GROUP DEMAND ANALYSIS & FORECASTING

3 – THE AUTO INDUSTRY

Presented by:
Surjit Das (F08114)
Subramanian(F08113)
Anthony Arun Pratap(F08112)
Saumya Debanth(F08111)
Varun Sethi(F08115)

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ACKNOWLEDGEMENTS

We would like to thank Thiagrajan Sir for giving us this

opportunity to work on this project. We, as a group are
thankful to him for guiding us on the project and
providing us with useful insight with regard to carrying
out the project. Through this project we have learnt
leaps and bounds about demand forecasting and its
causes, implications and usage in the automobile
industry. We, once again thank Dr. Thiagrajan for his
endeavour in the field of experiential learning.

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TABLE OF CONTENTS
Acknowledgements 2
Table of Contents 3
About the Industry 4
Introduction 4
Industry overview 5
Major Auto manufacturers in India 8
Broad Purposes of Demand Forecasting 11
About the Company: Maruti Udyog Ltd 16
Wagon-R Division 21
Past 21
Present 22
Key Demand Differentiators 23
Factors influencing car demand 25
Industry and consumer trends fuelling demand 26
in the auto-sector
Conclusion 34
Bibliography 35

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About the Industry

World motor vehicle production (2007)

Introduction
The automotive industry is the industry
involved in the design, development, Rank   Country/Region   Automobile production  
manufacture, marketing, and sale of motor
vehicles. In 2007, more than 73 million 1 Japan 11,596,327
motor vehicles, including cars and
commercial vehicles were produced
2 US 10,780,729
worldwide.

In 2007, a total of 71.9 million new 3 People's Republic of China 8,882,456

automobiles were sold worldwide: 22.9
million in Europe, 21.4 million in Asia-Pacific,
4 Germany 6,213,460
19.4 million in North America, 4.4 million in
Latin America, 2.4 million in the Middle East
and 1.4 million in Africa. The markets in 5 South Korea 4,086,308
North America and Japan were stagnant,
while those in South America and Asia grew
6 France 3,019,144
strongly. Of the major markets, Russia, Brazil
and China saw the most rapid growth.
7 Brazil 2,970,818
In 2008, with rapidly rising oil prices,
industries such as the automotive industry,
8 Spain 2,889,703
are experiencing a combination of pricing
pressures from raw material costs and
changes in consumer buying habits. The 9 Canada 2,578,238
industry is also facing increasing external
competition from the public transport
10 India 2,306,768
sector, as consumers re-evaluate their
vehicle usage.

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Industry Overview
Since the first car rolled out on the streets of Mumbai (then Bombay) in 1898, the
Automobile Industry of India has come a long way. During its early stages the auto industry
was overlooked by the then Government and the policies were also not favourable. The
liberalization policy and various tax reliefs by the Govt. of India in recent years has made
remarkable impacts on Indian Automobile Industry. Indian auto industry, which is currently
growing at the pace of around 18 % per annum, has become a hot destination for global
auto players like Volvo, General Motors and Ford.

A well developed transportation system plays a key role in the development of an economy,
and India is no exception to it. With the growth of transportation system the Automotive
Industry of India is also growing at rapid speed, occupying an important place on the
'canvas' of Indian economy.

Today Indian automotive industry is fully capable of producing various kinds of vehicles and
can be divided into 03 broad categories : Cars, two-wheelers and heavy vehicles.

Segment Knowhow
Passenger Car and Two-Wheeler Segments Lead In Sales Volumes

The passenger car and two-wheeler segments account for around 90 percent of total
volume sales in the industry. The entry of multinationals has dramatically increased
competition in the Indian passenger car market. There are 11 foreign carmakers offering
over 80 different models to customers in India. Sales in the economy-range segment
account for 50 percent of the market for ‘A’ models that are priced below $6,700
(Rs300,000) and 'B' cars in the price range of $6,700 to $11,000 (Rs300,000 to Rs500,000).
"Automobile manufacturers are now intending to provide cars at every price point and
reaching more potential customers," notes the analyst of this research.

The price range of $490 to $2,000 (Rs22,000 to Rs90,000) makes two-wheelers a viable
option for users who cannot afford a car. Motorcycle sales have continued their upward
journey in the financial year 2003-2004 with customer preference markedly shifting to this
segment. The demand for scooterettes is also rising with the introduction of new models.

Among the two-wheeler segment, motorcycles have major share in the market. Hero Honda
contributes 50% motorcycles to the market. In it Honda holds 46% share in scooter and TVS
makes 82% of the mopeds in the country.

