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Date: 08/07/2014 Time: 10:59:50

MKS0127IRC








Dilip Chhabrias Focus on a Niche Market Can it Sustain?
This Case was written by Gopal B and Syed A, IBS Research Center. It is intended to be used as the basis for class discussion rather than to illustrate either effective or ineffective
handling of a management situation. The case was compiled from published sources







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MKS0127IRC


Dilip Chhabrias Focus on a Niche Market Can it Sustain?
The Auto Expo 2008 in New Delhi was an event of sorts. The much awaited launch of Tata Nano, popularly known
as the Peoples Car by the Tata Group seemed to grip the attention of not only the Indian auto industry but also of
several industries overseas and the global media. The Indian media was frenzy with reports of how Nano would
change the industry dynamics. There were also reports of the increasing pace of growth in the passenger segment.
Amidst all this activity, the ace automobile designer, Dilip Chhabria (Dilip) launched Ambierod and the DC:S, a sports
car. The sports car is expected to be priced at INR 25 lakh.[1] The Ambierod is reported as futuristic in the luxury
segment. It is reported that the luxury car segment in India is witnessing growth over 30% annually. This seemed to
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explain the presence of global giants like, Audi and others in the Indian market.
However, it is reported that the small car segment in India is the fastest growing category. With the small car market
showing greater potential and the luxury segment attracting strong players such as Audi, Ferrari, Porsche and
Lamborghini, the Indian passenger car industry is full of opportunities and also threats to techno-entrepreneurs like
Dilip. On the other hand, Dilip seems to be reluctant to go anywhere near the small or mid-sized car market. He
continues to offer his services to companies and individuals interested in combining luxury and sophistication in their
automobiles. Though this is a niche segment, it is a potentially rich market. But with luxury cars entering India, would
Dilips designs continue to enthrall the Indian market? Is it not judicious for Dilip to enter the fast-paced small-sized
market and seek volumes? Would this continuing focus on a niche market help the company to sustain growth in the
future?
Dilip Chhabria Design
During the 1970s, Dilip Chhabria qualified in Transportation Design from the Art Center College of Design, Pasadena,
California, USA. He worked in the Design Centre at General Motors for a short tenure. After a year or so, he quit
General Motors and returned to India and joined his fathers company. During 1981, he started designing and making
automobile accessories. This venture was an instant success. Dilips father wound up his business and asked Dilip to
nurture his business. Eventually it grew to become Indias largest manufacturer of car accessories. But Dilip always
wanted to design cars and not just accessories for cars. In 1992, he designed his own Gypsy which caught everyones
attention. From here began Dilips journey of designing cars which were all unique. He established Dilip Chhabria
Design (DCD) in 1993. It was set up to offer design and prototype solutions to manufacturers and customers. Dilip
remodeled Maruti, Fiat, Contessa, Jeep, Tempo and Tata Sierra. He also offered his design expertise to Mahindra &
Mahindra, Tata Motors, Maruti-Suzuki, GM, Ford and Premier Automobile
DCD was set up for the sole purpose of offering design and prototyping services to the Indian original equipment
manufacturers (OEM) industry. It also offered customized one-off solutions to business clients and individual buyers as
well. The company catered to B2B and B2C segments of the market. DCD offered a wide range of services that
included styling, prototyping, engineering and customizing. Its clients included B2B customers such as the Tata
Motors, GM, Ford, Renault and several others, while B2C list predominantly comprised of celebrities and
industrialists. DCDs range of products and services catered to three-wheelers, four-wheelers, six-wheelers, eight-
wheelers and even airplanes and helicopters. The companys revenues stemmed from the B2B and B2C customers.
Within the B2B segment, the companys focus was to earn more from foreign business by benefiting from the cost
advantage of manufacturing domestically.
Dilip claimed that he and his team created prototypes much faster than anywhere else in the world.[2] By the end of
2000, DCD had churned out at least 450 designs in seven years while Italian design studios produced 60 designs over
50 years.[3] Dilip, himself had more than 550 designs to his credit. In the process, the company successfully built a
strong brand. DCD became a prominent name in the custom-designed automobile market. Dilip maintained that every
car he designed was a stand-alone creation. And with every new design, he seemed to push the benchmark of
creativity and sophistication a notch higher.
