A STUDY OF CONSUMER BEHAVIOR TOWARDS

PREMIUM PASSENGER CAR SEGMENT IN U.P.

IN POST-LIBERALIZATION ERA
(A CASE STUDY OF KAVAL TOWNS)

THESIS
SUBMITTED TO THE
UNIVERSITY OF LUCKNOW
FOR THE DEGREE OF

Doctor Of Philosophy
In
COMMERCE

By
SHEETAL

Under the Supervision of

Prof. A. CHATTERJEE
Department of Commerce,
University of Lucknow,
Lucknow

DEPARTMENT OF COMMERCE
UNIVERSITY OF LUCKNOW
LUCKNOW, U.P., INDIA
2014
WITH REGARDS
T O MY

PARENTS
 DEDICATED
TO

PUSHPENDRA
 CERTIFICATE

This is to certify that the thesis entitled A Study of Consumer

Behavior Towards Premium Passenger Car Segment in U. P. in
Post-Liberalization Era (A Case Study of KAVAL Towns) being
submitted for the award of Ph.D. degree in commerce is the bonafide
work of Ms. Sheetal, carried out under my supervision. She has
fulfilled the requirements for the degree of Doctor of Philosophy in
Commerce of the University of Lucknow, regarding the nature and the
prescribed period of work.

The thesis submitted by her incorporates the work done by her

and has not been submitted elsewhere for any degree or diploma.

Date: Supervisor

Prof. A. Chatterjee
 DECLARATION

I hereby declare that the thesis entitled, A Study of Consumer

Behavior Towards Premium Passenger Car Segment in U. P. in
Post-Liberalization Era (A Case Study of KAVAL Towns)
submitted by me to the University of Lucknow for the award of
Degree of Doctor of Philosophy is my own and that it has not been
submitted previously to any other institution including this University
nor has been published at any time before.

Date: Sheetal
Department of Commerce
University of Lucknow
Lucknow
 ACKNOWLEDGEMENT

My endeavour shall be incomplete without the

acknowledgement of those who have helped me in carrying out this
thesis. I would like to convey my feeling of gratitude to all those who
have in any manner helped me in completing my research work.

First and foremost, I thank Almighty God, who turned my

dream into a vision and helped me fulfil it by his grace.

With sincere regards, I am extremely grateful to my learned

supervisor, Prof. Arunabh Chatterjee (Dean, Faculty of Commerce,
University of Lucknow), for his guidance, openness and inspiration
in enabling me to focus on the completion of this research work. I
really felt privileged to be able to get an opportunity to work in his
supervision.

It gives me immense pleasure to express my warm regards and

sincere thanks to Prof. Arvind Kumar (Head of the Department,
Department of Commerce, University of Lucknow), for his
encouragement and incessant help during the dissertation work.

I convey my deep sense of gratitude to all dealers & experts of

premium cars for their kind co-operation during the research. I extend
my gratitude to all respondents and those who helped me in some way
or in other during this work for their honesty and authentic co-
operation.
 I am deeply indebted to my grandfather, parents, in-laws and
brothers for their unyielding encouragement, ongoing academic and
spiritual support.

Finally, a special thank to my beloved husband, Mr.

Pushpendra Mani, who I owe a huge debt of gratitude to, for always
being there, and for many sacrifices and ongoing care, unconditional
love, support and drive during the course of the study.

Date: (Sheetal)
Place: Lucknow
 TABLE OF CONTENTS

Chapter No. Details Pg No.

Chapter I Introduction 1-28

Chapter II Literature Review 29-59

Chapter III Research Methodology 60-73

Chapter IV An Overview of the Indian Automobile 74-112

Industry and Auto Policy 2002

Chapter V Profile of Selected Automobile Companies 113-170

Manufacturing Premium Passenger Cars

Chapter VI Analysis of Consumer Behaviour Towards 171-224

Premium Passenger Cars

Chapter VII Summary, Findings, Future Scope and 225-239

Conclusions

Bibliography 240-253

Annexure
 LIST OF TABLES

S. No. Details Pg
No.
Table 1.1 Status of Indian Passenger Car Industry (1970-2010) 12
Table 1.2 Company Wise Passenger Car Sales Statistics- 2012 14
Table 3.1 Sample Composition 66
Table 3.2 Gender wise distribution 66
Table 3.3 Age wise Distribution 67
Table 3.4 Occupation wise Distribution 68
Table 3.5 Qualification wise Distribution 69
Table 3.6 Income wise Distribution 70
Table 3.7 Years of Dealers Experience wise Distribution 72
Table 5.1 Premium passenger cars from Maruti Suzuki 119
Table 5.2 Premium Passenger Cars from Tata Motors 124
Table 5.3 Premium Passenger Cars from Audi AG 129
Table 5.4 Premium Passenger Cars from Toyota 135
Table 5.5 Premium Passenger Cars from Skoda Auto 141
Table 5.6 Premium Passenger cars from Ford 146
Table 5.7 Premium Passenger Cars from Hyundai Motors 151
Table 5.8 Premium Passenger Cars from the Volkswagen 155
Table 5.9 Premium Passenger Cars from Mitsubishi Motors 160
Table 5.10 Premium Passenger Cars from Nissan 164
Table 5.11 Premium Passenger Cars from Honda Motors 168
Table 5.12 Premium Passenger Cars from Chevrolet 170
Table 6.1 Number of Vehicles in a Household 173
Table 6.2 Consumers Opinion for the Premium Car 174
Table 6.3 Market Share of Premium Car Industry 175
Table 6.4 Consumers Previous Car 177
Table 6.5 Agreed Price band for the Premium car 179
Table 6.6 Mode of Payment for the Car 180
Table 6.7 Pre Purchase Strategies Adopted by Car Consumers 182
Table 6.8 Variables that Motivated for Purchasing the Car 184
Table 6.9 Sources of Information about model of the car 189
Table 6.10 Factors affecting brand preferences 192
Table 6.11 Role of Reference Groups in Making Purchase 194
Decisions
Table 6.12 Satisfaction Level with the Sales/Servicing Provided 196
by the Dealers
Table 6.13 Satisfaction Level with Current Car 198
Table 6.14 Future preference for the same brand 200
Table 6.15 Future preferences for the Brand of Premium Cars 203
Table 6.16 Dislikes/Problems Faced By the Respondents in their 204
cars
Table 6.17 Characteristics of Premium Car Buyers 206
Table 6.18 Characteristics of Premium Cars 207
Table 6.19 Occupational Profile of Maximum Premium Car 208
Customers
Table 6.20 Key Selling Points of Premium Cars 209
Table 6.21 To What Extent Dealers Provide Financing Facility 216
Table 6.22 Average No. of footfalls in a Week in Dealers 218
Showroom
Table 6.23 Average No. of Footfalls in the Premium Passenger 219
Car Segment
Table 6.24 Percentage Increase of Footfalls during Festive 221
Season
Table 6.25 Conversion Rate of Customers 223
 LIST OF FIGURES

S. No. Details Pg. No.

Figure 1.1 Buyer Behaviour Model 8
Figure 1.2 Passenger Car Sales growths 14
Figure 1.3 Bolt (Tata Motors) 22
Figure 1.4 Xcent (Hyundai) 23
Figure 1.5 Celerio (Maruti Suzuki) 24
Figure 1.6 Zest (Tata Motors) 24
Figure 2.1 Consumer Decision Making Process 45
Figure 3.1 Procedures for Developing a Questionnaire 64
Figure 3.2 Gender wise Distribution of Car Users 67
Figure 3.3 Age based distribution of Car User 68
Figure 3.4 Occupation wise Distribution 69
Figure 3.5 Qualification wise Distribution 70
Figure 3.6 Income wise Distribution 71
Figure 3.7 Years of Dealers Experience wise 72
Distribution
Figure 4.1 Distribution of Automobile Plants in India 98
Figure 5.1 Subsidiaries of Skoda Auto 138
Figure 6.1 Numbers of Vehicles in a Household 173
Figure 6.2 Market Share of Premium Car Industry 176
Figure 6.3 Consumers Previous Car 178
Figure 6.4 Agreed Price band for the Premium car 180
Figure 6.5 Mode of Payment 181
Figure 6.6 Satisfaction Level with the Dealers 197
Figure 6.7 Satisfaction Level with Current Car 199
Figure 6.8 Future preference for the same brand 201
Figure 6.9 Future preferences for the Brand of 203
Premium Cars
Figure 6.10 Occupational Profiles of Maximum 208
Premium Car Customers
Figure 6.11 Percentage extent of Finance provided by 217
the Dealers
Figure 6.12 Average No. of footfalls in a Week in 218
Dealers Showroom
Figure 6.13 Average No. of Footfalls in the Premium 220
Passenger Car Segment
Figure 6.14 Percentage Increases of Footfalls during 221
Festive Season
Figure 6.15 Conversion Rates of Customers 223
 PREFACE

The Indian automobile sector has emerged as one of the

significantly developing and growing sectors in the last decade. The
automobile industry of India has witnessed a tremendous growth in all
sections, right from two wheelers, three wheelers and passenger car
segment. De-licensing in 1991, brought revolutionary changes in the
industry and provided well deserved and timely growth impetus to the
respective industry. This attracted foreign auto giants to set up their
production facilities in the country in a bid to take advantage of
several benefits provided by the industry. The automobile sector
experienced a drastic change in the car segment with the number of
entrants like Toyota, Honda, Ford, GM etc. Indian auto makers like
Tata, Mahindra and Mahindra, Hindustan Motors and MUL are given
a tough run for their money by the foreign players.
A number of premium car brands competing with each other
have left the consumer with a large no. of alternatives to choose from.
The presence of large number of alternatives in this segment is the
important factor in studying the consumer behaviour. The rise in
disposable income, wide choice of models and easy availability of
finance will drive growth in premium passenger car segment and
future looks even brighter. The data collected and analyzed to bring
profitable insights for the marketers. Various factors and motivators
that derive the purchase behaviour of the mass have been compiled
through primary data and the changes in the outlook of the
consumers mindset have to be considered carefully by the marketers.
This thesis is an exhaustive research to identify the consumer
behaviour in premium car segment of automobile industry in UP.
Uttar Pradesh has become the main avenue with potential for
consumption of variety of products and services.
As far as Consumer behaviour is concerned it is the study of
use and disposal of products as well as the study of how they are
purchased. Having a better understanding of consumer behaviour will
help firms to get survival against its competitors. Understanding of
consumers behaviour enhances the marketers ability to predict the
consumers acceptance of their various informational and
environmental cues and thus plan their marketing strategies
accordingly. It also helps in the process of product positioning. An
understanding of the relevant markets can help in analyzing the
opportunities and then design suitable marketing plans accordingly.
We often wonder as to why people behave the way they
actually do in the market place. At times we are satisfied by own acts,
being unable to rationalize them. Innumerable questions constantly
agitate our mind. The proposed study especially focuses on the
analyzing consumer behaviour for premium passenger cars. It would
be helpful for various premium car manufacturers to know about
purchase behaviour of the population of Uttar Pradesh and
accordingly they can form comprehensive strategies for them.
The express purpose of this thesis is to provide the reader with
a usable managerial understanding of consumer behaviour of the state
of Uttar Pradesh. Throughout the thesis an attempt has been made to
resolve two fold task, one explain the factor influencing the behaviour
of premium car consumers, and secondly outline strategic
implications of such behaviour for the marketer.
As far as consumer behaviour for premium passenger car in UP
is concerned an attempt has been made to study, questionnaire survey
has been employed in which two questionnaires were used. One
questionnaire is for car dealers. Another questionnaire has been used
for assessment of consumer behaviour of premium car owners.
The material used for the thesis uses, is both very update yet
mostly inaccessible to general readers. The thesis has been developed
for UPs market place and for marketers in Uttar Pradesh. Thus, it has
valuable insights for both Indian and multinational marketers
operating in India. The thesis has been written for a general Indian
reader. The language used, the interpretation, the methodology and
the layout of the chapters etc. has kept their needs in mind. It shall be
a matter of immense pleasure if the readers feel benefited with the
results provided in the study.
Chapter-I
INTRODUCTION
 Chapter-I
INTRODUCTION

It is the customer who casts the vote that determine how big a
company would be.

This thesis is an investigation into consumer perceptions

towards premium passenger cars in five main markets of Uttar
Pradesh. Peter Drucker (1967) refers automobile industry as the
Industry of Industries. It is the backbone of petroleum, steel and
manufacturing sectors. It creates employments for thousands and gave
birth to many entrepreneurs. It satisfies one of the most basic needs of
human being, mobility. It is a well-known fact that automobile
Industry is the cornerstone of some of the most influential economics
in the world like USA and Japan. Indian automobile industry is all set
to play the same role in Indian economy. Indian automobile industry
is one of the most modern, growing and vibrant automobile markets
on the global map. The four-wheeler market in India is also one of the
fastest growing and most promising. No wonder, it has become a
center of attraction for most of the global automobile players.
India is making a shining mark on the map of the world by its
continuous and increasing flow of growth rate. India is always been a
slow walker on the way to higher economic growth rate because of the
prevalence of unsystematic and irrelevant marketing practices. It has
rightly been remarked that, marketing is the delivery of standard of
living. The impeded and distorted presence of marketing practices in
India has made sufficiently clear the deteriorating living standards of
the masses. Marketing deals with identifying and meeting human and
social needs and wants. Marketing is an organizational function and a

1
set of processes for creating, communicating and delivering value to
customers, and for managing customer relationships in ways that
benefit the organization and its stakeholders (Kotler and Keller,
2011). Marketing of any product or service is becoming more and
more scientific in the present times of intense competition and
constrained resources. It demands much more than merely art of just
selling. More and more companies are now resorting to the scientific
approach to marketing where strategies and decisions are based on
extensive market research and information on consumer behavior;
their needs, purchasing power money related objects that influences
buying decisions (Anand, 2006).
The study of consumer behavior deals with the decision process
and physical activity, individuals engage in when evaluating,
acquiring, using, or disposing of goods and services (Loudon and
Bitta, 2002). It is concerned with the understanding of individuals
purchasing and consumption activities. Consumer behavior should be
primary focus of every aspect of the firms marketing program
(Blackwell, et al. 2007). Behavior of consumer is influenced by
cultural factors, social forces like family, reference groups etc. and
perceptions (Sternthal and Craig, 1982). Consumption is the key to
understand why consumer buys products (Blackwell et al. 2007). The
study of consumer decision processes has been a focal interest in
consumer behavior for over 30 years.
Automobile market is of significant interest because of the
substantial impacts of automobile production and usage on a variety
of public policy concerns including trade flows, business cycles etc.
Automobile industry is the symbol of technical marvel by human
being. Automobiles are highly differentiated durable goods with
variable lifetime (Berkovee, 1985). The Indian automobile sector has

2
emerged as one of the significantly developing and growing sectors in
the last decade. The automobile industry of India has witnessed a
tremendous growth in all sections, right from two wheelers, three
wheelers and passenger car segment.
The story of a car is not a one night story rather it is one of the
most important chapters in the history of transport. The production
and consumption of cars in the Indian market is of economic as well
as political significance. The car industry accounts for a significant
portion of GDP in India affecting levels of employment and income,
the balance of payments, economic growth and valuable inward
foreign direct investment. Today, the Indian automobile industry is
concerned with consumer demands for styling, safety, and comfort;
and with labor relations and manufacturing efficiency.
For the last two decades, the Indian automobile industry was
the way behind some of the most influential economies like USA,
Japan, and China. Today, the Indian automobile industry is definitely
one of the most vibrant, modern and upbeat automobile markets of the
globe. With the emergence of financially sound middle- class, the
four- wheeler segment is witnessing terrific growth and one can
expect more contribution to the economy from this sector in the near
future. Indian automobile sector has now become the center of
attraction for most of the global automobile giants the world over. The
factors playing crucial role in the growth of Indian automobile
industry are:
1. Liberalized Government Policies
2. Competition in the automobile segment
3. Increased customer base
4. Easy availability of auto loans.

3
 The Indian automotive industry is complex and different from
the automotive industry in the West. It comprises different categories:
two wheelers, three wheelers, passenger cars, light commercial
vehicles (LCVs), multi-utility vehicles (MUVs) and heavy
commercial vehicles (HCVs), agricultural and farm and earth moving
equipment. Following the independence, in 1945 the government of
India and the private sector launched efforts to create an automotive
component manufacturing industry to supply to the automobile
industry. However, the growth was relatively slow in the 1950s and
1960s due to nationalization and the license raj, which hampered the
Indian private sector. After 1970, the Indian Automotive industry
started to grow; cars were still a major luxury. Japanese manufacturers
entered the Indian market ultimately leading to the establishment of
Maruti Udyog. A number of foreign firms initiated joint ventures with
Indian companies.
De-licensing in 1991, brought revolutionary changes in the
industry and provided well deserved and timely growth impetus to the
respective industry. This attracted foreign auto giants to set up their
production facilities in the country in a bid to take advantage of
several benefits provided by the industry. The automobile sector
experienced a drastic change in the car segment with the number of
entrants like Toyota, Honda, Ford, GM etc. Indian auto makers like
Tata, Mahindra and Mahindra, Hindustan Motors and MUL are given
a tough run for their money by the foreign players.
Indian automotive industry, which comprises of the automobile
and the auto-component industries, is one of the largest industries in
India. Increased competition on the home turf as well as the growing
acceptance of their products in the foreign markets have encouraged
the Indian auto manufacturers to upgrade their technological

4
capabilities, either through in-house research and development (R&D)
efforts or through other means of technology acquisition. The
industrious efforts of Indian auto manufacturers are earning acclaim
worldwide.
Even in the wake of economic depression, the industry
sustained its positive growth momentum mainly because of strong
domestic demand for passenger cars. Realizing booming passenger
car demand in the country, many domestic and foreign automobile
companies are formulating capacity expansion strategies, and billions
of dollar worth of investment is in pipeline. Considering huge market
potential, the production of passenger cars is projected to grow at a
CAGR of around 11% between 2010-11 and 2013-14. Consequently,
the country has emerged as a potential competitor of the Chinese
automobile market. Among the BRIC countries, China is one country
that India is most often compared with. Both countries offer
significant cost advantages, are regionally located in Asia and
contribute significantly to the growth of Global automobile industry.
Interestingly, the median is in India is 24 years as compared to 37 in
China which gives a bright outlook from a consumer pool perspective.

CONSUMER BEHAVIOUR
Consumer Buying Behavior refers to the buying behavior of the
ultimate consumers of the products or services. Knowledge of the
consumer behavior is very essential for designing any marketing
strategy. Understanding and adapting to consumer motivation and
behavior is not an option it has become a necessity for competitive
survival. Whenever, the marketing decisions are made without a real
research of the consumers behavior, based only on some assumptions
and some economic or marketing ideas used previously, and the result

5
can sometimes be good enough. The problem becomes important
when old marketing practices dont function anymore and, there is a
delay until marketers adapt to the new market situation. The current
economic slowdown has stopped the previous consumption habits and
now the market has to redefine where its heading to and determine
the emerging tendencies that will be profitable in the future.
Understanding consumer behavior is crucial for: (1) The
marketing strategy of companies, their chances of success being
bigger when decisions are well founded and arent made just
intuitively, (2) Policy making from the legal authorities, aiming at
diminishing or creating behaviors with a positive impact on
individuals and the society in general, and (3) The information of the
consumers, so that they can understand the strategies and tactics used
to influence them and be able to set limits for these influences when
necessary.
Some of the definitions of the Consumer Behavior are as follows:
Schiffman and Kanuk (2007, p.3)- The behavior that consumers
display in searching for, purchasing, using, evaluating, and disposing
of products and services that they expect will satisfy their needs.
American Marketing Association- Dynamic interaction of affect
and cognition, behavior and the environment by which human beings
conduct the exchange aspects of their lives.
Sheth, Mittal, Newman (1999) - Consumer behavior is the mental
and physical activities undertaken by household and business
customers that result in decisions and actions to pay for, purchase and
use products and services.
Philip Kotler (13th Edition, p. 144)- Consumer Behavior is the
study of how individuals, groups, and organizations select, buy, use,

6
and dispose of goods, services, ideas, or experiences to satisfy their
needs and wants.
Bearden et al. (Marketing Principles and Perspectives)
Consumer Behavior refers to the mental and emotional processes and
the physical activities of people who purchase and use goods and
services to satisfy particular needs and wants.
James F. Engal, Roger D. Blackwell and Paul W. Miniard (1990)
Consumer Behavior refers to the actions and decision processes of
people who purchase goods and services for personal consumption.
Batra, Kazmi (2004, p.5) Consumer Behavior refers to the mental
and emotional processes and the observable behavior of consumers
during searching, purchasing and post consumption of a product or
service.
Hence, consumer behavior consists of those activities directly
involved in obtaining, consuming and disposing of products and
services, including the decision processes that precede and follow
these actions. The study of consumer behavior helps marketers to
resolve every activity around the ultimate consumer and gauge their
behavior by specially focusing on:
Who buys products or services? How do they buy products or
services? Where do they buy them from? How often do they buy
products or services? When do they buy products or services? Why do
they buy them? And how often do they use them?
Above questions help in understanding better what factors
influence the decision making process of the consumers. Consumers
buying behavior is influenced by four major factors, i.e. cultural,
social, personal and psychological factors. A simple starting point of
understanding consumer behavior is to take a basic model of
consumer response (Figure 1.1).

7
 Consumer behavior is the study of use and disposal of products
as well as the study of how they are purchased. Having a better
understanding of consumer behavior will help firms to get survival
against its competitors. Understanding of consumers behavior
enhances the marketers ability to predict the consumers acceptance
of their various informational and environmental cues and thus plan
their marketing strategies accordingly. It also helps in the process of
product positioning. An understanding of the relevant markets can
help in analyzing the opportunities and then design suitable marketing
plans accordingly.
Figure 1.1 Buyer Behavior Model

MARKETING STIMULI OTHER STIMULI

PRODUCT ECONOMIC
PRICE TECHNOLOGICAL
PLACE POLITICAL
PROMOTION CULTURAL

BUYERS CHARACTERISTICS BUYERS DECISION PROCESS

CULTURAL PROBLEM RECOGNITION
SOCIAL INFORMATION SEARCH
PERSONAL EVALUATION OF ALTERNATIVES
PSYCHOLOGICAL PURCHASE DECISION
POST PURCHASE BEHAVIOUR

BUYERS DECISION
PRODUCT CHOICE
BRAND CHOICE
DEALER CHOICE
PURCHASE TIMING
PURCHASE AMOUNT

8
INCREASED COMPETITION IN POST- LIBERALIZATION
ERA
Following the Economic Liberalization in India in 1991, the
Indian automotive Industry has demonstrated sustained growth as a
result of increased competitiveness and relaxed restrictions. Several
Indian automobile manufacturers such as Tata Motors, Maruti Suzuki
and Mahindra & Mahindra, expanded their domestic and International
operations. Indias robust Economic growth led to the further
expansion of its domestic automobile market which has attracted
significant India- specific investment by multinational automobile
manufacturers.
The Indian automotive industry after de-licensing in July 1991
has grown at a spectacular rate on an average of 17% for last few
years. The auto industry is the greatest engine of economic growth in
the world. Automobile industry is currently contributing about 5% of
the total GDP of India. The Industry has attained a turnover of USD $
35.8 billion (INR 165,000 Crore) and an investment of USD 10.9
billion. The industry has provided direct and indirect employment to
13.1 million people. Industry creates job as building 60 million
vehicles requires the employment of about 9 million people directly in
making the vehicles and the parts that go into them. This is over 5
percent of the worlds total manufacturing employment. It is estimated
that each direct auto job supports at least another 5 indirect jobs in the
community, resulting in more than 50 million jobs owed to the auto
industry. Many people are employed in related manufacturing and
services. Autos are built using the goods of many industries, including
steel, iron, aluminium, glass, plastics, glass, carpeting, textiles,
computer chips, rubber etc.

9
 The projected size in 2016 of the Indian automotive industry
varies between $ 122 billion in export. This translates into a
contribution of 10% to 11% towards Indias GDP by 2016, which is
more than durable the current contribution.
Several leading world recognized manufacturers like- Fiat,
BMW, Ford, Honda, Hyundai, Suzuki, and Volkswagen. These
manufacturers have set up manufacturing facilities in India or are
importing CKD (Completely Knocked Down) kits for assembly in this
growing market. Competition has forced passenger car manufacturers
to be innovative and responsive to customer demands and needs with
substantial disposable income in hand and suitable financing vehicle
loan schemes at attractive rate of interest have greatly encouraged
more and more of the Indian consuming class to acquire passenger
cars.
INDIAN FOUR- WHEELER INDUSTRY
The first car ran on Indias roads in 1897. Until the 1930s, cars
were imported directly but in very small numbers. Embryonic
Automotive Industry emerged in India in the 1940s. Mahindra &
Mahindra was established by two brothers as a trading company in
1945, and began assembly of Jeep CJ- 3A utility vehicles under
license from willys. The Indian four wheeler market is a vibrant
market for passenger cars from the dominant subcategory of the four
wheeler segment with 1.35 million units out of a total of 1.65 million
passenger vehicles until October 2010. Still, the four- wheeler
industry in India has not quite matched up to the performance of its
counterparts in other parts of the world. The primary reason for this
has been the all-pervasive regulatory atmosphere prevailing ties the

10
opening up of the industry in the mid- 1990s. The various layers of
legislative acts sheltered the industry from external competition for a
long time. Moreover, the industry was considered low priority as
cars were thought of as unaffordable luxury. Post liberalization, the
car market in India have been in a burgeoning stage with all types of
cars flooding the market in order to meet the demand of Indian
customers who are increasingly exposed to state of the world
automobiles and want the best when it comes to purchasing a car.
It is expected that by 2030, the Indian car market will be the
third largest car market across the globe. The main encouraging
factors for the success story of the car market in India are the increase
in the opportunity for new investments, the rise in the GDP rate, the
growing per capita income, massive population and high ownership
capacity. The liberalization policies followed by the Indian
government had been inviting foreign players to participate in the car
market in India. The recent trend within the new generation to get
work in the software based sector has led to the rise in the income
level and change in the lifestyle significantly, which has further led to
the increase in demand for the luxurious cars among them.

11
 Table 1.1 Status of Indian Passenger Car Industry (1970-2010)
Year Status of Car Industry
1970-1984 Cars were a major luxury
Manufacturing was licensed
Expansion was restricted
Market was mainly dominated by TELCO,
Ashok Leyland, M&M, Hindustan Motors and
Premier Automobiles.
Quantitative restrictions on imports
1985-1995 Entry of Maruti Udyog Limited
Economic Liberalization started in 1991 led to
de-licensing of passenger car segment in 1993
MUL became market leader in the car segment
1996-2000 International auto players entered the market
Advanced technologies were introduced to
meet environmental and safety parameters
Auto finance emerged as an important demand
driver
2001-2010 Removal of quantitative restrictions
100% FDI introduced
Exports were given thrust
Automobile firms started collaborating with
financial firms to provide auto financing and
insurance services to customers
Core Group Automotive R&D (CAR) was set
up to identify priority areas for automotive
R&D in India in 2003.
(Source- SIAM)

12
 The car market in India is crowded with all varieties of car
models like the small cars, mid-size cars, luxury cars, super luxury
cars and sports utility vehicles. Initially, the most popular car model
dominating the car market in India was the Ambassador, which
however today gave way to numerous new models like Hyundai,
Honda, Mercedes-Benz, BMW, Bentley and many others. Moreover,
there are many other models in the pipeline to be launched in India.
Currently, there is high demand for cars across all the segments. With
the growing economy, people left with a lot of disposable income
spend it towards meeting their mobility needs such as cars. Banks and
other financial institutions have an assortment of vehicle loan schemes
with attractive rates of interest and convenient installments. These
schemes encourage people to go in for loans to purchase cars of their
choice. With the emergence of favorable trends in the automobile
sector in India, what remains to be seen is how these developments
will go a long way to transform the mobility needs of the ordinary
Indian.
Passenger Vehicles segment grew at 4.66 percent during April-
March 2012 over same period last year. Passenger Cars grew by 2.19
percent, Utility Vehicles grew by 16.47 percent and Vans by 10.01
percent during this period. In March 2012, domestic sales of
Passenger Cars grew by 19.66 percent over the same month last year.
Also, sales growth of total passenger vehicle in the month of March
2012 was at 20.59 percent (as compared to March 2011). For the first
time in history car sales crossed two million in a financial year
(OICA).

13
 Table 1.2 Company Wise Passenger Car Sales Statistics- 2012
Company Domestic sales
Maruti Suzuki India Limited 861,337 (2012-13)
Hyundai Motors 382851 (2012-13)
Tata Motors 174 692 (2012-13)
Ford India 87,600
Toyota Kirloskar Motor 172 241
BMW India 9375
Mercedes-Benz India 7138
Jaguar Land Rover 2393
Volvo 811
Audi India 9003
(Source: http://www.oica.net/category/sales-statistics)
Figure 1.2 Passenger Car Sales Growth

(Source: OICA)

SIAM, the Society of Indian Automobile Manufacturers of

India, has categorized the Car industry into six segments from A1 to

14
A6, depending on the length of the vehicle. The classification criterion
(in meters) for the various segments is as given below:
1. A1 (Mini) : <3.4 meters
2. A2 (Compact) : 3.4 to 4.0 meters
3. A3 (Mid-size) : 4.0 to 4.5 meters
4. A4 (Executive) : 4.5 to 4.7 meters
5. A5 (Premium) : 4.7 to 5 meters
6. A6 (Luxury) : >5.0 meters
(Source: SIAM)
Premium cars which now accounts for a big share of the Indian
passenger car market are the subject of this thesis based not only on
the economic importance of this product but also the relative neglect
of this subject in the academic literature. Apart from the significance
of actual manufacturing, the premium car is significant for its impact
on lifestyle and consumption as the car satisfies both the basic
consumer needs for transportation as well as a variety of wants.
Premium cars tend to be socially consumed. Wealthy consumers go
for them not only for the cars good quality and technical attributes,
but also for non-technical attributes such as the perceived image of the
car marquee in order to demonstrate their wealth and status (Time,
1999).

PREMIUM CARS
A premium car is referred to as an automobile with size
between that of a compact and a full size car. The price range is
between 7 and 15 lakhs. These cars have a passenger capacity
between 4 to 6 passengers. Several foreign companies with a global
presence are manufacturing and marketing premium segment cars in
India. A working definition of a premium car for this thesis is

15
developed being, a car in the Price range between Rs. 700,000 to Rs.
15,00,000 with premium specification produced in sufficient volume
to meet the demands of a significant customer segment.
The credit of manufacturing of premium cars goes to
companies like- Fiat India, Ford, General Motors, Hindustan Motors,
Hyundai, Maruti Udyog Limited, San Motors and Tata Motors etc.
The premium car market in India has registered a fair amount of
growth in the last few years. A premium car is a luxurious automobile
which effectively blends cargo capacity and passenger space for the
sake of style and grandeur.

Reasons for Growth of the Premium Car Market in India

The rising economy of the country as a result of which the
people have more disposable income which they are spending
on buying car of their choice.
The Indian Government has reduced the import tariffs and also
relaxed equity regulations with regard to the automobile
industry in India.
This has reduced the prices of automobiles giving a lift to the
premium car market in India.
IT boom in the country has enabled the youth earning high pay
packages, which have further boosted the Indian premium car
market.
Easy finance schemes, launched by the financial institutions
and automobile companies, giving a boost to the market of
premium car in India.
The premium car market in India has grown over the last few
years as a result of the increasing spending power of the aspiration

16
Indian population and attractive auto loan schemes launched by the
car companies in association with banks and financial institutions.

Environmental Scanning Of Premium Cars

Environmental scanning is the acquisition and use of
information about events, trends and relationship in an organizations
external environment, the knowledge of which would assist
management in planning the organizations future course of action.
Environment scanning leads to the identification of many issues that
affect the organization. These issues could be judged on the basis of
the intensity of their impact on the business of the organization and
the relative probability of such an impact. Business firms undertake
SWOT (strengths, weaknesses, opportunities and threats) analysis to
understand the external and internal environment. Factors responsible
for environment scanning of premium car segment are given below:
i. Financial Capability
ii. Marketing Capability
iii. Operations Capability Factors
iv. Personnel Capability and
v. General Management Capability
The dynamic of the internal environment of an organization can
be understood in terms of the organizational resources and behavior,
strengths and weakness, synergic effects and distinctive competencies.
An organization uses different types of resources and exhibits a
certain type of behavior. The combination of these different resources
along with the prevalent behavior produces synergy or design within
an organization, which leads to the development of strengths and
weaknesses over a period of time.

17
RECENT TRENDS IN INDIAN AUTOMOBILE INDUSTRY

An overview of the car segment of the Indian automobile

industry in the recent times depicts a series of exciting and interesting
changes that have heavily influenced the global automobile sector.
From being a country that used to import cars, India has emerged as
one with a host of world class competitive car manufacturers, high
end technological prowess, car exporter and automotive component
outsourcing to the global automobile giants. A big market for quality
and stylish cars, new makes and models is clearly visible in India.
Competition and customer expectation has forced manufacturers to be
innovative and responsive to customer demands and needs. Now, that
India is not alien to quality, perfection and customer expectations.

In recent years, India has emerged as a leading centre for the

manufacturers of small cars while the possibilities are impressive.
There are challenges that could thwart future growth of the Indian
automobile industry. Since the demand for automobiles in recent years
is directly linked to overall economic expansion and rising personal
incomes; industry growth will slow if the economy weakens. The
Indian automotive industry has emerged stronger from the recent
global economic crisis, and sales across all segments have noticed
record breaking numbers. India is place to a vibrant automobile of
more than 40 million vehicles. It has been one of the few worldwide
which saw growing passenger car sales during the economic crisis of
the recent past. In fact, in 2009-10 it has recorded its highest volumes
ever. It is believed this upward trend will be sustained in the coming
future due to a strong domestic demand and increased thrust on
exports.

18
 Automobile sales in India have been growing at a rapid rate due
to easier finance availability, increasing affordability and launch of
several new models instead of the fact that most auto makers hiked
price in 2010 to offset rise in taxes and input costs. The consumer
demand function is based on discrete choices and during each market
period, every consumer is assumed to choose the optimal vehicle
package from among those available (Berkovee, 1985). Economically
and demographically, Indian automotive industry is well-positioned
for growth and increasingly, export opportunities. Changing
demographics in India will see auto sales scale new heights. The
increasing number of educated people entering the working age
population will provide a fertile environment for a buoyant economy
and healthy demand for private vehicles.

The Indian economy has grown at an average rate of around 9

percent over the past five years and is expected to continue this
growth in the medium term. This is predicted to drive an increase in
the percentage of the Indian population able to afford vehicles. Indias
car per capita ratio (expressed in cars per 1,000 populations) is
currently among the lowest in the worlds top 10 auto markets
(KPMG, The Indian Automotive Industry Evolving Dynamics).

The future of the industry in the medium term based on current

trends is analyzed here along with two broad themes in the global
automobile industry:

Growth

Consolidation

19
 GROWTH

In the context of the unique characteristics of the Indian automobile

market, growth is expected to be driven by the following:

Affordability- while quite a few new vehicles launched in

the Indian market have been developed locally, vehicle affordability

remains a significant concern. Although the price of an average
motorcycle in India (about USD 900) is comparable to the average per
capita income, the prices of passenger cars have a long way to go.
Although the entry level car (Nano) is priced at around USD 2,500,
the passenger car market could grow multi-fold if there is a break-
through of another price level in the coming years.

Rural Market- The automobile industry has yet to fully tap

into demand from rural areas. Previously, consumers from rural areas
would need to go to automobile dealerships in towns and cities for
their vehicle purchases. However, in recent years, market players have
made overtures to rural consumers, with encore aging sales. While the
Indian automobile industry seeks to double total sales on the back of
steady growth over the next decade, these relatively under tapped
demand segments (rural markets, women, youth and luxury cars) are
expected to play a significant role.

CONSOLIDATION

As India is on road to become one of the worlds largest automobile

markets, it is interesting to look at its evolution over the years. Indias
attraction as a destination for automobile manufacturers has been
underscored by the number of new automobile producers entering the
country over the last two decades. Unlike in several markets, the
number of manufacturers has continued to grow in India over the

20
years across vehicle segments. The Indian market is evolving as a big
opportunity and auto players from across the world see it as a natural
extension of their business domain. And domestic players in the
automotive component sector are now viewing the entire global
market as an opportunity. With high skill levels and a competitive
environment, they are no longer restricted to viewing India alone.
Indian automobile companies not only cater to domestic demand, but
also to make deeper inroads into the export market. More and more
auto players are strategically eyeing India and as a result the industry
is exposed to advanced features, quality levels and performance
levels. While the passenger car segment has been dominated by three
industry giants Maruti Suzuki, Hyundai and Tata Motors (which
together accounted for 70 % of passenger car sales in the year 2009-
10) Considering the robust growth the industry is currently
witnessing, it is clear that any new entrant would need to demonstrate
consistent and clear differentiators to make a play for a leadership
position in the Indian market.

