The Fiat 500 is not a chick car!

It is funny how at times celebrity endorsements have the opposite impact on product popularity. Recently, I stumbled upon the Jennifer Lopez Fiat 500 campaign in the US (Official Fiat 500 video - Youtube). While there is nothing wrong in J Lo trying to bring back an iconic car to life, that too in a market where it never had any presence to start with, I still could not help but wonder why the Fiat guys could not get hold of a better brand ambassador for the cute little car.

As I started reading and looking for consumer responses to this particular campaign, I was not surprised. Most of the people, especially the ones aware of the Fiat brand and the 500, were not at all entertained. Simply because there is no relation between J Lo and the 500. Also the fact that J Lo is not a certified auto freak did not help either. For the purists, the whole campaign was 'tasteless.' Further, it is rumored that J Lo used a body double for the scene in the commercial when she zips around her 'block' in the Bronx and that she fumbled as she tried to open the car’s door in a live television appearance during the American Music Awards (NY Times). These 'misadventures' did not go too well with the audience. Neither, could J Lo convince the auto enthusiasts, nor could she convey the message that she still is 'Jenny from the block' and she loves driving the cute and maneuverable 500. In fact, Laura Soave, the Head of the Fiat brand in North America, lost her 20-month-old job especially due to the J Lo-500 campaign.

However, the ad campaign cannot be totally brushed aside. It did attract attention, although not from the intended target, but from teenagers and younger consumers who have no idea about the past antecedents of the 500. The campaign went a long way in branding the 500 as an essentially women's car. As a damage control mode, Fiat has now roped in Charlie Sheen for the 500 Abarth (the souped up version of 500) campaign (Youtube). I am still not sure whether an aging womanizer saying "Not all bad boys are created equal" will woo the potential 500 buyers.

Finally, Fiat seems to be getting it right with the Let your Italian out campaign. In fact, current Fiat owners and Fiat enthusiasts seem to have given the thumbs up to this advertisement (Fiat500owners.com). Hopefully, Fiat should be able to reach its ~5,000 a month sales figure for the 500 now.

Moving on to my home market, India, Fiat chose the former miss-Universe Lara Dutta as a brand ambassador for the 500. Now, I do respect this lady for her beauty and intellect, but somehow she just does not seem to be the right representative for the car. Earlier, the Palio was endorsed by cricketing legend Sachin Tendulkar. And Sachin autographed bright yellow Palios were quite common in the market - meaning the campaign was a success. However, I cannot say the same for the 500, which was introduced in the Indian market in 2008. There have not been much buzz about the 500 in the Indian market (mostly due to its ostentatious pricing) and I seriously doubt that the 500 will be branded as the rich lady's toy car with the present brand ambassador. Could not have Fiat roped in auto enthusiast Sanjay Dutt to be the brand ambassador instead?

Happy 2012!

Warm New Year wishes to you all! I hope that this year brings a lot of peace and happiness in your lives and sees your dreams come true.

Also, let us hope that we see a lot of action in the automotive industry this year in terms of new technology, models, better fuel efficiency and safer cars.

Electric vehicles in India

Any topic on electric vehicles (EVs) in India would invariably veer (at least for now) toward the Reva, by the Mahindra and Mahindra and Maini group joint-venture (Mahindra Reva Electric Vehicles Private Limited). Founded in 1994 by Sudarshan Maini and based in Bangalore, the Reva Electric Car Company, is involved in designing and manufacturing of compact EVs. In fact, the Reva (the present generation called the REVAi) is the largest selling EV in the world, not because of its range (80 kilometer) or its looks, but simply because of its price. The Reva (priced at approximately US$7,000) is five to 142 times cheaper than the Nissan Leaf and the Tesla Roadster, respectively!

Anyway, this write-up is not about the Reva, but to take the Reva as an example and try and discuss the ‘plight’ of EVs in India.

I have stayed in Bangalore for about four years before moving up north to the Delhi NCR. During my stay in Bangalore, the Reva was a pretty common sight, and I would see at least one of those EVs on my way to office or back. However, in the national capital region, I have failed to spot a single Reva in the one and a half years that I have been here. This made me ponder about this disparity, because Delhi and its satellite townships are a fair representation on the automotive scene in India.

I was fairly surprised and began thinking about why there is this divide in accepting an EV across different cities. And also on the fact that if there were to be more EVs in India, would there be a difference in mass acceptance, based on demographics, customer taste and infrastructure availability, or rather the lack of it.

