Home Winning Strategies for the Emerging Indian Market   Text of Presentation by Aditya Vij, President & MD, General Motors India at Business Session -I, "Winning Through Changed Strategies" of 3rd Auto Summit - 17th January 2004, New Delhi. Year 2003 has indeed been a very good year for all of us, and all indications are that we are looking at another successful year ahead in 2004. But, as all of us know, domestic and international economic situation is changing constantly. We would, therefore, have to be in the market place with strategies that address the challenges of the current environment while keeping the future in our planning horizon. Before we get down to detailed strategies for success, I want to quickly run through the current environment and what it augurs for all of us in business in the automotive industry. India is a nation in transition. At the opening of the Auto Expo, Deputy Prime Minister, Mr Advani mentioned, "In 2020 we want to be called a developed nation." I know, there are lot of turbulences on the way but I believe, the path has already begun so that we may be able to call ourselves a developed nation in 2020. We are not only a land of a billion people we are also the youngest nation in the world; nearly sixty per cent of our population is below twenty-five years of age. Indian economy is taking rapid strides - strides that are moving it from being an agrarian economy to an industrial one, from being a developing nation to a developed one. The world is already aware of the Indian software industry prowess. We are one of the biggest exporters of software in the world. Now it is the turn of the business process outsourcing saga to unfold. India has become the hub of the BPO industry, as well. The world is taking notice of our intellectual capital. Corporate giants like Microsoft, Intel who have never moved R&D outside the US in the past are moving to India. We, at General Motors, have recently set up a technical centre in Bangalore and are looking at the first science lab outside North America ever in India versus quite a few competing countries, like China. The Indian economy has never had its so good. We have just achieved in the second quarter, 8.4 per cent GDP growth and the forecast is upwards of seven per cent for the financial year. Stock markets are in the middle of a strongest ever bull run. Rally, this time, is led by market fundamentals and not by speculation. The foreign exchange reserves have, for the first time, crossed the hundred billion dollar mark. And there is an unmistakable air about the government's thrust on stage two reforms. It is just a matter of going through general elections and I am confident that the stage two reforms will be announced rapidly. The' government seems to be firm about the vital ingredients of economic growth, disinvestments and infrastructure development. The Golden Quadrilateral project is well on schedule. Indian road network of nearly 2.5 million kilometres is growing by whopping eleven kilometres a day. The Indian automobile industry, too, has had one of the best years in 2003. For the first time in history, the industry crossed the one million units mark of 4-wheeler sales. In fact, it is close to one million seventy thousand units in 2003 calendar year, a growth of twenty one per cent over the previous year. According to GM forecasters, it is expected to grow at eleven per cent compound rate per annum for the next decade.    ▪  We would have to be in the market place with strategies that address the challenges of the current environment while keeping the future in our planning horizon. ▪ India is a nation in transition and the path has begun to enable us to call ourselves a developed nation by 2020. ▪ Indian Automobile Industry is expected to grow at 11% compound rate per annum for the next decade.   Of course, as we have noticed, we go through peaks and valleys. We are on an upswing right now. But, if you take the average, we are looking at an eleven per cent growth in the next decade, which makes it one of the fastest growing markets in the world after China. Year 2003 was a special year for the automobile industry in more than one ways. The year saw huge growth in the top end passenger car segments, such as, the high-end luxury D2, C2, and C1 as it is defined. Readily available financing options and reduced interest rates have made the bigger and expensive cars within reach, thus fuelling high growth in those segments. The year was also the year of SUV s. The year saw the launch of five new SUVs in the market. The global, widely travelled Indian citizen would settle for nothing less than the best. So, we have started seeing the latest technology in India. There is a growing demand and need for specific cars. We saw the emerging needs for niche segments such as SUVs, MUVs and super luxury sedans. Consumerism has finally come to India. India saw surge in the affluent class and upper middle class, a class with higher purchasing power and willing to spend big money. While the population growth during 1996-97 to 2000-2001 was ten per cent, the affluent and upper middle classes grew by thirty five per cent and thirty per cent respectively. Growing affluence and willingness to spend augurs well for all of us in the automobile industry. The passenger cars and utility vehicles in India currently have a very low penetration of 4.2 per cent, as Mr Jagdish Khattar too, constantly reminded us. That coupled with growing affluence provides us with a huge growth opportunity in the years to come. There are nearly thirty five to forty million two-wheelers on Indian roads. These again are opportunity segments for cars and utility vehicles in the years to come. Cars, today, are not being seen as a one time, once in a lifetime purchase as they were in the past. The ownership lifecycle for new cars in affluent households has reduced from 4.7 years in 1999 to 3.8 years in 2002. Also, multiple car households are on the rise. And, a rise in working women population is further fuelling the demand for cars. All this is further helped by the reduction in consumer financing rates, which have fallen from fifteen per cent in 2000 to nine per cent last year. While the need of the hour is to consolidate partnerships to march with matching footsteps and closer ties on the road ahead, it is imperative to emerge as a winner in competitive times. We have to generate innovative solutions to milk the value chain. We have to explore new avenues that cater to the emerging requirements of the customers, for example, insurance, which, through the privatisation route has come of age in India as well. Leasing and financing options, workshop revenue, and other initiatives, such as, propagating a profitable accessories business offer other avenues in the value chain. Marketing lifestyle merchandise and promoting used car business are other such options. These have to be supported by the new age slogan of CRM i.e. know your customer. We still struggle as an industry to know our customers in detail. Are we able to translate all our customer requirements