KEY TRENDS THAT DRIVE AUTO EXPO 2014

The differentiated tax structure for smaller and larger vehicles

in the Indian market has paved the way for a new category of compact
sub-four-metre sedans and utility vehicles at the 12th edition of the
Auto Expo. The sub-four-metre sedan segment has grown 39 per cent
at a time when the overall market for passenger cars has shrunk by
seven per cent (OICA). Over the next two or three years, nearly a
dozen sub-four metre vehicles (Tata Motors (Zest & Bolt), Ford India
(Figo Concept), Hyundai Motor (Xcent) and Nissan) will hit Indian
roads - in what would be a first for any country globally.

21
Figure 1.3 Bolt (Tata Motors)

(Source: www.thehindubusinessline.com)

The other key trend, which emerged at the auto show this year
was the interest shown by automobile companies in equipping newer
vehicles with automatic transmission (AT) technology. Maruti Suzuki
slashed prices of AT variants by up to Rs 2 lakh launching automatic
manual transmission variants of the Celerio with prices starting at Rs
4.29 lakh (ex-showroom, Delhi). Tata Motors and Hyundai Motor
India are planning to introduce products with advanced automatic
manual transmission systems.

22
Figure 1.4 Xcent (Hyundai)

(Source: www.zigwheels.com)

With the price differential between manual transmission and

AT variants reduced from an average of Rs 1.2 lakh to Rs 39,000 with
the Celerio, Maruti Suzuki hopes 25-30 per cent of sales of its latest
offering in the compact segment would come from AT variants. Sales
of AT versions currently account for less than one per cent of overall
passenger vehicle sales in the industry (Business Standard). Tata
Motors has already unveiled the Zest, which has an automatic diesel
variant. The company is also considering launching an automatic
transmission variant of small car Nano. Hyundai has said its new
Xcent will have an automatic transmission variant.
In April 2014 Honda launched a continuous variable
transmission variant for the latest model of the City. Through the last
few years, worsening traffic conditions have led to high demand for
automatic transmission technology in India. Tata Motors, which
unveiled the 1.2 litre indigenously developed Revotron petrol engine

23
in compact cars Bolt and Zest, said the company would have more
offering in the petrol segment as well.

Figure 1.5 Celerio (Maruti Suzuki)

(Source: www.overdrive.in )

Figure 1.6 Zest (Tata Motors)

(Source: www.autocarindia.com)

24
 Hence, the consumers will have more options to choose from
the technological advanced vehicles. One more trend noticed was the
reduction in price gap between petrol and diesel fuel spurred a
renewed focus by auto manufacturers on vehicles powered by petrol
engine in this edition of the Auto Expo 2014.

THE PROBLEM STATEMENT

Consumer Behavior is the study of how individuals, groups and
organizations select, buy, use and dispose of goods, services, Ideas or
experiences to satisfy their needs and wants. Marketer must
understand both the theory and reality of Consumer Behavior. To
further specify the definition of customers attitude towards premium
passenger cars, a set of attitude variables which potential buyers of
luxury cars might hold was developed in discussion with premium car
dealers.

OBJECTIVES
The objective of this study was primarily to investigate the consumer
behavior towards premium passenger car. Supportive objectives are:
1. To analyze the individual pre-purchase search strategies in the
state of Uttar Pradesh.
2. To examine the factors motivated the premium car owners to
buy their car.
3. To study the role of sources of information influencing the
purchase decisions of the car owners.
4. To study the role of reference groups in influencing their car
purchase decisions.
5. To study the premium car consumers post-purchase
satisfaction with their car.

25
SIGNIFICANCE OF THE STUDY
1. This research gives an insight if the Indian automobile industry.
2. Through this research, it is made to be understood, how
consumers behave towards premium passenger cars. This is a
pertinent in premium passenger car segment in post
liberalization Era.
3. Demand determinants for the passenger cars can be classified
through this research.
4. The study of changing behavior towards the premium passenger
cars after de-licensing in 1991 in automobile industry can be
made through this research report.

SCOPE OF THE STUDY

Nowadays, car has become a necessity and forms an important
part of human life. Therefore, there is a significant scope to examine
the perception and purchase behavior of the consumers of premium
passenger cars. The study is restricted to five economically important
districts of Uttar Pradesh viz. Kanpur, Agra, Varanasi, Allahabad and
Lucknow. Being economically sound, these areas attract the global car
companies along with the national brands. Due to their increasing
purchasing power, the people of these areas have started buying cars
for business or personal use or the prestige and maintenance of social
status. Knowledge of the buying behavior of the different market
segments helps a seller to select their target segment and implement
marketing strategies to increase the sales. Advertisers and marketers
have been trying to discover why consumers buy premium cars and
what other features do they look for in a premium car for fulfilment of
their requirements. And, also what brand they opt. This study tries to
analyze the influence of perception in the consumers mind and how

26
this information can be used successfully by marketers to gain
doorway into the consumers minds. The scope of this research has a
very good future.

LIMITATIONS OF THE STUDY

1. The study and research will be limited to the Uttar Pradesh
region only and its results cannot be generalized in other states
due to socio-cultural and economic differences.
2. Only five districts i.e. Kanpur, Agra, Varanasi, Allahabad and
Lucknow, have been considered for the survey. This may not
represent whole of Uttar Pradesh.
3. The sample taken on convenience basis as respondents so
selected are the premium car owners only and other segments
are ignored. Therefore, results may not be valid for other car
segments.
4. In the context of the Indian automobile industry, the study will
be limited to the study of Consumer Behavior towards the
premium passenger cars only.
5. Dynamic nature of consumer may make this study useless over
time and place. Findings of today may become invalid at other
point of time.
6. Time & budgetary constraints.

HYPOTHESIS
1. Behavior of buyer is always influenced by social and economic
status, family requirements and their primary necessity of
transportation etc.

27
2. Buyer is always satisfied with Sale/Servicing provided by the
dealers.
3. Buyer is always satisfied with the post-purchase experience of
car.
4. There is an association between demand of vehicles and
technological advancement.
5. Prospective buyer behavior remains unchanged for the future
purchase of a premium passenger car.
6. No. of footfalls increase in the dealers showroom during
festive season by more than 5%.

28
 Chapter-II
LITERATURE REVIEW
 Chapter-II
LITERATURE REVIEW

This chapter reviews concepts and theories by researchers that

are highly related to the area of study. The chapter provides a critical
analysis of the views and insights of various researchers on the subject
area. The chapter starts by explaining the basics of the study, being
consumer behaviour. Consumer behaviour for premium passenger
cars in Uttar Pradesh is brought to light. The factors that are believed
to effect consumer preference for premium passenger cars are then
discussed. Further, the literature will examine how the Indian car
industry is segmented. The chapter then reviews effects of consumer
ethnocentrism with regard to the evaluation of global brands and local
brands by Indian consumers.
The literature review offers the theoretical background to the
research including definitions, framework, concepts and models.
Definitions of what constitutes consumer behaviour, along with the
consumer decision-making process, will be articulated. Further to the
above, a different view of consumer behaviour will be offered along
with the role and value of possessions.

Piplai (Research Entitled: Automobile Industry: Shifting

Strategic Focus)
Piplai (2001) examines the effects of liberalization on the
Indian vehicle industry in terms of production, marketing, export,
technology tie-up, product up-gradation and profitability. Till the
1940s, the Indian auto industry was non-existent, since automobile
were imported from General Motors and Ford. In early 1940s,
Hindustan Motors and Premier Auto started by importing Know-How

29
from General Motors and Fiat respectively. Since the 1950s, a few
other companies entered the market for two wheelers and commercial
vehicles (CVs). However most of them either imported or
indigenously produced auto components till the mid-1950s, when
India had launched import substitution programme, thereby resulting
in a distinctly separate auto component sector. Due to the high degree
of regulation and protection in the 1970s and 1980s, the reforms in the
early 1990s had led a boom in the auto industry till 1996, but the
response of the industry in terms of massive expansion of capacities
and entry of multinationals led to an acute over capacity. Intense
competition had led to price wars and aggressive cost-cutting
measures including layoffs and large scale retrenchments. Indian
companies have started focusing on the price-sensitive consumer.
Utility Vehicles, foreign companies continues utilising their expertise
on technology-intensive vehicles for individual and corporate usage.
Thus, Piplai (2001) concludes that vehicle industry in India has
not gained much from the reforms, other than being thrusted upon a
high degree of unsustainable competition.

Howard, J. A. and Sheth, J.N. (Research Entitled: Model of Buyer

Behaviour)
Howard and Sheth (1968), postulates one of the best known
models of consumer behaviour, which explains interactions, the
theory of buyer behaviour. Practically between the inputs (stimuli that
the consumer receives from his or her environment) and outputs (the
consumers actions, as observable results of the input stimuli) of
decision-making are the constructs, which are the processes, the
consumer goes through to decide upon his or her action. Authors
grouped these into following two areas:

30
 1. Perceptual: Those concerned with obtaining and handling
information about the product and services.
2. Learning: The process of learning that leads to the decision
itself.
In light of the above model the consumer decision-making is a
process that the consumer goes through.

Sagar, Ambuj, D. & Chandra & Pankaj (Research Entitled:

Technological Change in the Indian Passenger Car Industry)
Sagar et al. (2004), discussed, as to how the Indian car industry
has advanced technologically driven by a confluence of factors such
as intense competition, demanding consumer preferences,
Government policies (especially tightening emission standards), and
the global strategies of the various players. They elaborated that car
manufacturers in India are based on designs, incorporating advanced
technologies, that are often comparable with those available globally
and Indian car exports are also growing rapidly.

Mandeep Kaur and Sandhu H.S. (Research Entitled: A Study on

Factors Influencing Buying Behaviour of Passenger Car Market)
Mandeep Kaur and Sandhu (2006), attempts to find out the
important features which a customer considers while going to
purchase a new car. The premium car owners perceive that safety and
comfort are the most important features of the passenger car followed
by luxuriousness.

31
Dr. S. Subadra, Dr. K. M. Murugesan, Dr. R. Ganapathi
(Research Entitled: Consumer Perceptions and Behaviour: A
study with reference to car owners in Namakkal District)
S. Subadra et al. (2007), postulates the changing perceptions
and behaviour of the consumers with special reference to the car
owners. Through this research paper the authors discussed how India
is witnessing a change in consumerism. Market has now become pre-
dominantly consumer-driven. The focus has now been shifted from
product based marketing to the need based marketing. Consumer is
given many options to choose. This paper discussed the consumer
perceptions and behaviour of the car owners which was supposed to
give a feedback on how marketing strategies work. This study throws
light on various features that the manufacturers should concentrate on
to attract the prospective buyers. The authors trace the factor-analysis
factors influencing purchase. The general purpose of this is to find a
method of summarizing the information contained in a number of
original variables into a smaller set of new composite dimensions with
minimum loss of information. It derives out of several variables which
are identified as the influencer in purchase decision and satisfying the
consumers. Some 14 variables under the sub-head factors influencing
purchase have been discussed.
Hence, an understanding of the consumer behaviour enables a
marketer to take marketing decisions which are compatible with its
consumer needs. There are four main classes of consumer behaviour
determinants and expectations i.e., cultural, socio-economic, personal
and psychological. The manufacturers and marketers who study the
behaviour of consumers and cater to their needs will be successful.

32
Balakrishnan Menon, Dr. Jagathy Raj V. P. (Research Entitled:
Determinant Mean percentage score factors of the consumer
purchase behaviour of passenger cars)
Through this paper the researchers discuss the main purpose hat
is to come up with the identification of possible parameters and a
framework development, that influence the consumer purchase
behaviour patterns of passenger car owners in the state of Kerala, so
that further research could be done, based on the framework and the
identified parameters. With the multiple choices available to the
Indian passenger car buyers, it drastically changed the way, the car
purchase scenario in India. It transformed the automobile scenario
from a sellers market to buyers market. Passenger car customers
started developing their own personal preferences and purchasing
patterns, which were hitherto unknown in the Indian automobile
segment. Researchers conceptualized a consumer purchase behaviour
model with major parameters influencing the behavioural patterns of
the passenger car owners. In this model it is represented that the
consumer behaviour is a blend of Economic, technological, political,
cultural, demographic, and natural factors as well as his own
characteristics which is reflected by his attitude, motivation,
perception, personality, knowledge and lifestyle.
The study benefits the stakeholders of car manufacturers,
dealers, financing agencies, to formalize and sterilize their policies
towards an effective marketing strategy. All the parameters developed
in this paper and the model which has been conceptualized was tested
through an extensive research and quantitative analysis to establish its
acceptability. It is concluded that marketers can rationalize their
existence only when they are able to understand consumer behaviour.

33
Desagen Moodley (Research Entitled: Consumer Behaviour of
the Black Middle Class with the Passenger Vehicle Market in
South Africa)
In this research again the factors that influence the decision-
making process of the consumer while purchasing a passenger car
have been discussed. Results of this research confirmed that the steps
in the decision-making process were followed by this segment of the
population. The primary objective of this study is to investigate the
consumer decision-making process of the consumers in purchasing a
consumer motor vehicle. Further analysis resulted in establishing both
the product and situational factors that played a vital role in
influencing the purchase decision.
The research determines the factors result in the need to
purchase a passenger vehicle by evaluating the problem recognition
step of the decision making process. It is ascertained that the sources
as well as different types of information used during the information
search step and the impact of this during the decision making process.
This research is done to establish the product and situational variables
that are important to the consumers when purchasing a passenger
vehicle during the alternative evaluation step of the decision making
process evaluation of the purchase step, decision-making process and
the satisfaction of the product and so in the post-purchase. Through
this dissertation, the necessity, circumstances and price were
identified as the key factors that were identified during the problem
recognition step that contributed to the decision to purchase a
passenger vehicle.
A combination of information sources, ranging from the
internet, recommendations, advice, test drives, through the print
media were referenced prior to the purchase. From the perspective of

34
personal influence, family members, colleagues and friends were
found to be the most influential in the decision. Price, brand, fuel
consumption, features and benefits along with a maintenance/ motor-
plan were identified as a top five product factors that influence the
passenger car consumers. The situational factors had a very strong
emphasis on financial implications. Personal income, monthly
instalments, interest rates, lifestyle and payment period were
identified by Moodley (2007) as the top five factors that influenced
the black middle class while making a purchase.
Thus, It is determined that the majority of the population
understand the purchase transaction process. The majority indicated
that, they were involved and or concerned during the purchase
process.

Shyamala Mathan Sankar (Research Entitled: Consumer

Perception of Global vs. Local Brands: The Indian Car Industry)
Shyamala Mathan Sankar (2006), through this research study
examines consumer perception of global brands vs. local brands in the
Indian car industry. Consumer brand perception is having substantial
implications in Marketing. This study explores and helps in
understanding consumer perceptions of global and local car brands in
India by accomplishing the secondary objectives. The secondary
objectives were achieved by highlighting the factors that affect
consumer preferences for global brands, by examining the effects of
country of origin on consumer perception for global brands and local
brands, and by studying the effects of consumer ethnocentrism
towards global brands.
The findings of this particular study advised that the consumers
who possessed global car brands preferred their car brands due to

35
factors such as global presence, worldwide reputation, and quality of
being a foreign make. It was found the prestige of status had a very
little or no influence in their preference for global car brands
consumers made favourable perceptions of the country, wherein they
tend to associate factors such as superior quality, technical
advancements modernization etc., to the country from which the
brand had taken its origin. Consumers who owned a local car brand
evaluated the local brand in a favourable manner, wherein they tend to
associate the brand to Indias strong automobile sector that makes
quality and technically efficient cars. The study found to have both
non-ethnocentric consumers and consumers who were low on CET.
Most of the study results show, the local brands to be good in India,
but not as good as the global ones in quality, technical expertise and
designs of the cars.

Dr. M. Akber, P. Ashok Kumar (Research Entitled: A Study on

Attributes of Car Buyers in Vellore District)
M. Akber and P. Ashok Kumar (2012), presents this study of
consumer buying behaviour , that has proved that many factors like
price, income, distribution of income, competition with alternatives,
utility, consumer preference (economic factors) and factors like
culture, attitude, social values, lifestyles, personality, size of family,
education, health standards etc., play a major role in buying behaviour
of customers. The scientific study on the purchase decision towards
the purchasing of cars has revealed fruitful findings and
recommendations, which could be used for enhancing the products to
meet the requirements of car buyers. This study explores aspects like:
i. To investigate the reason for the time gap between intention and
actual purchase of a car.

36
ii. To identify the attribute sources of information for purchasing a
car.
iii. And to measure the significant motivating factors that contribute
for the preferences of the cars.
The overall analysis that contributes for the preference of any car has
come with five significant factors:
- Economy in fuel
- Economy in maintenance
- Purchase price
- Warranty
- Style
Pick-up, durability and size of the cars have been preferred very
less by the respondents. Resale value, company reputation, after sale
value, and prestige are the attributes which were not at all preferred by
any consumer using any brand of car.
The study has brought out the attributes of buyer of market and
different brand of a given market. If the Marketing Management of
respective car companies lesser the car as per the aspiration of buyer
revealed through the perfect study they would stand to benefit both in
intern of volume and value of turnover.

Balakrishnan Menon, Dr. Jagathy Raj V. P. (Research Entitled:

Model development and validation for studying consumer
preferences of car owners)
Balakrishnan Menon and Dr. Jagathy Raj V.P. (2012) present
this study to explore and conceptualize various parameters, which
influence the purchase pattern of passenger cars in the state of Kerala.
It also aims to develop a framework to study the behavioural patterns,
and also validate the acceptability of the research model so developed,

37
which might eventually influence the consumer purchase of the
passenger cars in the state. The parameters were grouped into major
categories such as product features influences, personal preferences,
market influence, external influence and influence of car financing
agencies, making it fast and affordable interest rates for car loans.
The data is collected and assimilated; the researcher
conceptualized the framework of consumer purchase behaviour of
passenger cars. The author further developed parameters for further
research study and consolidation, and identified further areas of study
for his full scale research work. The parameters developed by the
authors and the model which has been conceptualized, could be
further studied and tested through an extensive research and
quantitative analysis, for data analysis, interpretation and
recommendations.

Jakrapan Anurit (Research Entitled: An investigation into

consumers towards the purchase of New Luxury Cars in two
culturally distinct countries: The UK and Thailand)
This research is an investigation into consumer perceptions
towards luxury products and exemplified by two luxury car Marques
in two main markets and seeks to explain the brand dominance of
BMW in the individualistic culture of the UK and Mercedes in
communitarian Thailand. This research aims to answer following two
questions:
i. What are the factors, distinguish a luxury car?
ii. How do cultural differences between the UK and Thailand
explain the difference in purchasing patterns of BMW and
Mercedes and provides insights for brand marketing of the
two luxury car Marques?

38
 The principal contribution of this study lies in extending our
understanding of consumer behaviour through an empirical
examination of the contribution of group and social influences on
consumer behaviour towards the purchase of new luxury cars. This
thesis under study demonstrates the significance of the contribution of
group and social influences on consumer behaviour of luxury products
as exemplified are luxury cars in two main markets, the UK and
Thailand. Theoretical contributions of this thesis are as under:
- This thesis confirms Fishbeins behavioural model that there
can be different types of beliefs held by an individual.
- The theoretical contribution of this thesis lies in an extension of
Maslows hierarchy of needs and motivation.
- This thesis develops links between culture and consumer
behaviour by linking branding and consumer needs using brand
components, i.e. - functional, social and experimental images.

Constanin Sase, Madaline V. Ariton (Research Entitled: Factors

influencing passenger cars consumer behaviour and their use in
the environmental Public Policy)
Through this study author aims to make an analysis of
passenger car customer behaviour with an emphasis on the adoption
of Low-Carbon and fuel efficient vehicles, based on the research
existing on the subject. The author analysed the main ideas existing in
the academic literature on the study of the consumer behaviour for
passenger cars and highlight the role of the car in the consumers
mind and what blocks adopting environmental friendly cars.
According to the presented studies, it seems that the car has an
important symbolist to the consumer and doesnt represent only a
mean of satisfaction of the transportation need. The car is combined in

39
the consumer perception with his/her personality. It defines his/her
compared to the others and states his/her belonging to certain
consumer groups. It is presumed here that the role of the car will not
be changed in the near future; so the actions aiming to influence the
consumer behaviour need to take this into account.

Badri Narayan G., Pankaj Vashisht (Research Entitled:

Determinants of competitiveness of the Indian Auto Industry)
As in all other countries, the Indian automobile industry is also
one of the key drivers of industrial growth and employment, which
will further gain in importance in the coming years. Its recent records
of rapid growth of output, productivity improvements and expanding
share in global market has perhaps not been so well documented. This
study fills that gap. The study helps us understand how the industrys
success is quite directly linked to the trade and industrial policy
reforms initiated in the early 1990s. more importantly, this study
identifies the critical constraints that prevent the industry from further
expansion in the global share and emerge as one of the major
production and export hubs in the coming years.
According to this study, the major advantage of the Indian
economy is educated and skilled workforce with knowledge of
English language. So, our disadvantages include poor infrastructure,
complicated tax structure, inflexible labour laws, interstate policy
differences and inconsistencies. This study analyses the determinants
of competitiveness in the Indian automobile industry. The effective
rate of protection on automobiles is much higher than on components.
With the higher countervailing duty and other cesses/levies, the
effective rate of protection for automobile sector would be even
higher. The differential rate of effective protection distorts resource

40
allocation and investment pattern in the industry. The import tariff for
the assembled vehicles is 60%. Given the low level of protection both
for the auto components and CKD/SKD kits, this reflects a policy bias
in favour of auto assembles.
These are few of the recommendations provided by the authors.
It has been emphasised to work out for the several constraints, e.g. to
strengthen R&D and design capacity, skill shortages, Indias current
levels of tariff on capital goods, higher material goods, infrastructure
deficit, for strengthening of the anti-dumping mechanism and lack of
credit availability etc. At last, the authors opine that, the
recommendations provided in this paper, if accepted and
implemented, could contribute to Indias emergence as one of the
major automobile producing economics in the world. Given our
domestic demand and the entrepreneurial talent, this would be a
natural outcome.

Mahipat Ranawat, Rajnish Tiwari (Research Entitled: Influence

of Government Policies on Industry Development: The case of
Indias Automotive Industry)
According to this research, the evolution of Indias automobile
industry is identified to have occurred in four phases. In the first
(1947-1965) and second phase (1966-1979), the important policies
identified were related to protection, indigenisation and regulation of
the automotive industry. On the one-hand, these policies helped India
to build an indigenous automotive industry. While on the other it led
to unsatisfactory industry performance. In the third phase (1980-
1990), the single most important policy identified was the one with
regard to relaxation in the means of technology acquisition. The
foreign competition inducted into the industry transformed its

41
dynamics. Lastly, in the fourth phase (1991 onwards), the
liberalization with regard to foreign investment had a significant
influence on the Indian automotive industry as we see it today.
This work traces the evolution of the automotive industry from
its inception to present day and identifies the important policies made
by the Indian Government. This work also studies the influence of
important policies on the development of the industry. It is also of
interest to understand the considerations made on the part of the
Indian Government that underlie such policies and to explore the role
played by the Government in the development of the industry. With
every major shift in policies made by the Indian Government, the
automotive industry has come out stronger and better. While the shift
in policies seems to have mostly been brought by choice events, the
Indian Government has at least to be credited for making the right
decisions and implementing them correctly. Its paradoxical that the
Indian middle class, the most attractive features for foreign
investment in the liberalization phase, was a outcome of the statist
ideologies in the regulatory phase. Author has made a detailed
historical account to provide the context and considerations under
which the policies were formulated by the Indian Government.

Dr. H. S. Adithya (Research Entitled: Customer Perception and

Behaviour of car-owners- an Empirical study in Bangalore city)
Like previous ones this study also attempts to analyse the
variable that affect the buyer behaviour today. It throws light on
various features that the manufacturers should concentrate on to
attract the prospective buyers. It concludes the consumer behaviour
plays a vital role in marketing cars. Consumer behaviour consists of
the human behaviour that goes in making purchase decisions.

42
Understanding of the consumer behaviour enables a marketer to take
marketing decisions which are compatible with its customer needs.
Four major classes of consumer behaviour determinants and
expectations are cultural, socio-economic, personal and psychological.
The socio-economic determinants of consumer behaviour consists of
age, marital status, occupation, education, income, family size,
realizing the importance of passenger car industry in the present
economic situation, the researcher has analysed the perceptions and
behaviour of consumer related to the product.
From the discussion made in the paper, there are certain product
attributes which are identified in the study as influencing the purchase
decision and satisfying the consumers. Manufacturers show
concentrate on the product attributes as they influence the choice of
more prospective buyers. The population growth in India and the
increasing number of middle class consumers have attracted the
attention of car manufacturers and marketers. Those manufacturers
and marketers who study the behaviour of consumers and cater to
their needs will be successful. It is concluded that consumer behaviour
has a greater role to play in the LPG era of economic activities.

Dr. K. Singaravelu (Research Entitled: Consumer Behaviour: A

study of influence of special features of passenger cars in
Coimbatore)
This research is an attempt to assess the buying behaviour of
passenger cars. And to examine the pre-purchase behaviour of
passenger car buyers, study gives an analysis of influence of special
features of passenger cars. It is illustrated that Government employees
have got their salary increment after introduction of sixth pay
commission, which make them shift from two wheelers to four

43
wheelers. Hence, rising per capita income and changing demographic
distribution are conducive for growth of automotive industry. In this
research paper influence of the sources of information and influence
of special feature of passenger cars have been discussed. Sources of
information are classified into three categories, i.e., personal sources,
commercial sources and public sources. It is concluded that family
members, friends and relatives are the main motivators to purchase
the passenger cars. Likewise the factor analysis condensed and
simplified the influence of twenty seven features of passenger car and
grouped into five factors explaining 62.585 percent of the variability
of all the 27 features of the passenger cars.
The manufacturers should put in more efforts to increase the
market share in terms of introducing more innovative colours and new
models. Since, most of the customers feel that maintenance cost is
pretty high. The management should take efforts in reducing and
create awareness among customers by showing them how cheap it is
to maintain their passenger cars when compared to its competitors.

Sheth, J.N. Mittal, B. and Newman, B.I. (Research Entitled:

Customer Behaviour Consumer Behaviour and beyond)
Sheth et. al (1999) stated that in the individual decision-making,
the three customer roles (buyers, payers and users) could all be played
by a single individual, or each could be played by a different
individual. The buyer is the person who is engaged in the procurement
of the product from the marketplace. The buyer is the person who
plays the role of financing the purchase and also imposes the
relatively inflexible budget limits. The user is the person who actually
uses and derives the benefits or performance derived from the product
or service. As a customer, each of the above role players faces choices

44
which call for decisions. Hence, customer decisions are the decisions,
which customers make in the market place as buyers, payers and
users. Typically these decisions include whether to purchase, what to
purchase, when to purchase, from whom to purchase and how to pay
for it. Whether to purchase is the first level of decisions that entails
weighing alternative uses of money and time resources. Sheth et. al
(1999) go on to add that the product/service level choice in both a
whether to and what to purchase decision.
Mental budgeting is an important aspect of customer behaviour
particularly at the decision-making level. Mental budgeting is defined
as, the idea that customers mentally set aside budgets for products
categories which guides their subsequent behaviour as customers
(Sheth et. al, 1999, p. 518). Sheth et al, 1999, postulates the process of
customer decision making as shown in the figure below:

Figure 2.1 Consumer Decision Making Process

Problem Information Alternative Purchase Post -Purchase
Recognition Search Evaluation Experience

Source: Sheth, Mittal and Newman (1999, p. 529)

According to Sheth et al (1999), consumer behaviour is determined by

an individuals characteristics, demographics and motives.

Langford and Schultz (Research Entitled: Gaining 3-D insight to

drive profitable growth strategy and leadership)
According to Langford and Schultz, (2006), consumers tend to
be rather unpredictable and as such are notoriously difficult to
understand. Further to that consumers preferences and values are
complex, often rooted in factors unknown to even themselves. It is

45
therefore justified to state that consumers say one thing and then act is
ways that almost of the time appear contradictory. Langford and
Schultz (2006) adopted the above view and through statistical analysis
showed that no correlation between brands favoured and the actual
purchase patterns. This clearly demonstrates that knowing the
perceptions of customers and say is not the same as knowing how
they will react to changes in product attributes or Marketing
messages. Knowing the minds of consumers is only useful if it
deepens ones understanding of their intention, behaviour and to
affect it (Langford and Schultz, 2006).

Hirschman et al. (Research Entitled: The Experimental aspects

of consumption: Consumer Fantasies, Feelings and Fun)
Hirschman (1982), first articulated the experimental view, built
on the evolutionary nature of understanding of consumer behaviour.
This is made evident by the fact that Hirschman (1982) postulates that
the rational choice of consumer behaviour has evolved to a focus on
irrational buying needs. In essence, the enjoyment i.e. fun, fantasies
and feelings (experimental view) offered by a product and the
resultant feeling of pleasure play a vital role in consumer decision-
making and consumption. In contrast, the information processing
model views the consumers as logical thinkers who solve problems
with purchasing decisions.
However, it is noteworthy that Hirschman (1982) indicated that
while the conventional view of understanding consumer behaviour is
useful and still prevails, the experiential view supplements and
enriches the understanding of consumer behaviour by creating a
broadened view. Most of the consumer research has focused on the
tangible benefits of conventional goods and services i.e. passenger

46
cars that perform utilitarian functions based on relatively objective
features. However, the experiential perspective explores all the
symbolic meanings of more subjective characteristics such as
cheerfulness, sociability, elegance (Hirschman, 1982).

Ms. A. Josephine Stella, Dr. K. Rajeshwari (Research Entitled:

Consumer Behaviour towards passenger cars- A study with
reference to Virudhnagar District of Tamilnadu)
The research focuses on the consumer behaviour towards
passenger car and involves the critical analysis of factors influence the
purchase behaviour. The research is conducted for better
understanding of the relationship between the consumer satisfaction,
brand image and information from mass media towards the purchase
evaluation at various stages of purchase decision. By understanding
the consumers satisfaction of the product will help the automobile
manufacturers in developing their product to meet customers needs
and designing the proper Marketing programs and strategies. The
researcher has found out that the most important factor that influences
the consumers to use passenger cars is the price of the cars followed
by low maintenance, better quality and durability.
Further, there is significant relationship between demographic
characteristics towards various features of passenger cars. It is
concluded from the following study that customer satisfaction is the
important factor which affects the financial position and goodwill of
the company. Relationship Marketing is an influential asset for
consumer behaviour analysis at it has a keen interest in the re-
discovery of the true meaning of Marketing through the re-affirmation
of the importance of the customer or buyer. A greater importance is
also placed on consumer retention, customer relationship

47
management, personalization, customization and one-to-one
Marketing.

Bell, Gerald (Research Entitled: The Automobile Buyer after the

Purchase)
Bell (1967) analysed how a customer feels after buying a new
car. He also explores the effect of customers personalities in relation
to salesman persuasion that attempts to find customers post purchase
satisfaction. This research work was conducted in a large urban area
in the western part of United States. During summer months of 1965,
when the data was collected, 289 new cars were sold. Researcher
successfully interviewed 234 persons. It was concluded that person,
with high self-confidence had very little dissonance i.e. they made
their decisions, accepted then and were happy, where the persons with
low self-confidence had low dissonance and they were easily
persuaded by salesmen but in between them, the customers with little
confidence were highly dissonant and were not easily persuaded.
Perhaps, their self-doubts started to influence their attitudes after they
completed their purchase. Lastly, it was stated that persuadability acts
as an indirect cause of buyers dissonance.

Overy, R. J. (Research Entitled: Cars, Roads and Economic

Recovery in Germany)
Overy (1975) examined the nature of effects of motor car
revolution in Germany and demonstrated that the motor road and
motor car has played a significant part alongside rearmament in
initiating and sustaining the upwind in Germany between the year
1932 and 1938. Tables and percentage methods has been used to
demonstrate the data from the year 1920 to 1975 about production of

48
cars and their respective demands. It was observed that Nazi Motor
Plans were not interrupted by the war. They were always on the
developing phase.

Newman, J.W. & Staelin Richard (Research Entitled: Pre-

purchase Information Seeking For New Cars and Major
Household Appliances)
Newman and Staelin (1972), investigated the amount of
information seek by new car buyers and buyers of major household
appliances. Researcher employed two multivariate techniques,
Automatic Interaction Detector (AID) and Multiple Classification
Analysis (MCA). Data was collected from 653 households who had
bought one or more of the products of interest in 1967 or 1968 prior to
August 1968. Probability sampling was used to choose households in
USA excluding Alaska.
About 217 cars and 435 other major household appliances were
bought in that period. 29 variables were used e.g. level of satisfaction
with old products, number of television sets bought in last ten years
etc. It was found that 40 percent of buyers who had not regularly used
the products before also considered only one brand initially. Results
of the techniques used indicated that the amount of information
sought by many buyers was small, even though information was
accessible. Hence, it was concluded that buyers tried to search for the
things before purchase and unable to get proper information and the
purchase decision might prove to be wrong.

49
Davis, H. L. (Research Entitled: Decision Making within
Household)
Davis (1976), attempts to study the involvement of family
members in economic decisions and the process by which family
decisions are made. Davis opined that overall economic decisions
could be classified into three groups. Frequently purchased good or
services, durables and other economic decisions. One time purchase
of durables is more likely to involve more than one household
member. Purchase of durables is often preceded by a progression of
interrelated activities and decisions through time. Husbands, wives
and children have more opportunities to become involved at one or
more steps in purchase process. The studies show dominant influence
of husbands for decisions concerning price range and whether to
move, while the dominance of wives in deciding the number of
bedrooms and other house attributes. Researcher found a clear
dominance of husbands in automobile purchase, entertainment, small
decisions comprised of issues like financial management, money
management, budgeting etc. He found the role of wives as prominent
in money management. He made an agreement that group decision-
making differs in some important respects from individual decision-
making. First, families as group have characteristics that differ from
problem solving groups in organization or in the laboratory. Second,
he presented a repertoire of decision-making strategies with their use
being situational. And third, group members may not necessarily
agree about goals and agreement is not necessarily to reach decision.

50
Blomquist, Ake and Haessel, Walter (Research Entitled: Small
cars, Large cars and Price of Gasoline)
Blomquist and Haessel (1978) estimated disaggregated demand
functions for cars by size the age with particular attention to the
effects of gasoline prices on the composition of demand. The data
consists of cross-section of five year time series from eight Canadian
provinces. Researchers concluded that demand for each type of cars
had a relatively high short-term elasticity with respect to the prices of
gasoline was found to be relatively small, however, the demand for
older cars was found to have a substantial elasticity with respect to
price of gasoline and it was further concluded that large new cars
were affected by the change in price of gasoline.

Saish, S.M. and Bhardhwaj, Sivakumaran (Research Entitled:

Information Search Behaviour among New Car Buyers: A Two
Step Cluster Analysis)
Satish and Bharadwaj (2010) conducted a research on
information search behaviour among new car buyers. Data was
collected from two Indian Metros, Bangalore and Chennai. The
variables, selected for the study were taken from previous research.
The data was analysed with the help of factor analysis and variables
so taken were related with attributes of cars. Four factors were
extracted e.g. styling and comfort, value for money, safety and
reliability and miscellaneous etc. The groups were distinguished using
cluster analysis which was applied on search activity variables and
personality variables. Four clusters so formed were named, broad
moderate searchers, intense heavy searchers, low broad searchers and
low searchers. So the study was the first to segment the car buyers in
India and also the results were supported with previous studies.

51
Chattopadhyay, Tanmay, Dutta, Dutta, Rudrendunarayan &
Shivani, Shradha (Research Entitled: Media Mix Elements
affecting Brand Equity: A study of the Indian Passenger Car
Markets)
Chattopadhyay et al. (2010) tested a model for finding the
effect of advertising frequency across different media vehicles
towards building brand equity for passenger car market. The model
was tested for both first time buyers and repeated buyers. The effect
of media-mix elements on dimension of brand equity was examined.
The media-mix elements taken for the study were TV ads frequency,
print ads frequency, event sponsorship frequency, online ad frequency
and mobile ad frequency. Dimensions of brand equity taken were
perceived quality and brand awareness for cars. Secondary data for
the research purpose was collected from India: forecast and analysis,
2007. The primary data was collected with the help of pre tested
questionnaire with the help of pro-advent to administer survey across
five states in India. 494 respondents agreed to give their responses but
effective sample was 200. Sample was collected with the help of
systematic randomized sampling technique. Every third person who
parked their car in parking of mall between 3 pm to 9 pm on Friday
was contacted for survey. Structured Equation Modelling was used to
analyse the data and Cronbach Alpha was used to test validity and
reliability. It was found that all the four factors affect perceived
quality and brand awareness for both first time and repeated passenger
car buyers. It could be concluded that all media-mix elements do not
have significant impact on brand equity.