40% of the three-wheelers are used as goods transport purpose. Piaggio holds 40% of the
market share. Among the passenger transport, Bajaj is the leader by making 68% of the
three-wheelers.

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Cars dominate the passenger vehicle market by 79%. Maruti Suzuki has 52% share in
passenger cars and is a complete monopoly in multi purpose vehicles. In utility vehicles
Mahindra holds 42% share.

In commercial vehicle, Tata Motors dominates the market with more than 60% share. Tata
Motors is also the world's fifth largest medium & heavy commercial vehicle manufacturer.

Trend toward Multi-Axle Commercial Vehicles Bodes Well for Manufacturers

Spur in demand is also expected from the multi-utility vehicle (MUV) segment, and
especially the sports utility vehicle (SUV) that is rapidly becoming the second family vehicle.
Among other positive trends for the industry is the shift toward multi-axle commercial
vehicles. These vehicles offer improved operating economics over single-axle vehicles. The
higher cost of a multi-axle vehicle means more revenues for truck manufacturers. The long
slack in tractor sales has also shown signs of abating and is slowly recovering due to a
better-than-expected monsoon that has lead to higher agricultural output, and hence,
increased purchasing power.

Current Scenario
The Indian automobile segment experienced strong growth of 9.8% in April 2008 as the
demand of vehicle increased in its every segment. Starting of new financial year (April 2008)
has yielded positive results for the Indian automobile industry as sales experienced 9.8%
growth rate as per the Society of Indian Automobile Manufacturers (SIAM). It also revealed
good show up by all segments including cars, commercial vehicles, motorcycles and three-
wheeler.

According to the SIAM data, the vehicle sales in the domestic market reached 806238 Units
in April 2008 compared to 734103 Units in corresponding month last year. The car segment
sales grew strongly with 17% rise to 98740 Units and the two-wheeler sales in April 2008
surged by 8% to 616038 Units against 570381 Units in the same month last year.

The government initiative to cut down excise duty on two and three wheelers to enable
consumers afford them is largely accredited for growth in the Indian automobile industry in
April 2008. Festival of Navratri and fear of price hike in automobile industry also boosted
vehicle sales during April 2008.

Besides, the commercial vehicle segment of the Indian automobile industry witnessed the
strong growth in April 2008 during the last three years (2005-07). Indian economy is growing
at an unprecedented growth rate, leading to the development of industrial and
transportation sectors that heavily depend on the commercial vehicles. Consequently, the
demand for commercial vehicles is consistently growing. Seeing high growth in the Indian

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auto industry, many foreign players are getting into agreements with their Indian
counterparts to tap the opportunities.

However, the industry experts predict that despite the good performance by the Indian
automobile industry in April 2008, coming months will bring in difficulties for the industry,
given that steel prices are increasing ultimately pushing up the input cost.

According to a research analyst at RNCOS, “All the segment of the Indian automobile
industry are growing at a rapid pace, encouraging car manufacturers to expend in the
market. Given the current growth scenario, the Indian auto industry is offering huge growth
opportunities for both manufacturers and dealers as the demand for vehicles is escalating in
the country.”

Auto Companies in India

The onset of automobile industry in India saw companies like Hindustan Motors, Premier
Automobiles and Standard Motors catering to the manufacture of automobiles for Indian
customers. The era, 1950s - early 1990s was known as 'license raj,' when India was closed to
the world and imports. Hindustan Motors (HM) was the leader in car manufacturing and
sales until the 1980s, when the industry was opened up from protection. HM, joint venture
with Mitsubishi produced Lancer and Pajero, but is best known for its own model,
Ambassador.

Around 1970, Sanjay Gandhi, elder son of the then Prime Minister Indira Gandhi, envisioned
the manufacture of an indigenous, cost-effective, low maintenance compact car for the
Indian middle-class. The cabinet passed a unanimous resolution for the development and
production of a "People's Car." It was christened Maruti Limited. However, the company as
Maruti Udyog Ltd. matured only after the death of Sanjay Gandhi. The Maruti800 car went
on sale in 1983. By 1993 it sold up to 1,96,820 cars.

1991, the liberalisation of the Indian economy opened the market for foreign automobile
makers to venture in India. The license raj ended in 1993 and many foreign players entered
the Indian market by way of Joint ventures, collaborations or wholly owned subsidiary.

The automotive Industry in India is now working in terms of the dynamics of an open
market. Many joint ventures have been set up in India with foreign collaboration, both
technical and financial with leading global manufacturers. Also a very large number of joint
ventures have been set up in the auto-components sector and the pace is expected to pick
up even further. The Government of India is keen to provide a suitable economic, and
business environment conducive to the success of the established and prospective foreign
partnership ventures. $5.7 billion is the investment envisaged in the new vehicles projects.

