CRASH TEST

It’s easy to gauge the safety of a house. The strength of the doors and windows will indicate that. But what happens inside a four-wheeled vehicle! Mere doors and windows don’t protect the passengers sitting inside the car. There are multiple methods that have been incorporated by the auto companies in order to address this common concern. Seat belts, airbags, ABS, EBD and collapsible steering are all such items that aim to improve the safety index of a passenger car. Now, how does a company or an auto association regulate this index? The answer is crash tests. There are various forms of crash tests that are pressed upon the vehicles and the effects are rated by experts depending on the damage done to the dummy sitting behind the wheels. 

The countries across the world have resorted to various acceptance levels of this rating, largely depending upon the development of the domestic auto industry.

The various forms of crash testing are:-

• Frontal 
•  Frontal off-set
• Side on
• Steering impact
• Seat-belt anchorage
• Rear impact
• Roof strength
• Roll over testing
• Component testing like- a.     Pedestrian; b.      Child safety

The testing methods of some of the above mentioned ones are given below:-

FRONTAL

·         40 % ± 20 mm overlap in 56 km/h. (EU); 30 mph 0^o ± 30^o (USA)

·         Deformable barrier (AL honeycomb).

·          Two Hybrid III dummies in the front seats (injury criteria).

·         No door is allowed to open during test and the front doors may not bejammed.

·         It should be possible to open at least one door per passenger row without tools after crash and the maximum force needed to unbuckle the crash test dummy is 60 N. Further on, the dummy must be removable without adjusting the seats.

·         The fuel leakage may not exceed 30 g/min.

India follows the USA version.

SIDE IMPACT

·         A movable deformable barrier (MBD) weight of 950 ± 20 kg

·         Ground clearance: 300 ± 5 mm

·         Velocity: 50 ± 1 km/h (EU); The barrier strikes the vehicle oblique to simulate a speed of

30 mph for the striking vehicle and 15 mph p g p for the struck vehicle.(USA)

·         EUROSID crash test dummy

India follows the USA version but only the static impact

REAR COLLISION

For this test, a moving barrier of weight 4000 lbs and speed 30 mph is made to hit the car.

COUNTRY – WISE CRASH TESTING REGULATION

India

·         Frontal crash

·         steering impact

·         seat-belt anchorage

Europe

·         Steering Mechanism Impact

·         Seat Belt Anchorage

·         Restraints and Safety Belts

·         Seat Anchorages & Head Restraints

·         Non-incorporated Head Restraints

·         Rear-End Collision

·         Child Restraints in Power Driven Vehicles

·         Frontal Collision Safety

·         Occupant Protection in Lateral Collision

United States of America

·         Interior head impact

·         Interior head impact (Pole)

·         Interior head impact (Upper)

·         Head Impact

·         Head Restraints

·         Steering Control Impact

·         Steering Control Rearward Displacement

·         Seating

·         Occupant Crash Protection

·         Seat Belt Assemblies

·         Anchorages for Seat Belt Assemblies

·         Child Restraint System

·         Protection from Side-Impact

·         Protection from Rear-Impact

·         Anchorage Systems for Child Restraints

KOREA

·         Full-wrap frontal collision test (against a rigid barrier at 56km/h)

·         Offset frontal collision test (against a deformable barrier at 64km/h)

·         Side collision test (against a moving barrier at 55km/h)

·         Pedestrian (head and leg) protection performance test

·         Neck protection test in a rear-end collision

·         Braking performance test

·         Roll over test

CHINA

·         Full-wrap frontal collision test (including AF05 passenger in rear seats)(against a rigid barrier at 50km/h)

·         Offset frontal collision test (including AF05 passenger in rear seats)(against a deformable barrier at 56km/h)

·         Side collision test (against a moving barrier at 50km/h)

·         Installation seatbelt reminder, ISO-FIX anchorage assessment

AUSTRALIA, NEW ZEALAND

·         Offset frontal collision test (against a deformable barrier at 64km/h)

·         Side collision test (optionally pole test)(against a pole at 29km/h)

·         Pedestrian (head and leg) protection performance test

·         Installation of ESC equipment

This clearly shows that cars available in the Indian market are not the safest. ARAI needs to bring in stricter norms for the companies to adhere. Else, the customers will continue to suffer from lack of safety in the cars.

PASSENGER CAR SEGMENTS – INDIA

A 3-million huge industry cannot be devoid of some classical segmentization. India’s passenger car industry is broken down into multiple segments. This is done for ease of understanding and improved competition among manufacturers to get bigger pies of particular segments.

While there are multiple ways of segmenting this industry like based on price and engine size but the most prevalent and the official method is based on dimension. i.e. the length of the vehicle under consideration.