Here is what I figured out:

• Infrastructure: In Delhi, people fight for parking space. They get physically violent and at times your car is parked more than 300 meters from where you stay. In Bangalore, people usually have verbal altercations and generally mange to park their cars where they can see it. In some places in Delhi, the lanes are so narrow that it is almost impossible to park your car next to your house without causing an impediment to traffic. So, keeping an EV in Delhi can be quite a task, because recharging it would be a nightmare. Even office parking slots do not provide charging points for EVs. Essentially, it is much more practical to own and operate an EV in Bangalore, compared to Delhi.

Also, after sales and service for the Reva is negligible, if not altogether absent. As a consumer, everybody expects their car to be taken care of in an authorised service station for at least three years post-purchase. Mahindra and Reva need to increase the number of after sales service centers for people to feel comfortable buying their product. In fact, both Mahindra and Reva need to leverage the Mahindra service network and consciously draw consumers’ attention to the fact that the Mahindra network is there to support Reva consumers.

• Power scenario: In the satellite townships of Delhi, such as Gurgaon, power supply is very erratic. Power-cuts last up to eight hours at a stretch, and eight-hour-long power-cuts are not one-off incidents, they happen on a weekly basis. So, if you are in Gurgaon, even if you could park your EV in your living room, you still would not be able to recharge its batteries. Comparatively, Bangalore has fewer power-cuts and they generally do not last more than an hour. Also, electricity is far dearer in the NCR region – it could go up to INR7 per unit at places.
• Customer taste and requirement: This is a very subjective factor and it holds true not only for EVs, but all automobiles in general. For instance, you will see more white cars up north and more black cars down south. Indian consumers have different preferences for different colors in different regions. Coming back to EVs, no doubt the Reva back-up as the second car in all households in Bangalore, but in Delhi, the second car would be a Chevrolet Beat, or even a Tata Nano, but never a Reva. Quite possibly, because of the other factors I mentioned that go against the Reva, but also possibly because the Reva, is not up to the taste of consumers in the North. Bigger cars still hold an appeal up North. (You might want to argue about the Nano in the previous sentence; but the Nano is much roomier and has a sense of pride in ownership due to all the news it generated and because it is from Tata)
• Government initiative: It is a known fact that new technology cannot find mass-acceptance without government support. True that the Indian government has started, or at least given thought, to providing subsidies for EV and alternate powertrain suppliers and manufacturers. That is the first step and not sufficient enough to drive EV acceptance in India. Consumers should also benefit for choosing lesser polluting vehicles. Also, state governments should do away with taxes and levies on selling EVs. This will bring a price uniformity for EVs across states.

Therefore, I think that for EVs to be successful in India, we need to consider different markets (read cities) as unique and offer different solutions for the mass acceptance of the EV. A solution for the success of EVs in Pune, will not work in Chennai. India needs to be segregated on the basis of the different parameters mentioned above. However, on a national level, the issues of power and infrastructure shortage, state government encouragement, and the likes will still act against the interest of EVs. For that matter, pure-play EVs might not be the solution to clean transportation in India at all. Maybe, we need to replicate the success of CNG buses in the passenger vehicle domain, or maybe, we need to think of more indigenous alternate fuels, such as biogas. In fact, cheaper, cleaner and efficient last-mile connectivity could become a panacea for traffic congestion and vehicle pollution in India. We could, in theory, bypass the trials of alternate powertrain and be an example in efficient public transportation solutions, just like we bypassed the muscle car era and hopped straight on to compact cars, which are only beginning to make their mark in older and more mature automotive markets.

About time Honda India pulls up it socks

The other day I was thinking about Honda India's strategy, or rather the lack of it. Today I read in the Wall Street Journal and the Times of India that Honda has cut the price of its entry level sedan, the City by 4-8 percent. This will bring down the price of the City by at least INR44,000 from the present price of INR749,000 (ex-showroom price for the base model in New Delhi). A rather delayed reaction to present automotive market dynamics in India, but a very welcome one, nonetheless.

Although not as big as its Japanese brethren -- Toyota and Nissan -- Honda enjoyed a first-movers advantage in the Indian automotive market during the mid-90s, and has since then earned an enviable brand recall as a maker of quality and reliable cars. During the same time, other global OEMs such as GM, Ford, Hyundai and Renault too were trying to grab a share of the gradually growing Indian passenger vehicle market pie. The Americans and the French failed mostly due to outdated products and wrong calculations of the market pulse. The Koreans, due to the right product -- a feature rich hatchback, the Santro -- not only made a successful entry, but went on to become the number 2 in the 3.5 million strong current market.

