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CASE GAME The Case Of Market Leadership Can Ashwin retain its market leadership in passenger cars? R. Nair of Business Consulting Group, V. Venugopal of Mahindra & Mahindra, and B. Palekar of Eureka Forbes discuss. By R. Chandrasekhar
''The tables have turned,'' he said, addressing his team of senior executives, later in the day. ''When we started out in 1981, we set the trend on the twin planks of fuel economy and low maintenance cost. And made fossils of all the stodgy, fuel-guzzling models prevalent at that time. We got a resounding response from the burgeoning Indian middle class-at which Ashwin was targeted-at parameters like price, design, comfort, mileage, and, of course, the aspirations. We went on to corner over 80 per cent of the market and bestrode the Indian passenger car market like a colossus for well nigh decades. "Today, we are in the same position as the companies we upstaged on our debut. As compared to four manufacturers of passenger cars in the country, offering a dozen models, in 1981, there are a dozen manufacturers today offering an incredible 112 models. And our marketshare is down to 65 per cent.'' ''I have only this morning received a report from a well-known UK-based auto-consulting firm which has examined the prospects of passenger car makers in India in 2003,'' said Raghu Krishnan, Director (Finance). ''The report predicts on the basis of indisputable data that Ashwin's marketshare will decline to 36 per cent by 2003. "It also adds that Ashwin would still be the market leader at that time. But what is worrisome is that our margins are dipping with marketshare. Ashwin's net profits declined by 12 per cent last year, as compared to a 10 per cent increase the previous year.''
''It is not as if we were unaware of the changing scenario,'' remarked Sandeep Bhatnagar, Director (Manufacturing). ''We did consciously build entry barriers. But, some of those are no longer sources of unique competitive advantage. Take, for instance, the vendor development programme we pioneered. With import tariffs being progressively reduced, indigenisation is no longer an entry barrier. Or take the cost-leadership plank. None of our competitors can match the brand equity we have built on the value-for-money proposition. While that equity still holds well, it has ceased to be a source of advantage because the market, as a whole, has been witnessing a major transformation. A bulk of the Indian passenger car market is moving away from the low end.'' ''A major challenge lies in changing the mindset of people at Ashwin,'' said Ravi Shivdasani, Director (HRD). ''People in the company are so conditioned to the idea of market leadership that they simply can't realise that the good times are over. Perhaps, it helps to build some crisis scenarios so that everyone at Ashwin gets charged. We need to educate employees on how the market has transformed, almost beyond recognition, in the last few years and, therefore, how the old ways just will not do.'' ''The market is moving, as Sandeep mentioned, away from the low-end,'' remarked Vinod Bhatia, Director (marketing). ''The bottom-priced, sub-Rs 2.5 lakh market, which Ashwin built and nurtured, and which it dominated all these years, is beginning to flatten out. The action is gradually shifting to the next price segment of between Rs 3 lakh and Rs 4 lakh. It is this segment, in which Ashwin has had no major presence that most of the new entrants are concentrating. And it is this segment which will be the growth-driver of the passenger car industry in the years to come. Signs to this end are already evident. While the bottom-end of the market grew by only 25 per cent last year, the new segment grew by as much as 160 per cent.'' ''Of course, the main reason why the bottom is dropping out of Ashwin's main market is the availability of easier financing options today,'' said Krishnan. ''Car loans, offered at zero interest, have narrowed the difference between one price segment and the other in EMIs to just a couple of thousands, providing a strong incentive for customers to revise their aspirations upward.'' ''Our traditional business operating model is breaking down,'' said Mahadevan. ''Ashwin depended on a simple strategy to establish its supremacy in the passenger car market: it concentrated on a single, low-cost model from which it sought huge volumes. That was how we set up a 2.5 lakh car capacity plant at a sprawling 250 acre estate on the outskirts of Chennai. As years went by, we introduced three variants within the existing price band. The strategy worked. A market characterised by low purchasing power lapped up all of Ashwin's offerings. But it is time to redefine what Ashwin stands for as a company, who its customers are, what its value proposition should be, and how it can differentiate its product offerings.'' ''The passenger car market in the country straddles a wide price range today-from Rs 1.9 lakh at the low end to Rs 64 lakh at the premium end. The premium end, confined to the Rs 20 lakh-Rs 64 lakh band, is clearly not Ashwin's forte. We have no business to be there,'' said Bhatia. ''It does not jell with our traditional positioning on the value-for-money platform. But the small car segment (up to Rs 4 lakh) is the market we should consolidate our efforts in and the growing mid-size segment (between Rs 4 lakh and Rs 7 lakh) is the one we should seriously look at getting into.'' |
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Making a
passenger car against an individual order? Like a customised Rolls? Kumar
Mahadevan was amused at the distance the Indian passenger car industry had
traversed. As the CEO of Ashwin Udyog Ltd, the country's leading passenger
car-maker, Mahadevan had led the change in the industry from the front.
And yet, here was his counterpart at the Indian subsidiary of a Korean
major talking of how the company would deliver its premium car at a week's
notice, straight from the assembly line.