52
Goyal, B. B. & Aggarwal, Meghna (Research Entitled: Car
industry in India- An analytical study of factors of importance)
Goyal and Aggarwal (2008), attempts to find the relative
importance of various factors that attracts the customers while
selecting a particular car in its segment. For the purpose, the
questionnaire was developed and respondents were selected by
convenience sampling method. From Ludhiyana 277 respondents
were selected which comprised of 67 respondents from luxury car
segment and 117 from small car segment. Various statistical
techniques like Factor Analysis, Mean, Standard Deviation and Bi-
Variate Correlation had been used. The study reveals that in case of
purchase of luxury cars, the factors like horse power, model, luggage
capacity, accessories and loan facility emerged as most significant
factors and in case of medium cars, after sales service, availability of
spare parts, model, shape and engine capacity were important. In case
of small cars, the factors like accessories, engine capacity, after sales
service and price were main considerations. Hence, it was
recommended that the car manufacturers had to properly understand
the relative importance of various attributes for the different segments
of cars.

Kaushik, V. K. & Kaushik, Neeraj (Research Entitled: Buying

Behaviour for Passenger Cars (A study in South West Haryana))
Kaushik and Kaushik (2008) postulated empirically customers
preference towards passenger car brands in South West Haryana
region. He considered pre-purchase and post-purchase behaviour and
factors influencing the brand preference of passenger cars.
Judgemental Sampling method was used and study was carried out in
Bhiwani and Mahendragarh districts of Haryana in months of June to

53
August, 2007. Multi-Dimensional Scaling Techniques and cross
tabulation were used. It was observed from the study that Maruti 800,
Alto and Wagon R were most favourites in that region and customers
were more influenced by friends, relatives rather than dealers and
sales persons. Brand name, fuel, efficiency and price were found to be
primary determinants for buying cars in that region.

Rani, Sakthivel (Research Entitled: Passenger Car Industry in

India)
Rani (2008) presented a study of the passenger car industry in
India. Trends in Indian car industry had been studied prior to
liberalization and post- liberalization era. She articulated that broad
branding policy which gave new licences to broad groups of
automotive products started in 1985. In post-liberalization era, the
passenger car industry in the nineties was characterised by an increase
in the number of brands available in the market which caused brands
to compete on the basis of product features. Graph of sales of cars
increased from 264803 units in 1994-95 to 819918 units in 2004-05.
The car industry contributed 19% of indirect taxes in 2007 and gave
direct employment of over 2 million and indirect employment of
about 10 million. According to the author, basic challenges to Indian
car industry were road infrastructure, transportation, fuels, technology
infrastructure and reengineering. Most of the exports were in compact
car segment and over a period of time, it is presumed that it could
grow to include luxury cars also.

Verhoef, Peter, Langerak, Fred and Donkers, Bas (Research

Entitled: Understanding Brand and Dealer Retention in the New
Car Market: The Moderating Role of Brand Tier)

54
 Verhoef et. al (2007) investigates the brand and dealer retention
in the new car market and also studied the moderating role of brand
tier. The study investigated the degree to which dealers contribute to
brand retention and studied how this contribution is moderated by
brand tier. The data was collected from recent car buyers and sample
size was 999 car buyers. Findings showed that dealers selling volume
brands were able to improve brand retention rates. It was revealed that
dealers of prestigious and economy brands were unable to affect
brand retention. Extrinsic dealer service qualities have the smallest
affect for dealers selling economy brands, while dealer payment
equity is the very important determinant for dealer retention for these
dealers.

Renganathan, R. (Research Entitled: Consumer Markets and

Buyer Behaviour of Cars)
Renganathan (2005) analysed the consumer markets and buyer
behaviour of cars in Chennai area. The sample size for the study was
135 comprising of people who own a car and those who are willing to
upgrade from a two wheeler to four wheelers. Results indicated that
39% of the surveyed respondents expect a car to be luxurious and
mid-sized. It makes clear that, the style and appearance of a car also
influence a customers intention to buy a car. Hyundai has got a
substantial market share in the urban areas. It could also conduct some
campaigns and road shows in rural areas and cater to the respective
markets. Further, he suggests that when a company need an effective
advertising to persuade the consumers, it should first concentrate on
selection of celebrity endorsers. The brand managers must identify the
right celebrity by keeping the long-term impact in their minds, as

55
celebrity advertisements are not only to build powerful brand but also
assist to increase the recall level coupled with higher sales.

Sheth & Sisodia R.S. (Research Entitled: Consumer Behaviour

in the Future)
Sheth and Sisodia (2004), stated that human behaviour is
changing rapidly. As a result of latest technological revolution,
changes in market place behaviour will naturally follow. Future
consumers will be dramatically different from past and present
consumers. They will be more time-driven, more demanding, highly
individualistic and more information intensive. The success of
marketers will depend of their ability to deliver total customer
convenience. It includes hassle-free search (advertising-on-demand),
hassle-free acquisition (home delivery), hassle-free consumption (e.g.
products with built-in-expert systems to enable maximal value
extraction) and hassle-free disposal. Furthermore, shopping on
demand will include anytime, anywhere procurement as well as
anytime, anywhere consumption. It is concluded that there will
undoubtedly be winners and losers in change process, as well as
leaders and laggards. Marketers, who move proactively now to
redefine the function and rewrite its value equation, will position
themselves for a bright future.

York, Richard (Research Entitled: Cross National Variation in

the size of Passenger Car Fleets: A study in Environmentally
Significant Consumption
York (2003) presented a study on cross national variation in
size of passenger car fleets. Further, he studied multiple factors (e.g.,
demographics, economic and socio-political) that potentially influence

56
motorization. Least square regression technique had been used to
assess the influence of different factors. For the said purpose sample
was collected from 138 nations. The findings of the study suggested
that economic development appears to increase motorization and
globalization of individualistic social and political structures lead to
expansion of car fleets.

Morton, F. S. Zettelmeyer, F., & Risso, J. S. (Research Entitled:

Consumer Information and Price Discrimination: Does the
Internet Affect the Pricing of New cars to Women and
Minorities?)
Morton et al. (2002) analysed the relationship between car
prices and demographics and also studied the role of internet in
pricing of new cars. Researchers collected the principal data from a
major supplier of Marketing Research Information (MRI). MRI
collected transaction data from a random sample of dealers in the
major metropolitan areas of the United States. Data was collected
from January 1, 1999 to February 28, 2000. Customer information,
model and trim level of car, financing, trade information etc. were
included in the data. Data set contains 671468 transactions at 3562
dealerships. Price was taken as a dependent variable and
demographics like race, gender, age etc. are considered as
independent variables. As results suggested that, high income and
high education indicated lower elasticity of demand as highly
educated personnel were more effective negotiators. It was observed
that women paid more for cars as compared to men. All these cause
and effect relationships had been sort out with the help of Regression
analysis. Comparative analysis of buying behaviour of African-
American and Hispanic buyers was carried out and found out the

57
following aspects like minorities were mostly unable to finalize the
transactions and bought the cars from dealers at higher cost and they
were also observed in bargaining. Other objective of effect of internet
was also concluded with the help of Regression analysis only. It was
observed that Auto bytel paid 12% less than the other customers.
Autobytel.com also helped African-Americans to cover substantial
part of price premium they would otherwise pay. Hence, it could be
concluded that internet eliminated most variations in new car prices
that resulted from individual characteristics associated with ethnicity
and race. Authors also showed that disadvantaged minorities had
more to gain from using an online buying service than do whites.
Internet hides few of the information about consumers willingness to
pay so price discrimination is likely to be less pronounced.

Dr. Govind P. Shinde, Dr. Manisha Dubey (Research Entitled:

Automobile Industry and Performance of Key Players)
This study represents the figures of Indian automobile industry
during the period 2005 to 2010. The study has been conducted
considering the segments such as passenger vehicle, commercial
vehicle, utility vehicles, multi-purpose vehicles, two wheelers and
three wheelers. All the sections concisely explain the current and
future market trends, the developments in the Indian automobile
market. The methodology used to find the trends and the market share
of the Indian automobile industry. The researcher for the said purpose,
take into account, the past and current trends in an economy, and
more specifically in an industry, to bring out an objective market
analysis.
It has been concluded that despite economic slowdown, the
Indian automobile sector has shown high growth. The economic

58
sustainability and increasing living standards and purchasing powers
of the Indian customers, automobile sector has a bright coming future.
Further to the above, the industry is recording increasing growth rate
in sales, but still there are loopholes in the automobile industry and
these needs to be considered by the automobile industry to overcome.

Satish K. Batra, S. H. H. Kazmi (Book Entitled: Consumer

Behaviour (text and cases))
The author in this book presents an in-depth study of consumer
behaviour through several case studies. It is revealed that, consumer
behaviour is an applied science. Though, the nature of the subject is
such that, there are few definitive answers. Also, the study of
consumer behaviour goes well beyond the mere act of acquiring or
using the product or service. The study includes of how having or not
having things affect our lives and how our possession or use of
products or services influences the way we feel about others and
ourselves.
Furthermore, understanding consumer behaviour and knowing
consumers are not that simple, in fact it is almost impossible to
predict with one hundred percent accuracy, and how consumer will
behave in a given situation. Marketers are interested, in watching
people shopping, flirting, parading, playing, entertaining as they are
keenly interested in the wide variety of behaviours they display. It is
indicated that consumers are moved by a complex set of deep and
subtle emotions. Their behaviour springs from deeply held values and
attitudes, their perceptions of the world and their place in it, from
common sense, impulse, or whimsy, all this is the outcome of a large
number of external and internal influences.

59
 Chapter-III
RESEARCH METHODOLOGY
 Chapter III
RESEARCH METHODOLOGY

This chapter presents the methodological considerations to be

taken into account when studying consumer behaviour for premium
cars. Methodology for a study specifies what information is to be
gathered, what the sources are, and through what methods the data has
been collected and what analysis are to be employed. In order to select
appropriate research design and methods for the study undertaken,
presented chapter looks towards a directional focus for this research.
It allows selecting research methodologies for this study whether it
should be "positivist epistemology or positivism" or
"phenomenology", as each of which dominates the literature research
methodology and both are widely used in business research
(Saunders, Lewis, and Thomhill, 2000). Positivism has been used
because it is a scientific approach, which includes testing of
hypotheses. Phenomenology has been used because it allows
acknowledging the limitations of a given perspective: it allows seeing
how situations and problems can be tackled in different ways allowing
new kinds of solutions to come into view.
The main purpose of the study is to explore the Consumer
Behaviour towards premium passenger cars in the state of Uttar
Pradesh in post-liberalization era. Based on conceptual and theoretical
framework, this chapter focuses on the database, universe of the
study, sample size, sampling design, data collection, demographic
profile and the detailed analysis of the statistical tools used in the
entire study. The chapter commences with profiles of the car owners
and dealers.

60
RESEARCH PROCESS
a. Research :Descriptive Research
b. Data Sources :Secondary Data, Primary Data
c. Research Approach :Survey Method
d. Research Instrument :Questionnaire
e. Type of Questionnaire :Structured non-disguised
f. Sampling Plan
1. Sampling unit :KAVAL Towns (Kanpur,
Agra, Varanasi, Allahabad and
Lucknow)
2. Sample Size :250 (Consumers), 25 (Dealers)
3. Sampling Procedure :Simple Random Sampling/
Stratified Sampling
g. Contact Method :Personal Interview
h. Mode of Collecting Data :For primary data the
respondents were chosen randomly and requested to grant
interview. The questions were asked in a predetermined
sequence. The secondary data was collected from various
books, magazines, internet, journal, reports (both published and
unpublished) etc.
i. Data Processing
1. A number of tables and graphs are prepared to bring out the
main characteristics of the collected data.
2. Conclusions are drawn from the collected data.

DATA COLLECTION FROM PRIMARY SOURCES

A questionnaire survey was carried out with premium
passenger car users of several automobile companies and authorized

61
car dealers to study the consumer behaviour for premium passenger
car segment.

CONSTRUCTION OF QUESTIONNAIRE AND DATA

COLLECTION
The present study is primarily based on primary data. To collect
the primary data survey method has been used through a non-
disguised structured questionnaire comprising questions of
dichotomous type, multiple choice etc. for car consumers and car
dealers separately. With the help of conceptual framework, the
dimensions already identified were categorized according to the
existing established constructs.
Dimensions in the questionnaire were taken from the previous
studies like Anand (2006), Ekta (2007), Saurabh (2012), Kaushik &
Kaushik (2008), Jakrapan (2002) etc. The questionnaire was pretested
and necessary corrections were done by having meeting with the car
experts like managers of Sunny Toyota, Best Deals for Wheels and
other car dealers in Lucknow. This method of pretesting is to ensure
that understanding of the respondents about the statement used in the
questionnaire, whether addition or deletion of the items are required,
whether changing of words would make the clarity of dimensions or
changing order of the statements would ensure greater coherence. The
questionnaire for dealer and consumer consisted of following
question:
Part 1- This part of the questionnaire for consumer consisted of
personal information about the respondents regarding their Name,
Age, Gender, their Contact Details, Occupation, Educational
Qualifications and Family Income. Whereas in dealer questionnaire
this part consisted of Name, Age, Gender and contact details.

62
 Part 2- First seven questions of this part are general questions
regarding cars including one question regarding their opinion about
premium car. Question 16 dealt with the sources of information about
the model of the vehicle. Question 17 was regarding variables that
motivate consumers to buy their car. Question 18 dealt with the
variables that affect consumers look upon while purchasing the car.
Question 19 dealt with the Pre-Purchase Strategies adopted by
consumers. Question 20 was regarding the role of reference groups in
purchase decisions. Question 25 presents the variable that may be
responsible for the dislike/problems faced by the car consumers.
Question 21-24 was regarding the satisfaction level of the customers
with their car and the dealer as well.
In this part of the dealer questionnaire questions regarding
consumer behaviour for premium passenger car from the point of
view of car dealers are consisted.
The objectives of employing the questionnaire survey method
are: (1) to generate dealers and car owners perceptions, attitudes,
and buyer behaviour, and (2) to administer the questionnaire and
ensure reliability and validity, and to collect additional information.
The structured questionnaire was pre-tested and modified to varying
degrees and to make it suitable for either self-completion or
administration by the researcher. The final structured questionnaire
was composed of set-choice, pre-coded questions, which could be
used to collect socio-economic demographic, behavioural, and
attitudinal data. Questionnaire wording ensured that respondents
should be able to understand the questions, have the requisite
knowledge or information to answer, and be willing to provide
answers. Questionnaire layout and presentation were carefully

63
Figure 3.1 Procedures for Developing a Questionnaire

Step-1 Specify What Information Will Be

Sought

Step-2 Determine Type of Questionnaire and

Method of Administration

Step-3
Determine Content of Individual
Questions

Step-4 Determine Form of Response to Each

Question

Determine Wording of Each Question

Step-5

Determine Sequence of Questions

Step-6

Step-7 Determine Physical Characteristics of

Questions

Re-examine Steps 1 - 7 and Revise if

Step-8 Necessary

Step-9 Pre-test Questionnaire and Revise if

Necessary

Source: Churchill (1991, p360) suggested by Kornhauser and Sheatsley (1976)

64
designed to accommodate not only the respondents convenience, but
also the need of the data analysis.

DATABASE
The present work is primarily based on primary data collected
from 250 premium car owners and 25 car dealers. The respondents
were interviewed through non-disguised structured questionnaires in
English language designed for both separately. However, secondary
data have also been used to emphasize the distinct features of the
Indian Automobile Industry after de-regulation in the country. These
sources had been used as supporting evidence to justify the
significance of the study.

UNIVERSE OF THE STUDY

The present study is focused on the premium passenger car
owners residing in the areas of five economically significant districts
viz. Kanpur, Agra, Varanasi, Allahabad and Lucknow; i.e. KAVAL
towns of the state of Uttar Pradesh.

SAMPLE SIZE AND SAMPLING DESIGN

The present study used a survey method for the data collection.
Sample of 250 car users and 25 car dealers were taken, out of which
50 car users and 5 dealers were taken from each of the districts. The
data was collected from five economically significant districts of Uttar
Pradesh viz. KAVAL towns.

65
 Table 3.1
Sample Composition
S. No. Cities Sample Size (Car Sample Size (Car
Consumers) Dealers)
1. Kanpur 50 5
2. Agra 50 5
3. Varanasi 50 5
4. Allahabad 50 5
5. Lucknow 50 5
Total 250 25

Dealers and Car Owners Profiles

This section of the chapter presents profiles of samples used in
these researches respectively.

Table 3.2
Gender wise distribution
S. Gender Number of Percentage Number of Percentage
No. Respondents Respondents
(Car (Car Dealers)
Consumers)
1 Male 209 83.6% 23 92%
2 Female 41 16.4% 2 8%
Total 250 100% 25 100%

The number of male respondents (car users) taken for the study
from KAVAL towns was 209 and number of female respondents (car
users) taken from KAVAL towns was 41 respectively. It is clear that
there are 83.6% male in the survey whereas 16.4% are females.
Whereas in dealers sample 92% were males and only 8% were
females.

66
Figure 3.2 Gender wise Distribution of Car Users

83.60%

90.00%
80.00%
70.00%
60.00%
50.00%
40.00%
16.40%
30.00%
20.00%
10.00%
0.00%
Male Female

Table 3.3
Age wise Distribution
S. Age (in Number of Respondents
No. years) Car Percentage Car Percentage
Consumers Dealers
1. Upto 25 5 2% - -
2. 26-35 99 39.6% 8 32%
3. 36-45 71 28.4% 13 52%
4. Above 45 75 30% 4 16%
Total 250 100% 25 100%

The respondents were classified on the basis of age. Age was

classified as Upto 25, 26-35, 36-45 and above 45. Maximum number
of the premium car buyers fall in the category of 26-35 (39.6%) where
as only 2 % respondents fall in the category of upto 25 years, 28.4%
of respondents belong to 36-45 years and respondents falling in the
category of above 45 were 30%. As in dealers sample no response
fell in the class of upto 25 years. Maximum number (52%) of the

67
respondents fell in the category of 36-45 followed by 26-35 (32%)
and above 45 (16%) class.

Figure 3.3 Age based distribution of Car Users

39.60%

40%

35% 30%
28.40%
30%

25%

20%

15%

10%
2%
5%

0%
upto 25 26-35 36-45 above 45

Table 3.4
Occupation wise Distribution
S. No. Occupation Number of Percentage
Respondents
(Consumers)
1. Service 157 62.8%
2. Professional 49 19.6%
3. Business 39 15.6%
4. Agriculture 5 2%
Total 250 100

Consumers occupation was classified as Service class,

Professional, Business Class, Agriculture and Manufacturing.
Maximum number of respondents belongs to Service class (62.8%)

68
where as 19.6% respondents were Professional. 15.6% respondents
belong to Business class and 5% were from Agriculture. None of the
respondents indicated that they were from manufacturing sector;
hence the frequency count was zero and therefore not featured.

Figure 3.4 Occupation wise Distribution

62.80%
70.00%

60.00%

50.00%

40.00%

30.00% 19.60%
15.60%
20.00%
2%
10.00%

0.00%
Service Professional Business Agriculture

Table 3.5
Qualification wise Distribution
S. No. Educational Number of Respondents Percentage
Qualification (Consumers)
1. Non-Graduate 4 1.60%
2. Under Graduate 61 24.40%
3. Post Graduate 106 42.40%
4. Professional 52 20.80%
5. Any Other 27 10.80%
Total 250 100%

Respondents were further classified on the basis of their

educational qualifications. Maximum number of the respondents was

69
post graduate i.e. 42.40% of the respondents where as only 1.60% of
the respondents were non-graduate. 24.40% belong to under graduate
class and 20.80% respondents were having the professional
qualification. Rest 10.80% of the respondents belong to any other
class.

Figure 3.5 Qualification wise Distribution

42.40%
45.00%

40.00%

35.00%

30.00% 24.40%
20.80%
25.00%

20.00%

15.00% 10.80%

10.00%
1.60%
5.00%

0.00%
Non-Graduate Under Post Graduate Professional Any Other
Graduate

Table 3.6
Income wise Distribution
S. No. Family Monthly Number of Percentage
Income Respondents
1. Below 50,000 44 17.60%
2. 50,000-2,00,000 163 65.20%
3. 2,00,000-5,00,000 13 5.20%
4. 5,00,000 & above 30 12%
Total 250 100%

70
 Respondents were also classified on the basis of their family
monthly income. Maximum number of respondents fall under the
category of 50,000-2, 00,000 i.e. 65.20%, where as in the category of
2, 00,000-5, 00,000 there were only 5.20%. 17.60% fall under the
category of below 50,000 and 12% under the category of 5, 00,000 &
above.

Figure3.6 Income wise Distribution

65.20%
70.00%

60.00%

50.00%

40.00%

30.00%
17.60%
12%
20.00%
5.20%
10.00%

0.00%
Below 50000 50000-200000 200000-500000 500000 & above

71
FROM DEALERS QUESTIONNAIRE

Table 3.7
Years of Dealers Experience wise Distribution
S. No. Years of Experience Number of Percentage
Respondents
1 0-5 years 7 28%
2 5-10 years 11 44%
3 10-15 years 5 20%
4 More than 15 years 2 8%
Total 25 100

Car dealers were classified on the basis of their years of

experience in the trade. Maximum number of the respondents fall in
the category of 5-10 years i.e. 44% whereas in the category of more
than 15 years there were only 8%. 28% were in the category of 0-5
years and remaining 20% fall in the category of 10-15 years.

Figure: 3.7 Years of Dealers Experience wise Distribution

44%
45%
40%
35% 28%
30%
25% 20%

20%
15% 8%
10%
5%
0%
0-5 years 5-10 years 10-15 years more than 15
years

72
METHODOLOGY
Commensurate with the objectives of the study to analyze the
consumer behaviour towards premium passenger cars, the survey was
analyzed and categorized by using both the methods i.e. descriptive
and statisticallly as well. The inference and interpretation from the
sample were to be generalized over the concerned population.
Combination of figures and appropriate numerical methods were put
in to explore possible patterns and the data characteristics. Tables and
figures are presented in proper titles, caption to show clear, self-
descriptive, and informative displays of the results.

SPSS
Stastistical Package for Social Sciences (SPSS) version 16 for
windows had been used for carrying out analysis.

73
 Chapter-IV
AN OVERVIEW OF THE INDIAN AUTOMOBILE
INDUSTRY AND AUTO POLICY 2002
 Chapter- IV
AN OVERVIEW OF THE INDIAN AUTOMOBILE INDUSTRY
AND AUTO POLICY 2002

Automobile sector- the next blue-eyed boy of Indian economy

- Addi Vardhma

The automobile sector of any country reflects the health of its

economy. By this virtue, the Indian economy is very much in a good
shape, as the countrys automobile industry has marked an impressive
growth in the last fiscal. The automobile industry in India is one of the
largest in the world and one of the fastest growing globally. Indias
passenger car and commercial vehicle manufacturing industry is the
sixth largest in the world. It is expected to be the fifth largest
automobile market in the world by 2015. The automobile sector is one
of the core industries of the Indian economy whose prospect is
reflective of the economic resilience of the country.

CHRONOLOGICAL HISTORY OF THE EVOLUTION OF

AUTOMOBILE INDUSTRY IN INDIA: [From Statics to
Dynamics]
India set its foot in the global automotive industry in 1898, with
the first car rolled out in the streets of Mumbai. Since then, India has
come a long way. Taking into scrutiny the current statistics,
automotive industry is now, the most dynamic sectors in India. And
automobiles have drastically established market throughout India to
meet the requirements and satisfaction of a variety of consumers. The
broad aim of this section is to discuss the chronological growth

74
dynamics and changing forms of innovation in Indian automotive
industry since independence and before.
Indian automotive industrys building up characteristics from
the pre-independence period till date shows distinct phases. It all
started in 1940s for the first embryonic automotive industry to emerge
in the pre-independent India. Almost after a decade and a half since
then, leading entrepreneurs and the Government in the independent
India have extended efforts to create a manufacturing industry to
supply the automotive industry with components in 1953. This was
the beginning of the take-off phase of Indian economy. In the next
three decades, the growth in the automotive industry did not really
kick-start as the national economic growth was constantly following
the Hindu rate of growth, an annual growth that stagnated between 3.5
percent over 1950-1980. Despite the sluggish growth of the economy
during that time, the automotive industry began to witness a relatively
fast growth during 1970-1980, mainly due to the leading production
role of Telco, Ashok Leyland, Mahindra & Mahindra, Hindustan
Motors, Premier Automobiles and Bajaj Auto. Having experienced
several decades of colonial power, openness to risk of admission in
the global automotive production were severely licences, trade
restrictions and barriers. However, the growing demand for more cars
since 1980s has changed the entire growth scenario. During 1980-
1985, the first major change was sighted as Japanese manufacturers
began to build car and commercial vehicle factories in India in
partnership with Indian firms.
From the mid period of phase-3 (1966-1979) and the beginning
of phase-4 of economic reforms (e.g., during 1985-1990) the industry
marked the entry of Maruti Udyog into the production of passenger
car segment as persistent high import-tariff were relaxed to a great

75
extent and with lesser import cost adding to the overhead production
cost, higher productions were possible leading to the start of growing
exports. The phase-4 of economic reforms (i.e. 1988-2006) registered
the triumph of liberalization which kick started the much awaited
reform for the automotive sector paving the paving the way for the
firms which were genuinely waiting for joint-ventures, private
investment with duty-free technology transfer indirectly through
Foreign Direct Investment and directly by importing the new
innovations and technologies. It is during 1990-1995; Maruti Udyog
established itself as the leading passenger car maker. During 1995-
2000, leading international car makers entered the Indian market, a
trend that continues to accelerate till this date.
During this time advanced technology was introduced to meet
the competition, and environmental and safety imperatives. The
automobile companies started investing in service network to support
maintenance of non-road vehicles and auto financing started emerging
as an important driver for demand. Since 2000, significant trade and
investment restrictions were removed to speed up the momentum of
liberalization of the automotive industry. Indigenous production of
cars started since then with an eye to the domestic and international
market needs. Increasing efficiency was achieved with growing
investment in research and development while satisfying the strict
environment standards. As a result an influx of overseas technology
know-how has improved the impetus for improvements in quality and
productivity to a point where many global companies now view India
more favourably than China as a source point for components.
In India, automobile market is mainly dominated by Japanese
and also some multinational companies are currently investing in
India. The major foreign automobile manufacturers in India are

76
Honda, Toyota, Ford, Fiat, Daimler Chrysler, etc. The major Indian
players are Marui Udyog, Tata Motors and Hindustan Motors etc.
passenger and Commercial Vehicles capture around 20% market
share (SIAM statistics for 2006-07). The Indian automobile industry
has long been recognized as a core manufacturing sector with the
potential to drive national economic growth and faster the
development of technological capabilities through its powerful
backwards and forward linkages, and the localization of high value
added manufacturing processes within domestic economics. In recent
years, for instance, the contribution of the automotive industry of
GDP has risen noticeable from 2.77 percent in 1992-93 to 5 percent in
2011-12. The industry is now working in terms of the dynamics of an
open market with a multitude of automobile and auto-component
manufacturing firms. Various socio-economic and political factors
have shaped the development course of the industry along its way
through inception to the present-day dynamic forms.
The evolution of Indias automotive industry under the
influence of these factors could be identified to have occurred in
following different phases:

i) SCENARIO OF AUTOMOBILE INDUSTRY IN THE

PRE-INDEPENDENCE ERA:
The automobile as we know, it was not invented in a single day
by a single inventor. Indian automotive industrys building up
characteristics from the pre-independence period till date shows
distinct phases. About hundred years ago the first motorcar was
imported and import duty on vehicles was introduced. Indian Great
Royal Road was conceived, first car brought in India by a princely
ruler in 1898. Simpson & Co., established in 1840, was the first to

77
attempt motorcar and to build and operate petrol driven passenger
service. From 1888 Motors spirit attracted a substantial import duty.
In 1919 at the end of the war, a large number of military vehicles
came on the roads.
In 1928, assembly of CKD Trucks and Cars was started by the
wholly owned Indian subsidiary of American General Motors in
Bombay and in 1930-31 by Canadian Ford Motors in Madras,
Bombay and Calcutta. In 1935, the proposals of Sir M. Visvesvaraya,
an eminent Indian engineer and statesman, to set up an automobile
industry, were disallowed. The proposal, which included
establishment of a factory with a production capacity of 11,000
vehicles per year and a capital outlay of Indian Rupee (INR) 22.5
million, was however turned down by the then Government.
Nevertheless, as a by-product of Sir Visvesvarayas efforts, the
beginning of Indian automotive industry was marked in early 1940s
with the establishment of automobile companies by two Indian
industrial houses, i.e. Hindustan Motors Limited (HML) founded by
the Birlas and Premier Automobiles Limited (PAL) by the Walchand
Hirachand Group in 1942 and 1944 respectively. Both the companies
were established with the foreign technical collaboration and a
programme for progressive manufacturing of complete vehicles.
However, due to slow progress initially, the production of
automobiles by these companies started actually only after the Indias
independence.
Thus, starting from pre-independence era of as early as 1930s,
the Indian automotive industry has marched a long way- a journey
which was in most part beset with inward trade orientations
prompting large regulations and restrictions. As a result, the

78
automotive industry became one of the least innovative slots till 1980s
when Maruti Udyog Limited (MUL) began its operations.

ii) SCENARIO OF AUTOMOBILE INDUSTRY IN POST

INDEPENDENCE ERA:
The realisation of the dream of an independent India had
brought along with itself a challenge of nation building for its leaders.
The dismal performance of countrys industrial sector and agricultural
sector under the shackles of colonial rule had led to object levels of
poverty within the population. In light of the socio-economic
conditions then existing within the country, the newly formed
Government under the prime ministerial leadership of Jawaharlal
Nehru preferred the mixed economy for the nation. This implied that
the decision-making of what to produce, how to produce, how to
distribute was to be shouldered by both the state and the market. In
line with the intentions of the state to intervene in economic
development, Industrial Policy Resolution (IPR) passed in the
parliament of India in 1948. IPR of 1948 framed the approach that the
Government proposed to pursue in the industrial growth and
development. The resolution divided the nations industries into
different categories, depending upon their strategic importance and
specified the role of the state in the development of each category of
industries. In this regard, the automobile industry was classified under
the category of basic industries of importance. As mentioned in IPR,
1948, these industries of basic importance, whose location must be
governed by economic factors of all-India importance, or which
require a considerable investment of a high degree of technical skill
(GOI 2008b, p. 3), were suspected to the regulation and control by the
central Government. The initiatives within the automotive industry

79
were left to the private enterprises, with state playing only the role of
a controller. However, the state reserved the right to intervene and
progressively participate in the industry when deemed necessary. The
IPR, 1948 proposed central regulation on new foreign investments
and stipulated that effective control in future foreign equity
collaborations ought to rest in Indian hands. Further, in accordance
with the objectives laid by IPR 1948, the ministry of industry
prepared its first policy for the automotive industry in 1949. As
determined in the Resolution, the tariff on import of fully built
vehicles was heightened the same year, virtually banning their import
into the country. The foreign assemblers assembling CKD vehicles
were allowed to continue their operations nevertheless. Meanwhile
HML and PAL had already commenced their operations in 1947 and
1948 respectively. PAL assembled Dodge-Forgo trucks, whereas
HML started assembling Studebaker trucks. In 1951, the number of
vehicles assembled/produced in the country reached a figure of
21,577 (Narayana, 1989). The large number of on-road vehicles in the
country by this time had led to the development of a sizeable
replacement and repair sector. IPR of 1948 along with the Industries
(Development and Regulation) Act (IDRA), 1951, created an
elaborated licensing system surrounding the Indian Industries,
including the automotive industry. IDRA 1951, with subsequent
amendments owing to policy changes continued to apply to the Indian
industries till early 1990s.
In the meantime, the constitution of India effectively came into
force in January 1950. Subsequently, the planning commission was
set up in March 1950 to oversee the formulation and implementation
of five-year-plans (FYP) in India. With respect to the automotive
industry, the commission planned the total number of vehicles that

80
were to be produced in the given plan period depending upon
countrys need and the resources at disposal. For instance, the first
FYP (1951-1956) introduced in April 1951, targeted to raise the
population of vehicles in the country from 4,077 in 1951 to 30,000 in
1956 (GOI 1951). Accordingly, the ministry of Industry administered
the capacity licences to the automobile firms. In March 1952,
Government of India decided to replace its hitherto gut-reaction
policy for the automotive industry with a more studied and
comprehensive approach to the industry (Kathuria 1996). It was
referred to Tariff Commission the question of providing
protection/assistance for the encouragement of automotive industry.
After the commission submitted its recommendations, the
Government of India asked assembly plants, which did not have plans
to set up manufacturing facilities, to shut operation. As a result,
General Motors and Ford and other foreign assemblers who
considered the domestic demand too low to warrant a local
manufacturing programme were obliged to close down their
operations within three years. Thus, the exit of foreign assemblers by
1956 and the ban on import of fully-built vehicles since 1949
protected the Indian automotive industry from foreign competition
effectively.
The Tariff Commission endorsed the already existing
manufacturing plan of HML and PAL who had established their units
for manufacturing the components. With the exit of foreign
assemblers, both HML and PAL who had so far restricted themselves
to CVs entered into the production of cars. HML had collaboration
with Morris (UK) for cars, whereas PAL with Fiat (Italy) for the
same. In addition, the manufacturing programme of automobile
products of India, Ashok Motors and Standard Motors Products for

81
Cars and CVs was approved by the commission. Ashok Motors
established in 1940, after equity collaboration with British Leyland.
Standard Motor Products for the production of Cars and CVs was in
collaboration with Standard Motors (UK). In 1954, the decision of the
Government marked a turning point in the history of the Indian car
industry. The Government of India introduced what type of vehicle
each manufacturer should make. Therefore, each product was safety
cocooned in its own segment with no fears of any impending
competition. Even though new entrants were not allowed, they had
plans of a full-pledged manufacturing programme. The restrictive set
of policies was chiefly aimed at building an indigenous auto industry.
However, the restrictions in foreign collaborations led to limitations
on import of technology through technical agreements.
Industrial policy was revised and adopted in May 1956, known
as the Industrial Policy Resolution of 1956. The revised Industrial
policy described socialist pattern of society as the objective of
Parliaments social and economic policy (GOI 2008b). The
automotive industry under IPR of 1956 had been provided with
necessary autonomy for functioning. As the second FYP (1956-1961)
was introduced, massive investments were planned for the public
sector and the amount of deficit financing was around INR 1,600
million per year (GOI 1993). More emphasis was laid on the
production of trucks with regard to the nations priorities. It was
aimed at stepping up the indigenous content of the automobiles to 80
percent by end of the year 1960-61. Meanwhile by 1961, Tata
Engineering & Locomotive Company (TELCO) and Bajaj Tempo
with Programmes of CVs entered into the industry. TELCO was in
collaboration with Daimler-Benz (Germany) and Bajaj Tempo
initially produced three-wheelers under the license of Vidal & Sohn

82
Tempo Werke (Germany). To encourage the domestic production and
for keeping the automobile prices low, the government in early 1950s
had maintained lower import duties on the components still being
imported. The tariff commission was asked to enquire into and
recommend a price policy for the automobiles. The commission
suggested reviewing the whole question of protection granted to the
automotive industry after a period of ten years. The situation however
changed very soon with the balance-of-payments crisis that sprang up
in 1956-57. Immediate measures were required to counter the
economic crisis included cuts on foreign exchange allocated to the
automobile manufacturers. Moreover, each of these firms was
permitted to produce only one model. The sudden reduction in import
of vital components compelled the firms to reduce their production.
Thus, severe backlogs were generated for the production orders.
Reduction in supply of automobiles resulted in steep price increases
owing to supply-demand economics. At this particular time,
government decided to impose informal price control on
automobiles, which was accepted by the manufacturers. Under this
mechanism it was required the customer to place the order with the
dealer and submit a partial payment to the Indian Portal Service (IPS).
The manufacturers then had to deliver the automobiles in the
sequence of the orders registered with the IPS. Indian Government
also fixed the dealer commission to a maximum of 10 percent and
asked the manufacturers to intimate any decision of raising ex-works
prices in advance.
By its mechanism of informal price control, the Government of
India countered the negative effects of providing protection to the
automotive industry to some extent. However, the performance of the
automotive industry (especially passenger cars) had been

83
unsatisfactory throughout the 1950s. The growing criticism about the
quality and price of the auto products made the government to appoint
L. K. Jha Committee to look into these issues. In order to reduce costs
and improve quality, the committee recommended the encouragement
of an indigenous ancillaries sector. The subsequent adoption of these
recommendations by the Government marked a revolutionary step
through the evolution of a separate auto-component industry in the
country. The auto-component industry saw good development during
this phase due to the emphasis laid on indigenisation within each of
the three FYPs.
The third FYP (1961-1966) had stressed on the efforts of
indigenisation, in order to achieve the increased automobile
production targets of the plan period without putting strain on
countrys foreign exchange reserves. The plan noted that invested
designed to increase the indigenous content has to take precedence
over investment of establishing new units or expanding existing
(GOI 1961, p. 15). At this span of time the priority was given to the
production of CVs and 2-wheelers. The Indian automotive industry in
the years 1945 to 1965 was the one wherein the foreign competition
was highly restricted by means of protective rates of tariff and foreign
investment licensing requirements. Foreign collaborations were
allowed only after diligent considerations and were subject to
effective control by Indian firms. Development Council for
Automobiles, ACMA, SIAM and Vehicles Research and
Development Establishment such Auto-related institutions also got
established during this phase. During the period of 1967 to 1977 ruled
by Mrs. Indira Gandhi, the populist stance taken by the Government
perceptibly altered the automotive policy. The first step was initiated
in May 1966, with Government directing the tariff Commission to

84
look into the whole question of continuance of grant of protection to
the automotive industry. Based on the report of Tariff Commission,
the Tariff Commission recommended the Government: (a) To help
industry attain minimum efficient scale by limiting the number of
models to an absolute minimum, (b) to impose price controls on
passenger cars. Further, the Government imposed statutory price
controls on passenger cars in September 1969.
In the meantime, Indias first competition law known as the
Monopolies & Restrictive Trade Practices Act (MRTP), had passed
in 1969. TELCO was one of the first companies to come under the
scrutiny of the MRTP Commission when it applied for increasing its
licensed capacity from 24,000 to 36,000 units in December 1970
(Kathuria 1996). Foreign Investment Board was established in 1968 to
critically review the acquisition of foreign technology by allowing
foreign equity participation. The provisions of the FERA created
additional constraints on the import of technology, raw materials and
components for the industrial sector in general and the automotive
industry in particular. With regard to the industrial policy for
automobiles, the Government was very clear in its preference for
means of affordable personal and public transport as against to
luxurious passenger cars.
The enactment of MRTP and FERA in the early-half of this
phase strengthened the regulations surrounding the Indian automotive
industry. Many efforts were taken for 2-wheelers segment. On the
other hand, no additional capacity was planned for the passenger cars.
Between 1970 and 1975, Kinetic Engineering and state-owned
Scooters India made their into the 2-wheelers segment. Kinetic
Engineering started producing mopeds, whereas Scooters India
commenced production of scooters. A further setback to the

85
automobile industry came during this phase with the beginning of the
Oil Crisis in country in October 1973. The substantial rise in the
import bill of crude oil led to the Economic Crisis. For this reason,
India approached IMF for a monetary loan to dampen the oil shock
effects. The Balance-of-Payment crisis of the country made the
bureaucrats of the Ministry of Finance and the Ministry of Industry to
take a closer look at the development of the automobile industry,
especially the low fuel-efficiency of the Indian automobiles. This
study led to the division of automobile industry into two segments,
luxury (passenger cars) and non-luxury (rest of the industry)
segments. The ministries provided more emphasis for the
development and growth of non-luxury segment.
The aftereffects of Oil Crisis led to a steep rise in prices of the
common goods, thereby affecting economic well-being of the country.
Thus, the growth of most of the automobile segments slowed down
over the next few years. This rise in fuel prices resulted in a
noticeable decline in the demand for already troubled passenger car
segment. Some of relieves were given for the segment in 1975 with
the courts judgement against the statutory price controls on passenger
cars. With regard to the automotive industry, the fifth FYP (1974-
1979) targeted an annual production of 60,000 CVs, 3, 20,000 2-
wheelers and 32,000 passenger cars by end of 1978-79 as against the
actual production of 42,900 CVs, 150,700 2-wheelers and 44,200
passenger cars in the year 1973-74 (GOI 1974). As is evident from the
fifth FYP, from mid-1970s the Indian Government concentrated on
the policy of encouraging the growth of 2-wheeler segment. This all
was done to provide mobility to the countrys growing middle-class
without incurring higher petroleum consumption on cars. After 1975,
minor relaxations were being made to the licensing regulations.