A1 Segment - Mini – Up to 3400mm (M800, Nano)
A2 Segment - Compact – 3401 to 4000mm (Alto, wagon r, Zen,i10,A-star,Swift,i20,palio,indica etc)
A3 Segment – Midsize – 4001 to 4500mm (Manza, City, Sx4, Dzire, Logan, Accent, Fiesta, Verna etc)
A4 Segment - Executive – 4501 to 4700mm (Corolla, civic, C class, Cruze, Optra, Octavia etc)
A5 Segment - Premium – 4701 to 5000mm (Camry, E class, Accord, Sonata, Laura, Superb etc)
A6 Segment – Luxury – Above 5000mm (Mercedes S class, 5 series etc)
B1 Segment - Van – Omni, Versa, Magic etc
B2 Segment - MUV/MPV – Innova, Tavera, Sumo etc
SUV Segment - CRV, Vitara etc

While its easy for SIAM to segment the vehicles as per dimensions but for consumers, it becomes a tad difficult. This is primarily because of the widely varying / spread out prices of the vehicles.  A 2 segment, as per the above criterion, will range between 3 lakhs to 7 lakhs. And A 3 will be between 4.5 to 9 lakhs. Such wide variation in prices has distorted the image of segments in the minds of consumers. 

Hence, for simplicity purposes, a different segmentation has cropped up. The details are as follows:-

A Segment – Approximately below 3.5 lakhs - Alto, Eon, Nano, Spark, 800
B 1 Segment – Hatchback largely below 6 lakhs – Wagon R, Indica, Beat, Santro, A Star, Micra, Estilo
B 2 Segment – Hatchback majorly below 7.5 lakhs – Swift, I 10, I 20, Ritz, Figo, Polo, Liva, Vista, Jazz, Punto, Brio, Fabia, Pulse, Aveo UVA
C 1 Segment – Sedan below 8 lakhs – Dzire, Indigo, Etios, Sunny, Fiesta Classic, Verito, Accent, Ambassador, Aveo

C 2 Segment – Sedan below 9.5 lakhs – Linea, Manza, Verna, Rapid, Vento, City, SX 4, Verna New, Optra
D 1 Segment - Premium Sedan below 15 lakhs – Corolla, Civic, Cruze, Laura, Jetta, Fluence
D 2 Segment – Luxury Sedan below 25 lakhs– Superb, Passat, Accord, Camry, Sonata, Teana, Kizashi
B1 Segment - Van – Omni, Versa, Magic etc
B2 Segment - MUV/MPV – Innova, Tavera, Sumo etc
SUV Segment - CRV, Vitara etc

Now, lets see how the volumes stack up segment wise.

If we consider the 1^st Quarter of 2012-13, then total vehicle sales has been around 6.32 lakh units.

The hatchback segments has totaled to 56% of the entire passenger car sales in India. This comes to 355857 units. This clearly shows the popularity of smaller cars in the Indian market. Alto continues to be the top selling brand with 17422 in July. It is followed by Swift (11421) and Wagon R (9582) – all Maruti brands. This is an indication of how well the Maruti team has understood the Indian market. i 10, I 20, Nano, Beat, Figo, Santro & Polo are some of the high selling models in these segments and these models continue to clock more than 3000 units monthly. Nano has been a disappointment so far with huge expectations but it is showing some kind of resilience off late. Lets see how Tata Motors team takes this special car ahead!

 

As a segment, the Utility segment is showing the maximum growth. In fact, this segment has outclassed the other popular segments of A, B 1 & B 2.  With 128110 units under its hood in the 1^st quarter, the segment is definitely making some good progress.  Maruti’s Ertiga, Mahindra’s XUV 500 & Bolero has been instrumental in pushing the volumes of this segment. Innova and Omni too are raking in good numbers. What has been disappointing is the performance from the Tata Motors stable. Venture, Safari and Sumo have been showing steady decline in the numbers per se but definitely possess huge potential to challenge the other models.

Among the sedans, Maruti Dzire continues to lead the pack. With 11413 numbers in July, it is way ahead of its next model Verna (5300). The iconic models of City, Linea, SX4 have been showing consistent degrowth and seriously calls for some introspection by their respective manufacturers. Vento & Rapid also showed some slack but given the aggression of VW and Nissan, it wont be long before they start to pull in good numbers. Tata’s Indigo and Manza were on a slightly negative terrain all these months but somehow the trend has been reversed in July. 6816 for these 2 models augurs well for the company and lets hope the reversed trend continues. Frankly speaking, these 2 models are real value for money and pose serious threat to Maruti’s Dzire.

’12-’13 BUDGET ANALYSIS – AUTO INDUSTRY

On 16th March, Honorable finance minister Mr. Pranab Mukherjee presented the budget for 2012-13 – a year that heralds the beginning of the 12th 5-year plan. The overall review of the budget has not been very positive though some quarters have expressed happiness.

Let us understand how some of the budget points impact the automobile industry.