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Indian Automotive Industry: a Booming Buyer’s Market
The past few years have witnessed a rapid change in all the segments of the Indian
automotive industry. International competition, increase in the number of participants, and
the need to counter the pressure on margins have made it a buyer's rather than a seller's
market. Customers have wide model choices and the rising income levels – especially among
young adults – coupled with the low equal monthly installments (EMIs) have made vehicle
purchase affordable. With foreign competitors focusing on passenger vehicles, domestic
participants are scrambling to catch up and compete by investing in R&D and improving
overall efficiency.

Major Auto Manufacturers in India

Segments Companies
Cars/ SUVs  Suzuki  Daimler-Chrysler
 Honda  Skoda
 Toyota  Fiat
 Mitsubishi  Hyundai
 GM  Tata
 Ford  M&M

Two-wheelers  TVS  Yamaha

 Hero Honda  Kinetic
 Bajaj Auto  LML

CVs  Tata  Swaraj Mazda

 Ashok Leyland  Mahindra & Mahindra
 Tatra  Volvo
 Eicher-Mitsubishi

Tractors  Escorts  New Holland

 M&M  ITL-Renault
 L&T  John-Deere
 Punjab Tractors  Steyr

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Investment plans of major players
The automobile industry in India is on an investment overdrive. Be it passenger car or two-
wheeler manufacturers, commercial vehicle makers or three-wheeler companies - everyone
appears to be in a scramble to hike production capacities. The country is expected to
witness over Rs 30,000 crore of investment by 2010.

Over the next one year, some 20 new cars will be seen on Indian roads. Maruti Udyog is
coming up with new Zen and the diesel version of Swift during the next few months.
Hyundai will also be unmasking the Verna and a brand new diesel car. General Motors will
be launching a mini and may be a compact car.

Most of the companies have made their intentions clear. Maruti Udyog has set up the
second car plant with a manufacturing capacity of 2.5 lakh units per annum for an
investment of Rs 6,500 crore (Rs 3,200 crore for diesel engines and Rs 2,718 crore for the
car plant itself). Hyundai and Tata Motors have announced plans for investing a similar
amount over the next 3 years. Hyundai will bring in more than Rs 3,800 crore to India, Tata
Motors will be investing Rs 2,000 crore in its small car project.

General Motors will be investing Rs 100 crore, Ford about Rs 350 crore and Toyota

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announced modest expansion plans even as Honda Siel has earmarked Rs 3,000 crore over
the next decade for India - a sizeable chunk of this should come by 2010 since the company
is also looking to enter the lucrative small car segment.

Some new entrants will also taste the water. They are the big names in passenger cars like
Citroen, Volkswagen AG, Nissan (separately, apart from its tie-up with Suzuki), Alfa Romeo,
Maserati, Land Rover and Aston Martin.

Talking about the commercial vehicle segment, Ashok Leyland and Tata Motors have each
announced well over Rs 1,000 crore of investment. Mahindra & Mahindra's joint venture
with International Trucks is expected to see an infusion of at least Rs 500 crore.

In two-wheelers segment, Chinese bike major Lifan and the iconic US brand Harley-Davidson
are expected to enter India soon. Hero Honda is about to establish its fourth manufacturing
plant. Bajaj Auto and TVS Motors are moving to the excise-free zones of Himachal Pradesh
and Uttaranchal for putting up new capacity.

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 BROAD PURPOSES OF DEMAND FORECASTING:
National Analysts effectively generates demand estimates for clients in an array of industry sectors
by:

 Identifying and describing the current and future competitive landscape.

 Framing the purchase/usage decision in meaningful ways.
 Generating forecasts for contingencies in as yet uncertain/undecided product profiles or
competitive options.
 Anticipating demand among different market segments.
 Calibrating survey-derived demand estimates to predict actual—not just relative—revenue or
usage volume.
 Integrating the influence of multiple decision makers on acquisition and usage.

Describing the key items in blue wrt a pharma firm

Competitive Landscape
A common error in demand forecasting is to ask potential decision makers what they would
purchase or use without properly sensitizing them to environmental and competitive conditions
that are likely to exist at a time in the future when the product will be introduced.

For example, pharmaceutical firms need to forecast usage of a drug well before introduction, but to
obtain estimates of usage that are reasonably reliable, it is critical to account for available brands
and generic alternatives as well as the regulatory and reimbursement environment which is likely to
appear when the new drug is introduced.

