Ethics, morality amidst robust sales?

By C. R. L. Narasimhan

Even after selling more than 5.50 lakh cars during the last financial year (April 1999-March 2000), the passenger car industry does not seem to exhibit either the confidence or the maturity that comes with such success. One hastens to qualify the above observation: the boom conditions in the industry - very likely to extend to the next few years - have not spread the cheer uniformly. The industry is highly skewed and fragmented. Maruti alone sold 4.06 lakhs of those cars and Hyundai 75,660. Telco, with 55,000 of its Indicas, and Daewoo (more than 40,000) have been the other two significant performers. As for the rest, reaching even a five digit figure is some distance and time away.

On the positive side the spur in car sales is directly attributable to the competition. However, industry experts like the Chairman of Daewoo India Mr. S. G. Awasthi are quick to point out that such competition is only at the beginning stage. The Indian market has to evolve not only in volumes and variety but also in terms of ethics. Competition has already worked wonders.

At a very basic level it has created among Indian consumers awareness of a modern automobile. The car manufacturers have done their utmost to widen the market. There has been a tremendous all round transformation in dealerships, service stations, finance schemes and in practically every other area of automobile ownership and usage.

Today's car market does not even remotely resemble what it was just ten years ago. Yet there are glaring shortcomings caused partly by the structure of the industry and partly by the manufacturers' slow or faulty response to the market dynamics.

Fragmentation of the market is a reality. In an economic sense it militates against economies of scale so essential for any manufacturer's success. It is one of the main consequences directly attributable to the manufacturers' lack of understanding of the Indian market place. So far there have been only two valuable lessons learnt: that Indian customers are price sensitive to a degree but given the right choice they have been prepared to move up the value chain - from the previously largest selling A category (Maruti 800) to the B segment (Zen, Santro, Indica, Matiz, Fiat Uno, Wagon R). The Maruti 800 is still a successful car sales wise, but the model itself has had an inordinately long run. Reports say that Maruti is contemplating an entirely new product in that range.

The action has definitely shifted to the next higher segment. Most of last year's action has been here - by way of new models, extension of dealerships, attractive product dissemination and so on. Getting on top of the B category has been a priority for all car makers.

Even for those who do not have ready made models to offer in that segment. All out efforts to woo the customers have their seamy side. For many manufacturers the end seems to justify the means. It is in that context that a whole lot of questionable tactics have come to the fore.

Some of the auto companies' recent communication strategy including advertisements are aimed as much at debunking competitors as spreading information. Some of these questionable tactics go in the garb of comparative advertising. In other instances, it has taken the form of ``planting'' news - say an ``undercutting'' but unsustainable price announcement just a few days before the bookings on a competitor's car are about to open.

There are examples under each category. The list is long but instances that are highly topical today - the Hyundai campaign against Ford's IKON 1.3 which has gone to the MRTP Commission is only one of the several - merit attention if only to speculate on what it seeks to achieve. Ironically, Hyundai has been one of the few genuine successes in India: its success has gone far beyond even the robust sales it has generated on its two models.

A rating agency recently gave the company's commercial paper programme the highest rating. Since all manufacturers will ultimately be judged by their financial performance, Hyundai's success so early on seems exemplary. Most certainly the rules of the communication game will be rewritten. The impetus may come from unexpected quarters. Expensive strategies, not just advertising but in total communications will backfire if they only seek to belittle competitors. Comparative advertising ought to be welcomed in the interests of consumers. It opens up the market further. But it has to be based on a certain value system. Otherwise, the nascent auto industry as a whole will be adversely affected, says Mr. Awasthi.

Send this article to Friends by E-Mail

Section  : Business
Previous : BHEL Bangalore maintains growth
Next     : Canara Bank likely to post Rs. 700 cr. operating
           profit