The companys ability to redesign ordinary-looking cars into highly desirable piece of beauty and innovation created a
huge demand from automakers and individuals both in India and overseas. DCDs expertise in car design also led it to
foray into in-car entertainment solutions. With new generation mobile antennas becoming affordable, DCD enabled car
owners to bring satellite television to the backseats of their automobiles. The company launched this service after 2
years of research and physical testing all over India.
During early 2003, Dilip was in the eye of media attention for his design work on the prototype of the Aston Martin
AMV8. The Aston Martin was created for the legendary spy, James Bond in the movie, Die Another Day. It is
reported that Dilip received accolades for the venture. This also led to more business for vehicle prototyping from
abroad. He worked with the design team at General Motors to create the prototype of the Chevrolet Beat. The
redesigned automobile, a peppy micro-compact made its debut at the New York Auto Show in 2007.
By 2007, Dilip had customized six Rolls-Royce for international clients. This helped DCD to gain international repute.
Referring to the futuristic car to be designed for Hollywood in 2008, Dilip says, Ever since DC Design customized a
Rolls-Royce for a UK client, there has been no looking back. This assignment will, however, is very prestigious. It will
be futuristic as if straight from a science fiction. So be it the speedometer or the air-conditioning, or the lighting, a
touch screen will do the job.[4]
DCD made only 60-70 cars annually. Its 450 employees worked in perfect sync to design one car which has more
than 2,100 components. [5] Such uniquely designed cars cater to a specific segment of the market that seeks style and
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flamboyance in cars. As Dilip mentions, Exotic cars are all about irrationality. The more irrational they are the more
attractive and desirable they become. You cant drive these cars to work everyday, but at the same time, the
knowledge that you have an irrational car sitting in your garage gives you a high thats difficult to match. [6] By 2007,
the company had rolled out more than 2,000 cars. Each car was unique by itself and no design had been repeated.
His new creation for the Auto Expo 2008, Ambierod is inspired by the Indian Ambassador. It retains its
quintessential looks while at the same time is inspired by the American Hotrods. Its a luxury car with an automated
instrumental panel backed by satellite navigation system, rear vision camera, three LCD television screens, on-board
internet mobility, videoconferencing-enabled flat bed and multi-coloured mood lighting. It boasts of leg space of 4-feet
thus ensuring wider room feel. It is reported that the luxury car will be built on a BMW chassis with an exterior of an
Ambassador. The Ambierod is expected to be priced close to INR 4 crore.[7]
The Auto Expo also witnessed the launch of yet another of Dilips creations, the sporty DC:S (the S). The model is
positioned on driving attributes similar to that of a Ferrari or a Lamborghini. The S is expected to be put into
production based on the response at the Auto Expo. DCD intends to keep the production of S at 300 cars during the
first year of launch. It is expected to incur an investment of INR 60 crore.[8] The S might be launched both in
domestic and overseas markets.
In March 2008, DCD is expected to create another buzz, by delivering a futuristic car for a Hollywood celebrity. The
car is a remodeled version of Rolls-Royce and is priced at INR 2 crore. DCD also has plans to diversify to other
areas of design like furniture and other luxury durables. The company also intends to launch a car design school in
2009. However, the buoyant passenger car market throws new challenges for DCD.
DCD: Challenges and Diversification
DCD has four main challenges. One, the launch of Tatas Nano is believed to change the industrys dynamics and
several players have already announced their intentions to launch their small cars. Two, with the entry of luxury car
makers in the Indian market, DCD would face severe competitive pressure. Three, there have also been some safety
concerns raised for the DCD cars. It is not clear whether DCD has the resources to conduct safety tests like the large
automakers do. Four, the expansion of DCDs design expertise to other areas question the brand strength and the
core competency of the company
With the launch of Tatas Nano, the automobile industry is all set to put India on the world map. Large car makers are
looking at the potential in the Indian market. Their offerings are either stripped-out versions of large family saloons or
small cars that are purpose-built. Several of these car makers are already making concrete plans to counter Nanos
entry into the Indian market. Renault-Nissan signed a joint deal with Mahindra to produce the low-cost Logan car in
India. It also entered into a pact with Bajaj to make an even cheaper car.