Competitive Timeline

Framing the Purchase/Usage Decision

Marketing research agencies are frequently asked to develop volumetric forecasts. For
instance, communications companies need to estimate minutes of usage a new product or
service will generate, computer companies want to know how many processing units will be
sold, and pharmaceutical firms require estimates of drug prescribing volumes. In some

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cases, volumetric estimates are straightforward, but increasingly they are complicated by
usage or purchases that are tailored to individual applications or patients. Failure to frame
the purchase or usage decision in a manner that accounts for real world differences in
application will produce misleading estimates of usage or purchase. For example, the
graphic below describes an estimate of new product usage without accounting for the fact
that physicians might tailor drug selection to individual patient needs.

When physicians are asked to estimate usage in the context of the therapeutic needs of a
sample of patients from their own practices, we get a real world estimate of usage that is
considerably different than the aggregate usage forecast. Beyond estimating precision,
proper framing can produce information to support effective downstream marketing
activities. In the example below, notice how prescription behavior varies by patient type.
This information can be used by sales to position utilization of the new drug more
effectively.

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Forecasting for Product Configuration & Market Contingencies
Frequently clients have the opportunity to configure a product to maximize revenue or
usage. However, on some occasions, clients will not have the freedom to configure the
attributes of the product as they wish, and they may not even know what attributes the
product will ultimately possess because the product is still in development. Independent of
product configurations, there may be considerable uncertainties about future competitive
offers or responses. In each of these situations, the accuracy and utility of demand forecasts
are threatened.

One of the most effective ways to account for these types of contingencies is to use conjoint
or discrete choice analysis. These techniques expose decision makers to samples of
alternative configurations to obtain measures of the relative impact of each candidate
attribute or contingency. Using decision maker preferences, conjoint and discrete choice
analysis permits forecasts for thousands of alternative configurations or contingencies.

Demand Among Market Segments

Demand estimation by segment can create considerable value for clients. Understanding
what groups are more likely to acquire or use a product permits cost-effective targeting of
promotional and sales activities. Consider the example below:

  Primary Care Physicians Specialists

Size of MD population 85,000 15,000

Patients per MD 3 20

Size of eligible patient 255,000 300,000

population

% of patients Rx’d 10% 35%

new product

# of Rx'd patients 25,500 105,000

In this example there are five times more primary care physicians than specialists yet
specialists manage about the same number of patients who are eligible for a new therapy.
Demand forecasting estimates that specialists will prescribe the new therapy for five times
as many patients. Clearly, by targeting specialists, a pharmaceutical firm could use a smaller
sales force to produce considerably more sales.

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Calibrating Survey-Derived Demand Estimates

Survey-derived demand estimates can be very effective tools for product development,
marketing, and sales. However, demand estimates that are not adjusted for sources of error
can be misleading and very costly. Consider the following example:

 There are five million diagnosed heart failure patients in the U.S.
 A survey of physicians who treat heart failure produces an unadjusted estimate that
40% of all heart patients would receive drug X if it were available.
 Anticipating more than two million patients, pharmaceutical firm A invests heavily in
advertising, promotion, and sales reps.
 Three years after introduction, only 200,000 patients receive drug X.

Pharmaceutical firm A learned an expensive lesson about adjusting survey-derived demand

estimates for various sources of potential error. Some of the more common sources of error
pharmaceutical A should have adjusted for include:

 The gap between intention to acquire and actual acquisition.

 Inaccurate assumptions about market, competitor, product, and/or economic
conditions.
 Assumptions about awareness and availability.

While some research and consulting firms claim to have a formula for various forms of error,
National Analysts has found that variations in product, market, and competitive conditions
make canned approaches unreliable. In fact, our most reliable calibrations for error are
customized using a combination of forecasting experience and modeling expertise
supplemented by a healthy dose of product, industry, and market knowledge.

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Integrating the Influence of Multiple Decision Makers

In many cases, reliable forecasts require an understanding and measurement of multiple

influencer or decision maker effects on demand. National Analysts’ experience has taught us
to tailor our forecasting approach to the appropriate decision-making conditions.
Frequently, it is necessary to identify and survey multiple influencers or decision makers,and
then integrate their views. For example, if we are asked to estimate the prescribing volume
of a new drug therapy:

 Managed care decision makers would be asked for the formulary status that a new
prescription product would be likely to earn in their organization (1) if the decision
were entirely up to the payer and (2) given varying levels of patient and physician
demand.

 Patients would be asked what they would do if they saw advertisements for the new
drug or if their MDs gave them a choice of several alternatives, and how their
decisions would change as a function of what they personally would have to pay for
different drug options.

 Physicians would be asked to predict their product-prescribing behavior not only

based on changing clinical profiles, but also in response to patient requests and/or
formulary restrictions.