Honda, on the other hand ignored the 75 percent share of the auto market -- hatchbacks, and focused on sedans (globally, the small car segment, or the sub-C segment), and launched the City. At the time of the City's introduction, the sedan segment in India was dominated by the Maruti-Suzuki Esteem and followed by the Ford Escort, the Opel Astra and the Daewoo Cielo. The American cars were based on outdated platforms and never made it big in India. The Esteem and the Cielo were popular models because they were affordable and comparatively more reliable. However, the quality and performance aspects were totally missing. It was this large gap that the Honda City filled along with the Mitsubishi Lancer (the Lancer was the only other sedan in its class that provided competition to the City).

Since then, the City has been bread and butter for Honda India. Honda asked a premium for the City as there were no other products to compete with it and rich Indians complied. Some defied and bought the Lancer instead. Honda's India operations were profitable. However, the party was spoiled as the average salaried Indian started earning more and other OEMs started looking at the Indian market in earnest and launched competitive models. Honda's sales volumes took a hit.

And its been down for a while. Honda plans to boost sales of the City by this price cut. However there are deeper problems within Honda India and it products.

Here is my take on Honda India's issues:

• Pricing - The Indian automotive market is highly competitive now. At three-fourths of the City's cost Hyundai and Maruti-Suzuki offers sedans with more features and creature comfort. Honda's lone hatchback, the Jazz, is priced around INR650,000. At the same price point most OEMs offer sedans. This is an important factor as the car is still an aspirational object for majority of buyers in India -- bigger is still better.
• Local sourcing - Honda sources ~60 percent of the components for it cars (the Jazz, the City, the CR-V and the Accord) locally in India. Its competitors source 80-90 percent components locally and are aiming for 100 percent local sourcing. Local sourcing reduces input costs for automakers and is reflected in the bottom line of the company's books. It also helps reduce custom duties in many essential components, such as engines.
• Diesel powertrains - With petrol prices nearly touching INR70 per liter, new car buyers are seriously considering diesel vehicles. Even if petrol and diesel prices were to be equal, ~35 percent Indian car buyers (personal estimate) would still prefer diesel powerplants. So, literally Honda could add 35 percent more sales volume. Anyway, with diesel engines becoming more efficient and less polluting, it is a very bad strategy to not have diesel powertrains, not only in India, but globally. Honda and Mitsubishi are the only OEMs in India that do not have a diesel option.

Three basic points, and Honda could once again dominate the entry-level sedan market in India.

The Chinese are here!

Beijing Automotive Industry Holding Co., better known as BAIC plans to sell commercial vehicles in India. Good news, bad news? I say premature news.


Well, you see, China and India are the poster children of the global economy at present, especially in the automotive industry and these two countries are trying to make their mark felt in the industry. They drive substantial global sales, but do not have domestic companies that contribute much, yet, to those sales figure. China and India are core competitors in the automotive industry, like everything else. When it comes to these two countries, it is not about the companies, but about the countries. These two countries are growing at an incredible pace and they will be the architects of the present and future world economy. 


So, a rapidly growing Chinese company trying to sell its wheels in India, or rather, to quote Bloomberg, "start its overseas expansion by entering the Indian market", is bad news for India's rapidly growing automotive companies (talking in terms of the global automotive scenario) like Tata Motors, Mahindra&Mahindra, Ashok Leyland and also for the smaller International Cars & Motors Ltd. (that is Sonalika - the Toyota Qualis look alike - for people unfamiliar with the name of the real company).


Okay, enough of cryptic clues. The crux of the matter is, both Chinese and Indian auto makers are trying to go global in a big way - they have the same goals, so it does not make sense for them to mutually compete in each other's domestic markets. India has a maximum of 10 auto makers, both passenger and commercial (yes, including Hindustan Motors and Premier), China has around 130 indigenous automakers!


Both these markets need to break even and their domestic auto makers need to win a decent pie of the global automotive market before they can start competing with each other. They are already struggling hard enough to make their presence felt among the Detroit and Germany big 6.


Here is the piece of news that got me started in the first place.

M&M acquires Ssangyong - Can we say that finally?

Okay, we have been hearing about the Mahindra & Mahindra acquisition of Ssangyong for a while now and no further developments have been heard of; however, there is definitive news that M&M will buy a majority stake in the smallest of the Korean car makers, Ssangyong, by end-2010 or early 2011. At this stage there are no details of the amount involved in the acquisition. M&M mentioned that it will go through the final due diligence of Ssangyong sometime in September 2010 and then fix the deal.