86
Further, in 1978, Indian Government also dismantled some of its
stricter controls on foreign equity collaborations.
Thus, this phase of the development of Indian automotive
industry witnessed increasing regulation and disparate segmental
growths with the introduction of MRTP and FERA. The
macroeconomic setbacks along with populist policies undermined of
Luxury (passenger car) segment. Over this period the CVs and UVs
segment saw moderate, average annual growth rates of 3.3% and
3.8% respectively. The protective rates of tariff on components were
preserved. By early 1970s substantial progress had been made in the
indigenization of components and the domestic content of almost all
automobiles was above 90% (Narayana 1989). At last, the automotive
industry in co-operation with the Ministry of Industry established the
Automotive Research Association India in 1966 for supporting R & D
efforts within the industry. All the segments within the industry
experienced noticeable year-to-year fluctuations in demand with the
period of 1966 to 1979.

iii) SCENARIO OF AUTOMOBILE INDUSTRY IN PRE

LIBERALIZATION ERA:
The sixth FYP covering the period of 1980-1985 introduced in
early 1981 reflected these changes to the industrial policy. The overall
policy shifted in the industrial sector brought about important changes
within the automotive industry. Several relaxations were made to the
regulations pertaining to capacity licensing and foreign collaborations.
It was 1981; the Government gave letter of intent to four Indian firms
for the manufacturing of LCVs. All the four firms (i.e. Swaraj Mazda,
DCM-Toyota, Allwyn-Nissan and Eicher Mitsubishi) were in
technical-cum-financial collaboration with Japanese players and were

87
licensed a production capacity of 12,500 vehicles per year (Pingle
1999), and they commenced their production in 1985.
The passenger car segment also witnessed a major change
during this phase. The industrial policy shift of 1980 intended to
favour consumers by providing them with free choice regarding all
types of consumer products including luxuries. Despite of being
classified in 1970s as a luxury segment, the passenger car segment
was added to the Appendix-I list in 1982 along with UVs and 2/3-
wheelers.
Thus, the luxury segment is to be classified as a core industry of
national economic importance, whose development was to be
favoured by the upcoming Government Policies. Reviewing the
development, the passenger car segment had made so far under the
existent firms. In the early 1980s, consumer consumption is somewhat
conspicuous. Many firms ignored consumer input or publicly
confront consumer group (Evans and Berman, 1987). In the
meantime, state owned enterprise Maruti Udyog Limited (MUL)
entered into collaboration with Suzuki (Japan) in 1982. The Japanese
collaborator offered the best deal with three car models, 26% equity
stake and indigenisation content level agreement of 95% by 1988-89.
The first motor car rolled out from the MULs factory in 1984, and
with this, it changed the face of Indias automotive industry. When
Maruti Udyog Limited introduced Maruti 800, it provided a
complete facelift to the Indian car industry. The car was launched as a
peoples car with a price tag of INR 40,000. The model changed the
industrys profile dramatically. Maruti 800 was well accepted by the
middle income families in the country and its sales also increased
rapidly.

88
 Government of India provided the Fiscal incentives to the
passenger car manufacturers in 1984 to enable them to import
technology and improve the fuel efficiency of their vehicles.
Domestic firms took advantage of these opportunities and upgraded
their technology base, either by direct imports of technology or by
foreign technical collaboration. PAL bought a license from Fiat (Italy)
for the manufacturing of its Fiat 124 model and re-engineered it to
receive a fuel-efficient Nissan engine produced after collaboration
with Nissan (Japan). Similarly, HML collaborated with Vauxhall
Motors (US) to manufacture phased-out Vauxhall Victor Motor, and
modified it to receive a fuel-efficient Isuzu engine licensed from Isuzu
(Japan).
Under the competition from MULs newly launched UV model,
M&M, which had enjoyed monopoly in the UV segment so far was
also compelled to upgrade its model with a new Peugeot engine
licensed from France based Peugeot. The existing players entered into
collaborations with Japanese automotive firms (e.g. Bajaj Auto with
Kawasaki, TVS Motors with Suzuki and Escorts with Yamaha). The
entry of new players accompanied by import relaxations in early
1980s brought about fundamental changes to the structure of Indian
automotive industry. Indian consumers, who had to be restricted to a
few models with outdated technology, were made available a variety
of choices of better-technology and fuel-efficient vehicles in 1980s. In
order to make sure that the new automobiles are affordable and
therefore having sufficient demand, the Indian Government continued
its automatic growth and regularisation of excess capacity schemes
of late 1970s. In 1985, the broad-branding grouped passenger cars,
CVs and UVs into one-product group named on-road four wheelers.
This entitled that any firm operational in the aforementioned

89
segments, within its overall capacity, had the opportunity to diversify
into any other segment within the group or vary the product-mix over
the segments based on the demand conditions from May 1985, all the
automobile and component manufacturers were exempted from
Section 21 and 22 of the MRTP Act, which consists that the large
industrial houses were no longer obliged to take MRTP approvals. In
March 1985, the auto component segment was de-licensed under
IDRA for non-MRTP and non-FERA, companies with the conditions
that the firm was not located within urban or municipal limits.
In 1985 itself, after the entry of Maruti Udyog, the car makers
were given a free hand to fix the prices of cars. Thus, effectively
abolishing all controls related to the pricing of the end-product. In the
early 1980s a series of liberal policy changes were announced
marking another turning point for the automobile industry. Though a
liberal move, the licensing system was still very much intact.
By the end of this phase, the limited de-regulation drive for
industrial production came to an abrupt stop due to the growing
opposition from within the ruling party. The limited liberalisation that
took place during this phase had a considerable impact on the
development of Indias automobile industry. The modernisation
programme of early 1980s intensified competition in the automobile
industry and upgraded its technological base. The Governments drive
for indigenisation continued during this phase with all the vehicle and
component JVs required under the phased manufacturing programme
to achieve 95% indigenisation within five years of start of production.
Indian consumers were given a free choice to select among a variety
of better- technology and fuel-efficient vehicles including luxuries.
Passenger cars, a non-priority sector in 1970s, brought to be identified
as a core industry of national importance. The production of cars in

90
the year 1989-90 at 179,278 exceeded that of CVs. The influx of
foreign collaborations in the vehicle segment, and thereby entrance of
diverse product designs necessitated technological upgrade from the
side of auto-component manufacturers as well. As a result, the
domestic manufacturers entered into collaborations with foreign
players. The foreign collaborators in the vehicles segment were
followed by their local suppliers who also entered the Indian market
forging collaborations with the domestic players. This was the time
wherein the Japanese best practices made their way into the Indian
automobile industry. In addition, the Motor Vehicles Act passed in
1988 mandated the components used in the Indian vehicles to be
certified under the standards laid by the Bureau of Indian Standards.
The export performance of the automotive industry in the post-
independence era was mediocre. Being a net user of foreign exchange,
the automotive industry was given very much attention during the
sixth plan period for improving its export performance. Accordingly,
several export promotion measures were implemented by the Indian
Government. As a consequence, the export of Indian automotive
industry nearly doubled from INR 1561 million between the years
1984-85 to INR 3041 million in 1988-89 (ACMA 1991-92 cited after
Chugan 1995).

iv) SCENARIO OF AUTOMOBILE INDUSTRY IN POST-

LIBERALIZATION ERA:
Economic liberalization- allowing unrestricted Foreign Direct
Investment (FDI) and removing foreign currency neutralisation and
export obligation has also been one of the key to Indias automotive
volatility (Economic Times of India).

91
 The economic crisis of 1990-91 followed by a major shift in the
countrys overall economic policy framework marked the beginning
of the phase of liberalisation and globalisation. The sweeping changes
in overall industrial policy have a significant impact on the
development move of Indias automotive industry. Though a few
liberalisation measures had already been introduced in the period of
1980s, the policy reforms initiated in 1991were much more
comprehensive. The entire vehicles segment, except passenger cars
and the auto- component segment were de-licensed in July 1991. The
passenger car segment got de-licensed in May 1993. Along with
action of the need for MRTP clearance, this meant that the automotive
firms were free to enter, expand, diversify, merge or acquire based on
their commercial judgements. The liberalisations concerning foreign
investment encouraged. The global players entered into the Indian
market establishing JVs with domestic players. While FDI up to 51%
was allowed on an automatic basis, the same for more than 51%
required governmental clearances which were approved on a case-to-
case basis depending upon the sophistication of technology brought
in, projected exports etc. The phased manufacturing programme
requiring time-bound indigenisation was dropped in 1991 for the new
units and in 1994 for the existing ones.
While the aforementioned structural reforms benefited the
automotive industry over a longer term, the short-term stabilisation
measures adopted by the Indian Government to counter the crisis
adversely affected the industrys growth. As an immediate measure to
improve the countrys Balance-of-Payment situation, the Government
discouraged the consumption of oil by imposing a surcharge of 25%
on all the petroleum products. It was also imposed a heavy excise duty
on selling price of all the automobiles. For instance, the excise duty

92
on passenger cars was increased from 42% to 53% in August 1990,
and further raised to 66% in July1991 (Sumantran et al. 1993).
Further, in order to reduce the trade deficit the rupee was devalued
and the auxiliary customs duty was increased. The escalation of the
Yen-Rupee exchange rate combined with the increased cost of
production of the newer import-dependent components undermined
the performance of firms with recent Japanese collaborations. On the
demand side, the hike in fuel prices and the credit squeeze to curb the
inflation stifled the demand for automobiles in the country.
The automotive industry, which saw a negative annual growth
rate of 10.1% in the vehicles segment in the period 1991-92,
recovered in the subsequent years of the past-reforms period. The
excise duty on passenger cars reduced from 66% to 55% in June 1992
(Sumantran et al. 1993). The excise duties on other vehicle segment
were also found rationalised. The tariff structure for auto- related
products imports also underwent changes with the peak tariff rate
reduced from 150% in 1991 to 110% in 1992, 85% in 1993, 65% in
1994 and 50% in 1995 (Kathuria 1996). The lowering of trade
barriers, the possibility of making direct investments and the
promising growth potential of the domestic market, brought India on
to the reader of foreign automotive players. The passenger car
segment with the highest untapped growth potential saw the most
hectic activities from the international automotive firms. By the mid-
1990s, several foreign players entered into the Indian passenger car
market by mainly setting up JVs with the domestic firms, e.g.
Mercedes- Benz with TELCO (1994), General Motors with HML
(1994), Peugeot with PAL (1994), Daewoo with acquisition of DCM-
Toyota (1995), Honda Motors with Siel Ltd. (1995), Ford with M &
M (1996), Hyundai with a 100%- owned subsidiary (1996), Fiat with

93
Tata Motors (1997) and Toyota with Kirloskar Group (1997). Most of
these new JVs proposed an initially assembling of only SKD/CKD
kits. Resultant, for Balance-of-Payments reasons, the Government in
1995, asked these companies to individually commit an equivalent
amount of exports.
In 1997, the ministry of industry in its Industrial Policy for
automotive industry placed import of capital goods and auto-
components under Open General License (OGL), but regulated the
vehicles in CBU form or in SKD/CKD form. The automobile
manufacturing units were allowed to import vehicles only in
SKD/CKD condition and were required to obtain a license for the
same. The availability of licenses was subjected to execution of
Memorandum of Understanding (MoU) duly signed with the DGFT.
As described in GOI 2002 (pp. 2, 3) such a MoU required the
companies to:
i) Have a plan for actual production and not just merely assemble
SKD/CKD kits.
ii) Bring in at least USD 50 million for having operations as a
subsidiary.
iii) Reach an indigenisation content level of 50% in the third and
70% in the fifth year from the date of clearance of the first lot
of imports.
iv) Neutralise foreign exchange out go on imports by equivalent
exports.
Such an obligation commences from the third year from the starting of
operations.
By April 2001, eleven companies had signed such MoU with
the DGFI (GOI 2002). In the meantime, the passenger car segment
saw the entry of Skoda in 1999. In the 2-/3- wheeler segment, the

94
trend was for the earlier foreign collaborators of 1980s to either
acquire majority stake in the Joint Ventures or establish independent
subsidiary in the country.
Considering a vision of establishing a globally competitive
automotive industry in India and to double its contribution to the
economy by 2010, the Ministry of Industry presented for the first time
a separate auto policy in March 2002, known as Auto Policy 2002.
This document supersedes the auto policy adopted in 1997 by
addressing emerging problems, being more investor friendly and
ensuring compatibility with World Trade Organisation (WTO)
commitments. Auto Policy 2002 was presented for making the Indian
automotive industry globally competitive. It aims at promoting
indigenous designs and development and modernisation within the
country as well as establishing domestic safety and environmental
standards at par with the international ones. Auto Policy 2002 targets
at making India an international hub for manufacturing of small cars
as well as a key centre in the world for the 2-wheelers and tractors.
Accordingly, the Auto Policy proposed various initiatives relating to
investment, tariffs, duties and imports in order to achieve its
propounded objectives. Within a decade of introduction of structural
reforms in the country, the production of Indian automotive industry
had been increased from 1,603,736 2-wheelers, 1, 65,309 cars,
144,248 CVs, 76,750 3-wheelers and 31,530 UVs in 1991-92 to
4,271,327 2-wheelers, 564,052 cars, 162,508 CVs, 212,748 3-
wheelers and 105,667 UVs in 2001-02 (SIAM). Along with the
reductions in the overall tariff level to open up India for foreign trade,
the Government has also progressively rationalised its domestic
taxation structure to provide a fair competition to its domestic
manufacturers against the international competition, e.g.: the excise

95
duty on passenger cars has been brought down from 66% in 1991-92
to 24% in 2008-09.
Thus, during this phase, the increasing investor friendly as well
as liberal trade measures adopted by the government led to a
momentous increase in the number of international players active in
the country. The dismantling of licensing controls also encouraged the
domestic players to undertake the entrepreneurial endeavours. Further,
the competition within all the segments of the automotive industry got
increased. The market for automotive vehicles in India, transformed
into a buyers market, which had earlier been a sellers market. It was
the Indian consumer, who benefited the most from the intensified
competition, which brought his requirements of a cost-effective,
technologically-competent, fuel-efficient and reliable means of
transportation into perspective. Sound macroeconomic base of
demand growth drivers along with convenient credit facilities have
ensured rising demand for automotive vehicles in the country. Hence
the attempt of the Government in making a major shift in its economic
policy framework in early 1990s, along with its continued support to
the automotive industry had put the industry on a fast track of
development.
During this phase, environmental and safety standards as an
integral and important part of the modern automotive industry,
received due attention. First state emission norms came into effect for
petrol vehicles in 1991 and for diesel ones in 1992. Euro I, Euro II
and Euro III norms to align Indian safety standards with the global
ones have subsequently been introduced in India in 1996, 2000 and
2005 respectively. With its accession to United Nations Working
Party-29 in 2005, efforts are being made by the India towards the
harmonisation of auto standards worldwide and therefore integrating

96
its automotive industry into the global automotive industry. Viewing
the technology front, the liberalisation concerning international
technology agreements and foreign collaborations infused world-class
technology into the industry. The Indian Government has encouraged
efforts for latest foreign technology assimilation, indigenised design
and development. R&D efforts for the industry have also been
encouraged time-to-time. Many domestic as well as foreign firms
have set up R&D facilities in the country. As a result the launching of
Indias first indigenously developed car Indica by Tata Motors in
1999, took place.
Thus, the Indian automobile industry embarked a new journey
in 1991 with de-licensing of the sector and subsequent opening up for
100% Foreign Direct Investment (FDI). Since then almost all global
major players have set up their facilities in India, taking a level of
Production from 2 million in 1991 to over 10 million in recent years.
Such increased interaction and interdependence between the Indian
automotive firms and their foreign counterparts is leading to the
globalisation of Indian automotive industry.

AUTOMOBILE INDUSTRY CLUSTERS

The Indian automotive industry has been noticed to have grown
in clusters, which are evident in and around Manesar in North, Pune
in West, Chennai in South, Jamshedpur-Kolkata in East and Indore in
Central India (GOI 2006a). ACMA (2008a) describes such a pattern
of investments in the country as regionally balanced. Figure 4.1
indicates the distribution of manufacturing plants of major automobile
players across different states and union territories in India.

97
Figure 4.1 Distributions of Automobile Plants in India

(Source: Ranawat and Tiwari (2007), Influence of Govt. Policies on Indias

Automotive Industry, p. 14)

98
IMPACT OF GOVERNMENT POLICIES ON THE
DEVELOPMENT OF INDIAN AUTOMOTIVE INDUSTRY
[Especially passenger car segment]:
This section of the chapter provides a general discussion on
Government influence on Indian automotive industrys development
from its inception to the day present day form. The term policy
basically refers to a decision that is made by the government to
provide guidance for addressing selected concerns. The role of the
Government should play in the development of a nations industries
has been a topic of much discussion; see for instance Porter (1990)
and Lall (2003). With de-licensing in 1991 and globalisation gaining
pace in present day times, the development progress of a nations
industry is increasingly gauged by its ability to endure and excel
against international competition at the domestic as well as in the
export markets. In order to give a boost to the growth in the countrys
automobile sector, the Government have taken several initiatives.
Since independence, the Government considered the passenger car to
be a luxury item and imposed very high tariffs. Since the economic
liberalisation launched in 1991, the Indias automobile policy
announced in June 1993 by the Indian Government has changed.
The policies need to be consistent and there should not be any
turbulence, for instance, due to ambiguity of diesel pricing many
OEMs are unable to fix their plans. Some of them have been decided
not to take a decision, said Mohit Arora, Executive Director, J D
Power Asia Pacific.
Yes, there are short term challenges in India like the high
interest rates, inflationary pressures but in the long-term it has the
advantage of having stable government and legal systems, said

99
Goeff Broderick (Vice President and General Manager, J D Power
Asia Pacific)
However, India would need to have consistent policies,
especially when it comes to issues related to the sector such as fuel
pricing, for the sector to fulfil its potential. This particular discussion,
in its true semantic sense, would necessitate identification of all the
policies that have influenced the development of Indias automotive
industry and an understanding of their impact on the industrys
development. A list of such policies, from the vast array of
Government policies that potentially influence the development of the
automotive industry, may include industrial, foreign investment
policy, trade policy, fiscal policy, monetary policy, science and
technology policy, environmental policy, labour policy, education
policy, transport policy, small-scale sector policy and so on. The
reason behind development of such an overwhelming list of policies is
the complex functioning of the automotive influenced by several
policy areas. For countries like India, another consideration that
expands such a list of policies is the formulation of additional policies
at the regional level by respective state Governments. The policies
change over time on the basis of the understanding of the impact of a
certain policy over the development period of Indias automotive
industry.
Additionally, with regard to understanding the impact of
relevant policies, it is ideally required to ascertain the influences of
relevant policies on the development of the automotive industry using
qualitative and quantitative means. In order to comment upon the
development of the industry, one needs to consider several aspects of
industry development- size, structure, investment, growth,
performance, competition, product variety, technology base, product

100
quality, R&D, imports, exports, environmental and safety standards,
international competitiveness and so on. Hence a study of the
influence of a particular policy on the development of the industry
would require a consideration of its impact on several above-
mentioned aspects. Within the policy space surrounding the
automotive industry, some policies are more direct in their influence
on industry development than others.
In consideration to the complexities of the several policies, this
section shall discuss the influence of Government policies while
maintaining the scope of discussion within modest levels. For this
reason, this section focuses only on the key policies, with the
importance of these policies over others judged based upon the
literature reviewed on the subject matter. The influence of key policy
decisions on the development of Indian automotive industry are
discussed using the findings of veteran researchers on the subject
matters, supplemented by the authors own analysis. Also the key
policy decision varies for different vehicle segments of the industry as
well as for different firms within the same vehicle segment, the
section attempts at providing a limited discussion of the important
segment-wise and firm level influences.

INFLUENCE OF KEY POLICY DECISIONS IN THE POST-

INDEPENDENCE ERA:
The Indian Auto Policy has been in line with the prevailing
industrial policy framework. During the British regime, India had no
industry to start with and all the automobiles were imported from the
international auto players such as GM (General Motors) and Ford
Motors. In order to conserve foreign exchange the incentivise
assembly over more imports; the Indian Government in 1948 raised

101
the tariff barriers on vehicles imported in the CBU form. This
virtually eliminated the CBU imports and thereby protected the final
product i.e. the complete vehicle from global competition. Such a
policy decision if did not directly help the domestic firms HML and
PAL with their recently commenced assembly operations then it
actually did not hurt. Even in the recent times in India, the tariffs on
CBU imports are maintained high enough to discourage any
significant market for them.
In the IPR 1948, the Government recognised the strategic
importance of automotive industry and brought it under the purview
of state regulation. Furthermore, IDRA of 1951 defined the manner in
which the industrial sector was supposed to be regulated, including
automobile industry. Under the IDRA, the automotive firms were
obliged to obtain licenses from the Government for the purpose of
entry, diversification, capacity expansion, foreign collaborations,
imports of machinery and components. The licenses were issued in
accordance to the developmental objectives laid in the FYPS, which
in turn were based on political agendas and projected demands. The
government then restricted the industry competition to fewer firms in
order to avoid fragmentation of the industry, and thereby the
uneconomic scales of production. Weak internal competition provided
the then existing firms with a protected market, and thereby little
incentives for undertaking R&D efforts. This manifested itself in the
obsolete design and inadequate quality of the vehicles produced at
that time. The industrys output was controlled by capacity and
product licensing. The IDRA 1951, with minor modifications
continued to apply to the automotive industry till early 1990s. While
the major impact of the licensing system was not felt in the initial
years of industrys development, the resentment among the

102
automobile manufacturers was becoming more evident in the second-
half of 1960s and the 1970s (Pingle 1999). If the capacity licensing
affected any firms, then it was the market leaders Bajaj Auto and
Escorts that could have grown much more, had the IPR been more
relaxed. Nevertheless, it has to be noted that the growth of licensed
capacities of Bajaj Auto and Escorts were among the highest in the
industry in 1960s and 1970s (Narayana 1989).
The Indian Government in 1953 imposed the requirement of
progressive manufacturing on the automobile assemblers, following
the recommendation of the tariff commission. Restricted allocation of
foreign exchange was the measure used to implement the decision.
The policy decision with its intention of indigenising the production
of vehicles in India had a significant impact on the development of
Indias automotive industry. The immediate result was the exit of
foreign assemblers from the Indian market. The domestic assemblers
entered into collaborations with foreign players for manufacturing of
automobiles in India. The Government successfully increased
indigenisation content from 50% in 1950s to 80% in 1960s. Price of
the automobiles got raised. The learning by doing involved in local
manufacturing of vehicle sub-assemblies certainly helped to improve
the manufacturing capabilities of the industry (Narayana 1989).
Considerable amount of foreign exchange was being spent on
importing critical components. For addressing these concerns, the
Government in 1960 adopted policies for encouraging the
development of ancillaries. This marked the bargaining for the
development of a distinct auto-component sector in India. In 1956, the
government implemented protection rates of tariff on aftermarket
ancillaries produced by the small scale units. Pingle (1999) argues
that such a strategy of the Government based on socialistic principles,

103
led to a fragmented structure of the auto-component industry with
inefficient units- a problem that persists even today. 1n 1968, the
growing criticism towards the reliance on foreign technology
influenced the government to adopt stricter controls on foreign equity
collaborations. Since, there was no possibility of introduction of any
new foreign designs, the domestic firms like Bajaj Auto and TELCO
were incentivised to introduce indigenously designed vehicles and
capture market share of the competitors relying on international
designs.
Several important policy decisions were made between the
period of 1947 to 1965, and the thrust was on protection
indigenisation and regulation of the automotive industry. The key
policy decisions played a significant role in determining the initial
structure, performance and growth of the industry (Narayana 1989).
The exclusion of passenger car segment, the one considered most
important in the global automotive industry; from the developmental
agenda of policies negatively impacted its growth and demand
conditions. The role played by the Indian Government over this period
was more direct and regulative in nature. Even though the public
sector was expanded under IPR of 1948/1956, the automobile industry
was given sufficient autonomy for its operations. Thus, the
importance of automotive industry in the nations economic
development was rightfully identified by the government from the
very beginning.

INFLUENCE OF KEY POLICY DECISIONS IN THE PRE-

LIBERALIZATION ERA:
This phase is also known as deregulation phase. In early 1980s,
the Government made policy decisions for infusing fuel-efficient

104
technologies and competition into the automotive industry. These
policy decisions included relaxations in new entries, foreign equity
collaborations and import of technology and machinery, collectively
referred to as the Modernisation Programme (Narayana 1989). At
that time, several JVs were established between the Japanese and
Indian entities for technology transfer and equity participation. And
other domestic firms entered into the technology collaborations with
western and Japanese manufacturers for manufacturing new fuel-
efficient vehicle models. This modernisation programme had a
significant impact on the development of Indian automotive industry,
which transformed the industry with mixed outcomes. The choices
available to the Indian consumers increased. The Japanese
collaborations brought world-class manufacturing practices in the
country. The entries of new firms into the automotive segments led to
a significant change in the competitive position of the old players
(Narayana 1998). The two domestic manufacturers of big cars, HML
and PAL, lost their market leadership to MUL, which was able to
capture more than 60% of the market in only a few years. On the other
hand, the industry experienced problems of higher concentration and
greater fragmentation (Dcosta 1995).
In 1980, the government made a decision to promote exports of
automotive products in order to attain a favourable balance of trade
and to support an optimum utilisation of production capacities. The
promotion measures from government included simplified procedures
for exports, easy availability of licenses for 100% export-oriented
units and easier expansion of existing units for the purpose of exports,
amongst others (GOI 2008b). For instance, MUL started making
indirect exports of the Japanese collaborators 800 cc car model to the
European countries, under the Modernisation Programme. As a result,

105
the export of the automotive industry thus doubled over the period
1984-85 to 1988-89. Even though in 1980s the share of Indias
automotive exports in the global export market was very small (e.g.
around .1%) (Dcosta 1995), the Government policy decision to
promote exports during this phase was an important initiative in the
development of countrys automotive industry.
To facilitate the optimum utilisation of installed capacities and
expand the Indian industries the Indian Government introduced the
broad-banding policy in 1985. Under this policy, the government
decided to issue licenses to the automotive firms for broader product
groups. The broad-banding policy created a potential for severe
competition within the auto-component segment. The significance of
policy decisions made during this phase witnessed the growth of
automobile product in India during the second half of 1980s. Under
the constraints of saving on imports of oil, improving the performance
of the automobile industry and satisfying the growing demand of
vehicles in the country, the Indian government decided to upgrade the
technology base and competitiveness of the industry. Among all other
policy decisions made during this limited-liberalisation phase, the
most significant policy decision was the relaxations with regard to
foreign collaborations (Narayana 1989). Further, during this phase the
transition, from statist ideology to pro-market orthodoxy, by the
government from a heavily regulated industrial environment to the
one in this phase was not abrupt. The only contradiction to the states
facilitative role was its permission for only one new entry in the high
growth car segment as compared to four new entries in the LCV
segment.

106
INFLUENCE OF KEY POLICY DECISIONS IN THE POST-
LIBERALIZATION ERA:
De-licensing in 1991, brought revolutionary changes in the
automobile industry and provided well-deserved and timely growth
impetus to the industry. The government also adopted a more liberal
stance towards foreign trade and investment. These policy changes
had far reaching implications, which was collectively known as
liberalisation of Indian economy. Under this policy decision de-
licensing, 51% FDI via automatic route, relaxations for critical
imports and suspension of local content requirements. The influence
of these policy decisions over the developmental aspects of the
industry was visible by mid 1990s, when it led to a second wave of
restructuring of the industry and resulted in a fiercely competitive
domestic market, both in terms of price and quality. The de-licensing
led to a spate of entries by the foreign players, establishing JVs with
the domestic players. After de-licensing of cars in 1993, 17 new
ventures had come up out of which 16 were manufacturer of cars
(GOI 2002). This transformed the car segment into one of the most
competitive sector from the previously oligopolistic sector in the
industry. The freer capacity licensing policies of 1980s were of no
help to the industry since the actual production of automotive firms
was usually below their installed capacities (Narayana 1989). The
automobile industry suffered from the problem of overcapacity and
the sales- capacity ratio of automobile manufacturers improved after
1998 (Singh 2004). Compared to the 1980s, the technology
collaboration phase was apparently better due to the mechanism of
technology transfer from the foreign equity to its Indian subsidiary as
opposed to a less than 40%-owned JV in the 1980s.

107
 In 1980s, the Phased Manufacturing Programme, which
required the automobile firms to attain an indigenisation level of 95%,
was dropped under the liberalisation regime. 1995 onwards, the
foreign firms were obliged to maintain foreign exchange neutrality.
From 1997, the new foreign players were required to sign MoU with
the DGFT for importing SKD/CKD kits. In general, Liberalisation
policy raised the technological competence level of Indias
automotive industry. Auto Policy 2002, stresses on the need to
provide direction to the growth and development of the automotive
industry in India. The policy resulted in reduction of duties in the
auto-component sector to a large extent and the automobile sector to
some extent and extension of R&D incentives to the auto sector. In
2005-06, some major policy developments relevant for the auto sector
took place in India. Implementation of VAT, introduction of Euro II,
Euro III norms were some of those policies came into force during
this period. Further, Finance Bill 2006 reduced excise duty of motor
vehicles to 12.5 percent against 15% before and import duty of raw
materials to 5-7.5% against 10% before and has given a thrust to the
infrastructural development.
In August 2006, the working group on automotive industry in
the Ministry of Heavy Industries has brought out a report for the
Eleventh Five Year Plan, stresses on the need of speeding up the
move towards VAT in the states and GST at the centre. Government
of India prepared a document named Automotive Mission Plan 2006-
2016, in order to accelerate and sustain growth in the automotive
sector. It was prepared with a vision i.e. to emerge as the destination
of choice in the world for design and manufacture of automobiles and
auto components with output reaching a level of USD 145 billion

108
accounting for more than 10% of the GDP and providing additional
employment to 25 million people by 2016.
With every major shift in policies made by the Indian
Government during various phases, the automotive industry has come
out stronger and better. While the shift in policies seems to have
mostly been brought by chance events, the Indian Government has at
least to be praised for making the right decisions and implementing
them correctly. The technological up gradation and product
innovations of domestic firms like Tata Motors and Bajaj Auto today
are the fruits of indigenisation and protection policies of the
regulatory phase. As a result, the country has emerged as a potential
competitor of the Chinese automobile industry.

AUTO POLICY 2002:

India recognized the role of automobile industry that it could
play in driving economic growth. Hence, with a vision of establishing
a globally competitive automotive industry in the country and
doubling its contribution to the economy by 2010, the Government of
India presented for the first time a separate Auto Policy document in
March 2002. This document is known as Auto Policy 2002. The
document supersedes the auto policy adopted in 1977 by addressing
emerging problems, being more investor friendly and ensuring
compatibility with World Trade Organisation (WTO) commitments.
Through Auto Policy 2002, government sets itself for making the
Indian automotive industry globally competitive. Society of Indian
Automobile Manufacturers (SIAM) welcomed the announcement of
Auto Policy, and feels that the policy would serve as a reference
document for all stakeholders and other interested investors. Auto
Policy targets at making India as an international hub for

109
manufacturing of small cars as well as a key centre in the world for 2-
wheelers and tractors. In this direction, the policy proposed various
initiatives relating to investment, tariffs, duties and imports in order to
achieve its objective mentioned below.

POLICY OBJECTIVES:
The Auto Policy 2002 aims at promoting modernisation and
indigenous design and development within the country as well as
establishing domestic safety and environmental standards at par with
the international ones. The objectives are to:
i. Exalt the automobile sector as a lever of industrial growth
and employment and to achieve a high degree of value
addition in the country.
ii. Development of domestic safety and environmental
standards at par with international standards.
iii. Assist development of vehicles propelled by alternate
energy sources.
iv. Steer Indias software industry into automobile technology.
v. Conduce incessant modernisation of the industry and
facilitate indigenous design, research and development.
vi. Ensure a balanced transition to open trade at a minimal risk
to the Indian economy and local industry.
vii. Promote a globally competitive automotive industry and
emerge as a global source for auto components.
viii. Establish an international hub for manufacturing small,
affordable passenger cars and a key centre for
manufacturing tractors and 2- wheelers in the world.
The Auto Policy 2002 has spelt out the direction of growth for
the auto sector in India and address most concerns of the automobile

110
sector, including, promotion of R&D in the automotive sector to
ensure continuous technology up gradation, building better designing
capacities to remain competitive, impetus to alternative fuel vehicles
through appropriate long term fiscal structure to facilitate their
acceptance and emphasis on low emission fuel auto technologies and
availability of appropriate auto fuels and encouragement to
construction of safer automotive (bus/trucks) bodies- subjective
unorganised sector also to 16% excise duty on body building activities
as in case of OEMs.
The policy rightly recognised the need for modernising the pore
profile of vehicles to arrest degradation of air quality. The terminal
life policy for CVs and move toward international taxing policies
linked to age of vehicles, are steps in the right direction. SIAM has
always been advocating encouragement of value addition within the
country against mere trading activity. However, this aspect has not
been fully addressed. The Auto Policy 2002 allows automatic
approval for foreign equity investment up to 100% in the automotive
segment and does not lay down any minimum investment criteria.
Policy also stressed upon strengthening the environmental & safety
standards. Thus, Auto Policy 2002 comprises of several policy
decisions that aim at making the Indian automotive industry globally
competitive and for raising its contribution to the countrys economy.
Discontinuation of foreign exchange neutrality requirement and
approval of 100% FDI via automatic route are the policy decisions
aimed at creating a more conducive atmosphere for the foreign
investors. The influence of the policy decisions is strikingly visible in
the exponential growth in FDI received by the automotive sector over
the period 2004-05 to 2007-08. Premium car manufacturers like
Volkswagen and BMW, who previously could not have complied

111
with the localisation commitments owing to their high quality
standards, have established their assembly facilities in India after
2002.
Furthermore, incentives for R&D efforts planned by the
Government of India have incentivised car manufacturers like Suzuki
and Hyundai to undertake R&D in India. On the basis of policy
changes, Singh (2004) estimates some increase in the import intensity
of foreign owned vehicle manufacturers in the near future, and also an
increase in the export-output ratio of the auto component industry.
However, with the Auto Policy 2002 in place, the automotive industry
was supposed to get further fillip to become vibrant and globally
competitive. In this case the industry also got the required support
from other ministries and department of Government of India in
achieving the objectives set down in the Auto Policy 2002.