Then, for any particular combination of (1) a drug's clinical profile, (2) its formulary status,
and (3) the degree of patient demand and preference, market research agencies can
generate an estimate of prescribing volume.

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Company
Maruti Udyog Ltd

Quick Facts

Year of Establishment February 1981

"The Leader in The Indian Automobile Industry, Creating

Vision Customer Delight and Shareholder's Wealth; A pride of
India."

Industry Automotive - Four Wheelers

Listings & its codes BSE - Code: 532500

NSE - Code: MARUTI
Bloomberg: MUL@IN
Reuters: MRTI.BO

Joint Venture With Suzuki Motor Company, now Suzuki Motor

Corporation, of Japan in October 1982.

Brands
Maruti 800 Maruti Alto Maruti Baleno

Maruti Esteem Maruti Grand Vitara XL-7 Maruti Gypsy King

Maruti Omni Maruti Suzuki SX4 Maruti Swift

Maruti Versa Maruti Vitara Maruti Wagon-R

Maruti Zen

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Sales Performance

Particulars Quarter ended Nine Months Ended Financial Year

Ended

31.12.0 31.12.0 31.12.05 31.12.04 30.06.2005

Dates
5 4 (6 month) (9 month) (Audited)

Domestic Vehicles
137,127 122,042 380,763 351,583 487,402
Sold (No.)

Export Vehicles Sold

7,883 14,027 26,656 37,958 48,899
(No.)

Total Vehicles Sold

145,010 136,069 407,419 389,541 536,301
(No.)

Net Sales 310,431 279,646 874,309 787,726 1,091,075

Total Income 322,079 293,837 909,516 821,177 1,135,387

Total Expenditure 264,831 245,363 764,078 692,645 955,614

Profit before Tax 50,269 37,207 122,454 91,465 130,489

Net Profit 33,901 23,966 82,813 59,418 85,363

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Milestones
1981  Maruti Udyog Ltd. was incorporated.

1982  Steped into a JV with SMC of Japan.

1983  Maruti 800, a 796 cc hatchback, India's first affordable car was produced.

1984  Installed capacity reached 40,000 units. Omni, a 796 cc MUV was in
production.

1985  Launch of Maruti Gypsy (970cc, 4WD off-road vehicle).

1986  Produced 100,000 vehicles (cumulative production).

1987  Exported first lot of 500 cars to Hungary.

1988  Installed capacity increased to 100,000 units.

1992  SMC increases its stake to 50 per cent.

1994  Produced the 1 millionth vehicle since the commencement of production.

1995  Second plant launched, the installed capacity reached 200,000 units.

1996  Launch of 24-hour emergency on-road vehicle service.

1997  Produced the 2 millionth vehicle since the commencement of production.

1998  Launch of website as part of CRM initiatives.

1999  Launch of Maruti - Suzuki innovative traffic beat in Delhi and Chennai as
social initiatives.

2000  IDTR (Institute of Driving Training and Research) launched jointly with Delhi
government to promote safe driving habits.

2001  Launch of customer information centers in Hyderabad, Bangalore, and

Chennai.

2002  SMC increases its stake to 54.2 per cent.

 Launch of Maruti Finance with 10 finance companies in Mumbai.
 Start of Maruti True value in Mumbai.

2003  Production of 4 millionth vehicle.

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  Listed on BSE and NSE after a public issue oversubscribed 10 times.

2004  Maruti closed the financial year 2003-04 with an annual sale of 472122 units,
the highest ever since the company began operations 20 years ago.

2005  The fiftieth lakh car rolls out in April, 2005.

Rewards and Accolades

2005  Number one in JD Power SSI for the second consecutive year.
 Number one in JD Power CSI for the sixth time in a row - the
only car to win it so many times.
 M800, WagonR and Swift topped their segments in the TNS
Total Customer Satisfaction Study Leadership in the JD Power
Initial Quality Study - Alto number one in its segment for the
2nd time in a row, Esteem number one in its segment for the
3rd year in a row, Swift number one in the premium compact
segment.
 WagonR and Esteem top their segments in the JD Power APEAL
study.
 TNS ranks Maruti 4th in the Corporate Reputation Strength
(CSR) study (#1 in Auto sector)-Feb 05.
 Maruti bagged the "Manufacturer of the year" award from
Autocar-CNBC (2nd time in a row)-Feb 05.
 First Indian car manufacturer to reach 5 million vehicles sales.
 Business World ranks Maruti among top five most respected
companies in India-Oct 04.
 Maruti ranked among top ten (Rank7) greenest companies in
India by Business Today - Sep '04

2004  Maruti Suzuki was No. 1 in Customer satisfaction, No. 1 in Sales

Satisfaction No.1 in Product Quality (Esteem and Alto) and No. 1
in Product Appeal (Esteem and Wagon R).
 No. 1 in Total Customer Satisfaction (Maruti 800, Zen and Alto).
 Business World ranked us among the country's five most
respected companies.
 Business World ranked us the country's most respected
automobile company.
 Voted Manufacturer of the year by CNBC.
 Voted one of India's Greenest Companies by Business Today-AC
Nielson ORG-MARG.