Not many people have seen Ssangyong cars, rather SUVs - that is what this Korean car maker specializes in - low-priced, robust SUVs. The Korean SUV maker has vehicles like Rexton, Kyron, Rodius and one sedan in its entire line-up - the Chairman.

M&M, through this deal, can expand its line-up of SUVs; but when it comes to sedans - the basic ingredient for any versatile car maker - I can only hope that M&M does not have another sour experience like the Logan. Ssangyong, on the other hand, will not go bankrupt and have access to more markets and M&M's technology. With this deal, M&M is giving out all the signals that it intends to focus on SUVs - at a time when people are selling off their gas guzzlers and shifting to more fuel-efficient vehicles. Lets hope that M&M becomes the phoenix of the SUV market , and brings out SUVs that suit the taste and needs of the present and future markets - vehicles with more high-end torque, yet thrifty on fuel consumption.

Here is a ball-park SWOT analysis of M&M:

Strengths: Well established as an utility and farm equipment manufacturer. Has dealer networks in the US, South Africa, Latin America and other key markets. Diversified business and hence the group has financial stability. Few model line-up in the passenger vehicle segment, hence less complexity. Has the advantage to design a new global vehicle platform and bring out different products. Has been making vehicles since the 1940s and has a lineage of sorts.

Weaknesses: Does not yet have a mass-market sedan or hatchback - and hence missing out on the major passenger vehicle market share. Has not yet reached the levels of international collaboration needed to bring out world-class petrol/diesel engines in the 1.3 to 1.6 liter displacement range, to be globally viable. Vehicle platforms are dated and the company is still perceived as essentially commercial vehicle manufacturers. Cannot really go global with just utility vehicles and SUVs. The Scorpio cannot sustain M&M for long.

Opportunities: Emerging markets in South Asia, like Vietnam, Thailand and Indonesia, markets in Eastern Europe, like Russia, Turkey, et al and Latin American markets. M&M needs to develop a small/mid-segment sedan or hatchback to shares in these markets. The acquisition of Reva holds lot of potential. M&M should aggressively pursue electric vehicle development at this moment, and if done properly, the company will have a headstart over many smaller but global players. M&M should invest its research rupees in developing a global small SUV - which is the fad and demand of the day. It already has the expertise and just needs to tweak the engine and platform a little bit.

Threats: The biggest threat for M&M is Tata Motors and the Chinese companies. Other OEMs comparable to M&M are increasingly entering into technology sharing partnerships and thus have access to better technology. Consumers in India and other potential markets have more options to choose from and if M&M does not diversify its product portfolio it will lose out to competition.

For those who have not seen Ssangyong vehicles:

                                                                           Rexton

Mandatory fuel economy standard for India

The biggest irony for a country obsessed with fuel economy is the fact that India does not yet have an official fuel economy standard set by the government. Efforts to set up a standard have been made in the past; however, like everything else in this country, those efforts yielded no outcome as everything got lost in the mire of bureaucracy and organisational power play.

However, things are set to change as the Environment and Forest Minister of State Mr. Jairam Ramesh, formally announced on August 2010, that there will be a mandatory fuel efficiency standard for auto makers. What worries me however, is the fact that the minister did not specify a timeline. He just said that a standard will be enforced “soon”. Now, from what little I know of these auto-related policies, there always is a time frame set for the enforcement of policies and future regulations. It would be a welcome change if this time the ball is really set rolling and we have a fuel economy standard by end-2012.

The automotive industry is gradually becoming very uniform across the globe. What I mean to say is that the regional differences of types of engines and cars are lessening as the world strives for smaller and more fuel-efficient cars. Auto makers are already collaborating with one another in terms of technology sharing so that they can bring out cleaner cars. This is partly due to the price of fossil fuel, growing awareness among people for the environment, the US suddenly waking up to the need to have fuel-efficient cars and lastly, but by far the most important reason, the very strict CO2 regulations imposed by the EU 27 states. The point, however, is that OEMs already have the technology, so an Indian fuel-efficiency standard set at par with global standards will not be impossible for auto makers to achieve, and this in a way will contribute to the much talked about harmonization of standards in the automotive industry.

Lets hope this time we really show we are concerned and join the global race to cut emission, reduce fossil fuel dependence and participate in a greener tomorrow.