112
 Chapter-V
PROFILE OF SELECTED AUTOMOBILE
COMPANIES MANUFACTURING PREMIUM
PASSENGER CARS
 Chapter-V
PROFILE OF SELECTED AUTOMOBILE COMPANIES
MANUFACTURING PREMIUM PASSENGER CARS

De-licensing in 1991, brought revolutionary changes in the

industry and provided well deserved and timely growth impetus to the
respective industry. This attracted foreign auto giants to set up their
production facilities in the country in a bid to take advantage of
several benefits provided by the industry. The automobile sector
experienced a drastic change in the car segment with the number of
entrants like Toyota, Honda, Ford, GM etc. Indian auto makers like
Tata, Mahindra and Mahindra, Hindustan Motors and MUL are given
a tough run for their money by the foreign players. Subsequently,
profile of selected automobile companies producing premium
passenger cars has been illustrated.

MARUTI SUZUKI INDIA LIMITED

Type : Public
Industry : Automotive
Predecessors(s) : MarutiUdyog Limited
Founded : 1981
Founder : Sanjay Gandhi
Headquarters : New Delhi, India
Chairman : R. C. Bhargava
Products : Automobiles
Staff Strength : 6903 (2011)
Parent : Suzuki
Website : www.marutisuzuki.com
Company Logo :

113
COMPANY PROFILE:
Maruti Suzuki India Limited commonly referred to as Maruti,
an Indian car major was formerly known as Maruti Udyog Limited
(MUL). MUL was set up in February 1981 by the Government of
India and was initially called Maruti Technical Services Private
Limited. The first Managing Director of the company was Sanjay
Gandhi, late Indian Prime Minister. The objective behind
establishment of Maruti Udyog Limited was to produce Comfortable
and affordable private means of transportation. The actual production
commenced in 1993 with its first car Maruti 800, and its only
competitors- The Hindustan Ambassador and Premier Padmini were
both around 25 years out of date at that point.
During the period of 1985 to 1996, a few other significant
developments took place including the company entered into
collaboration with Japanese automobile and motorcycle manufacturer,
Suzuki. Suzuki taking up 50% stake in Maruti, leading to a 50-50
joint venture between Maruti and the Government of India and over
60 percent of its parts being produced in India leading to lower costs
of production as the parts did not have to be imported from abroad.
On this collaboration Mr. R. C. Bhargava, the Chairman of Maruti
said, the company went to Japan, and none of the companies out of

114
Nissan, Mitsubishi and Daihatsu were ready to bring 40 percent equity
in India. Suzuki was the only company which agreed to bring 26
percent equity to India and raise it to 40 percent thereafter. The
second car the company produced was a Multi-Utility Vehicle called
the Omni. Between 1994 and 1996 Maruti released the Esteem, the
Gypsy, the Omni, the Gypsy King and Zen. Maruti introduced its first
CNG car in 2001. In the same year Maruti invested INR 550 crore in
manufacturing cars.
In the year 2002 Maruti launched a call centre. This was the
first call centre a company had ever launched in India. This year,
Maruti set up a website for its Wagon-R car, introduced a new model
of the Zen, got the IRTE, National award for its safety initiatives,
traffic management and environment protection, and launched the
Baleno and the Wagon-R with electric power steering. In 2002,
Maruti launched Maruti Finance to offer financial services like
extended warranty and finance for car insurance. It also hiked its car
prices and launched the Versa. 2002 was a good year for the company
in exports as it produced 16,000 cars. In the next few years Maruti got
into collaboration with various companies to launch car-selling
schemes. They partnered with State Bank of India and Reliance
Industries Limited for the said purpose. Form 2005-2007 Maruti
became the market leader of Indian car industry and in 2006 unveiled
the new Wagon-R in Punjab. In 2007, Maruti launched the SX4
sedan. After unveiling crossover utility vehicle SX4 S-Cross and
concept sedan Ciaz, Maruti Suzuki India plans to introduce three
products across the mid-sized sedan and utility vehicle categories
through the next two years. It aims to increase its share in the mid-
range premium vehicles market (source: Business Standard).

115
MANUFACTURING FACILITIES:
Maruti Suzuki has two manufacturing units in India, first, in
Gurgaon and second is in Manesar. The Gurgaon manufacturing
facility has three fully integrated manufacturing plants and is spread
over 300 acres. The Manesar manufacturing facility was inaugurated
in February 2007 and is spread over 600 acres. Both the
manufacturing plants have a combined production capacity of 14,
50,000 vehicles annually. On June 2012, Haryana State Industries and
Infrastructure Development Corporation demanded Maruti Suzuki to
pay an additional INR 235 crore for enhanced land acquisition for its
Manesar plant expansion.

INTERNATIONAL OPERATIONS:
Maruti Suzuki is a global company with over 8,500 employees
engaged in sales, customer service, manufacturing and distribution in
many countries across the world. Suzuki Motor Corporation, the
parent company owns 54% of Marutis shares. It is partly owned by
the Government of India and partly by the Japanese company Suzuki
Motor Corporation. Marutis cars are of European style but custom
made to cater to the local markets. Maruti Suzuki has launched the
Grand Vitara, SX4 and the swift as part of the worldwide strategy.
Maruti Suzuki not only provides hatchbacks, mid and small sized cars
but also luxury cars. The company has launched another concept car
called Kizashi, which was show cased in the Frankfurt motor show
and is now available in India. The Grand Vitara, which is an SUV and
Kizashi, a sports sedan are imported from Japan as Completely Built
Units (CBU).

116
EXPORTS:
Maruti Suzuki exports entry-level models across the globe to
over 100 countries and the focus has been on identifying new markets.
The company exports to the United Kingdom, Italy, Hungry,
Netherlands, Germany, Latin America, Africa, Philippines and
Indonesia. Along with these countries, Maruti also sells its cars to
Algeria, Chile, Sri Lanka and Nepal. The company exported 38,000
passenger cars in 2006-2007 around 6.4 per cent of its total sales. The
car that contributes most to Maruti export-income is the A-Star
model. Even though the company exports to all five continents,
Europe makes up 56 per cent of Marutis cumulative exports as of
February 2011, making it the single largest source of export income
for the company. The sales figures for the continent of Europe as of
February 2011, by country are given below:
Netherlands : 67,700 units
Italy : 41,000 units
United Kingdom : 34,000 units
Germany : 20,000 units
Hungary : 20,000 units
[Source: Drive inside.com]

TECHNOLOGY:
Maruti Udyog Limited has been one of the successful
Government enterprises. For bringing latest technology to India,
Suzuki Motor Company of Japan was chosen from seven other
prospective partners worldwide. The three declared objectives of
MUL are modernization of the Indian automobile industry, production
of fuel-efficient vehicles to conserve scarce resources, and production
of large number of motor vehicles.

117
VALUES AND VISION:
MUL is Indias leader in the automobile industry. It believes that
the customer is king. It is making sure that performance, after sales
service and customer support are really good in India. Here are some
key points from Marutis vision statement:
i. Modernization of the Indian automobile industry.
ii. Developing cars faster and selling them for less.
iii. Production of fuel-efficient vehicles to conserve scarce
resources.
iv. Production of large number of motor vehicles, which was
necessary for economic growth.
v. Market Penetration, Market Development Similarly Product
Development and Diversification.
vi. Partner relationship management, value chain, value
delivery network.
Maruti has two values viz. Capability and Commitment. Maruti
defines its vision statement to include the following five areas:
i. Customer Obsession: Making sure that the customer gets
what he desires.
ii. Fast, flexible and first Mover: It produces and sells cars at
a rapid pace.
iii. Innovation and creativity: it introduces new technologies
and new models at a rapid pace.
iv. Networking and Partnership: It believes in partnering
with various companies from producing parts to hosting car
shows.
v. Openness and Learning: People working in the company
are given a chance to experiment and explore.

118
SALES NETWORK:
As of March 31, 2011, Maruti Suzuki has 933 dealerships
across 666 towns and cities in all states and union territories of India.
It has 2,946 service stations in 1,395 towns and cities throughout India
(Source: Maruti Suzuki Network). As of November 2012, it had a
market share of 37% of the Indian passenger car market. In February
2012, the company sold its tem millionth vehicle in India. Along with
coming up with new cars and new plants, Maruti is also expanding its
transportation capacity. The company has forged partnership for this
with the Adani Group to set up a mega car terminal at the Mundra
Port

TABLE 5.1 PREMIUM PASSENGER CARS FROM MARUTI

SUZUKI
Company Model
Maruti Suzuki New Mruti Suzuki SX4

TATA MOTORS LIMITED

Type : Public
Industry : Automotive
Founded : 1945
Founder : JRD Tata
Headquarters : Mumbai, India
Products : Automobiles
Staff strength : Over 60,000 employees
Parent : Tata Group
Subsidiaries : Jaguar Land Rover, Tata Daewoo, Tata
Hispano
Website : www.tatamotors.com

119
Company Logo :

COMPANY PROFILE:
Tata Motors Limited is one of the business conglomerate Tata
Group. Tata Motors was first established in 1935 as a locomotive
manufacturing unit. Tata Motors Limited was established in 1945, and
its presence cuts across the length and breadth of India. Jahangir
Ratanji Dadabhoy Tata was the founder of Tata Motors (1945). Tata
Motors Limited, previously known as TELCO, is Indias largest
automobile company with consolidated revenues of INR 1, 88,818
crores in 2012-13. Company produced its first commercial vehicle
was produced in 1954, in collaboration with Daimler-Benz AG of
Germany. Tata Motors is a multinational corporation accounting for
70% cumulative market share in the domestic commercial vehicle
segment. In 1986, the company began the production of the first LCV
(Light Commercial Vehicle) model, Tata 407. The company is the
worlds second largest manufacturer of Commercial Vehicles, worlds
fourth largest truck manufacturers and worlds second largest bus
manufacturer.
In the early 1990s, the company began its expansion into the
car market. Its first passenger vehicle was Tata Sierra, a multi-utility
vehicle, launched in 1991. Afterwards, Tata came up with three other
automobiles, namely, Tata Estate in 1992, Tata Sumo in 1994 and

120
Tata Safari, Indias first SUV, in 1998. After thoroughly analysing the
demand of the consumers, Tata Motors decided to build a small car.
Thus in 1998, Indias first fully indigenous passenger car, Tata Indica
was launched. It received an immediate success, since it was
inexpensive and relatively easy to build maintain. The car was
exported to several other countries. In 2004, it acquired the Daewoo,
commercial vehicle Company, South Koreas second largest truck
maker. Today, two-thirds of heavy commercial vehicle exports out of
South Korea are from Tata Daewoo. In 2005, Tata Motors Acquired a
21% stake in Hispano Carrocera, a reputed Spanish bus and coach
manufacturer, and subsequently the remaining stake in 2009. In 2006,
Tata Motors formed a 51:49 Joint Venture with the Brazil- based,
Marcopolo, a global leader in body-building for buses and coached to
manufacture fully built buses and coaches for India. In January 2008,
Tata Motors unveiled its peoples car, the Tata Nano. Nano brings the
joy of a car within the reach of thousands of families.
Tata Motors Limited engages in the manufacturing and sales of
commercial and passenger vehicles primarily in India. The companys
product portfolio includes micro, compact, mid-size passenger cars,
premium and luxury Sports Utility Vehicles and cars, Utility Vehicles,
small, light, intermediate, medium and heavy commercial vehicles,
defence and homeland security vehicles, as well as vans, trucks, buses
and coaches. The company also produces electric and hybrid vehicles
for personal and public transportation. The company is involved in
marketing and marketing cars, financing the vehicles sold by the
dealers and sale of spare parts and accessories. In addition through
subsidiaries it engages in the provision of engineering and automotive
solutions, as well as machine tools and factory automation solutions,
construction equipment manufacturing, automotive vehicle

121
components manufacturing and supply chain activities, provision of
tooling, plastic and electronic components for automotive and
computer applications and automotive retailing and service operation.
The company is in collaboration with Jaguar to produce premium
passenger cars.

SUBSIDIARIES:
The other ventures of Tata Group include Tata Steel, Tata
Consultancy Services, Tata Technologies, Tata Tea, Titan Industries,
Tata Power, and Taj Hotels and so on.

MANUFACTURING FACILITIES:
Tata Motors owes its leading position in the Indian automobile
industry to its strong focus on indigenisation. This focus has driven
the company to set up world-class manufacturing units with state-of-
the art technology. The companys manufacturing base in India is
spread across Jamshedpur (Jharkhand), Lucknow (Uttar Pradesh),
Pune (Maharashtra), Sanand (Gujarat), Pantnagar (Uttarakhand) and
Dharwad (Karnataka). The company has set up an industrial joint
venture with Fiat Group Automobiles at Ranjan Gaon (Maharashtra)
to produce both Fiat and Tata cars and Fiat power trains. The Tata
Motors Groups over 58,000 employees are guided by the mission, to
be passionate in anticipating and providing the best vehicle and
experience that excite our customers globally.

EXPORTS:
The Tata Motors is also expanding its international footprints,
established through exports since 1961. In 1961, exports began with
the first truck being shipped to Sri Lanka. Companys commercial and

122
passenger vehicles are already being marketed in several countries.
Tata Motors has vehicle assembly operations in India, the United
Kingdom, South Korea, Thailand, Spain and South Africa. Tata
Motors principal subsidiaries include Jaguar Land Rover, Tata
Daewoo and Tata Hispano.

TECHNOLOGY:
Tata Motors is equally focused on environment friendly
technologies in emissions and alternative fuels. It has developed
electric and hybrid vehicles both for personal and public
transportation. It has been implementing several environment-friendly
technologies in manufacturing processes significantly enhancing
resource conservation.

INTERNATIONAL OPERATIONS:
Tata Motors has its operations in Thailand, South Africa,
Argentina and South Korea. It was running Jaguar Land Rover - the
British Brand. Tata Motors has a cost advantage in India as the labour
is 8-9 per cent of the sales against 30-35 percent in developed
countries. There is a huge demand due to infrastructural developments
and Tata Motors is able to leverage its knowledge on the Indian
market. Tata is expanding to foreign markets to become competitive
globally. The biggest accomplishment of Tata is with the Light
Commercial Vehicle, Indias first Sport Utility Vehicle and Tata
Indica released in 1998. Tata Ace became Indias first developed mini
truck and then came the Peoples car- the Tata Nano. The Middle East
Market is a big market for Tata Motors. It markets its passenger and
commercial vehicles worldwide.

123
VISION AND VALUES:
The vision statement of Tata Motors Limited, Indias largest
automobile company, is to be best in the manner in which we
operate, best in the products we deliver, and best in our values system
and ethics. Tata Motors is committed to improve the quality of life of
communities by working on four thrust areas- employability,
education, health and environment. The foundation of companys
growth over the last five decades is a deep understanding of economic
stimuli and customer needs, and the ability to translate them into
customer-desired offering through leading edge R&D. With the
foundation of its heritage Tata Motors today is etching a refulgent
future.

TABLE 5.2 PREMIUM PASSENGER CARS FROM TATA

MOTORS
Company Model Variant
Tata Indigo e-CS
Indigo CS GLF
Tata Motors Indigo CS GLS
Tata Indigo CS Indigo CS LE (TDI)
Indigo CS LX (TDI)
Indigo CS LS (TDI)

AUDI AG
Type : Public
Industry : Automotive
Founded : 1909
Founder : August Horch
Headquarters : Ingolstadt, Germany

124
Area Served : Worldwide
Products : Luxury Vehicles
Parent : Audi AG
Website : www.audi.com, www.audi.in
Company Logo :

COMPANY PROFILE:
Audi is a German-based company and is also been enlisted
among the oldest car manufacturing companies of Germany. Audi is
the subsidiary of Volkswagen. As a manufacturer of high quality
luxury cars, Audi is one of the worlds leading premium brands. The
Audi Group, comprising the two brands Audi and Lamborghini, has
for many years been one of the worlds leading carmaker in the
premium and superior segment. Since its inception, Audi has ruled the
domains of European Automobile Markets. The core of the company
comprises the Audi brand, whose vehicles delight customers with
their outstanding modern design, technological innovations and high
built quality. The company also offers an exclusive customization
program and high grade lifestyle articles that embody the spirit of the
brand with the four rings. The Badge of Audi is personified by the
famous four rings of Audi, stands for those four companies of
Germany, namely, Audi DKW, Horch and Wanderer, consolidated to
form a new company, Audi AG. The Audi Group has its headquarters

125
in Ingolstadt. In addition to technical development, sales and
administration this location is home to the bulk of manufacturing
operations.
The Audi A3 and A3 sport back models, the A4 car line, the A5
sport back and the A5 coupe, RS5 coupe and Q5 models are built in
Ingolstadt. Bodies for the A3 Cabriolet and for the TT car line are also
manufactured at this plant. The Neckarsulam plant is home to Quattro
GmbH, a fully owned subsidiary of Audi AG. The A4 Sedan, the A5
and RS5 Cabriolet models, the A6 car line, the A6 sport back and the
A8 luxury sedan are manufactured. In addition to attractive high-
performance vehicles such as the RS models, Quattro GmbH builds
the R8 line of super cars at its bespoke manufacturing operations
there.
Audi started with a 2,612 cc inline four engine model Type A,
followed by a 3, 564 cc model, as well as 4,680 cc and 5720cc
models. These cars were successful even in sporting events. The first
six-cylinder model Type M, 4,655 cc appeared in 1924. Reflecting the
economic pressures of the time, auto union concentrated increasingly
on smaller cars through the 1930s, so that by 1938 the companys
DKW brand accounted for 17.9% of the German car market, while
Audi held only 0.1%. After the final few Audis were delivered in
1939 the Audi name disappeared completely from the new car
market for more than two decades. Volkswagen re-launched the Audi
brand with the 1965 introduction of the Audi F103 series. Through the
acquisition of DUCATI MOTOR HOLDING S. P. A. Bologna (Italy)
and its subsidiaries, the Audi Group has moreover since July 2012
been able to offer its customers motorcycles built by one of the most
successful manufacturers in that segment. Through this takeover of
the Italian brand Ducati, the Audi Group has further raised its profile

126
and now embodies sportiness, innovation, passion and a consistent
premium philosophy more strongly than ever.
The company celebrated its 100th birthday in 2009. 2012
brought major economic challenges. There was a marked slowdown
in global economic growth as the year progressed. Audi plans to
significantly increase the number of models in its portfolio for 2015 to
2040.

MANUFACTURING FACILITIES:
Audi manufactures vehicles in seven plants around the world;
some of them are shared with other Volkswagen Marques, although
many sub-assemblies such as engines and transmissions are
manufactured within other Volkswagen Group plants. Audis two
principal assembly plants are:
i. Ingolstadt: Incorporated by Auto Union in 1964, it is the
largest Audi plant. Its where the Audi A3, Audi A4, A5 and
Audi Q5 cars are built. The Audi Hungaria, Audi TT Coupe,
the Audi TT Roadster are also built in this facility. This
production plant produces about 5, 00,000 vehicles per annum.
ii. Neckarsulam: This plant was acquired from NSU in 1969.
Here in this plant Audi A6, Audi A7, A8 and all RS variants of
Audi are produced.
Outside Germany Audis production plants are in Bratislava
(Slovakia), Martorell (Spain), Gyor (Hungary), Brussels (Belgium),
Changchun (China), Aurangabad (India), Jakarta (Indonesia).
In September 2012, Audi announced the commencement of its
first North America manufacturing plant in Puebla, Mexico. This
plant is expected to be operative in 2016 and produce the second
generation Q5. The company is represented worldwide as in 110

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countries and has been selling cars in India since 2004. In March
2007, Audi established a formal presence in India with Audi India
being a division of Volkswagen Group Sales India Private Limited.
The plant produces the Audi A6, the Audi A4, 2000 Audi A6 and
11,000 Audi A4 are expected to be produced at the Aurangabad plant
by 2015. An additional assembly line was installed to produce the
Audi A4. Currently fully imported parts of Audi cars are assembled at
the Aurangabad plant of Skoda Auto. Audi India sold 3,003 vehicles
in the year 2010 compared to 1,650 vehicles in 2009 and registered an
increase of 81% in sales growth. Audi India continued its successful
course in India with yet another remarkable growth with 710 units
sold in May 2013. Audi India clocked a growth of 57.42% over the
same period last year (May 2012:451 units). For the period of January
to May 2013, the company grew by 24.8%, delivering 4096 units as
compared to 3282 units during January to May 2012. The company
caters to elite and rich class of consumers. Audi India is in an
emerging stage but it foresees immense business opportunities in the
future. Audi India plans to expand its network to 34 dealerships by the
end of 2013 from its existing 26 centres.

TECHNOLOGY:
Audis slogan is Vorsprungdurch Technik, means
Advancement through Technology. Recently in United States, Audi
has updated the slogan to Truth in Engineering. Audi has a MMI
operating system, a high tech entertainment and information system
and the drive strain. It also has a turbo engine and great fuel-
efficiency. Audi has a Quattro all-wheel drive system, which delivers
powers to wheels. The Audi space frame is a technology used to
create a frame body that offers increased stiffness.

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EXPORTS:
The brand with the four rings increased its deliveries by 11.7%
in fiscal 2012 to the record total of 1,45,51,23 vehicles.

VISIONS AND VALUES:

Audis vision is to provide experience not cars. The company is
passionate about what they do. They provide great cars and great
after-sales service. They want to establish long-term relationship with
their buyers.

TABLE 5.3 PREMIUM PASSENGER CARS FROM AUDI AG

Company Model Variant
Saloon
Audi A4 S4
RS4
Audi AG Audi A6 Saloon
A8
Audi A8 A8L
12 CYLINDER A8
S8

TOYOTA MOTORS
Type : JV
Industry : Automotive
Founded : 1937
Founder : Kiichiro Toyoda
Headquarters : Toyota, Aichi, Japan
Chairman : Takeshi Uchiyamada
Products : Automobiles

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Staff Strength : 331,876 (2012)
Parent : Toyota Group
Website : www.toyota.com, www.toyotabharat.com
Company Logo :

COMPANY PROFILE:
Toyota Motor Corporation, TMC, is a Japanese Multinational
Automobile Manufacturing Company. Company has its headquarters
in Toyota, Aichi, Japan. Kiichiro Toyoda founded the Toyota Motor
Corporation. In 1926, Toyoda Automatic Loom works was created.
Kiichiro was also an innovator, and visits he made to Europe and
USA in the 1920s introduced him to the automatic industry. Saki chi
Toyoda received some monetary reward for selling the patent rights of
his automatic loom, and Kiichiro laid the foundation of Toyota Motor
Corporation in 1937. In year 1936, Toyota produced its first passenger
car Toyota AA. Toyota is one of the largest car manufacturers in the
world, with scores of factories in dozens of countries. Its standing in
the automotive world as the most successful and most profitable car
maker is unquestioned.
It was Australia where todays world car industry leader first
tasted success beyond its Japanese domestic market. It was through
Toyota Australia that the Japanese company learned many lessons
which have underpinned its global success, and it was Toyota

130
Australia that achieved many breakthroughs within the group: first
successful land cruiser exports, first finance arm to fund dealers
inventory, first successful production outside Japan and first exporter
of the Camry apart from the parent company itself. Toyota Production
System was established Kiichiros just-in-time philosophy-
producing only precise quantities of already ordered items with the
absolute minimum of waste- was a key factor in the systems
development. The Toyota Production System began to be adopted by
the automotive industry across the world. Toyota has a 40% market
share in Japan. The first crown models arrived in the USA in 1957,
and by 1965, with models such as Corolla, Toyota began to build its
reputation and sales to rival those of domestic producers. Toyota was
imported into Europe via Denmark in 1963. Toyota has continued to
grow in Europes sophisticated and complex market, and in 2000 the
company delivered its tem millionth car to a customer in Germany.
In 2002, Toyota managed to enter a Formula One works team
and establish joint ventures with French motoring companies Citroen
and Peugeot a year after Toyota started producing cars in French.
Toyota ranked 8th of Forbes 2000 list of the worlds leading
companies for the year 2005 but slid to 55 for 2011. The company
was on the top in global automobile sales for the first quarter of 2008,
From November 2009 through2010. Toyota recalled more than 9
million cars and trucks worldwide in several recall campaigns, and
briefly halted production and sales. The company initiated the recalls,
the first two with the assistance of the U.S. National Highway Traffic
Safety Administration (NHTSA), after reports that several vehicles
experienced unintended acceleration.
In October 2012, Toyota announced a recall of 7.43 million
vehicles worldwide to fix manufacturing power window switches, the

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largest recall since that of Ford Motor Company in 1996. The move
came after a series of recalls between 2009 and 2011 in which it
pulled back around 10 million recalls amidst claims of faunally
mechanics.
MANUFACTURING FACILITY:
Toyota has long been recognized as an industry leader in
manufacturing and production. Toyota has its North America
headquarters in USA. They are located in Toyota Motor North
America and were established in March 1996. They liaison, and have
public relations and survey through North America. The second office
is Toyota Motor Engineering and Manufacturing North America-
R&D and overall supervision of manufacturing in North America. In
Belgium, Europe, there is Toyota Motor Europe which does co-
ordination of Toyotas European business. Then there is Toyota
Motor business in Singapore- it is called as the Toyota Motor Asia
Pacific and they have parts supply to all ASEAN countries and sales
support marketing in Asia. Then there is the Toyota Motor Asia
Pacific Engineering and Manufacturing. They are responsible for the
development and evaluation efforts for locally produced vehicles and
operation support for Toyota in Asia and Middle East.
Toyota has its manufacturing facilities worldwide. Toyota
Motor Corporation started its operations in India in 1997 in a Joint-
Venture with the Indian Automobile Giant, The Kirloskar Group and
formed Toyota Kirloskar Motor Private Limited (TKMPL). It invested
INR seven billion in the company and is the fourth largest carmaker in
India. Toyota has 89% of equity shares and the Kirloskar Group has
11% equity shares in TKMPL. The company, TKMPL, according to
its mission statement aims to play a major role in the development of
the automotive industry and the creation of employment opportunities

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not only through its dealers network, but also through ancillary
industries with a business philosophy of Putting Customers First.
We believe in putting you, our customers first and it is this approach
that enables us to respond effectively to your changing needs, whether
its in terms of quality, service or driving experience- said Mr
Hiroshi Nakagawa, MD & CEO, TMC.
TKMPLs manufacturing plants are at Bidadi, Karnataka and
Bangalore. Both the facilities have a combined capacity of 1, 50,000
vehicles per annum.

INTERNATIONAL OPERATION:
Toyota, in collaboration with Daihatsu Motor Company
manufactured 8.54 million vehicles in 2005, about 5, 00,000 fewer
than those produced by General Motors. The company has a large
market share in the United States. It is the largest car seller in
Australia. It also has a large number of cars selling in South East Asia
due to its subsidiary Daihatsu, which operates from South East Asia.
However, in Europe it has a really small market share. The companys
Lexus brand, whose market share struggled in Europe. It has 3/10th of
1% market share compared to 2% market share as the US luxury
segment leader.
In 2007, Toyota had produced 2.348 million pieces of cars. The
most prominent cars from Toyota are the Corolla and Camry sedans.
Toyota ranks number 2 with a 16% market share after General Motors
in United States. In January 2009, it announced the closure of all its
Japanese plants for 11 days to reduce output and stocks of unsold
vehicles.

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EXPORTS:
The company is making India the global manufacturing hub for
small cars. It is planning to make India the export base for mid-size
cars. It exports its vehicles to the Canada, Venezuela, Mexico, Brazil
and Europe etc. By July 2012, the company reported that it had
manufactured its 200-millionth vehicle. In 2011 it was the largest
automobile manufacturer worldwide, and it is the eleventh-largest
company in the world by revenue through domestic sales and exports.

VISION & VALUES:

Toyotas vision and values are to honour the language and spirit
of every nation, respect the culture and customs of every nation,
dedicate business for providing great products, create and develop
advanced technologies, foster a corporate culture, pursue growth
through global community and innovative management, work with
business partners ethically. Toyota believed that one must be faithful
to their duties, be studious and creative, be practical; built a homely
atmosphere at work, have respect for spiritual matters. Toyota needs
to provide its customers with great products through improving its
business performance and maintaining great working conditions.

TECHNOLOGY:
Toyota has introduced new technologies including one of the
first mass-produced hybrid gasoline-electric vehicles, of which it says
it has sold 2 million globally (as of 2010). Toyota also introduced
Isuzu Diesel Technology into their products in collaboration with
Isuzu Motors Limited. Toyota has been a leader in environment
friendly vehicle technologies, most notably the RAV4EV and Toyota
Prius. The company produces its most of the vehicles with automatic

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transmissions with an Eco Drive Indicator, which take into
consideration rate of acceleration, engine and transmission efficiency
and speed.

TABLE 5.4 PREMIUM PASSENGER CARS FROM TOYOTA

Company Model Variant
2.4 L (A/T)
Toyota Camry 2.4 L (M/T)
Toyota Motors Corolla 1.8 E
Toyota Corolla Corolla 1.8 G
Corolla 1.8 J
Corolla Altis

SKODA AUTO
Type : Subsidiary
Industry : Automotive
Founded : 1895
Founder : Vaclav Laurin and Vaclav Klement
Headquarters : Mlada Boleslav, Czech Republic
Products : Automobiles
Area served : Worldwide
Staff strength : 32,000 (2012)
Parent : Volkswagen Group
Website : www.skoda-auto.com,
www.skoda- auto.co.in

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Company Logo :

COMPANY PROFILE:
The road to todays prosperity began in 1895, when Vaclav
Laurin and Vaclav Klement began manufacturing Slavia-brand
bicycles. Skoda Auto Group is one of the largest corporate groups in
the Czech Republic. Skoda Auto is one of the five oldest companies
that begun producing cars and has an unbroken history. Skoda Auto is
a part of the famous automobile manufacturers of Europe, the
Volkswagen Group, and it became a wholly owned subsidiary of the
Volkswagen Group in 2000, positioned as the entry brand to the
group. Skoda Auto launched its first car in 1905. Since becoming a
part of Volkswagen Group, Skoda Auto has more than tripled its
production, significantly expanded its product portfolio, and
reinforced the Skoda brands image. Thus, its global sales reached
about 949,412 cars in 2012. Today, Skoda is one of the most
successful automobile brands, offering nine models and having
established a presence in more than 100 countries worldwide.
The first automobile Laurin and Klement produced was the
Voiturette A and it was a great success. After the success of the
Voiturette A, the company started developing automobiles for
international automobile market. In 1907, Laurin and Klement

136
announced conversion to a joint-stock company. The company then
extended its production network. However, as the First World War
came by, in 1914, the company had to start giving attention to the
production of military arsenal for the armed force. In 1925, Laurin
and Klement were acquired by Skoda Works and continued operating,
henceforth under a different name of Skoda Auto. For several years,
the production of cars halted, due to the political changes in the
economy during the Second World War. In 1987, however, the Skoda
Favorite went into production. This led to re-launching of the
company and with the political transformation of 1989; Skoda decided
to search for a new partner. In 1991, Skoda partnered with the
German company, Volkswagen, to produce cars.
Skoda Auto Group consists of the parent company, SKODA
AUTO a.s. (the company) and its fully consolidated subsidiaries:
Skoda Auto Deutschland GmbH, SKODA AUTO Slovensko, s.r.o.,
Skoda Auto Polska S. A., Skoda Auto India Private Ltd. and the
affiliate 000 Volkswagen RUS. In the year 2011, Skoda sold a record
number of 875,000 cars, and it stated that it aimed to double its sales
by 2018, as part of the Volkswagen Groups plan to become the
largest car maker in the world. In 2012, Skoda showcased steady
growth despite tough market conditions. Skoda Auto India achieved a
growth of 13% in its deliveries for 2012. Cumulative sales for the year
2012 numbered 34,678 as against 30,741 in the year 2011. Its total
global sales reached 939,200 cars in 2012.

137
Figure 5.1 Subsidiaries of Skoda Auto

1. SKODA AUTO a.s.

based in Mlada Boleslav Czech Republic

3. Skoda Auto Slovensko,

2. Skoda Auto Deutschland GmbH s.r.o.
based in Weiterstadt, Germany based in Bratisalva,
Skoda Auto stake:100% Slovakia Skoda Auto
stake:100%

5. Skoda Auto
4. Skoda Auto India Private Ltd.
Polska S.A. based 6. ooo VOLKSWAGEN
based in RUS
in Poznan, Poland Aurangabad, India
Skoda Auto Stake Skoda Auto stake: based in Kaluga, Russia,
:100% 100% Skoda Auto stake:30%

(Source: CARS AND PEOPLE Skoda Auto 2007 ANNUAL REPORT)

MANUFACTURING FACILITIES:
Skoda Auto Group is one of the largest corporate groups in the
Czech Republic. Skoda is a truly global company with a distribution
network of about 531 dealers all over the world. It operates in over
100 markets all over the world. Skoda Auto India Private Limited
currently has 106 dealerships and 89 service centres across cities.
Skodas main hub is Europe; however, the company has expanded
operations all over the world. In Central and Eastern Europe, Skoda is
the market leader and is entering speedily into Asias markets. Skoda
gained a lot of popularity in the Indian car market, especially in the
luxury segment. Skoda launched its first car in India was the Skoda
Octavia which was priced at INR 10.6 lakhs.
The tryst of Skoda auto with India began in the year 2001,
when it entered the Indian market. Skoda Auto India Private Limited

138
was established in 1999 as SKODA AUTO a.s. and its vehicle
assembly operations commenced in 2001. The company began at
Shendra, Aurangabad, and it was Skodas first manufacturing unit
Asia. The Companys principal businesses are the manufacturing and
sale of vehicles, components, original parts, accessories and other
goods. Since, becoming a part of Volkswagen Group, Skoda Auto has
more than tripled its production, significantly expanded its product
portfolio, and reinforced the Skodas Brand image. Furthermore, the
second plant of the company opened in India was under the
Volkswagen Group at Chekan, in March 2009. However, the
production at the plant started two months later in May 2009. As of
2010, Skoda decided that it will produce 1.5 million cars per annum
worldwide for the next 10 years.

SKODA AUTO SOCIAL RESPONSIBILITY:

Skoda Auto has a long-term programme in which it dedicates
extraordinary efforts to minimising the negative environmental impact
of its operations. This related not only to the companys own
manufacturing and sales operations, including emphasis on recycling
and conservation of resources, but also extends to preferring suppliers
that meet the most demanding environmental standards- ISO 14000.
New products are developed with the aim of limiting CO2 emissions.
By using alternative sources of energy (e.g. combustion of biomass),
the company helps to mitigate climate change. The company also pays
extraordinary attention to its employees, both in issues of
occupational safety and health and with regard for the development of
their professional qualifications and off-the-job needs. The company
takes the initiative in supporting equal opportunity with regard for the
ageing population and ethnic composition. The company also operates

139
protected workshops, in which handicapped persons find permanent
and temporary employment. For a long time, now the company has
exceeded employee training standards by operating its own secondary
Vocational School, as well as a Company University- the only one of
its kind in Czech Republic.

VISION AND VALUES:

Skoda created a vision statement for the company. For the
company to follow this statement will require adherence to the
following values:
i. Intelligence
ii. Attractiveness
iii. Dedication.
Apart from these three values, the companys vision is to become the
market leader in Europe. The company promises to provide quality
sales, service and transportation needs to their users. Skoda is known
for the stylish exterior and classy outlook of its cars. It is also popular
for its consistent effort to come up with modern technologies that
customer will love to drive.