19
Company Flashback

Maruti Udyog Limited (MUL), established in 1981, had a prime objective to meet the
growing demand of a personal mode of transport, which is caused due to lack of efficient
public transport system. The incorporation of the company was through an Act of
Parliament.

Suzuki Motor Company of Japan was chosen from seven other prospective partners
worldwide. Suzuki was due not only to its undisputed leadership in small cars but also to
commitments to actively bring to MUL contemporary technology and Japanese
management practices (that had catapulted Japan over USA to the status of the top auto
manufacturing country in the world).

A licence and a Joint Venture agreement was signed between Government of India and
Suzuki Motor Company (now Suzuki Motor Corporation of Japan) in Oct 1982.

The objectives of MUL are as cited below:

 Modernization of the Indian Automobile Industry.

 Production of fuel-efficient vehicles to conserve scarce resources.
 Production of large number of motor vehicles which was necessary for economic
growth.

In 2001, MUL became one of the first automobile companies, globally, to be honoured with
an ISO 9000:2000 certificate. The production/ R&D is spread across 297 acres with 3 fully-
integrated production facilities. The MUL plant has already rolled out 4.3 million vehicles.
The fact says that, on an average two vehicles roll out of the factory in every single minute.
The company takes approximately 14 hours to make a car. Not only this, with range of 11
models in 50 variants, Maruti Suzuki fits every car-buyer's budget and any dream.

20
Wagon-R Division of MUL
Past
Just over 10 years since its launch in 1993, in its original form, more than 2 million units of
Suzuki's unique, versatile and affordable 660cc Wagon R – on sale only in Japan and the
forerunner of the Wagon R+ that’s been on sale in the UK and Europe since 1997 – have
been produced.

Following its introduction in Japan the Wagon R received the country's "New Car of the Year
Award" and almost immediately became the best selling small passenger car in Japan's
popular sub-660cc market sector. Its success was such that by October, 1996 more than
500,000 Wagon R had been sold. Now, just seven years later, the magic two million
production figure has been achieved.

Recognising the potential for the unique Wagon R concept in markets outside Japan,
especially Europe, Suzuki subsequently set out to develop the Wagon R+ which was
launched in Europe in 1997 with an all-new successor model unveiled in 2000. Almost
30,000 have now been sold in the UK since it became available and its popularity continues
to increase.

Suzuki's philosophy – which led to the successful development of Wagon R and Wagon R+ –
is that mini vehicles of the future should now be developed to the very fullest extent as they
take account of environmental considerations and modern day usage requirements in most
markets, worldwide.

Large opening doors and high seating levels provide easy access into and out of the vehicle
and exceptional all round visibility for both driver and passengers.

The number one mini-car manufacturer in Japan for the last 30 years and now one of the
world's largest car makers, Suzuki has firmly established a global reputation as a leader in
compact car design and production, dedicated to providing attractive, functional and
environmentally friendly vehicles that are durable, practical and exceptional value-for-
money.

Wagon R in Japan and Wagon R+ in the UK and Europe and their rapidly growing popularity
together provide yet another effective demonstration of the considerable success and
appropriate nature of Suzuki's business philosophies and product development strategies.

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Wagon-R in India
The Maruti Wagon-R is a made for India version of Suzuki Wagon R.

The Wagon-R was born out of Japanese kei-jido-sha restrictions which dictated a limited
length and engine size. This boxy, tall-boy design has now completed five years of presence
on Indian roads.

Maruti's launch of the car was ill-timed. Despite being one of the world's first tall-boy
designs (along with models from Daihatsu and Daewoo), the Wagon-R was not first-to-
market in India.

The Hyundai Santro, a less avant garde version of the Hyundai Atos was the first tall-boy
design to hit the Indian roads. It preceded the Maruti-Suzuki Wagon R by a two year lead.

The Wagon R's bread-box shape did not immediately cut ice with the Indian consumer and
the car saw slow sales initially.

Now the car has found a market for itself, especially among young Indian urban
professionals who don't mind its boxy slab-sided looks, but value its Maruti lineage. The car
is currently among India's top five best-selling cars.