into our products? Customer relationship management will help us keep our customers for lifetime. With an array of products and brands to choose from, the consumer is king today. Gone are the days when we had to make a couple of calls to get a car allocated. Today, you call a dealer and the vehicle will be delivered at your doorstep the same evening. Every industry is reaching out to the customer in order to provide better service. The customer has to be seen as not a one-time player but an individual who will provide sustained revenue source over the entire product ownership period and even after that. Needless to add, a more than satisfactory ownership experience would also mean repeat purchases from existing owners at lower activation costs while providing added, advantages of positive word of mouth. We, at GM, had done some benchmarking a few years ago in Europe. It costs us five times the amount to get a new customer than it costs us to retain an existing customer. Therefore, we in the automotive industry, and specifically at the dealership level, need to understand that keeping an existing customer is probably the most valuable resource we have. The new age service industries, such as, financial services and airlines have brought about a complete change in service paradigm and automobile industry cannot ignore these shifts. The influx of ATMs in today's lives is just a case in point. Automobile industry cannot run away from customer expectations of higher, better and 'at your doorstep' service levels. This implies having customer at the heart of the business, understanding the customer needs better than others and fulfilling those needs through better service. This means, if customers are free only on a Sunday, then being open on Sundays is imperative. If customers are seen at one stop shop in a mall, we need to be present at the mall.    ▪  Growing affluence and willingness to spend augurs well for the automobile industry. ▪ The need of the hour is to consolidate partnerships to march with matching footsteps on the road ahead and generate innovative solutions to milk the value chain. ▪ We still struggle to know our customers in detail. ▪ It costs five times the amount to get a new customer than it costs to retain an existing customer.   Another issue that all of us will have to address soon is the increasing complexity at dealerships. The launch of more and more products by each manufacturer will result in each dealership having to display vehicles ranging from a mini car, what we call A and B segment in India to an expensive product like a sports utility vehicle. This means having to deal with diverse customer profiles and having the required infrastructure to handle such customers and products. Interestingly, as we added product range to our portfolio late last year, we realised that it is important to have separate sales teams to address different kinds of customers. The requirements of one customer group may not be quite the same as those of another one even within the car industry. The demand for ever improving service standards would result in the evolution of a dealership into a brand than just a delivery outlet. The service, one dealer provides over the other, will be the brand strength that he will bring to the table. And, local marketing activities that will be conducted by a dealer will be its brand advertising and promotion. Therefore, in the future, not only would we talk about automotive brands, the dealer will become a brand point as well. When a customer has a positive experience at a dealership and the dealer is able to brand it well over time is what is likely to sell future products. At General Motors, we had lot of introspection as to how do we grow in the future? How do we see the future? We realised that with disappearing international boundaries in business, today, a new market place is evolving. This is a phenomenon, we at General Motors have captured in our vision and thinking while outlining the future. The new market place will consist of two distinct market places, the developed market and the developing market. We need to understand that we are in transition. So, we will have to watch how we walk from being a developing country to a developed one. Both developed and developing markets are driven by a need that is slightly different today, different lifestyles, different empowerment levels, which are obviously defined by the local populace of the region. In this new market place, the manufacturers need to understand opportunities and challenges, given the power shift to customers. We need to understand the changing and evolving nature of competition and explore some of the major business trends affecting global companies like General Motors, Ford, Toyota, etc. We also need to understand some of the major opportunities and challenges faced by global businesses given the major business trends, and also understand the new pressures being placed on global businesses from financial, environmental and regulatory constituents. Now, what do they take to win in the market place. Business entities have specific objectives primarily driven by motive of profit for the organisation but also a service to the community at large. Today, for winning in the market place, be it developed or developing, it is imperative for 'auto manufacturers to understand the linkage between the products portfolio and services and also to understand, while executing their business model, that it is necessary to win in the market place. It is important to forge stronger relationships with the customers. Another market strategy that you need to follow is to work towards the growth of your basic business. This also implies that stick to what you know well and continue to do well. For the developed markets, we need to focus on the augmentation of products and services and introduce additional value added services. For the developing markets, we need to focus on low cost urban mobility and cost was the reason mentioned even by the Hon'ble Minister today. We need to be always conscious of cost and continue to provide basic transportation. That is where we are going to see the future growth. So, I think, we are in a state of flux, in a state of change, which a lot of us have begun to recognise and adapt to. As we move ourselves from a developing economy to a developed one, we need to be consciously aware of the changing trends. And, with today's communication level, it is not difficult to keep abreast with the changing trends. Industry will be a winner together with you.    ▪  The demand for ever improving service standards would result in the evolution of dealerships into a brand than just a delivery outlet. ▪ With disappearing international boundaries in business a new market place is evolving. ▪ Business entities have specific objectives primarily driven by motive of profit, but also a service to the community at large. ▪ A market strategy that needs to be followed is to work towards the growth of one's basic business. This implies stick to what you know well and continue to do well.