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TABLE 5.5 PREMIUM PASSENGER CARS FROM SKODA
AUTO
Company Model Variant
Skoda Fabia Fabia Ambience 1.2
MPIHTP
Elegance 1.4 TDIPD
Elegance 1.4 MPI
Skoda Skoda Laura Skoda Laura Ambiente
Skoda Laura Elegance
Skoda Laurin &
Klement
Skoda Octavia Classic L&K
Skoda RS 1.8 Turbo
Skoda Superb
Skoda Octavia Combi

FORD MOTORS
Type : Public
Industry : Automotive
Founded : 1903
Founder : Henry Ford
Headquarters : Dearborn Michigan, US
Products : Automobiles
Area served : Worldwide
Staff strength : 171,000 (2012)
Website : www.ford.com, www.india.ford.com
Company Logo :

141
COMPANY PROFILE:
Ford Motor Company is an American multinational automaker.
It was founded by Henry Ford and incorporated on June, 1903. The
company was incorporated, with 12 investors owing a total of 1000
shares. Ford sells automobiles and commercial vehicles under the
Ford brand and luxury cars under the Lincoln brand. Ford is the
second-largest US- based automaker and the fifth-largest in the world
based on 2010 vehicle sales. The first car, the Ford manufactured was
the Model A in 1903. However, the first simple, affordable car that
Ford produced was the Model T. In 1914, Ford produced 308,162 cars
and in 1927, by the time the last Model T was built, the company
produced an automobile every 24 seconds. With the 1980s, Ford
introduced several highly successful vehicles around the world. In
1990 and 1994 respectively, Ford also acquired Jaguar cars and Aston
Martin. During the mid-to late 1990s, Ford continued to sell large
numbers of vehicles, in a booming American economy with a soaring
stock market and low fuel prices. With the down of the new century,
legacy healthcare costs, higher fuel prices and a faltering economy
lead to falling market shares, declining sales and diminished profit
margins. Most of the corporate profits came from financing consumer
automobile loans through Ford Motor Credit Company.

142
 Ford introduced methods for large-scale manufacturing of cars
and large-scale management of an industrial workforce using
elaborately engineered manufacturing sequences typified by moving
assembly lines by 1914. These methods were known around the world
as Fordism. On June 2, 2008, Ford sold its Jaguar and Land Rover
operations to Tata Motors for $2.3 billion. Fords core and affiliated
automotive brands include Aston Martin, Ford, Jaguar, Land Rover,
Lincoln, Mazda, Mercury and Volvo. With the de-regulation of
passenger car industry in India, in 1993, Ford established a Joint-
Venture company Mahindra & Mahindra in order to increase its
presence in the Asia-Pacific region and to capture a share of the
liberalized and high growth passenger car industry in India. The
company then known as Ford India Limited (FIL) in February 1999,
with Ford holding the majority stake. Ford India was the first
subsidiary of a multinational car manufacturer to launch a car
specifically for India. Ford India Private Limited currently is the 6 th
largest car maker in India.
The cars that Ford produces globally are: Ford E-series, Wagon,
Ford Edge, Ford Escape, Ford Expedition, Ford Explorer, Ford Fiesta,
Ford Flex, Ford Focus, Ford Fusion, Ford Mustang, Ford Shelby GT
500, Ford Taurus and Ford Transit connect Wagon.

MANUFACTURING FACILITIES:
Ford has ninety production plants all over the world, which
include the Auto alliance International Plant, Bahia Plant, Blue
Diamond Track, Buffalo Stamping, Chicago Embassy, Cologne
Transmission, Dagenham Engine, Dearborn Truck, Ford Malaysia,
Genk Body and Assembly, Michigan Assembly Plant and Valencia
Assembly Plant. The companys worldwide operations are in Europe,

143
Asia-Pacific, Central and South America, the Caribbean, Africa and
the Middle East. Ford outside the United States focuses on sales and
distribution. It has 200 markets across six continents and maintains
108 plants worldwide as of 2006.
Ford began its production in India in 1998. Ford has a plant in
India located in Tamil Nadu. It employs about 2,100 employees and
manufactures the Ford Endeavour, Fiesta, Fusion, Ford Ikon and Ford
Figo. Ford has another manufacturing plant in India with a capacity of
100,000 vehicles annually, located in Maraimalai Nagar, 45
kilometres from Chennai. When Ford launched the Figo in 2010, it
invested $500 million to double the capacity of the plant to 2 lakh
vehicles annually. It also set up a facility to make 250,000 engines
every year. Ford Indicas main focus has been on building a strong
local supply base. Currently, the level of localization of Ford Ikon is
over 90%. To meet the growing domestic demand and with an eye on
engine export, the company has invested $72 million to raise engine
production capacity to 330,000 units.

DEALERSHIP:
As of February 2013, Ford India has 260 dealerships across 138
cities in 23 states and 3 union territories across the country. In the
year 2010, Ford India registered a sales growth of 172% with
recorded sales of 83,887 vehicles against 29,488 vehicles sold during
the year 2009. Whereas, the company reported 24.03 percent decline
in total sales in April 2013 at 7,270 units. The company had sold a
total of 9,569 units in the same month during the year 2012.

144
TECHNOLOGY:
Ford has launched two new technologies, the Global Avatar and
the Sync. The Sync is developed in collaboration with Microsoft
which is a voice-control technology that allows the user to give
commands via voice. Ford has launched an animation technology
which allows the company to create a global avatar that will design
the car in an online environment. This will allow the company to
design the test many parts of the car without incurring the huge cost of
physical building and testing. The avatar will assemble the vehicle
parts and build a digital prototype.

VISION & VALUES:

Ford has a vision to become one of the worlds leading
consumer companies for automotive products and services. Apart
from that, its vision is to provide personal mobility for people all over
the world. Their goal is to achieve customer satisfaction by providing
customers products of high quality and good service. Their goal is to
strive for excellence in everything they do. To move their business
forward, Ford aims to maintain healthy relationships with its vendors
and business associations. Ford has its following four goals:
i. To be a consumer-needs driven company.
ii. To respect and value each team members contribution.
iii. To be an environmentally responsible company that lives up
to the standards of society.
iv. To constantly improve in everything the company does.

145
TABLE 5.6 PREMIUM PASSENGER CARS FROM FORD
Company Model
Ford Ford Mondeo Ghia Duratec
Fiesta

HYUNDAI MOTOR COMPANY

Type : Public
Industry : Automotive
Founded : December, 1967
Founder : Chung Ju-yung
Headquarters : Seoul, South Korea
Products : Automobiles, commercial vehicles, engines
Area served : Worldwide
Staff strength : 57,105 (2011)
Parent : Hyundai Motor Group
Website : www.hyundai.com, www.hyundai.co.in
Company Logo :

COMPANY PROFILE:
Hyundai Motor Company is the South Korean automobile
manufacturing company. It is placed sixth among the automobile
maker in the world. Hyundai was started in 1967, when the founders
decided to assemble someone elses vehicles. The founder developed

146
his own vehicles and succeeding in exporting vehicles to other
countries. The company launched its first car, Cortina, in 1968. In
1975, the Pony, the first Korean car was released by the Hyundai with
styling by Giorgio Giugiaro of Ital. Design and power train
technology provided by Japans Mitsubishi Motors. Pony became the
top-selling car on the Canadian market due to its higher degree of
quality and refinement in the lowest price auto segment. In 1985, the
one millionth car from Hyundai was built.
In 1986, Hyundai began to sell cars in the United States. The
company started to produce models with its own technology in 1988,
beginning with the mid-size Sonata. In 1991, the company succeeded
in developing its first proprietary gasoline engine, the four cylinders
Alpha, and also its own transmission, thus paving the way for
technological independence. In 1996, Hyundai Motor India Limited
was established with a production plant in Irungattukottai near
Chennai, India. Hyundai Motor India Limited (HMIL) is a wholly
owned subsidiary of Hyundai Motor Company (HMC). In 1998,
Hyundai began to overhaul its image in an attempt to establish itself
as a world-class brand. Hyundai Motor Group, invested heavily in the
quality, design, manufacturing and long-term research of its vehicles.
In 2004, Hyundai was ranked second in initial quality in a
survey/study by J. D. Power and Associates. Hyundai is now one of
the top 100 most valuable brands all over the world. Since 2002,
Hyundai has also been one of the worldwide official sponsors of the
FIFA World Cup. In 2011, Hyundai sold 4.05 million cars worldwide
and the Hyundai Motor Group was the worlds fourth largest
automaker. Hyundai vehicles are sold in 193 countries through some
5,000 dealerships.

147
 HMIL is the largest passenger car exporter and the second
largest car manufacturer in India. Currently, the company markets
more than 30 variants of passenger cars in six segments. HMILs first
passenger car, the Hyundai Santro was launched in 23rd September
1998, and was a runaway success. HMIL forms a critical part of
HMCs global export hub, it touched 1.5 million in exports in March
2012. It currently exports to more than 120 countries across the world
and has been Indias number one automobile exporter for seven year
in a row. In September 3, 2013, Hyundai launched its much awaited
car, Grand i10.

MANUFACTURING FACILITIES:
Hyundai operates the worlds largest integrated automobile
manufacturing facility in Ulsan, South Korea, which has an annual
production capacity of 1.6 million units. Hyundai has its production
plants all over the world which include: The Ulsan Plant, the Asan
Plant, the Jeonju Plant, the America Alabama Plant, the China Plant,
the Indian Plant, the Turkey Plant, the Russia Plant and the Brazil
Plant.
In India, the Hyundai Plant is located in Irungattukottai, 30
kilometres from Chennai. This plant was set up in May 1996 and
rolled out the first Santro seventeen months afterwards. The plant is
built on 500+ acres of land and had an investment of INR 2,500
crores. HMILs fully integrated state-of-the art manufacturing plant
near Chennai boasts of advanced production, quality and testing
capabilities. To cater to rising demand the company commissioned its
second plant in February 2008, having an installed capacity of
330,000 units per annum. Both the manufacturing units are capable of
producing 630,000 vehicles annually. To support its growth and

148
expansion plans HMIL currently has 346 dealers and around 800
centres across India. In its commitment to provide customers cutting
edge global technology, HMIL set up a modern multi-million dollar
Research & Development facility in Hyderabad. In terms of
worldwide sales, the US, Chinese and Indian Marketing are doing
well. Hyundai has also developed a model in India for sales. Hyundai
will grab a large share of the car market by turning its operations in
China and India into key design, manufacturing and export hubs for
its entire global operations. Hyundai has 6 centres worldwide, located
in Korea, Germany, Japan and India. Additionally, there is an
American design centre in California that develops designs for US
market.

TECHNOLOGY:
Hyundai has the Alpha Engine, Theta Engine, S Engine,
Lambda FR Engine, Theta GDI Engine, Class- best power trains,
environment-friendly exhaust systems, green engines, power train
centre and highest performing power trains etc. Hyundais current
design philosophy is known as Fluidic Sculpture, which is heavily
inspired by nature. Hyundai Motor India Engineering (HMIE) gives
technical and engineering support in vehicle development and CAD
&CAE support to Hyundais main R&D centre in Namyang, Korea.
In 2010, Hyundai started its design activities at Hyderabad
R&D centre with Styling, Digital Design & Skin CAD Teams. The R-
engine for passenger Diesel cars that meet the Euro-5 Environmental
Regulation Standards is developed by Hyundai and the company
received certification for low-pollution emitting vehicle in the
metropolitan area. The companys TAU engine received the honour

149
of being named as the Worlds 10 Best Engines for the past two
consecutive years.

VISION AND VALUES:

Hyundai released its Vision 2020 to establish the firm as the
global leader in the automobile market. The company focuses on key
vision strategies:
Automotive Vision: to become a trusted lifetime partner of our
customer, we will bring a new perspective to automobiles through
innovative mobility solutions based on human-centric, eco-friendly
technologies and services.
Steel Vision: as an eco-friendly, resource-circulating company, we
will lead a new era in the steel industry by providing high value-added
products and services and realizing worlds best competitiveness
based on co-operative relations with our stakeholders.
Construction Vision: As a global leading provider of high-value
engineering solutions, we will create the foundation for a batter life
through cross-business synergy and convergence with future
technologies.
Hyundai focuses on five main values: Customer Challenge,
Collaboration, People and Globality. Providing customers top service
will be at the top of their agenda. The company will venture into new
areas and not remain traditional. The company will have a spirit of
collaboration. People will be respected and valued. The company is
not limited to country-centric areas but will be known in the global
arena.

150
TABLE 5.7 PREMIUM PASSENGER CARS FROM HYUNDAI
MOTORS
Company Model Variant
Hyundai Motors Hyundai Sonata Embera 2.4 M/T
Embera 2.4 A/T
Embera H-Matic

VOLKSWAGEN
Industry : Automotive
Founded : 1937
Founder : Ferdinand Porsche
Headquarters : Wolfsburg, Germany
Products : Automobiles
Area served : Worldwide
Parent : Volkswagen Group
Website : www.volkswagen.com,
www.volkswagen.co.in
Company Logo :

COMPANY PROFILE:
Volkswagen, the top-selling marquee of the Volkswagen
Group, is the biggest German automaker and the second biggest

151
automaker in the world. Volkswagen was originally founded in 1937
by the Nazi Trade Union, the German Labour Front (Deutsche Arbeits
Front). In the early 1930s, the average German couldnt afford
anything except for a motorcycle. Initially the companys name was
Gessellschaftzur Vorbereitung des Deutschen Volkswagen mbH.
The name was changed to Volkswagen AG in 1938. Bela Barenyi
created the basic design in the middle 1920s. Joseph Genz developed
the Standard Superior. In 1933, when these projects were under
consideration, Adolf Hitler decided to sponsor a Volkswagen
program. Hitler started a new factory and named Ferdinand Porsche as
the engineer for designing the new car, who later on agreed to create
the peoples car for Hitler in 1934.
During the second World Was, Volkswagen production is
switched to armaments. Volkswagen established a humanitarian fund.
The British Militry Government takes responsibility of the company.
Volkswagen Bully creates rising demand. In 1956, a separate
manufacturing plant for the transporter is established. In 1972,
Volkswagen breaks world car production record with 15,007,034
units assembled. The Beetle goes ahead of the Ford Model T. In 1973,
the production of the Volkswagen Passat was commenced. The
Volkswagen Group consists of seven brands: Volkswagen, Audi,
SEAT, Skoda, Volkswagen Commercial Vehicles, Bentley, Bugatti,
Lamborghini and Scania. In Europe one of the five cars comes from
Volkswagen. In 2010, Volkswagen posted record sales of 6.29 million
vehicles, with its global market share at 11.4%. Volkswagen means
peoples car in German. Its slogan is Das Auto (the car).
Volkswagen ranks first in speeding the most money of any automaker
on research and development. It has three cars in the top-10 list of

152
best-selling cars of all time compiled by the website 24/7 Wall St: the
Volkswagen Golf, the Volkswagen Beetle and the Volkswagen
Passat. Volkswagen sets its foot in the Indian automobile market in
2007 as Volkswagen India Private Limited (VIPL). VIPL is a
subsidiary of Volkswagen Group Sales India Private Limited that
assembles manufactures and distributes Volkswagen vehicles in India.
Volkswagen wants to increase its sales in India to one million
cars by 2018. They plan to dedicate the success they had in China. In
India, the company needs to sell large volume of cars to survive in
India. Volkswagen is aiming to double its US market share from 2%
to 4% for the year 2014, and has aimed to become, sustainably, the
worlds largest car maker by 2018.

MANUFACTURING FACILITIES:
Volkswagen has become a large international corporation from
where it started and expanded to different worldwide markets and
countries. The world headquarters of Volkswagen are located in its
home country in Wolfsburg, Germany. Since 2011, Volkswagen
operates 62 production plants in fifteen European countries and a
further seven countries in the USA, Asia and Africa. Nearly, 400,000
employees produce about 30,000 vehicles or are involved in vehicle-
related services each working day worldwide. The Volkswagen Group
sales its vehicles in around 153 countries.
In India VIPL operates a manufacturing plant in Chekan,
Maharashtra, which produces approximately 110,000 vehicles per
annum. The manufacturing plant is also shared by Skoda Auto India
Private Limited for Assembling the Skoda Fabia and Skoda Rapid.
VIPL currently has more than 70 dealerships in 56 cities across 18

153
states and 2 Union Territories of India. Volkswagen India, the Indian
Unit of the largest German Automaker Volkswagen AG has witnessed
a marginal increase in its sales during the month of March 2012. The
company during this period managed to sell total of 8,326 units of its
cars in the Indian market as compared to 8,095 units sold in the same
month previous year. Volkswagen has set up its global research and
development operations in India to make Volkswagen vehicles for all
markets worldwide. There is a companys technical centre in Pune for
the same. Volkswagen has global operations, but its primary market in
Europe. The second largest market globally of Volkswagen is China,
where Volkswagen Group China is the largest Joint Venture
Automaker selling more than one million vehicles in 2010.

ENVIRONMENTAL RECORDS:
Volkswagen first implemented its seven environmental goals in
Technical Development in 1996. The plan contains themes involving
climate protection, resource conservation and healthcare, through
objectives such as reducing greenhouse emissions and fuel
consumption, enabling the use of alternative fuels and avoiding the
use of hazardous materials. The original 1996 goals have since been
revised in 2002 and 2007. Volkswagen was the first car manufacturer
to apply ISO 14000, during its drafting stage and was re-certified
under the standards in September 2005. In 2011, Greenpeace began
criticising Volkswagens opposition to legislation requiring tighter
controls on CO2 emissions and energy efficiency, and on advertising
campaign was launched parodying VWs recent series of Star wars-
based commercials.

154
VISION & VALUES:
The company provides its customers cars with a unique feature
set Volkswagen strives for excellence in Manufacturing of high
quality cars and they believe in integrity, respect for people
teamwork, responsibility and autonomy, leadership skills, excellent
professional qualifications and commitment to a common goal. They
are organized in word and believe in personal and professional
development. They also have a philosophy of continuous training.
They provide employees with a training centre to develop their skills.
They want to produce a product that is the Best in Class

MODELS:
Some of the vehicles sold by the company include: Volkswagen
Passat, Volkswagen Jetta, Volkswagen Polo, Volkswagen Vento,
Volkswagen Touarag, Volkswagen New Beetle, Volkswagen Phaeton
etc.

TABLE 5.8 PREMIUM PASSENGER CARS FROM THE

VOLKSWAGEN
Company Model
Volkswagen Polo
Volkswagen Passat
Volkswagen Volkswagen Touarag
Volkswagen Jetta
Volkswagen Beetle

155
MITSUBISHI MOTORS
Type : Public
Industry : Automotive
Founded : April, 1970
Headquarters : Minato, Tokyo, Japan
Products : Automobiles, light trucks
Area served : Worldwide
Staff strength : 30,777 (2012)
Parent : Mitsubishi Group
Website : www.mitsubishi-motors.com
Company Logo :

COMPANY PROFILE:
Mitsubishi is a Japanese conglomerate which consists of a
number of businesses under the Mitsubishi brand. Mitsubishi Motor
Corporation is a multinational automaker headquartered in Minato,
Tokyo, Japan. In the year 2011 Mitsubishi Motors was the sixth
biggest Japanese automaker and the sixteenth biggest worldwide by
production. Mitsubishi Motors was started dates back to 1917, when
the Mitsubishi Model A, Japans first series-production automobile,
was introduced. The company established itself as an innovator,
developing amongst others, Japans first diesel engine, its first large
sized bus, first four-wheel drive passenger car prototype and its first
diesel-powered truck over the next two decades. At the end of Second
World War, Japans large industrial groups were dismantled by order
of the Allied powers and Mitsubishi Heavy Industries was split into

156
three regional companies, each with and involvement in motor vehicle
development. In 1946, the company introduced a bus which could run
either by petrol or alternative fuels, and 1947, saw the introduction of
an electric bus, passenger vehicle production was confined primarily
to Mitsubishis first scooter.
As per capita income was rising and idea of family motoring
was taking off, the Mitsubishi 500, fulfilled this need, followed, in
1962, by a four-seater micro-compact with a two stroke air-cooled
359 cc engine, the Minica- a name which still lives today. The first
Colt- a larger, more comfortable family car, was also introduced in the
same year and the first Galentin 1969. With similar growth in its
commercial vehicle production, it was decided that the company
should create a single operation to focus on the automotive industry
and in 1970; the Mitsubishi Motor Corporation (MMC) was formed.
The 1970s saw the beginning of Mitsubishi considerable.
International rallying success with Gallants and Lancers,
demonstrating the qualities of performance and Yataro Iwasaki was
the founder of Mitsubishi Shipping, Reliability for which they are
known today.

MANUFACTURING FACILITIES:
The company has production facilities in Japan and worldwide.
The company has offices and also research and development facilities
all over the world. Mitsubishi Motors Corporation ventured into the
Indian market through its association with Hindustan Motors Limited,
Indias major automobile manufacturing company. HM-Mitsubishi
Motors than launched the well accepted Lancer in India. HM-
Mitsubishi launched several other products in the Indian market, such
as the Pajero, the Cedia, the Montero and the Outlander. HM-

157
Mitsubishi currently has around 41 dealerships across India, including
Metropolitan cities. As part of a global expansion program, in 1998
Indian distribution was ensured with the formation of The Chennai
Car Plant, a technical collaboration between the Mitsubishi Motors
Corporation Japan and Hindustan Motors Limited.
The company has six vehicle manufacturing facilities in six
countries, Japan, Philippines, Thailand, United States, Brazil, and
twelve plants co-owned in partnership with others. It also has three
further engine and transmission manufacturing plants, five R&D
centres and 75 subsidiaries, affiliates and partners. Its vehicles are
manufactured, assembled or sold in more than 160 countries
worldwide. Mitsubishi plans to expand export/import business of
Mitsubishi in India with ASEAN countries, expand the business in
India and go beyond simple import/export by bringing in its global
strengths in sophisticated trading functions such as financing, credit
control, warehousing and logistics, systems etc. suited to the Indian
market. The companys manufacturing plant is located in Tiruvallur,
Tamil Nadu, and it mainly produces outdated models wound up by
Mitsubishi elsewhere.

TECHNOLOGY:
Mitsubishi cars are fitted with the Mitsubishi Motors all-wheel
control system. The system extracts its means from the performance
and traction of the four tyres. The all wheel control system cultivates
its long history in rally racing. The multi-select 4WD system strikes a
balance between the 4WD system and the 2WD system. It offers a
sporty field on the road. In safety technologies there is the ABS and
Brake Assist, the Stability Control and the Noise View Camera. The

158
brake system prevents slippage due to tire lock. Under this system
tired do not lock and vehicle is stable.
There is a Reinforced Impact Safety Evolution Body. In the
event of a collision maintaining the survival space is essential. There
is a straight frame construction, octangular front side members and 3-
way input distribution cross-dash pillar braces for absorbing and
distribute energy. There is a tailored bank technology where welds are
formed of various dimensions. Further, Mitsubishi plans to introduce
six electric cars or hybrids by 2015 beginning with the MiEV. Their
production will be 5% powered by electricity by 2015.

VISION AND VALUES:

Mitsubishi strives to enrich society while contributing to the
preservation of the global environment. It wants to achieve its goal for
the great good of society. It maintains its principles of transparency
and openness along with conducting business with integrity and
fairness. Another philosophy was of expanding business considering
the global perspective. They have undertaken any different projects
and have become good friends with different countries. Mitsubishi is a
company that delights customers and is respected worldwide. They
live quality, diversity and employee involvement. The company
believes in resourceful and inspired leadership.

159
TABLE 5.9 PREMIUM PASSENGER CARS FROM
MITSUBISHI MOTORS
Company Model Variant
Mitsubishi 1.5 L Petrol
Mitsubishi Lancer 2.0 L Diesel
1.8 L Petrol
(automatic)
Mitsubishi Lancer Lancer Cedia
Cedia Lancer Cedia Sports

NISSAN MOTOR COMPANY LIMITED

Type : Public
Industry : Automotive, Financial Services
Founded : December, 1933
Founder(s) : Masujiro Hashimoto, Kenjiro Den, Rokuro
Aoyama, Meitaro Takeuchi, Yoshisuke
Aikawa
Headquarters : Nishi-Ku, Yokohama, Japan
Products : Automobiles
Area served : Worldwide
Staff strength : 155,099 (2011)
Parent : Renault Nissan Automotive India Private
Limited
Website : www.nissan-global.com
Company Logo :

160
COMPANY PROFILE:
Nissan Motor Company Limited is a Japan-based company
primarily engaged in the manufacturing and sell of automobiles. The
Japanese multinational automaker has its headquarters in Nishi-Ku,
Yokohama, Japan. Nissan Motors was established in 1933, currently
manufactures vehicles in 20 countries and areas around the world,
including Japan. As of March 2012, the company offers products and
services in more than 160 countries and areas worldwide.
Masujiro Hashimoto founded the Kwaishinsha Motor Car
works in 1991. The company produced its first car in 1914, called
DAT. Hashimoto was a pioneer in Japanese automobile industry.
Jitsuyo Jidosha was a predecessor of Nissan and was established in
Osaka in 1919 to make Gorham styled three wheeled vehicles.
Kwaishinsha Company and Jitsuyo Jidosha Company merged in 1926
for the Dat Jidosha Siezo Company. This led to establishment of the
Nissan Motor Company. In 1936, Nissan purchased its own facility
for making cars and trucks. The company also manufactured engines
for army planes and boats. Nissan, with its automotive technology,
entered the marine business in 1970 by introducing the marine engine
for the first genuine pleasure boats produced in Japan. Since then, the
company has been engaged in various marine businesses including
pleasure boats production and sales, marine business and export of

161
outboard engines. Nissan Marine now manages nine marines both
under the direct and entrusted management.
In 1999, Nissan entered a two-way alliances with Renault S.A.
of France, which owns 43.4% of Nissan, while Nissan holds 15% of
Renault shares, along with its normal range of models, Nissan also
produces a range of luxury automobiles under the Infiniti brand
name. The company has two business segments viz. the Automobile
segment manufactures and sells vehicles, forklifts, marine products
and accessories. The sales Financing segment is engaged in the
provision of sales financing services. As of March 31, 2012, the
company has 199 subsidiaries and 25 associated companies. In
August 2011, the company established a Kijusyu-based company. On
March 2012; the companys fully acquired Aichi Machine Industry
Co. Limited, which is engaged in the development, manufacturing,
sale of engine and manual transmission in Nagoya, Japan. Company
acquired a market share dramatically. Its global sales figure was
4,940,133 in the year 2012 in comparison to the previous year, in
2011, it was 4,669,981.

MANUFACTURING FACILITIES:
Nissan has its production plant all over the world including
Thailand, Malaysia, china etc. Nissan Motors has its Indian subsidiary
namely Nissan Motor India Private Limited (NMIPL). It started its
operations in India in 2005, with the launch of the Nissan X-Trail
(T30). NMIPL has its manufacturing facility in Chennai, which can
annually manufacture around 200,000 vehicles. The Chennai facility
has an additional capacity of 200,000 vehicles per annum exclusively
for French car maker, Renaults Indian arm, Renault India Private

162
Limited. The plants combined manufacturing capacity is 400,000
vehicles per annum.
NMIPL has appointed Hover Automotive India for the Sales,
Service, Parts, Marketing and Dealer Development functions for
Nissan vehicles in the country. Nissan currently has 40 dealerships
across 39 cities in 17 states and 1 union territory of India. NMIPL
announced sales results for the month ended July 2012. For the
month, the company reported, it has sold 3,481 units against 1,593
units during the same month a year ago. Nissan Sunny-the entry-level
sedan, leads the sales with 2,436 units and Micra, the compact hatch
back, posted sales of 1,028 units.

TECHNOLOGY:
Nissan has a 3-cylinder 1.2 litre Direct Injection Gasoline
Engine. This aims to achieve low CO2 emissions. The new hybrid
vehicle was developed to improve environmental performance. Nissan
has developed the Super Motor. It has also developed a 3D motor
system. In terms of safety technology Nissan has a Moving Object
Detection System, which detects technology around the car and to
prevent the car from colliding with another car. The Intelligent Cruise
Control System helps vehicles maintain comfortable driving.

VISION AND VALUES:

Nissan believes in that the Power comes from inside. These
days a more and more people, especially the middle class is buying
cars and the world population is expanding at a rapid pace of 6.7
billion to 9 billion by 2050. They believe in providing products of
superior quality. Nissan has a clear vision for the future. Their mission

163
is to enrich peoples lives, build partnerships, dealerships and interact
with employees, customers and shareholders.

TABLE 5.10 PREMIUM PASSENGER CARS FROM NISSAN

Company Model
Nissan 370Z
Nissan Motor Company Limited Nissan Teana
Sunny

HONDA
Type : Public
Industry : Automotive, Aviation
Founded : 1948
Founder(s) : Soichiro Honda, Takeo Fujisawa
Headquarters : Minato, Tokyo, Japan
Area Served : Worldwide
Products : Automobiles
Staff strength : 179,060 (2012)
Website : www.honda.com, www.hondacarindia.com
Company Logo :

COMPANY PROFILE:
Honda Motor Company is a Japanese automobile
manufacturing company. Honda Motor Company Limited grew in a

164
short time to become the worlds largest manufacturer of motorcycles
by 1964. First, production automobile from Honda was the T360 mini
pick-up truck, which went on sales in August 1963. The first car
produced by the company was the S500 sports car, which followed
the T360 into production in October 1963. Over the next few decades,
Honda worked to expand its product line and expanded operations and
exports to several countries around the world. In the year 1986, Honda
introduced the successful Acura brand to the American market in an
attempt to gain ground in the luxury vehicle market. Honda, in 1991,
introduced the Honda NSX supercar, the first all-aluminium
monocoque vehicle that incorporated a mid-engine V6 with variable-
valve timing. In 1992 and 1993, Japanese media reported that Honda
was at serious risk of an unwanted and hostile takeover by Mitsubishi
Motors, who at the time was a larger automaker by volume and flush
with profits from their successful Pajero and Diamante.
Later, year 1995 gave rise to the Honda Aircraft Company with
the goal of producing jet aircraft under Hondas name. Honda entered
into the Indian Automobile market in 1995. It has its Indian subsidiary
namely, Honda Cars India Limited (HCIL) for the production,
Marketing and export of passenger cars. Honda Cars India Limited
was formerly known as Honda Siel Cars India Limited and began its
operations as a Joint Venture between Honda Motor Company and
Usha International of Siddharth Shriram Group, with a commitment to
provide Hondas latest passenger car models and technologies to the
Indian customers. In August 2012, Honda bought out Usha
Internationals entire 3.16 percent stake for INR 1.8 billion in the
Joint Venture. Hence, the company officially changed its name to
Honda Cars India Ltd. and became 100% subsidiary of Honda. Riding
on Low Base, Honda Cars India Ltd. (HCIL), clocked a whopping

165
296% surge its domestic sales at 4,242 units during December 2012,
as against 1,072 units sold in December 2011. The company also
exported a total volume of 422 units during the month. Model-wise
sales break-up of HCIL in December 2012 is: Brio-2,286 units, Jazz-
365 units, City-1,442 units, Civic-70 units and Accord-79 units
[source: Federation of Automobile Dealers Association].

MANUFACTURING FACILITIES:
The company has its manufacturing plants across the world.
These plants are located in China, the United States, Pakistan,
Canada, England, Japan, Belgium, Brazil, Mxico, New Zealand,
Malaysia, Indonesia, Thailand, Turkey, Taiwan, Peru, Argentina and
India. Honda Cars India Limited (HCIL) has its first manufacturing
unit at Greater Noida, Uttar Pradesh, set up in 1997. The green field
project is spread across 150 acres and has annual production capacity
of 1, 00,000 units. The companys second manufacturing unit is in
Tapukara, Rajasthan. This facility is spread over 450 acres and
currently has a state-of-the art power trains and press shop. The
company invested INR 7.8 billion in Bhiwadi for its second
production plant with an annual production capacity of 50,000 units.
HCIL has a strong sales and distribution network spread across the
country. The network includes 150 authorised dealership facilities in
97 cities. HCILs dealerships are based on the 3S facility format,
offering complete range of Sales, Service and Spares, services to its
customers.
Riding on Low Base, Honda Cars India Ltd. Clocked a
whopping 296% surge its domestic sales at 4,242 units during
December 2012, as against 1,072 units sold in December 2011. The
company also exported a total volume of 422 units during the month.

166
TECHNOLOGY:
Honda has technological advancement for its automobiles and
motorcycles itself. Within automotive they have seen different
technologies that are discussed below:
i. The first is VCM- VCM stands for Variable Cylinder
Management and it manages the Honda cylinders.
ii. VTEC- VTEC stands for Variable Valve Timing and Lift
Electronic control and it is for Engines.
iii. CVT- CVT (Continuously Variable Transmission) helps in
acceleration.
iv. Crash Compatibility body that presents the Honda from
causing safety hazards.
v. Honda Integrated Motor Assist is an electric Motor provided
to the companys products that helps in fuel efficiency.
vi. I-VTEC (Intelligent Valve Timing and Life Electronic
Control) is an environmentally responsible technology. It
improves combustion efficiency.
vii. SH-AWD technology handles the driving wheel and it
distributes torque to the four wheels.

VISION & VALUES:

The company has three basic principles: buying, selling and
creating. The mission statement of the company is to provide great
quality products at reasonable prices. The main strategy of the
management of the company is to proceed with ambition and
youthfulness, develop fresh ideas and make the most of their time.
The company wants to produce products that benefits society.
They have manufacturing plants, dealerships and showrooms all over

167
the world to meet the demands of the customers in different parts of
the world. Honda executes its environmental responsibility honestly.

TABLE 5.11 PREMIUM PASSENGER CARS FROM HONDA

MOTORS
Company Model Variant
Accord VTi-LM/T
Honda Accord Accord VTi-LA/T
Accord V6
Honda City Honda City E
Honda Motors Honda City S
Civic 1.8 S MT
Civic 1.8S AT
Honda Civic Civic 1.8V MA
Civic 1.8V AT
Civic Hybrid

CHEVROLET
Type : Division
Industry : Automotive
Founded : November 1911
Founder(s) : Louis Chevrolet, William C. Durant
Headquarters : Detroit, Michigan, the United States
Products : Automobiles
Area Served : Worldwide
Parent : General Motors Company
Website : www.chevrolet.com, www.chevrolet.co.in
Company Logo :

168
COMPANY PROFILE:
Chevrolet referred to as Chevy, is a vehicle producing company
by the American Corporation General Motors (GM). The company
was founded by Louis Chevrolet and William C. Durant on November
3, 1911 as the Chevrolet Motor Car Company. In 1918 it was acquired
by General Motors. Chevrolet branded vehicles are sold in most
automotive markets across the globe. In 2005, Chevrolet was re-
launched in Europe, primarily selling vehicles manufactured by GM
Korea and slotting in below Opel. In North America, Chevrolet
produces and sells a wide range of vehicles, from sub-compact
automobiles to medium-duty commercial trucks. In the 1918 model
year, Chevrolet introduced the series D a V8- powered model in four-
passenger roadster and five-passenger tourer models. Chevrolet had a
great influence on the American automobile market during the 1950s
and 1960s. In 1953 it produced the corvette, a two-seater sport car
with a fibre glass body. In 1957, Chevy introduced its first fuel-
injected engine, the Rochester Ramjet Option on Corvette and
passenger cars. In 1963, one out of every ten cars sold in the United
States was form Chevrolet.
In India, Chevrolet Sales India Private Ltd. (CSIPL), is a
division of General Motors India Private Limited, which in turn is a

169
JV of General Motors of the US. CSIPL is the 5th largest car
manufacturer in India. Chevrolet came to India in 1928. Its office was
set up in Bombay with an assembly plant constructed in Sewree.
General Motors was the first automobile company to open an
assembly plant in India. Its vehicle production started in 1928 with the
national series AB Touring. In 1952-53, the socialist Indian
Government forced all the foreign car companies to shut shop.
Later, in 2003, CSIPL was established and Chevrolet brand
was re-launched in India. It replaced Opel the only brand offering by
General Motors India Private Limited. CSIPL is one of the fastest-
growing automotive nameplates in the country, which provides
customers with fuel-efficient vehicles that feature spirited
performance, expressive design and high quality. The Chevrolet
portfolio in India includes the Captiva, Cruze, Sail, Sail U-Va, Spark,
Beat and Tavera.

TABLE 5.12 PREMIUM PASSENGER CARS FROM

CHEVROLET
Company Model Variant
Chevrolet Cruze
Automatic
Chevrolet Chevrolet Cruze
1.6 Elite
1.6 LS Elite
Chevrolet Optra 1.6 LT Royale
1.8 LT
1.8 LT AT

170
 Chapter-VI
ANALYSIS OF CONSUMER BEHAVIOUR
TOWARDS PREMIUM PASSENGER CARS
 Chapter- VI
ANALYSIS OF CONSUMER BEHAVIOUR TOWARDS
PREMIUM PASSENGER CARS

Consumer behaviour involves the use and disposal of products

and services as well as the study of how they are purchased. Product
use is often of interest to the marketer, because this may influence
how a product is best positioned or how the market share can be
enlarged. The demanding assertive consumer is now sowing the seeds
for an exciting retail transformation that has already started bringing
in larger interest from global formats. With the arrival of global
players, the race is on to please the Indian consumer and its time for
them to sit back and enjoy the hospitality of being treated like a king.
Automobiles are a liberating technology for people around the world.
The personal vehicle allows an individual to live, work and play in
ways that were unimaginable a century ago.
The previous chapter delineated that the research methods
employed in the fieldwork was questionnaire survey. The survey
results are illustrated according to the format of questionnaires which
was taken into consideration the consumers perception for premium
cars. The results per question are presented in the graphical and
tabular form, where applicable followed by an investigation of factors
underlying the purchase behaviour for the premium segment cars.
Demographic profile is presented in the Chapter 3. The chi-square
statistic was used to test the hypothesis framed for the study. The
research questions as outlined in questionnaires (Annexure) are
included. For the research survey the experts whom the researcher
interacted were, Car dealers, Marketing experts, Academicians,
Professionals, Management consultants, marketing professionals from

171
major players. It is believed that the experts are the ones who can
describe the well about the product in a proper manner. Their opinion
about a particular product do leaves an important impression for any
buyer. The overall aim of the questionnaire survey with the dealer
staff was to maximise the opportunity to gain different perspectives of
the criteria or critical factors associated with owner perceptions of the
new premium car and to support findings from the questionnaire
survey.
In this chapter the Results of the research are presented in terms
of quantitative forms. It has been illustrated in the form of tables and
graphs. The results presented in the tables and graphs to follow are the
outcome of analysis based on frequency counts. Frequency is the
number of times a particular option was selected. Due the number of
respondents, answers to the open ended questions that were the
similar were grouped accordingly.