Present
Buoyed by the success of the WagonR and building on its design and engineering
capabilities, Maruti Udyog, in what is seen as the most significant effort at showcasing its
design capabilities, recently launched a new-look WagonR, together with the dual fuel —
petrol-cum-LPG — ‘WagonR Duo’, a first in the compact car segment.

This growth would be significant considering the company’s overall sales, including exports,
grew 4.8 percent last fiscal at 5,61,822 units. Sales of 5,27,038 units in the domestic market
translate into a growth rate of 8.1 percent last year.

However, high cost of raw materials like steel, aluminum and rubber has had an adverse
effect on Maruti’s margins as well as those of its vendors. To rationalise such cost pressures,
the company would hike prices of its models soon. Cyclical trends indicate that after
declining numbers for three years, sales would pick up this fiscal. It is necessary for us to
constantly refresh the brand, and the launch of the new WagonR represents an effort in this
direction.

While the price of the new WagonR remains unchanged, the Duo, available in two variants,
Lx and Lxi will retail at Rs 3.40 lakh and Rs 3.68 lakh respectively in Delhi and Rs 3.51 lakh

22
and Rs 3.83 lakh respectively in Mumbai, all ex-showroom prices.

Launched in February 2000, the last variant of the WagonR that was introduced was the
Primea, a limited edition version which Maruti said had been a ‘hit’. The WagonR, which is
part of the company’s suite of compact cars that includes the Alto and Zen, has seen a
compounded annual growth rate of 28.63 percent since its launch, as compared to the
industry growth of 8.21 percent. The increasing popularity of the car can also be gauged
from the fact that MUL sold 88,630 units in 2005-06 as compared to the 25,167 units it sold
in FY 2002.

Key Demand Differentiators

The Wagon R+ is substantially wider and more powerful than the Wagon R. For 2004 – and
at no extra cost – it has new front end styling and comes equipped with a new 1.3 litre VVT-i
engine, ABS with EBD and new interior trim. Overall it provides excellent performance,
safety and unrivalled interior space for five adults and their luggage.

The compact exterior dimensions of the Wagon R+ make it the perfect car for urban use
where road space is at a premium and parking spaces are becoming extremely hard to find.

In perfecting the Wagon R+ and launching it in Europe, Suzuki has provided a unique and
fresh choice for consumers looking for a practical, functional and stylish car that is friendly
to the environment, because of its optimum size and operational efficiency, without
sacrificing buyers' purpose or lifestyle requirements.

The car is powered by a 1061 cc four cylinder, sixteen valve, multipoint fuel-injected engine
producing 64 bhp (47.7 kW) at 6200 rpm and 84 newton-metres (62 ft·lbf) of torque at 3500
rpm.

The car comes with a variety of trim levels. These include the LX (sans power steering), LXi
(power steering), VXi (fully loaded) and the AX (automatic). The car normally comes with a
5-speed manual transmission and seats 4 (including the driver) comfortably. Light kerb
weight (750–775 kg) makes for a nimble car with good acceleration and a top speed of
160 km/h (99 mph). The car's fuel economy is somewhere in the range of 13 to 14 km/l (7.7
to 7.1 l/100 km) in city driving and 18 to 20 km/l (5.6 to 5.0 l/100 km) on the highway.

The car is priced between Rs. 350,000 (LX) to Rs. 485,000 (AX).

The biggest advantage that the company offers its customers is the factory-fitted gas kit,
which also comes with a two-year comprehensive warranty. Further, engineers have
innovatively designed the LPG toroidal tank to fit into the spare wheel area. Company
officials said this tank is resistant to collision and also features a safety valve to prevent
leakages. The entire LPG kit, including the cylinder, has been approved by the Department

23
of Explosives (DoE) and homologated at the Automotive Research Association of India.

In terms of the vehicle’s performance, a fair amount of refinement has been done on the
Wagon-R engine to make it 10 percent more fuel efficient than its previous avatar. The
company further claimed the WagonR Duo ensures a 33 percent reduction in running cost
with respect to petrol. It claims a mere 3 percent power loss, when driven in the LPG mode.
Moreover, the engine life remains the same on the LPG compared to petrol. The Duo has
options for either a 35-litre petrol tank and a 28-litre LPG tank.

The WagonR Duo is the first offering in green fuels in the A2 segment. With its special
toroidal design, the car offers more luggage space.