The major impact points are as follows:-
1. Service tax rate hiked by 2% (from 8% to 10%)
     -> This increases the vehicle prices by 2% almost flatly. So for vehicles falling in the price bracket          of 3 – 10 lakhs, the price increase can be approx 6 – 20 k.
     -> My personal feeling is that this will not have any negative impact on the sales numbers;          attractive schemes and value for money purchase will be differentiating factors
2. Service tax hike for luxury cars – vehicles that were attracting a duty of 22% will now be taxed 24% and those with 22% + 15,000 will be taxed flat at 27%
     -> Certain vehicles having more than 1500 cc engine will fall under this bracket
     -> The impact on masses will be minimal
3. Customs duty on CBU’s of large cars / MUV’s / SUV’s with price >= $40,000 increased from 60% to 75%
     -> Will impact the imported vehicles from the stables of BMW, Audi, VW to name a few
     -> This is a favourable point for our country:-
         i. The customer willing to shell out 35-50 lakhs will not mind shelling out 2-3 lakhs more              because of the hike; hence increase in revenue for the govt
         ii. An indication to these auto majors to shore up their assembly units in this country. No hike              on CKD’s; hence these companies should look to build assembly units in India. Favourable              in terms of employment and local revenue generation
4. Customs duty waived off on parts required for research on hybrid vehicles
     -> Will boost research and have a long term positive impact; but no short term impact

There goes the major impact points for the sector. Lacklustre to say the least. Nothing that will boost the sales of the vehicles. Automobile industry is considered to be a precursor to the economy movement and not a sibling of the power, infra & agri industries. Thus, the govt should have announced some favourable goodies that would have helped this sector push for growth.

With regards to companies, the Indian manufacturers neither stand to gain nor lose. The foreign carmakers do find themselves on a sticky wicket with the push to shore up their Indian assembly unit plans. Additionally, companies with big vehicles in their backyard will be hit by the selective hike in service tax rate for luxury cars.

Now, coming to minor impact points.
1. Customs duty on imported equipments for agriculture being waived off
     -> This is a boost to the agriculture sector
     -> Hence the farm equipment companies like Mahindra stand to gain. Tata Motors Commercial          Unit will benefit very marginally from this too
2. Tax on interest payments on ECB reduced from 20% to 5% for power, infra and fertilizer industries
     -> This is boost to the power and infra sector
     -> Hence Tata Motors Commercial Unit, Ashok Leyland and Eicher motors stand to gain from this
3. NSDC(National Skill Development Centre) gets more project approvals and fundings
     -> 3 sector are already functional and automobile is one of them
     -> This will help create more auto-trained manpower and thus serve the numerous existing and upcoming automobile factories
4. RRB (Regional Rural Banks) being extended till 1k and 2k population group villages
     -> Boost to credit facility penetration
     -> Hence will have a mild positive impact on auto industry. Mahindra, Tata Motors can look to          gain from this

These minor points do give a positive signal to the auto industry but when added with the major points, the impact is again miniscule.

If we analyze company wise, Mahindra looks to gain the maximum while Tata Motors and Ashok Leyland will have almost no impact. The others will face marginal heat from this budget.

Marketing Stretagy - Tata Motors

It was a thing of the past that same outlets and dealerships used to sell both Passenger cars and Commercial vehicles. Not that nobody knew how to market but the industry dynamics was such that automobiles used to be "Pull" products. Nowadays, its a mix of both "push" and "pull". Hence the companies are giving more and more importance to the 4P's of marketing - product, promotion, price & place.

Lets see how Tata Motors is doing it.

Products are aplenty in the company's stable. From 1.6 lakh's Nano to a 1.1 crore Jaguar, this company boasts of the most versatile product range in the world. These products cater to various target segments and are thus projected differently. The promotions are unique for each brand and tend to focus on their targetted segment group. e.g. Safari's "Reclaim your Life" is focused more towards the adventurous-yet-successful group of people. Nano's "Khushiyon ki Chabi" focuses on value for money and family emotions. So, these ads are meant to make a space in the particular brand's target segment. Price of the product too helps ascertain the message conveyed through various ads. The company uses various pricing strategies too and that also differs across the brands. e.g. Nano's initial pricing of 1 lakh was a penetration pricing where it was more important to increase market penetration. Presently, the pricing can at best be termed as cost plus pricing, where a certain margin is added to the cost of manufacturing. Aria's pricing on the other hand can be easily branded as a creamy strategy. It is deliberately kept on the higher side so that public views it as a premium product. So pricing is a big factor in automobile industry where there's a host of models in the price bracket of 3-8 lakhs. Now lets discuss the most important P - Place. Place indicates the location where the suppliers come i.e. manufacturing plant and where the customers come i.e. dealerships.

Tata Motors has multiple manufacturing locations spread across the country. This helps in spreading the tax gains that state govt's offer to the company in exchange of investment. It also ensures that the company ties up with multiple suppliers and thus reduce its dependence on few selected suppliers. In case of dealerships, network reach is the road to success. Maruti, Hyundai has shown it. Tata Motors is following it strongly now but with a difference. Instead of opening full range dealerships, Tata Motors is opening up segment specific or Line of Business specific outlets. e.g. Nano outlets, Utility Vehicles outlets, etc. This makes sense as then the market penetration increases at a very rapid pace and dependence on large entities reduce. Within a few month's time, the company has managed to open up more than 100 such outlets across the country. Biggest positive points for these outlets are a) Low turnaround time (b) Low break even point (c)Faster service to the customer. The only negative aspect might be of customer experience and am sure the company will make policies to manage that. What a great idea indeed.

It wont be long that this unique network expansion drive will start reaping rich results for the company. Then others will surely follow suit too. And the industry will be back to BOOM once again!