RESULTS FROM CONSUMERS QUESTIONNAIRE

ANALYSIS OF TOTAL NUMBER OF VEHICLES IN A

HOUSEHOLD
Question 9 in the consumers questionnaire is framed to analyse
the total number of vehicles in a household. Responses for the
question are tabulated and graphically shown in the Table 6.1 and
Figure 6.1.

172
 Table 6.1
Numbers of Vehicles in a Household
S. No. No. of Vehicles Frequencies Percentage
1. 1 97 38.80%
2. 2 100 40.00%
3. 3 34 13.60%
4. More than 3 19 7.60%
250 100

Interpretation: The Table 6.1 reveals that the maximum number of

respondents (40%) owned 2 vehicles in their households. And only
7.6% of the respondents owned more than 3 vehicles. 38.8% of the
respondents owned only 1 vehicle and 13.6% of the respondents
owned vehicles in their household.

Figure 6.1 Numbers of Vehicles in a Household

38.80% 40%

40.00%

35.00%

30.00%

25.00%

20.00% 13.60%
15.00%
7.60%
10.00%

5.00%

0.00%
1 2 3 more than 3

173
ANALYSIS OF CONSUMERS OPINION FOR A PREMIUM
CAR
Different customers have different mindset. By keeping this in
mind question 10 is framed to know the consumers opinion for a
premium car. Certain parameters are set to know the responses of the
samples. For analyzing the data percentage analysis has been
considered and ranking is done accordingly. Results are tabulated in
the Table 6.2.

Table 6.2
Consumers Opinion for the Premium Car
Consumers Opinion Frequency Percentage Rank
A car sized between that of 57 22.80% 2
Compact and Full sized cars
A Car having a seating 29 11.60% 4
Capacity of 4/5 Passengers
Where Price of the car ranges 112 44.80% 1
between Rs. 7-15 lakhs
Cars mainly targeted towards 52 20.80% 3
higher income groups
Total 250 100

Interpretation: Through question 10 when consumers opinions

about the specifications of the premium cars were analyzed, It is
observed that maximum number of the respondents (44.80%) opine
that premium car is the automobile where price ranges between 7-15
lakhs. Least percentage (11.60%) of the respondents gave their
opinion as a car having a seating capacity of 4/5 passengers, is a
premium car.

174
ANALYSIS OF BEST PREMIUM CAR
Question 11 and 12 aimed to determine the brand and the
purchase year of the respondents premium cars. Results are drawn in
the table 6.3.

Table 6.3
Market Share of Premium Car Companies

Best Car 2008 2009 2010 2011 2012 2013 Total

Maruti 11(11.9) 24(26.1) 8(8.7) 30(32.6) 7(7.6) 12(13.1) 92 (100)
(47.8) (48.9) (38.1) (52.6) (11.6) (30) (36.8)
Hyundai - 6 (20.7) - 5 (17.2) 8 (27.6) 10 29 (100)
(12.3) (8.8) (13.3) (34.5) (11.6)
(25)
Tata - 10(32.3) 3 (9.7) 8 (25.8) 6 (19.3) 4 (12.9) 31 (100)
(20.4) (14.3) (14.1) (10) (10) (12.4)
Honda 4 (11.4) 5 (14.3) 8 5 (14.2) 11(31.5) 2 (5.7) 35 (100)
(17.4) (10.2) (22.9) (8.8) (18.4) (5) (14)
(38.1)
Ford - 1 (5.6) - 1 (5.6) 16(88.8) - 18 (100)
(2.1) (1.7) (26.7) (7.2)
Chevrolet 2 (20) - - - 4 (40) 4 (40) 10 (100)
(8.7) (6.7) (10) (4)
Volkswagen - - - 5 (62.5) 2 (25) 1 (12.5) 8 (100)
(8.8) (3.4) (2.5) (3.2)
Nissan - - - 2 (25) 1 (12.5) 5 (62.5) 8 (100)
(3.5) (1.6) (12.5) (3.2)
Others 6 (31.5) 3 (15.8) 2 1 (5.2) 5 (26.3) 2 (10.6) 19 (100)
(26.1) (6.1) (10.6) (1.7) (8.3) (5) (7.6)
(9.5)
Total 23(9.2) 49(19.6) 21(8.4) 57(22.8) 60(24) 40(16) 250 (100)
(100) (100) (100) (100) (100) (100) (100)
(Figures in brackets are percentage)

175
Interpretation: The results as shown in Table 6.3 and Figure 6.2
indicate there are top 3 vehicle brands identified were:
Maruti- 36.8%
Honda- 14%
Tata- 12.4%

Figure 6.2 Market Shares of Premium Car Companies

3.20% 3.20% maruti

7.60%
4% hyundai
36.80%
tata
7.20%
honda
14% ford
chevrolet
12.40% 11.60%
Volkswagon
nissan
others

It is interesting to note that only the four brands viz. Maruti,

Hyundai, Tata and Honda resulted in a double digit percentage
response rate. The rationale for the low percentage response rate could
be attributed to many reasons. One of those reasons could be the fact
that there are around fifteen brands of premium passenger cars in
India, causing the market to be highly segmented. The brand names
selected as top 4 are not surprising. SIAMs (March-April 2011)
report for passenger car indicates that these companies dominate the
sales figure. Table 6.3 illustrates that 62.8% of the sample indicated
that they purchased their vehicle between 2011 and 2013. This means

176
that the samples vehicles are less than a year but not more than six
years old. And the majority (24%) of the sample purchased their
vehicle in the year of 2012.
This draws us to the conclusion that the majority (62.8%) of the
sample owns vehicles that are new or fairly new which ties into the
vehicle sales figures as depicted in Table1.2.

INFORMATION ABOUT CONSUMERS PREVIOUS CAR

Question 13 dealt with What brand of vehicle did you have
previously? For this question only 114 (45.6%) respondents
answered that they previously also had a car. And for 136 (54.4%) of
respondents their current car is their first car only. Brand wise
distribution of the 114 respondents previous cars is in the table 6.4
given below.

Table 6.4
Consumers Previous Car
S. Previous Car Frequency Percentage
No.
1 Maruti 72 63.16%
2 Ford 9 7.89%
3 Tata 8 7.02%
4 Toyota 4 3.51%
5 Hyundai 8 7.02%
6 Fiat 9 7.89%
7 Ambassador 4 3.51%
Total 114 100

177
Interpretation: From the above table it can be clearly seen that
maximum number (63.16%) of the respondents previously had a car
of Maruti brand. And least number (3.51%) of the respondents had
cars of Toyota and Ambassador Brands. The three top vehicle brands
that were previously owned include:
Maruti- 63.16%
Ford, Fiat- 7.89%
Hyundai- 7.02%

Figure 6.3 Consumers Previous Car

7.89% 3.51%
7.02% maruti
3.51% ford
7.02% hyundai
7.89% 63.16% toyota
tata
fiat
Ambassaor

There appears a degree of brand loyalty to Maruti and Hyundai.

This was confirmed by cross tabulating the brand of current vehicle
with the brand of previous vehicle. Table 6.4 indicates that Ford and
Fiat feature as one of the top selling brands. Maruti is the sweetheart
to the customers as they show brand loyalty towards it (shown in
figure 6.2 & 6.3).

178
ANALYSIS OF PRICE THAT A CONSUMER MAY AGREE
UPON TO PAY FOR A PREMIUM CAR OF THEIR LIKING
This part of the chapter represents and validates price choices
of the customers that they may agree upon to pay for a Premium Car
of their liking. For this open ended question different responses were
obtained. Since, the cost of the premium cars has been fixed by SIAM
as 7-15 lakhs. On the basis of these all the responses were distributed
into four measures i.e. upto 6 lakhs, 6 to 9 lakhs, 9 to 12 lakhs and 12-
15 lakhs. Marketer can get a clear understanding and can take pricing
decisions accordingly. Results are drawn in the Table 6.5.

Table 6.5
Agreed Price band for the Premium car
Agreed Price of the Frequency Percentage
Car
Upto 6 lakh 43 17.20%
6-9 lakh 112 44.80%
9-12 lakhs 86 34.40%
12-15 lakhs 9 3.60%
Total 250 100

Interpretation: The table 6.5 showed that 44.8% of the respondents

agreed upon to pay Rs. 6-9 lakhs for the premium car of their liking.
And only 3.6% of the respondents were agreed to pay Rs. 12-15 lakhs.
From this it is clear that price is the main consideration for people in
Uttar Pradesh as consumers seek maximum benefit in the lesser
amount when it is all about the vehicle of their choice.

179
Figure 6.4 Agreed Price Band for the Premium Cars
44.80%

45.00%
40.00% 34.40%

35.00%
30.00%
25.00%
17.20%
20.00%
15.00%
10.00% 3.60%

5.00%
0.00%
upto 6 lakhs 6-9 lakhs 9-12 lakhs 12-15 lakhs

MODE OF PAYMENT OPTED BY THE CAR USERS

Question 15 is regarding the mode of payment adopted by the
premium car consumers. Under this dichotomous type of question,
options were provided to the respondents were One time/Cash Down
and Finance. The following table would reveal the number of
respondents went for the given options.

Table 6.6
Mode of Payment for the Car
Mode of Payment Frequencies Percentage
One Time/Cash Down 48 19.2%
Finance 202 80.8%
Total 250 100

Interpretation: Table 6.6 reveals that only 19.2% of the sample

indicated that their vehicle was not financed. The majority (80.8%)
had finance.

180
Figure 6.5 Mode of Payment

80.80%
90.00%
80.00%
70.00%
60.00%
50.00%
40.00% 19.20%
30.00%
20.00%
10.00%
0.00%
one time/Cash Down Finance

ANALYSIS OF PRE PURCHASE BEHAVIOUR

Based on intensive interaction with the respondents the
questionnaire had been filled. This part of the chapter represents and
validates comprehensive model to explain pre-purchase strategies
adopted by premium passenger car consumers. Marketer can get a
clear understanding and can improve on these specific dimensions.
The technique used to analyze the particular problem is Weighted
Average Score Test. And the weights are assigned as 3 to Strongly
Agree, 2 to Indifferent and 1 to Strongly Disagree. The results
are as under in Table 6.7.
(SA- Strongly Agree, ID- Indifferent, SD- Strongly Disagree)

181
 Table 6.7
Pre Purchase Strategies Adopted by Car Consumers
Variables SA ID SD Weighted Ranks Std, Variance
(N=250) (Freq) (Freq) (Freq) Average Deviation
Score
Talking to 120 99 31 2.3560 5 .69223 .479
Sales Persons
Looking at 87 131 32 2.2200 6 .65522 .429
Advertisement
of cars
Collecting 175 75 0 2.7000 1 .45918 .211
Information
From Others
Visiting 167 67 16 2.6040 2 .60717 .369
Dealers
Showroom
Reading Auto 59 119 72 1.9480 7 .72346 .523
Magazines
Websites 127 95 28 2.3960 4 .68194 .465
Expert 151 67 32 2.4760 3 .71236 .507
Opinions
Test Driving 195 35 20 2.7000 1 .60950 .371

Interpretation: The Table 6.7 showed that factors Collecting

Information from Others, and Test Driving respectively are more
important with weighted average score of 2.7000 and Standard
Deviation of .45918 and .60950 respectively with Variance .211 and
.371 respectively. The second important variable is Visiting Dealers
showroom with weighted average score of 2.6040 followed by
Expert Opinions with weighted average score of 2.4760.
Websites or Internet is the 4th Important variable with Weighted
Average Score of 2.3960 followed by the 5th important variable i.e.
182
Talking to Sales Persons, with Weighted Average Score of 2.3560.
Reading Auto Magazines is the least important pre-purchase
strategy adopted by the premium car buyers with Weighted Average
Score of 1.9480.
Eight items have been taken to analyze the Pre-Purchase
Strategies adopted by premium passenger car buyers. Behaviour
displayed by the sample clearly showed that the major factors that
accounted for Pre-Purchase Search Strategies are Collecting
Information from Others, Test Driving, Visiting Dealers
Showroom and Experts Opinions. Marketer should try to improve
on these specified aspects. Customers rely more on Collecting
Information from Others for getting information about specific cars.
Thus, marketers must focus on publishing books, Auto Magazines,
organizing automobile shows and fairs and designing informative
websites to their customers.

MOTIVATIONS FOR PURCHASING NEW CAR

This part of the chapter presents and validates comprehensive
model to explain variables that motivate a buyer to purchase a new
car. Weighted Average Score test has been used to analyze the
particular problem. Further, ranking has been done accordingly. And
the weights are assigned as 3 to Most Important, 2 to Indifferent
and 1 to Least Important.
(MI- Most Important, ID- Indifferent, LI- Least Important)

183
 Table 6.8
Variables that Motivated for Purchasing the Car
Variables MI ID LI WAS Ranks Std, Variance
(N=250) (freq) (Freq) (freq) Deviation
Symbol of Social 120 83 47 2.2920 5 .764903 .585
Status
Time Saving 95 120 35 2.2400 6 .681364 .464
Device
Source of 40 79 131 1.6360 9 .744123 .554
Entertainment
Guarantee/Warranty 218 32 0 2.8720 1 .334760 .112
Item of Necessity 191 43 16 2.7000 2 .582544 .339
Marketing 47 119 84 1.8520 8 .710009 .504
Influence
Luxurious Item 95 119 36 2.2360 6 .685700 .470
Family 199 20 31 2.6720 3 .685782 .470
Requirement
Economy 172 55 23 2.5960 4 .653062 .426

Interpretation- From the Table 6.8, it is clear that

Guarantee/Warranty is the most important variable with Weighted
Average Score of 2.8720 and Standard Deviation of .334760 & .112
Variance that may motivate a person to purchase a new car. Source of
Entertainment is the least important variable with Weighted Average
Score of 1.6360, Standard Deviation of .744123 and .554 variance.
The results clearly showed that consumers prefer to purchase
car for their convenience. They preferably seek Guarantee/warranty,
their family convenience etc. More than half of the sample as noted
above still sees the purchase of a vehicle as a need to fulfil the
primary need of transportation. Marketers should try to understand the

184
emotional & psychological aspects of the prospective customers and
try to reflect this in their promotional strategies as much as possible.
Testing of Hypothesis
Chi-Square Test
Table 6.8.1: Symbol of Social Status (V01)

Observed N Expected N Residual

1 47 83.3 -36.3
2 83 83.3 -.3
3 120 83.3 36.7
Total 250

Table 6.8.2: Time saving Device (V02)

Observed N Expected N Residual
1 35 83.3 -48.3
2 120 83.3 36.7
3 95 83.3 11.7
Total 250

Table 6.8.3: Source of Entertainment (V03)

Observed N Expected N Residual
1 131 83.3 47.7
2 79 83.3 -4.3
3 40 83.3 -43.3
Total 250

Table 6.8.4: Guarantee/Warranty (V04)

Observed N Expected N Residual
1 32 125.0 -93.0
2 218 125.0 93.0
Total 250

185
 Table 6.8.5: Item of Necessity (V05)
Observed N Expected N Residual
1 16 83.3 -67.3
2 43 83.3 -40.3
3 191 83.3 107.7
Total 250

Table 6.8.6: Marketing Influence (V06)

Observed N Expected N Residual
1 84 83.3 .7
2 119 83.3 35.7
3 47 83.3 -36.3
Total 250

Table 6.8.7: Luxurious Item (V07)

Observed N Expected N Residual
1 36 83.3 -47.3
2 119 83.3 35.7
3 95 83.3 11.7
Total 250

Table 6.8.8: Family Requirement (V08)

Observed N Expected N Residual
1 31 83.3 -52.3
2 20 83.3 -63.3
3 199 83.3 115.7
Total 250

Table 6.8.9: Economy (V09)

Observed N Expected N Residual
1 23 83.3 -60.3
2 55 83.3 -28.3
3 172 83.3 88.7
Total 250

186
H0: Behaviour of buyer is not influenced by social and economic
status, family requirements and their primary necessity of
transportation etc.
H1: Behaviour of buyer is always influenced by social and economic
status, family requirements and their primary necessity of
transportation etc.
Table 6.8.10 confirms Hypothesis 1:
Behaviour of buyer is always influenced by social and economic
status, family requirements and their primary necessity of
transportation etc.

187
 Table 6.8.10
Test Statistics (Testing of Hypothesis)

VAR 01 VAR 02 VAR 03 VAR 04 VAR 05 VAR 06 VAR 07 VAR 08 VAR 09

Chi-Square; 31.976 45.800 50.024 138.384 213.032 31.112 43.784 241.544 147.656

df 2 2 2 1 2 2 2 2 2

Asymp. Sig. .000 .000 .000 .000 .000 .000 .000 .000 .000

188
ROLE OF SOURCES OF INFORMATION ABOUT THE CAR
BEFORE PURCHASING
This research question presents and validates comprehensive
way to explain sources of information about the car before selecting a
particular car model. Customer has choices among the highly
competitive market. It explains the customer perception regarding
promotional mode opted by the marketer. Under this 9 variables were
framed and only 8 variables were for considered the study for the
reason the frequency count for the ninth variable (others) was zero. To
analyze the responses percentage analysis is used and ranking is done
accordingly. The results are tabulated in Table 6.9 below.

Table 6.9
Sources of Information about Model of the Car
Variables Frequency Percentage Rank
(N=250)
T.V. Advertisements 136 54.4% 3
Newspapers/Magazines 80 32% 4
Friends/Family 148 59.2% 1
Internet/E-mails 78 31.2% 5
Radio/FM 8 3.2% 7
Brochures/Printed Displays 60 24% 6
Wall Writing/Bill Board 8 3.2% 7
Self Decision 140 56% 2

Interpretation: Table 6.9 reveals that Friends/Family is the primary

source of information as maximum number of the respondents
(59.2%) received the information about their car model from the
same. Self Decision was found the second most chosen variable by

189
the respondents with 56% of the respondents. It means 56% of the
respondents may not consult from anywhere about a particular model
of the car. They themselves take the decisions in this regard.
Surprising to note was that Radio/FM and Wall Writing/Bill Board
both are the least important sources of information from the
consumers view point with the lowest percentage (3.2%) of the
frequency.
Implications for Marketers: The Table 6.9 would help the marketers
in understanding the behaviour of customers and helps in knowing the
role of information sources in deciding a particular model of the car in
Uttar Pradesh and accordingly strategies can be made for them. The
results revealed that deciding the car model decisions are mostly
influenced by the Friends/Family (59.2%) followed by customer
himself (56%). It is recommended that marketer should target other
members also like spouse, friends and children etc. in order to
increase sales in the state of Uttar Pradesh. Marketers have to refresh
better policies for car consumers as they tend to ask others before
purchasing cars in order to attract even more customers.

190
MEASUREMENT OF CONSUMER BUYING PREFERENCES
FOR BRANDS AND ATTRIBUTE SELECTION
This part of the chapter presents and validates comprehensive
way to explain factors affecting selection of a particular brand and
attributes of a car. There has been a growing interest in the area of
branding, as goodwill of the firm is represented by the brand. Brand is
very much distinctive in a highly competitive market place. The
technique used to analyze this problem is percentage analysis of
different variables and ranking is done accordingly. Major variables
that determine the selection of brand of a car are presented to
respondent and is asked to rate them to response and further
percentage is calculated in order to analyze the importance of those
particular variables in all five towns i.e. Kanpur, Allahabad, Varanasi,
Agra and Lucknow. All reasons cited by the respondents are
illustrated in Table 6.10 below.

191
 Table 6.10
Factors Affecting Brand Preferences
Factors Frequency Percentage Rank
(N=250)
Marketing Influence 86 34.4% 11
Brand Reputation or Image 210 84% 1
Imported Technology 168 67.2% 5
Good After Sales Service 192 76.8% 3
Guarantee/Warranty 196 78.4% 2
Technology Advancement 172 68.8% 4
Promotional Strategies 30 12% 13
Friends/Relative Recommendation 110 44% 9
Level of Satisfaction With Old 100 40% 10
Brand of Car
Acquaintance with Retailer 4 1.6% 14
Discounts Available 100 40% 10
Resale Value 146 58.4% 7
Pick and Serve Facility 60 24% 12
Spare Parts Availability 122 48.8% 8
Competitive Price 149 59.6% 6

Interpretation- The Table 6.10 clearly states that the most important
factor that make up the selection of particular brand is Brand
Reputation or Image (84%) followed by the Guaranty/Warranty
(78.4%) and Good after sales services (76.8%), whereas least
important factor is Acquaintance with Retailer. It may be due to the
fact that Brand Reputation or Image in the market place really helps in
making up the mind of the customer as it helps in selecting the
customer a particular brand in pre-purchase phase.
Implications for Marketers: The pull factor to a particular brand of
vehicle in this instance is the brand reputation in the market place.

192
Cars have been endowed with a complex cocktail of functional,
emotional, and image facets formulated and maintained by marketers
in order to attract and retain customers. The functional facet includes
extrinsic, utilitarian, tangible product's attributes, such as cars'
superior performance, comfort, quality, and resale value, which
benefit the consumption that is 'cognitively' driven (Strahilevitz and
Myers, 1998). Customers buy the brand values first and then the
model in case of vehicles. Consumer behaviour is very much
influenced by the brand name and when we talk about brands of cars,
there are so many brands which tend to give several choices to the
customers to choose from. The major car manufacturers in India are
Maruti Udyog Limited, Hindustan Motors, Hyundai Motors India
Ltd., Honda Siel Cars India Ltd. Etc. Toyota Kirloskar Motor Ltd.,
and General Motors India Pvt. Ltd. etc. Companies have to come out
with more innovative versions of premium cars in order to increase
their market share.

ROLE OF REFERENCE GROUPS IN MAKING PURCHASE

DECISIONS
The marketers must develop an understanding of how
consumers actually make their buying decisions. Specifically,
marketers must identify who makes the buying decisions and the steps
in the buying process and in this context, the respondents were asked
about the role played by their different reference groups in purchase
decision of cars. Philip Kotler (2012) recognizes following five
different roles; people might play in buying decision:
Initiator- The person who first suggests the idea of buying the
product or service.
Influencer- the person whose advice influences the decision.

193
 Decider- The person who decides on any component of a
buying decision.
Buyer- The one who actually makes the purchase.
User- the person who consumes the product or service.
For the present study, the reference groups selected are Spouse,
Children, Parents, Siblings, Dealers, Opinion Leader, Friends, Car
Consumer itself and any other like neighbour etc. Percentage analysis
has been used to analyse the decision frequency. The following table
would reveal the role of reference groups in making purchase
decisions for premium passenger car.

Table 6.11
Role of Reference Groups in Making Purchase Decisions
Reference Groups Frequency Percentage Rank
(N=250)
Spouse 128 51.2% 1

Children 76 30.4% 3

Parents 48 19.2% 5

Brother/Sister or 50 20% 4
Dealers
Opinion Leader 40 16% 6

Friends 128 51.2% 1

Solely self 90 36% 2

Any other 18 7.2% 7

Interpretation: It can be clearly seen from the above Table 6.11 that
spouse (51.2%) and friends (51.2%) play a vital role in making car
purchase decisions as people are more influenced by them so they ask

194
them before purchasing the product. Customer himself (36%) lies at
second place in making purchase decision.
Implications for Marketers: The table 6.11 would help the
marketers in understanding the behaviour of customers and helps in
knowing the role of reference groups in Uttar Pradesh and accordingly
strategies can be made for them. The results revealed that the car
purchase decisions are mostly influenced by the spouse (51.2%) and
friends (51.2%) followed by customer himself (36%). It is
recommended that marketer should target other members also like
spouse, friends and children etc. in order to increase sales in the state
of Uttar Pradesh. Marketers have to frame better policies for car
consumers as they tend to ask others before purchasing cars in order
to attract even more customers.

195
CONSUMERS SATISFACTION LEVEL REGARDING
SALES/SERVICING PROVIDED BY THE DEALERS
Question 21 investigated the satisfaction level of the premium
car owners to the sales/servicing provided by the dealers. None of the
respondents indicated that they were very dissatisfied with their
current car; hence the frequency count was zero and therefore not
featured. The samples responses are depicted in Table 6.12 and
Figure 6.6.

Table 6.12
Satisfaction Level with the Sales/Servicing Provided by the
Dealers
Satisfaction Level Frequency Percentage
Excellent 64 25.6%
Good 120 48%
Satisfactory 51 20.4%
Poor 15 6%
Total 250 100

Interpretation: Data in Table 6.12 clearly shows that the majority

(48%) of the samples experienced Good sales/servicing provided by
the dealer. 25.6% of the respondents rated their satisfaction level with
the dealers as Excellent. Only 6% samples of all faced the Poor
experience with the car dealers.

196
Figure 6.6 Satisfaction Level with the Car Dealers

48%
50.00%
45.00%
40.00%
35.00%
25.60%
30.00%
20.40%
25.00%
20.00%
15.00%
6%
10.00%
5.00%
0.00%
Excellent Good Satisfactory Poor

Testing of Hypothesis
Table 6.12.1: Chi-Square Test

Observed N Expected N Residual

1. Excellent 64 62.5 1.5
2.Good 120 62.5 57.5
3.Satisfactory 51 62.5 -11.5
4.Poor 15 62.5 -47.5
Total 250

Table 6.12.1.1: Test Statistics

VAR00001
Chi-Square 91.152
df 3
Asymp. Sig. .000
H0: Buyer is not satisfied with sales/servicing provided by the
dealers.
H1: Buyer is always satisfied with sales/servicing provided by the
dealers.

197
Table 6.12.1.1 confirms Hypothesis 2:
Buyer is always satisfied with sales/servicing provided by the
dealers.

ANALYSIS OF CONSUMERS SATISFACTION LEVEL WITH

THE CURRENT CAR
Question 22 investigated the post-purchase experience of the
premium car owners to purchase their vehicle. None of the
respondents indicated that they were very dissatisfied with their
current car; hence the frequency count was zero and therefore not
featured. Results are depicted in Table 6.13 and Figure 6.7.
Table 6.13
Satisfaction Level with Current Car
Satisfaction with Current Frequency Percentage
Car
Very Satisfied 119 47.6%
Satisfied 126 50.4%
Dissatisfied 5 2%
Total 250 100

Interpretation: Results in Table 6.13 reveals that 98% of the

responses of samples fell into the two upper classes, which indicated
that they were very satisfied to satisfied with their current car. Only
2% consumers were dissatisfied with the car performance they own.
As such post purchase dissonance is very low.

198
Figure 6.7 Satisfaction Level with Current Car

60.00%

50.00%

40.00%

30.00%

20.00%

10.00%

0.00%
Very Satisfied Satisfied Dissatisfied

The post-purchase experience relates to satisfaction or

dissatisfaction stemming from confirmation of disconfirmation of
actual performance versus expected performance. The majority (98%)
confirmed that their vehicle matched their expectations.
Testing of Hypothesis
Table 6.13.1: Chi-Square Test

S. No. Observed N Expected N Residual

1.Very Satisfied 119 83.3 35.7
2.Satisfied 126 83.3 42.7
3.Dissatisfied 5 83.3 -78.3
Total 250

Table 6.13.1.1: Test Statistics

VAR00001
Chi-Square 110.744
df 2
Asymp. Sig. .000

199
H0: Buyer is not satisfied with post purchase experience of their car.
H1: Buyer is always satisfied with post purchase experience of their
car.
Table 6.13.1.1 confirms Hypothesis 3:
Buyer is always satisfied with post purchase experience of their
car.

ANALYSIS OF CONSUMERS WISH TO BUY SIMILAR

BRANDED VEHICLE IN FUTURE
Question 23 investigated responses to in future if the
respondent wishes to buy any other premium, would they like to buy
the premium car of the same company? The results of question 23
are tabulated and graphically shown in Table 6.14 and Figure 6.8
respectively.
Table 6.14
Future Preference for the Same Brand
Buy Same Brand in No. of respondents Percentage
Future
Yes 200 80%
No 50 20%
Total 250 100%

Interpretation: Table 6.14 reveals that 80% of the sample indicated

that they would buy the same brand in future. This suggests that the
majority of the sample could be considered to be somewhat brand
loyal and is less likely to switch to another brand when they have to
go through the process of purchasing a vehicle in future. It is
noteworthy from the marketing prospective that 20% have indicated
the need to switch brands. It is assumed that product and situational
factors could play an important role in the customers need to switch
200
brands. Table 6.14 illustrates that about 80% of the respondents will
progress in the same or similar manner in future when making their
decision. Trying this, together with confirmation of satisfaction
ratings concluded above (Table 6.13), results in the conclusion that
the future response of the majority of the respondents will result in the
loyalty route.

Figure 6.8 Future Preferences for the Same Brand

80%

80%

70%

60%

50%

40%
20%
30%

20%

10%

0%
Yes no

Testing of Hypothesis
Table 6.14.1: Chi-Square Test

S. No. Observed N Expected N Residual

1 200 125.0 75.0
2 50 125.0 -75.0
Total 250

201
Table 6.14.1.1: Test Statistics

VAR00001
Chi-Square 90.000
df 1
Asymp. Sig. .000

H0: Prospective buyer behaviour does not remain unchanged for the
future purchase of a premium passenger car.
H1: Prospective buyer behaviour remains unchanged for the future
purchase of a premium passenger car.
Table 6.14.1.1 Confirms Hypothesis 5:
Prospective buyer behaviour remains unchanged for the future
purchase of a premium car.

ANALYSIS OF FUTURE PREFERENCES FOR THE BRANDS

OF PREMIUM CAR
Question 24 aimed to determine, if the respondents answer to
the question 23 was no, what alternative brand of premium car other
than comes to their mind? As illustrated in Table 6.14, 20% of the
sample as illustrated in (question 23) who indicated that they would
not buy the same brand in the future was asked which brand they
would consider switching to then. The results of question 24 are
tabulated in the Table 6.15.

202
 Table 6.15
Future Preferences for the Brand of Premium Cars
Future cars Frequencies Percentage Rank
brand
Preferences
Maruti 9 18% 2
Hyundai 7 14% 4
Skoda 9 18% 2
Ford 8 16% 3
BMW 11 22% 1
Toyota 2 4% 6
Honda 4 8% 5
Total 50 100

Interpretation: The above table reveals that BMW is the most

preferred cars brand as it is preferred by the 22% of the respondents.
It may be because of the technological advancement of the brand and
its reputation in the high end consumer class.

Figure 6.9 Future Preferences for the Brand of Premium Cars

4%
8% 18% MARUTI
HYUNDAI
22%
14% SKODA
FORD

18% BMW
16%
TOYOTA
HONDA

203
 Second most preferred choices are the Skoda and Maruti with
18% of the frequency. Toyota is the least preferred premium cars
brand as their future car among the consumers of the Uttar Pradesh.
Hence, BMW (22%), Maruti (18%) & Skoda (18%) and Ford (16%)
were the top mentions by the car consumers.

DISLIKES/PROBLEMS FACED BY THE PREMIUM CAR

CONSUMERS IN THEIR VEHICLE
Question 25 dealt with the dislikes or problems faced by the
respondents in their car. For the said purpose 9 common variables
were considered. For the Question 25 only 168 respondents out of 250
responded. It may be due to the reason that 82 premium car users
were completely satisfied with their vehicle. Hence only 168 answers
were considered for the analysis. To analyze the responses percentage
analysis is used and ranking is done accordingly.

Table 6.16
Dislikes/Problems Faced By the Respondents in their cars
Dislikes/Problems faced in Car Frequency Percentage Rank
Sales & Servicing 48 19.2% 4
Maintenance 62 24.8% 2
Spare Parts Availability 54 21.6% 3
Fuel Economy 40 16% 5
Breakdown 10 4% 7
Outdated Styling 64 25.6% 1
Safety 40 16% 5
Driving Discomfort 28 11.2% 6
Any Other 10 4% 7

204
Interpretation- The Table 6.16 reveals that Outdated Styling is the
primary factor chosen by 25.6% of the respondents for disliking their
vehicle followed by Maintenance (24.8%) and Spare Parts
Availability (21.6%). Breakdown (4%) of the vehicle and other
factors like space problem and interior (4%) are the least important
factors for the consumers for not liking their car. It may be due to the
reason that there is cut throat competition among the car
manufacturers and consumer seeks technological advancement as per
the need of time. Marketers have to frame better designs for car
consumers as it helps in reducing dislikes for the respective cars.

RESULTS FROM DEALERS QUESTIONNAIRE

ANALYSIS OF CHARACTERISTICS OF PREMIUM CAR

BUYERS
Question 7 in the dealers questionnaire dealt with the
characteristics of premium car buyer. Five variables have been
considered for the analysis. Weighted Average Score test has been
used to analyze the particular problem. Further, ranking has been done
accordingly. And the weights are assigned as 3 to Strongly Agree,
2 to Indifferent and 1 to Strongly Disagree. Results for analysis
are drawn in the Table 6.17.
(SA- Strongly Agree, ID- Indifferent, SD- Strongly Disagree)

205
 Table 6.17
Characteristics of Premium Car Buyers
Variables SA ID SD WAS Rank SD Varia
nce
High Income 24 1 0 2.9600 1 .20000 .040
Social Status 10 14 1 2.3600 4 .56862 .323
Esteem Conscious 22 2 1 2.8400 2 .47258 .223
Tempted by the 3 14 8 1.8000 5 .64550 .417
Promotional
Strategies
Family Influenced 20 4 1 2.7600 3 .52281 .273

Interpretation: Table 6.17 clearly showed that High Income ranks

no. 1 among the characteristics of premium car buyers with Weighted
Average Score of 2.9600, Standard Deviation of .20000 and .040
Variance followed by Esteem Conscious with WAS of 2.8400,
Standard Deviation of .47258 and .223 Variance. The results indicate
through above table that promotional strategies (WAS=1.8000) do not
appear to be an influencing factor when making a decision to purchase
a premium car. It can be concluded that people with high disposable
income preferably go for a premium car.

ANALYSIS OF CHARACTERISTICS OF PREMIUM CARS,

BUYERS LOOK UPON WHILE MAKING THEIR PURCHASE
Question 8 illustrates the characteristics of a premium car that a
customer finds for. Five characteristics had been drawn of the
premium cars. None of the respondents fall in the categories of a car
having carrying capacity of 4/5 passengers and Brand of the car;
hence the frequency count was zero and therefore not featured.
Response of the samples is illustrated in the Table 6.18.

206
 Table 6.18
Characteristics of Premium Cars
Characteristics of Premium Cars Frequencies Percentage
A car sized between that of compact and full 7 28%
size cars
Price of car ranges between 7-15 lakhs 8 32%
Car with technological advancements 10 40%
Total 25 100

Interpretation: Table 6.18 clearly shows that car with technological

advancements (40%) is the primary characteristic that customers find
for in a premium car during his purchase. Hence in order to increase
customer base, companies have to come out with more innovativeness
and technological advancements in their cars.

ANALYSIS OF OCCUPATIONAL PROFILE OF MAXIMUM

PREMIUM CAR CUSTOMERS
Question 10 dealt with the occupational profile of maximum
premium car customers in the dealers showrooms. Four occupation
categories have been studied where in forth (others) category people
from agriculture, manufacturing industry will be included. Results are
depicted in Table 6.19.

207
 Table 6.19
Occupational Profile of Maximum Premium Car Customers
S. No. Occupation Number of Percentage
Respondents
1. Business 11 44%
2. Service 3 12%
3. Professional 10 40%
4. Others 1 4%
Total 25 100

Interpretation: Table 6.19 displays that maximum premium car

customers in the dealers showroom are from the business (44%) class
followed by the professionals (40%). Least number of the customers
are from the others (manufacturing, agriculture etc.) class. It is
recommended that market should target people from business and
professional class with their new and improved models through
promotional strategies.