Factors influencing Car Demand

24
REGRESSION ANALYSIS FOR SALES
COMPANY NAME: Maruti Udhyog Pvt Ltd

Regression Equation of y on X:

Y = a + bX

Product of time
time deviations and sales
For finding the values of a and b,
year sales(units)(Y) deviatin(x) (X2) (Xy)
a (constant variable) = ∑y / n
2005 569850 -2 4 -1139700

2006 289440 =545316.4

-1 1 -289440
of growth) = ∑Xy /0∑X2
2007 b (rate 569850 0 0
=
2008 764942 40080.21 1 764942

2009 Hence,532500 2
the regression equation 4
is Y = a + bX 1065000

total Y= 545316.4
2726582
+ 40080.2x 0 10 400802

With the help of this equation, we can find out the trend values
for the next five years as follows:

Y= 545316.4 + 40080.2x
x
(In thousands of Rs.)

2010 665557

2011 705637.2

2012 745717.4

2013 785797.6

2014 825877.8

25
 Chart Title
900000
800000
700000
600000
500000
400000
300000
200000
100000
0 years
2005 2006 2007 2008 2009 2010 sales in2012
2011 units 2013 2014

26
Industry and Consumer Trends fuelling Demand in
the auto-sector
GDP growing up to 8 percent

The economy of India, measured in USD exchange-rate terms, is the twelfth largest in the
world, with a GDP of around $1 trillion (2008). It recorded a GDP growth rate of 9.1% for the
fiscal year 2007–2008 which makes it the second fastest big emerging economy, after China,
in the world. At this rate of sustained growth many economists forecast that India would,
over the coming decades, have a more pronounced economic effect on the world stage.

This rise in economic growth rate can influence the automotive sector in many ways.
Foreign manufacturer interest, increase in consumer spending, easy access to finance, are
just some of the factors that will be impacted positively by sustained GDP growth rate.

27
Increase in family income

The top 10 towns in India with highest family income are shown above. These are tier-II and
tier-III towns with the population having good purchasing power. As time progresses, the
per-capita income across other towns will also increase; as a result of which many more
towns will be added to this group.

Increase in remittances
28
An increase in inward remittances will again add to the disposable income of the middle-
class, thereby increasing their purchasing power.

Easy access to finance

29
 Increased Consumer Spending

With a large number of Indian and foreign banks opening up shop in India and also
expanding at a fast rate, access to finance for purchase of 2-wheelers and 4-wheelers won’t
be much of a bother for the Indian middle class. Non-Banking Finance Companies (NBFCs)
can also play a vital role in providing timely finance to prospective customers.

Increased Consumer Spending

30
The above figure shows that how over the years the size of the middle-income segment has
increased over the years and how it will increase in the future. Clearly, there’s a huge
potential for auto manufacturers to tap this potential market.

Increasing volume of exports

31
 Past trends can be reliable indicators of future market trends, especially when economic
and other conditions remain relatively stable to support growth. The past data for auto
exports and component exports is very strong and there’s no reason to believe that such a
trend will not continue in the future.

Increased presence of multinational companies

32
Over the years, multi-national companies like Hyundai, Suzuki, Toyota, General Motors and
now Volkswagen have stepped up their presence in India. They recognize the true potential
of the automotive sector in India.

More women workforce

33
As more and more women show their willingness to join the active work-force, auto
companies will come out with differentiated offerings to cater to this sector. Some two
wheeler companies like TVS have already come out with niche offerings which is meant for
earning women.

IN CONCLUSION

34
It is expected that per head disposal income in India will grow at CAGR of 12.11% from fiscal
year (FY) 2007 to FY 2010. It is likely to boost purchasing powers of population, and
consequently, the sale of motorcycles and compact cars will increase. Car stock per 1000
population is expected to increase at a CAGR of 9.14% during the forecasted period from
FY2007 to FY2010. New passenger car registration is expected to grow at a CAGR of 11.41%
during the forecasted period. In commercial vehicles segment, light commercial vehicles are
expected to register a higher growth rate than the heavy and medium commercial vehicles
from FY2007 to FY 2010. India had the lowest penetration rate of motorcycles in comparison
to Indonesia, Thailand and Malaysia in 2005, indicating good growth prospects for the
motorcycle manufacturers. In hindsight the automobile industry is a classic example of the
scope, benefits and purpose of demand forecasting. Perhaps no other industry uses demand
forecasting to the extent auto manufacturing concerns do. Indeed, it was a pleasure for our
group to have been given the opportunity to conduct such an analysis that embodies and
captures this essence.

BIBLIOGRAPHY
www.frost.com
www.rncos.com

35
 www.nationalanalysts.com
www.surfindia.com
www.marutisuzuki.com
www.wikipedia.org
www.bharatbook.com
www.aiacanada.com
www.pr.com
www.automotiveindustrymarket.com
www.justauto.com
www.automotiveuniverse.net

36