all types of media for promoting its products. The promotion mix consist of four
major tools –
- Advertisement - Publicity - Personal Selling - Sales Promotion
Advertisements are telecast in the visual media and the print media such as Television, radio,
newspaper, magazine, road shows, seminars and workshops. Publicity and word of mouth had
played a vital role in the success of Maruti Suzuki India Limited.

PERFORMANCE OF MSIL IN THE FINANCIAL YEAR

Last week, Maruti Suzuki released the sales numbers for the month of October 2019 and after
several months of de-growth, the company has finally reported a satisfactory 4.5 per cent rise in
volumes. Last month Maruti Suzuki India's total sales were 153,435 units, as compared to the
146,766 units which were sold during the same month last year. In comparison to the sales
numbers from April to October of 2018 and 2019 the company got a negative change of 20.3%

15
SWOT ANALYSIS
Strengths- Weaknesses –
- Brand name. - Lack of separate Research and Development
- Largest distribution network in the country. department.
- Wide range of products offered at different - New model introduction to only cosmetic
price points. changes.
- Cheapest cars in their respective segments. - Dominance mainly at lower level of
- Encouraging export. segments.
- Economy with latest technology.

Opportunities – Threats –
- Rise of Indian middle class and small cities. - Many players fighting for the same segment.
- A booming economy. - Entry of new players in the market.
- Rising export. - Cannibalism in the products
-Upcoming BS6 norms

The BCG MATRIX of MSIL –

STAR QUESTION MARK

CELERIO, ALTO K10, VITARA BREZZA, CIAZ, RITZ, OMNI, GYPSY

BALENO, IGNIS, ERTIGA, S-CROSS S-PRESSO
ALTO 800

CASH COW DOGS

SWIFT, DZIRE, WAGON-R, EECO SX4, ZEN ESTILO, VERSA,

A-STAR

In concern of BCG matrix of MSIL , Celerio, Alto 800, Alto K10, Vitara Brezza, Baleno, Ignis,
Ertiga and s-cross have the high market share and high growth rate and Swift, Dzire, Wagon R
and Eeco have high market share but low growth rate. Ciaz, Gypsy, Omni and Ritz having high
business growth and low market share so here is a question mark to high market share. Zen
Estilo, Versa, SX4, and A-star are came under the dog category because both market share and
business growth rate are low that’s why the production of these vehicles was stopped.

16