Figure 6.10 Occupational Profiles of Maximum Premium Car

Customers

44%
45% 40%

40%
35%
30%
25%
20%
12%
15%
10% 4%
5%
0%
Business Service Professional others

208
ANALYSIS OF KEY SELLING POINTS OF PREMIUM CARS
Question 9 in the dealers questionnaire dealt with the key
selling points of the premium cars. Weighted Average Score test has
been used to analyze the problem. Further, ranking has been done
accordingly. And the weights are assigned as 3 to Strongly Agree,
2 to Indifferent and 1 to Strongly Disagree. Results are presented
in Table 6.20.
(SA- Strongly Agree, ID- Indifferent, SD- Strongly Disagree)
Table 6.20 Key Selling Points of Premium Cars
Variables SA ID SD WAS Rank SD Variance
Symbol of social 18 6 1 2.6800 3 .55678 .310
status
Luxurious item 22 2 1 2.8400 2 .47258 .223
Driving comfort 23 1 1 2.8800 1 .43970 .193
Safety & Security 12 9 4 2.3200 5 .74833 .560
Family 17 6 2 2.6000 4 .64550 .417
requirement
Credit payment 6 10 9 1.8800 7 .78102 .610
Discounts 3 12 10 1.7200 10 .67823 .460
available
Marketing 5 16 4 2.0400 6 .61101 .373
influence
Brand reputation 23 1 1 2.8800 1 .43970 .193
Technological 22 2 1 2.8400 2 .47258 .223
advancement
Promotional 3 14 8 1.8000 9 .64550 .417
strategies
Good after sales 22 2 1 2.8400 2 .47258 .223
services
Location of 5 11 9 1.8400 8 .74610 .557
workshop

209
 Interpretation: The Table 6.20 reveals that driving comfort and
brand reputation that explained .193% of variance and .43970
Standard Deviation with WAS of 2.8800 are the most preferred key
selling points of premium cars followed by Good After Sales
Service, Technological Advancement and Luxurious Item,
explained .223% of variance and WAS of 2.8400. There is no need to
think about availing discounts as people assigned less weight-age to
the discounts available. It can be said that people prefer driving
comfort, companys brand image, technological advancement, good
after sales service, their social esteem, safety & security features more
than any other variable. So, marketer should try to target the
customers on the basis of these variables that accounted for
convenience of customers. Companies should try to come out with
such requirements of the car buyers and try to reflect these in their
promotional strategies as much as possible. Results from the question
18 in consumers questionnaire also indicated that brand reputation is
the most important variable that influences an individual in selecting a
particular brand of premium car.

Testing of Hypothesis: Chi-Square Test

Table 6.20.1: Symbol of Social Status
Observed N Expected N Residual

1 1 8.3 -7.3
2 6 8.3 -2.3
3 18 8.3 9.7

Total 25

210
 Table 6.20.2: Luxurious Item
Observed N Expected N Residual

1 1 8.3 -7.3
2 2 8.3 -6.3
3 22 8.3 13.7
Total 25

Table 6.20.3: Driving Comfort

Observed N Expected N Residual

1 1 8.3 -7.3
2 1 8.3 -7.3
3 23 8.3 14.7
Total 25

Table 6.20.4: Safety & Security

Observed N Expected N Residual

1 4 8.3 -4.3
2 9 8.3 .7
3 12 8.3 3.7

Total 25

Table 6.20.5: Family Requirement

Observed N Expected N Residual

1 2 8.3 -6.3
2 6 8.3 -2.3
3 17 8.3 8.7
Total 25

211
 Table 6.20.6: Credit Payment
Observed N Expected N Residual

1 9 8.3 .7
2 10 8.3 1.7
3 6 8.3 -2.3
Total 25

Table 6.20.7: Discounts Payable

Observed N Expected N Residual

1 10 8.3 1.7
2 12 8.3 3.7
3 3 8.3 -5.3

Total 25

Table 6.20.8: Marketing Influence

Observed N Expected N Residual

1 4 8.3 -4.3
2 16 8.3 7.7
3 5 8.3 -3.3

Total 25

Table 6.20.9: Brand Reputation

Observed N Expected N Residual

1 1 8.3 -7.3
2 1 8.3 -7.3
3 23 8.3 14.7
Total 25

212
 Table 6.20.10: Technological Advancement
Observed N Expected N Residual

1 1 8.3 -7.3
2 2 8.3 -6.3
3 22 8.3 13.7
Total 25

Table 6.20.11: Promotional Strategies

Observed N Expected N Residual

1 8 8.3 -.3
2 14 8.3 5.7
3 3 8.3 -5.3

Total 25

Table 6.20.12: Good after sales services

Observed N Expected N Residual

1 1 8.3 -7.3
2 2 8.3 -6.3
3 22 8.3 13.7

Total 25

Table 6.20.13: Location of Workshop

Observed N Expected N Residual

1 9 8.3 .7
2 11 8.3 2.7
3 5 8.3 -3.3
Total 25

213
H0: There is no association between demand of vehicles and
technological advancement.
H1: There is an association between demand of vehicles and
technological advancement.
Table 6.20.14 confirms Hypothesis 4:
There is an association between demand of vehicles and
technological advancement.

214
 Table 6.20.14

Test Statistics (Testing of Hypothesis)

VAR01 VAR02 VAR03 VAR04 VAR05 VAR06 VAR07 VAR08 VAR09 VAR10 VAR11 VAR12 VAR13

Chi-
Square 18.320 33.680 38.720 3.920 14.480 1.040 5.360 10.640 38.720 33.680 7.280 33.680 2.240

df
2 2 2 2 2 2 2 2 2 2 2 2 2

Asymp.
Sig. .000 .000 .000 .141 .001 .595 .069 .005 .000 .000 .026 .000 .326

215
ANALYSIS OF FINANCING FACILITIES PROVIDED BY
THE CAR DEALERS
Easy finance availability is the primary reason for growing
demand of the automobiles. Hence in todays competitive scenario
most of all the manufacturer or auto dealers are providing credit
facility to their customers in order to make bigger market share.
Question 11 asked to the dealers dealt with Do you provide financing
facility? All the dealers (100%) approached for filling up the
questionnaire indicated that provide financing facility to their
customers. Further, if they answer yes to the question 11,
distribution is done as <2 lakhs, 2-5 lakhs, 5-10 lakhs and More than
10 lakhs, for question 12, to what extent do you provide financing
facility? As frequency count for the <2 lakhs class was zero so it
has been excluded from the analysis. Results are drawn in the Table
6.21 and Figure 6.11:

Table 6.21
To What Extent Dealers Provide Financing Facility
S. No. Financing Limit Frequency Percentage
1. 2-5 lakhs 3 12%
2. 5-10 lakhs 9 36%
3. More than 10 lakhs 13 52%
Total 25 100

Interpretation: From the Table 6.21 it can be clearly seen that most
of the sample fall in the category of More than 10 lakhs with 52%.
Least number (12%) of the respondents fall in the category of 2-5
lakhs. Since most of the dealers interviewed for filling up the
questionnaire deals in the premium and luxury cars as well, thus
premium cars can cost upto 15 lakhs and so as luxury cars for more
216
than 15 lakhs. Therefore if a customer wants his luxury car to be
financed then he might require finance facility for more than 10 lakhs.
Banks should pay more attention to this segment considering a large
percentage seeks vehicle finance.

Figure 6.11 Percentage Limit of Finance Provided by the Dealers

52%
60%

50%
36%
40%

30%
12%
20%

10%

0%
2-5 lakhs 5-10 lakhs more than 10 lakhs

ANALYSIS OF AVERAGE NUMBER OF FOOTFALLS IN A

WEEK IN THE DEALERS SHOWROOM
Question 13 was an open ended question, dealt with the average
number of footfalls in a week in the dealers showroom. On the basis
of sample responses were categorized in four categories viz. Upto
100, 100-200 and 200-300 for convenience. Results are depicted in
the Table 6.22 and Figure 6.12.

217
 Table 6.22
Average No. of Footfalls in a Week in Dealers Showroom
S. No. Average No. of Frequency Percentage
footfalls
1. Upto 100 8 32%
2. 100-200 15 60%
3. 200-300 2 8%
Total 25 100

Interpretation: Results in the Table 6.22 indicates that maximum

number (60%) of the footfalls in a week in the dealers showroom lies
in the category of 100-200 followed by Upto 100 with frequency
percentage of 32%. Minimum respondents (8%) fall in the category of
200-300.

Figure 6.12 Average No. of Footfalls in a Week in Dealers

Showroom

70% 60%

60%

50%
32%
40%

30%

20% 8%

10%

0%
upto 100 100-200 200-300

218
ANALYSIS OF AVERAGE NUMBER OF FOOTFALLS IN
THE PREMIUM PASSENGER CAR SEGMENT
For studying average percentage of the footfalls in a week,
passenger car segment was divided into two segments viz. premium
passenger car and others (mid size, compact cars etc.). On the basis of
dealers responses average no. of footfalls in the premium passenger
car segment was distributed among four classes as upto 5%, 6%-10%,
11%-15% and more than 15%. Percentage analysis is used to see the
average number of footfalls in the segment under study. Results are
drawn in the Table 6.23 and Figure 6.13:

Table 6.23
Average No. of Footfalls in the Premium Passenger Car Segment
S. No. Average No. of Footfalls Frequency Percentage
1. Upto 5% 9 36%
2. 6-10% 7 28%
3. 11-15% 5 20%
4. More than 15% 4 16%
Total 25 100

Interpretation: it can be clearly seen in the Table 6.23 that in the

dealers showroom maximum frequency percentage (36%) for
average no. of footfalls in a week in premium car segment falls in the
Upto 5% class followed by 6-10% (28%) and 11-15% (20%).
Least percentage of responses falls under the category of More than
15% (16%). It is assumed that only those, who have more disposable
income, might go for a premium car to maintain their social and
economic status as well. Marketers should tap this particular segment
through their promotional strategies in order to maximize the sales.

219
Figure 6.13 Average No. of Footfalls in the Premium Passenger
Car Segment

36%
40%

35%
28%
30%

25% 20%
16%
20%

15%

10%

5%

0%
upto 5% 6-10% 11-15% more than 15%

ANALYSIS OF PERCENTAGE INCREASE OF FOOTFALLS

DURING FESTIVE SEASON
Question 15 in Dealers questionnaire investigated the
percentage increase in footfalls during festive season. All the
responses were divided into four class i.e. <5%, 5-15%, 15-25% and
more than 15%. None of the respondents indicated that in their
showroom percentage increase of footfalls during festive season lies
in the category of <5%, hence the frequency count was zero and
therefore not featured. This is depicted in Table 6.24 and Figure 6.14.

220
 Table 6.24
Percentage Increase of Footfalls during Festive Season
S. No. Percentage Increase Frequency Percentage
1. 5-15% 6 24%
2. 15-25% 12 48%
3. More than 25% 7 28%
Total 25 100

Interpretation: Table 6.24 clearly shows that maximum number

(48%) of the sample lies under the category 15-25% followed by more
than 25% (28%). Least number of the respondents (24%) indicates
that percentage increase of footfalls during festive season is 5-15%.
Though mostly customers make their vehicle purchase in the festive
season, it is recommended to the marketer that an attempt should be
made to introduce new strategies during festive season which lead to
increase in sales.

Figure 6.14 Percentage Increases of Footfalls during Festive

Season

48%
50%
45%
40%
35% 28%
24%
30%
25%
20%
15%
10%
5%
0%
5-10% 10-15% More than 15%

221
Testing of Hypothesis
Table 6.24.1: Chi-Square Test

Observed N Expected N Residual

2 6 8.3 -2.3
3 12 8.3 3.7
4 7 8.3 -1.3
Total 25

Table 6.24.2: Test Statistics

VAR00001
Chi-Square 2.480
df 2
Asymp. Sig. .289

H0: No. of foot falls does not increase in the dealers showroom
during festive season by more than 5%.
H1: No. of footfalls increases in the dealers showroom during festive
season by more than 5%.
Table 6.24.2 accepts the null hypothesis:
No. of footfalls does not increase in the dealers showroom during
festive season by more than 5%.

THE CONVERSION RATE OF THE CAR CUSTOMERS

Question no. 16 is framed to analyse the average conversion
rate of customers. Responses are categorized into four divisions; <5%,
5-10%, 10-15% and more than 15%. Frequency count was zero for the
More than 15% category and therefore not featured. Collected data
in shown in the Table 6.25 and Figure 6.15.

222
 Table 6.25
Conversion Rate of Customers
S. No. Conversion Rate Frequency Percentage
1. <5% 8 32%
2. 5-10% 16 64%
3. 10-15% 1 4%
Total 25 100

Interpretation: Table 6.25 reveals that maximum number of the

respondents (64%) falls in the category of 5-10% followed by <5%
(32%) and 10-15% (4%). It might be due to the reason that the
situational factors (e.g. interest rates, payment options, payment
period etc.) might influence the customers when purchasing a
passenger vehicle.

Figure 6.15 Conversion Rates of Customers

64%
70%

60%

50%
32%
40%

30%

20%
4%
10%

0%
<5% 5-10% 10-15%

The results presented in the chapter presents the findings drawn

from the survey questionnaires following descriptive analysis. This

223
chapter provides empirical support for the hypotheses framed for the
study. Chapter 7, which follows, presents an overall conclusion to this
study as well as future recommendations and details the key
contributions of this thesis. Moreover, Chapter 7 discusses a number
of research limitations and identifies potential avenues for further
research.

224
 Chapter-VII
SUMMARY, FINDINGS, FUTURE SCOPE
AND CONCLUSIONS
 Chapter-VII
SUMMARY, FINDINGS, FUTURE SCOPE AND
CONCLUSIONS

This thesis is an investigation into consumer perceptions

towards premium passenger cars in five main markets of Uttar
Pradesh. Automobile industry is the backbone of petroleum, steel and
manufacturing sectors. It creates employments for thousands and gave
birth to many entrepreneurs. It satisfies one of the most basic needs of
human being, mobility. It is a well-known fact that automobile
Industry is the cornerstone of some of the most influential economics
in the world like USA and Japan. Indian automobile industry is all set
to play the same role in Indian economy. The four-wheeler market in
India is also one of the fastest growing and most promising. No
wonder, it has become a centre of attraction for most of the global
automobile players.
India is making a shining mark on the map of the world by its
continuous and increasing flow of growth rate. The study of consumer
behaviour deals with the decision process and physical activity,
individuals engage in when evaluating, acquiring, using, or disposing
of goods and services (Loudon and Bitta, 2002). It is concerned with
the understanding of individuals purchasing and consumption
activities. Consumer behaviour should be primary focus of every
aspect of the firms marketing program (Blackwell, et al. 2007).
Behaviour of consumer is influenced by cultural factors, social forces
like family, reference groups etc. and perceptions (Sternthal and
Craig, 1982). Consumption is the key to understand why consumer
buys products (Blackwell et al. 2007). The study of consumer

225
decision processes has been a focal interest in consumer behaviour for
over 30 years.
Understanding consumer behaviour is crucial for: (1) The
marketing strategy of companies, their chances of success being
bigger when decisions are well founded and arent made just
intuitively, (2) Policy making from the legal authorities, aiming at
diminishing or creating behaviours with a positive impact on
individuals and the society in general, and (3) The information of the
consumers, so that they can understand the strategies and tactics used
to influence them and be able to set limits for these influences when
necessary.
Automobile market is of significant interest because of the
substantial impacts of automobile production and usage on a variety
of public policy concerns including trade flows, business cycles etc.
Automobile industry is the symbol of technical marvel by human
being. Automobiles are highly differentiated durable goods with
variable lifetime (Berkovee, 1985). The Indian automobile sector has
emerged as one of the significantly developing and growing sectors in
the last decade. The automobile industry of India has witnessed a
tremendous growth in all sections, right from two wheelers, three
wheelers and passenger car segment. A number of studies have been
conducted on consumer behaviour towards cars (Goyal & Aggarwal
(2008), Saurabh (2012) etc.). But this study specifically illustrates the
consumer behaviour for premium passenger cars. Uttar Pradesh has
become the main avenue with potential for consumption of variety of
products and services.
The Indian automotive industry comprises different categories:
two wheelers, three wheelers, passenger cars, light commercial
vehicles (LCVs), multi-utility vehicles (MUVs) and heavy

226
commercial vehicles (HCVs), agricultural and farm and earth moving
equipment. For the last two decades, the Indian automobile industry
was the way behind some of the most influential economies like USA,
Japan, and China. Today, the Indian automobile industry is definitely
one of the most vibrant, modern and upbeat automobile markets of the
globe. With the emergence of financially sound middle- class, the
four- wheeler segment is witnessing terrific growth and one can
expect more contribution to the economy from this sector in the near
future. Indian automobile sector has now become the centre of
attraction for most of the global automobile giants the world over.
De-licensing in 1991, brought revolutionary changes in the
industry and provided well deserved and timely growth impetus to the
respective industry. This attracted foreign auto giants to set up their
production facilities in the country in a bid to take advantage of
several benefits provided by the industry. The automobile sector
experienced a drastic change in the car segment with the number of
entrants like Toyota, Honda, Ford, GM etc. Indian auto makers like
Tata, Mahindra and Mahindra, Hindustan Motors and MUL are given
a tough run for their money by the foreign players.
The Indian automotive industry after de-licensing in July 1991
has grown at a spectacular rate on an average of 17% for last few
years. The Industry has attained a turnover of USD $ 35.8 billion
(INR 165,000 Crore) and an investment of USD 10.9 billion. The
industry has provided direct and indirect employment to 13.1 million
people. Automobile industry is currently contributing about 5% of the
total GDP of India. The projected size in 2016 of the Indian
automotive industry varies between $ 122 billion in exports. This
translates into a contribution of 10% to 11% towards Indias GDP by
2016, which is more than durable the current contribution.

227
 Automobile sales in India have been growing at a fast rate due
to easier availability of finance and launch of numerous models
instead of the fact that most auto makers raised price thrice in 2010 to
offset rise in taxes and input costs. In todays scenario, people in the
state of Uttar Pradesh are trying to elevate their life style and they are
disappointed with the public transport system. This has lead to the
exponential sales of passenger car segment in the domestic market.
The consumer demand function is based on discrete choices and
during each market period, every consumer is assumed to choose the
optimal vehicle package from among those available (Berkovee
1985).
The proposed study especially focuses on the analyzing
consumer behaviour for premium passenger cars. It would be helpful
for various premium car manufacturers to know about purchase
behaviour of the population of Uttar Pradesh and accordingly they can
form comprehensive strategies for them.

FINDINGS
This part of the chapter highlights the main findings of this research.
Findings of Analysis of Pre-Purchase Strategies
Collecting Information from Others and Test Driving are
the most significant variables which explained .211% and
.371% of the variances respectively with Weighted Average
Score of 2.7000. It clearly showed that customers believe in out
of store search the most as they may be thinking that people
from Inside Company may tend to fool the customer. Customer
tries to collect information from other mediums rather than
companys offices or employees. Dealers try to satisfy their
customers by providing them with test drives of different cars.

228
 Visiting Dealers Showroom accounts for .369% of the
variance and Weighted Average Score of 2.6040 is the second
most important variable. People spend a lot of time in walking
around dealers showroom and they frequently visit different
dealers to get more and more information about cars.
Expert Opinions is the third most important variable that
explained .507% of the variance and Weighted Average Score
of 2.4760.
Reading Auto Magazines is the least important variable
which explained .523% of the variance with Weighted Average
Score of 1.9480. Respondents do not prefer reading auto
magazine for gathering information for their purchase.

Findings of Analysis of Variables Motivating New Car Purchase

The variables that motivate buyers to purchase a new car have been
studied.
Guarantee/Warranty is the most important variable that
explained .112% of the variance and Weighted Average Score
of 2.8720.
Item of Necessity is the second most important variable that
explained .339% of the variance and Weighted Average Score
of 2.7000.
Family Requirement accounts for .470% of the variance and
Weighted Average Score of 2.6720, is the third important
variable. People tend to buy a new car when they actually need
it.
Chi-Square Test has been adopted to test the hypothesis:

229
Behaviour of buyer is always influenced by social and economic
status, family requirements and their primary necessity of
transportation etc.
And the Table 6.8.10 confirms the hypothesis framed for the study.
The results clearly showed that consumers prefer to purchase
car for their convenience. They preferably seek Guarantee/warranty,
their family convenience etc. From an extreme perception of cars
being an ultimate luxury, today it has probably acquired the status of
necessity to many state dwellers. More than half of the sample as
noted above still sees the purchase of a vehicle as a need to fulfil the
primary need of transportation.

Findings of Analysis of Role of Sources of Information

Influencing the Purchase Decision
Friends/Family is the most important source of information
considered with maximum frequency of 59.2%.
Customers Self-decision ranks as the second important
variable with frequency percentage of 56%. It indicated that
customer does not get influenced from any prescribed sources
of information, and relies only on own resources (e.g. visiting
dealers showrooms etc.)
Radio/FM and Wall Writing/ Billboard, these two are the
least important sources of information with frequency
percentage of 3.2%.

These findings help the marketers in understanding the

behaviour of customers and help in knowing the role of information
sources in deciding a particular model of the car in Uttar Pradesh and
accordingly strategies can be made for them. The results revealed that

230
deciding the car model decisions are mostly influenced by the
Friends/Family (59.2%) followed by customer himself (56%). It is
recommended that marketer should target other members also like
spouse, friends and children etc. in order to increase sales in the state
of Uttar Pradesh. Marketers have to refresh better policies for car
consumers as they tend to ask others before purchasing cars in order
to attract even more customers.

Findings of the analysis of the role of reference groups in

influencing their car purchase decisions.
The Table 6.11 reveals that Friends and Spouse is the most
referred reference group with frequency percentage of 51.2%
which play a vital role in making car purchase decisions as
people are more influenced by them so they ask them before
purchasing the product.
Solely self is the second most chosen option with frequency
percentage of 36%. It might be due to the reason that customer
does not tend to ask any other before making his purchase.
Any other with frequency percentage of 7.2% accounts for
the least important reference group. Any other could consist
of neighbour, peer group etc.

The study reveals that respondents made their self-decision

before making his purchase. When a buyer enters the show room to
purchase a product, then most of the times he is with the frame of
mind for the product is going for; the buyer does his home work and
comes down with a frame of mind to go for the product.
It is recommended that marketer should target other members
also like spouse, friends and children etc. in order to increase sales in
231
the state of Uttar Pradesh. Marketers have to frame better policies for
car consumers as they tend to ask others before purchasing cars in
order to attract even more customers.

Findings of Analysis of Car Users Post-Purchase Satisfaction

When consumers satisfaction level regarding sales/servicing
provided by the dealers was analyzed, 94% of the samples
indicated that their satisfaction level lies between Excellent to
Satisfactory, whereas only 6% of the samples received poor
level of satisfaction from the dealers. Chi-Square test has been
carried out to test the hypothesis and Table 6.12.1.1 confirms
the Hypothesis:
Buyer is always satisfied with sales/servicing provided by the
dealers.
When consumers satisfaction level with their current car was
analyzed 98% of the samples indicated that they were very
satisfied to satisfied with their current car and only 2%
respondents were dissatisfied with their current car. Chi-Square
test has been carried out to test the hypothesis and Table
6.13.1.1 confirms the Hypothesis:
Buyer is always satisfied with post purchase experience of their
car.

Findings of Analysis of Factors influencing consumers in brand

selection of a premium car
Brand Reputation or Image was found the most important
variable with frequency percentage of 84%. The pull factor to a
particular brand of vehicle in this instance is the brand
reputation in the market place.
232
 Guaranty/Warranty is the second most important variable
influence consumers in the selection of the cars brand with
frequency percentage of 78.4%.
Good After Sales Services ranks as the third most importantly
considered variable with frequency count of 76.8%
Whereas least important factor is Acquaintance with Retailer
(1.6%).

Findings of Analysis of Dislikes/problems faced by the premium

car consumers in their car
Outdated Styling is major problem of maximum consumers
with frequency percentage of 25.6%, followed by the
Maintenance (24.8%) and Spare Parts Availability (21.6%).
Breakdown and Any Other (space, interior etc.), secured
equal frequency of 4%, are least preferred problems faced by
the car users.

Findings of analysis of key selling points of premium cars

Driving Comfort and Brand Reputation are the most
important key selling points that explained the .193% of the
variance and with Weighted Average Score of 2.8800, followed
by the Technological Advancement, Good after Sales
Services and Luxurious Item, explained .223% of variance
separately with Weighted Average Score of 2.8400.
Chi-Square Test confirms the hypothesis:
There is an association between demand of vehicles and
technological advancement.

233
 The study reveals a very distinctive picture in case of popularity
of different car brands. In case of Maruti the model was found
to be most common among the population of Uttar Pradesh.

SUGGESTIONS & RECOMMENDATIONS

In reviewing the results, the followings are the recommendations to
the marketer.
1. The premium car industry has undergone a drastic change in
terms of consumer perceptions as well technology. Behaviour
displayed by the researched group clearly showed that major
factors that accounted for pre-Purchase Search Strategies are
Collecting Information from Others, Test Driving and
Visiting Dealers Showroom Marketer should improve on
these aspects. Customers rely more on Collecting Information
from Others for gathering the knowledge about specific cars.
Marketer must focus on displaying car in the showroom,
organizing automobile shows in order to attract customers on
large scale.
2. In order to maximize the customer base it is recommended that
marketer should target other members also like spouse, friends
and children etc. in order to increase sales in the state of Uttar
Pradesh. Marketers have to frame better policies for car
consumers as they tend to ask others before purchasing cars in
order to attract even more customers. The results can help the
marketers in understanding the behaviour of customers and help
in knowing the role of information sources in deciding a
particular model of the car in Uttar Pradesh and accordingly
strategies can be made for them. The results revealed that
deciding the car model decisions are mostly influenced by the

234
 Friends/Family followed by customer himself. Marketers have
to refresh better policies for car consumers as they tend to ask
others before purchasing cars in order to attract even more
customers.
3. The results revealed that the most important factor that makes
up the brand selection is Brand Reputation or Image followed
by guaranty/warranty. And the least important factor is
Acquaintance with Retailer.
4. Results of analysis of variables motivating new car purchase
reveals that guaranty/warranty, item of necessity and family
requirements are the important variables motivate an individual
to purchase a car. The results clearly showed that consumers
prefer to purchase car for their convenience. They preferably
seek Guarantee/warranty, their family convenience etc.
5. Outdated styling, maintenance and spare parts availability are
the main problems faced by maximum respondents in their car.
Marketer should try overcoming these problems to increase
sales.
6. Banks should pay more attention to this segment considering a
large percentage has already sought vehicle finance.

Suggestions from the customers:

7. Skodas consumer seeks the technological advancements in
their vehicle.
8. Hyundai is very famous in the Uttar Pradesh but it should come
out with fuel efficient version so that desires of individuals can
be satisfied.

235
 9. Suggestion from the Fords consumers, It must be re-designed
and must come with more luxurious in the same price and
ground clearance should be improved within same range
10.Suggestion from the Tata cars consumer company should
provide variety in models, and it should be more economic and
stylish
11.Hyundais consumers want their car to be more luxurious at
affordable price and fuel efficient.
12.Maruti cars consumers complain about the weak car body and
sometimes disappointed with the after sales services. Other
changes include marginally revamped interiors and
substantially more space.
Marketer should notice the suggestion and an attempt should be made
to introduce new and improved strategies which lead to increase in
sales of the company.

CONCLUSION
The characteristics of the socio-econocultural environment in
which we have lived and are living has intimately influenced our
resources, tastes, and preferences. It therefore affects our behaviour
as customers by helping to define what we can and want to use, pay
for, and buy.
-Sheth, Mittal & Newman
After the detailed analysis of this exhaustive study, it is the time
to bring it to a meaningful conclusion. The global automobile industry
is a key sector of the economy for every major country in the world.
The industry continues to grow, registering a 30 percent increase over
the past decade (1995-2005) (Source: OICA). In the post
liberalization era consumers experienced a lot of changes in the

236
quality of their life in various product segments, especially in
premium passenger car segment. A number of premium car brands
competing with each other have left the consumer with a large no. of
alternatives to choose from. The presence of large number of
alternatives in this segment is the important factor in studying the
consumer behaviour. The rise in disposable income, wide choice of
models and easy availability of finance will drive growth in premium
passenger car segment and future looks even brighter. The data
collected and analyzed to bring profitable insights for the marketers.
Various factors and motivators that derive the purchase behaviour of
the mass have been compiled through primary data and the changes in
the outlook of the consumers mindset have to be considered carefully
by the marketers. It was concluded that an intensive study is done
before hand by the buyer before going for a particular car as most of
the respondents made a self-decision for a particular product. The
rising disposable income levels, technological advancements have
compelling effects on the marketers to now concentrate on a wide
variety of factors demonstrated by the target consumers. Marketers
have to come out with innovative promotional strategies to attract this
segment of the consumers. Pre-Purchase Search Strategies adopted by
the consumers have to be carefully tackled by marketers in order to
increase profitability. Hopefully the marketer will find the present
study useful and logical for tapping the consumers of the Uttar
Pradesh.
The goal is to present the analysis of consumer behaviour so
that the marketers can concentrate on the right track to tap the market
by keeping in mind the findings of the study. By understanding these
underlying factors associated with consumer behaviour, policies can

237
be designed on the desired lines and also implemented them smoothly
so that the researched area begin to reap their full potential.

SCOPE FOR FURTHER RESEARCH

There is engulfing potential for further research in this area. This
section suggests these potential avenues for future research, which
may be pursued by researchers of their interests.
Since this study is confined to the state of Uttar Pradesh only,
the researcher may focus on the other parts of country to
generalize the findings of the study.
Inter-State comparison can be made to study the topic in a
comprehensive way.
Researcher may concentrate on marketing mix to have in depth
knowledge of the state.
An examination into the financial implications of purchasing a
vehicle could be conducted across the state.
Researcher may examine how marketing programme strategies
affect consumer perceptions for premium cars.

238
Spread Smiles, Over the Miles

239
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http://www.siamindia.com/scripts/installed-capacities.aspx
http://www.economywatch.com/business-and-economy/automobile-
industry.html
www.wikipedia.com
www.driveinside.com

253
 ANNEXURES
(No.1)
QUESTIONNAIRE (FOR CONSUMERS)

Dear Respondents,

I solicit your kind co-operation in filling up this questionnaire to be used

for my Ph.D. thesis titled, A Study of Consumer Behaviour towards Premium
Passenger Car Segment in U.P. in Post-Liberalization Era (A Case Study of
KAVAL Towns). I shall be grateful if you kindly spare some of your valuable
time to respond the knowing questions. Contents and information provided by
you shall be kept absolutely confidential and used only for academic
purposes.
Name Sheetal
JRF (Commerce)

Kindly tick where appropriate:

PART I

1. Name: ..

2. Age (years): .

3. Gender : i) Male ii) Female

4. State/Union Territory: .

5. Occupation :
i. Service ii. Professional
iii. Business iv. Agriculture
v. Manufacturing

6. Educational Qualifications :
i. Non-Graduate ii. Under Graduate
iii. Post Graduate iv. Professional
v. Any other (Specify)...

7. Family Income (Rs. Per month)

i. Below 50,000 ii. 50,000-2,00,000
iii. 2,00,000-5,00,000 iv. 5,00,000 & above

8. Address & Contact No./e-mail :

 PART II

9. How many vehicles are owned in your household?

i. 1 ii. 2
iii. 3 iv. More than 3

10. In your opinion what is a premium car?

i. A premium car is an automobile with a size between that
of compact and full size
ii. A car having a seating capacity of 4/5 passengers
iii. Where price of the car ranges between Rs. 7-15 lakhs
iv. Those cars that are mainly targeted towards higher
income groups

11. Which brand(s) of premium car(s) do you own?

i. ii.

iii. iv.

12. What is/are the make and model of your car(s)?

Make Model

i.

ii.

iii.

iv.

13. If this is not your first car, what was the make and model of previous
car(s)?

Make Model

i.

ii.

14. What Price of the car your may agree upon to pay for a Premium Car
of your liking :

15. Mode of payment you did opt for buying the car :

i. One time/Cash Down ii. Finance

16. Source of Information about model before you purchased it : (tick as
many)
i. T.V. Advertisements
ii. News papers/Magazines
iii. Friends/Family
iv. Internet/E-mails
v. Radio/FM
vi. Brochures/Printed displays
vii. Wall writing/bill board
viii. Self Decision
ix. Other (Please specify)

17. A list of variables that may motivate you to purchase a new car, is
given below. Tick the appropriate option where Mimp. Most
Important, ID Indifferent, Limp Least Important
Variables Mimp. ID Limp.
i. Symbol of social status
ii. Time saving device
iii. Source of entertainment
iv. Guarantee/Warranty
v. Item of necessity
vi. Marketing influence
vii. Luxurious Item
viii. Family requirement
ix. Economy

18. Given below is a list of variables that affects an individual in selecting a

particular brand of car. Tick the appropriate option(s) you considered
while making your purchase : (tick as may)
i. Marketing influence
ii. Brand reputationor image
iii. Imported technology
iv. Good after sales service
v. Guarantee/Warranty
vi. Technology advancement
vii. Promotional strategies
viii. Friend/Relative Recommendation
ix. Level of satisfaction with old brand of car
x. Acquaintance with retailer
xi. Discounts available
xii. Resale value
xiii. Pick and serve facility
xiv. Spare parts availability
xv. Competitive price
19. What are the pre-purchase strategies adopted by you before
purchasing the car.Tick the appropriate option :(Can tick more than
one)
Variables Strongly Indifferent Strongly
Agree Disagree

Talking to sales persons

Looking at advertisements of cars
Collecting information from others
Visiting dealers showroom
Reading auto magazines
Websites
Expert opinions
Test driving

20. Who among the following affects you most in making car related
decisions? (tick upto 3)
i. Spouse
ii. Children
iii. Parents
iv. Brother/Sister or Dealers
v. Opinion leader
vi. Friends
vii. Solely self
viii. Any other (Pl. specify)..

21. Your satisfaction level regarding sales/servicing provided by dealers?

i. Excellent ii. Good
iii. Satisfactory iv. Poor

22. How satisfied are your with your current car?

i. Very satisfied ii. Satisfied
iii. Dissatisfied iv. Very Dissatisfied

23. In future if you wish to buy any other premium car, would you like to
buy the premium car of the same company?
i. Yes ii. No.
24. If No, than which brand of premium car other than yours comes to your
mind and why?
...
....
....

25. Dislikes/Problems faced in your car out of the listed ones : (Can tick
more than one)
i. Sales & servicing

ii. Maintenance
iii. Spare parts availability
iv. Fuel economy
v. Breakdown
vi. Outdated styling
vii. Safety
viii. Driving discomfort
ix. Any other (Pl. specify)

26. Any other thing you would like to share about your car?

...
....
....

(Signature of Respondent)

***
 ANNEXURES
(No.2)

QUESTIONNAIRE (FOR DEALERS)

Dear Respondents,

I solicit your kind co-operation in filling up this questionnaire to be used

for my Ph.D. thesis titled, A Study of Consumer Behaviour Towards Premium
Passenger Car Segment in U.P. in Post-Liberalization Era (A Case Study of
KAVAL Towns). I shall be grateful if you kindly spare some of your valuable
time to respond the knowing questions. Contents and information provided by
you shall be kept absolutely confidential and used only for academic
purposes.
Name Sheetal
JRF (Commerce)
Kindly tick where appropriate:

PART I

1. Name: ..

2. Age (years):

3. Gender : i) Male ii) Female

4. Address:

5. Mobile No. /e-mail: .

PART II

6. How many years of dealer experience do you have in this trade?

i. 0-5 years ii. 5-10 years

iii. 10-15 years iv. More than 15 years

7. What are the characteristics of a premium car buyer? (tick upto 3)

Strongly Indifferent Strongly

Agree Disagree
i. High Income
ii. Social Status
 7

iii. Esteem Conscious

iv. Tempted by the Promotional
Strategies
v. Family Influenced

8. What characteristics do customers find for in a premium passenger

car?

i. An automobile with a size between that of compact and full

size cars
ii. A car having the capacity to carry 4/5 passengers
iii. The price of premium cars ranges between 7-15 lakhs
iv. The premium cars are technologically advanced
v. Brand of the car

9. What are the key selling points of premium cars? (tick as many)

Strongly Indifferent Strongly

Agree Disagree
i. Symbol of social status
ii. Luxurious item
iii. Driving comfort
iv. Safety & security
v. Family requirement
vi. Credit payment
vii. Discounts available
viii. Marketing influence
ix. Brand reputation
x. Technological advancement
xi. Promotional strategies
xii. Good after sales services
xiii. Location of workshop

10. Occupational profile of maximum premium car customers?

i. Business ii. Service
iii. Professional iv. Others

11. Do you provide financing facility?

 8

i. Yes ii. No

12. If yes, than to what extent do you provide financing facility?

i. <2 lakhs ii. 2-5 lakhs
iii. 5-10 lakhs iv. More than 10 lakhs

13. Average No. of footfalls in a week?

..

14. Please provide the percentage of footfalls in the following segments.

i. Premium Passenger car segment

ii. Others

15. Percentage increase of footfalls during festive season :

i. <5% ii. 5-15%

iii. 15-25% iv. More than 25%

16. What is the conversion rate of customers?

i. < 5% ii. 5-10%
iii. 10-15% iv. More than 15%

(Signature of Respondent)

***