Many opine that the industry dynamics would change with the launch of Tata Nano. As Daryl T. Rolley, Head of
North American and Asian Operations for Ariba[9] mentions, Its basically throwing out everything the auto industry
had thought about cost structures in the past and taking out a clean sheet of paper and asking, Whats possible? In
the next five to 10 years, the whole auto industry is going to be flipped upside down.[10] It is also believed that
Tatas Nano would put pressure on the worlds biggest carmakers if it forays into other developing markets. This
move would cut the expansion plans of the industry leaders. Tata could also launch a Nano version that would meet
US or European specifications and still sell at a bargain price of $6,000.[11]
With several players in the industry competing for a small pie in the small car category, analysts debate if DCD should
change its focus and enter this category. Though the small and midsized car market seems to show more promise,
Dilip seems to show no interest in this segment. He continues to keep his focus on extreme clients who are flashy and
flamboyant. The companys clientele comprises of those who are ready to spend more than INR 50 lakh for
redesigning. Referring to the huge market of the small and midsized segment, he quips, Mr.Average is being taken
care of by the car companies.[12]
However, Dilip admits that Tatas Nano would certainly give rise to entrepreneurs who would dream of similar such
offerings to the market. He continues, Although I do not intend to venture into the small car segment, I have designed
concepts for various entrepreneurs who are dreaming of introducing small cars.[13]
DCD has to face yet another challenge in its niche luxury market. The luxury car market, during the period 20022007
has tripled. The year 2007 witnessed fast-paced growth of 26% in the luxury car market in India. In 2007 alone, the
industry witnessed the entry of three luxury car makers, Porsche, Audi and BMW. Porsche entered the Indian market
with 911 Carrera turbo, the Boxter and Cayenne SUV. It was reported that within a week of launch there were 31
orders, mostly for Cayenne, from Delhi and Mumbai.[14] The luxury segment is expected to witness the launch of 10
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new models along with 15 new SUVs in 2008.[15] With the Indian market showing interest in luxury cars, several
other players seem to be noticing the trend. By 2010, Ferrari is expected to join the fray. Dilip is hopeful that the
custom-design vehicle market would experience a boom with the market ready to spend about INR 4 to INR 6
million for a custom-designed car.[16]
Analysts feel that with the luxury market is in the boom phase, the Indian consumer would have a range of cars to
choose from. These cars would also have the support of huge advertising budget and a prestigious brand name.
Would it be possible for Dilip to match the promotional and brand strength of the competition?
Critics of DC cars also question whether they comply with safety and environmental norms. Nevertheless, Dilip
brushes aside apprehensions and assures, In all the vehicles, we use maximum number of OEM components.[17] It
is felt that DC cars have been able to attract certain amount of interest since the country is witnessing affluence.
However as stringent safety guidelines are implemented, DCD would feel the pressure to conform to safety standards.
Industry experts opine that testing DCDs unique cars would be a challenge as well as an increase in costs for the
company.
Yet another challenge arises from Dilips decision to diversify. Dilip is also branching out from designing cars to
designing television sets, refrigerators, office interiors and furniture. This diversification plan has also raised many
eyebrows. It is felt that such diversification would dilute DCDs image of being a car designer. At the same time, some
fashion analysts feel that Dilip has more to offer when it comes to design and therefore should not restrict to designing
cars alone. Dilip is set to launch Indias first automotive design school in 2009. With the market for passenger cars
being buoyant, Dilip feels that there is huge potential for youngsters to be trained in car designing. The design school is
expected to be a big hit since there is also an increasing demand for custom-made automobiles.
Though DCD wants to bypass the growth in small-size car market, it is optimistic about the future of the segment in the
car market that looks for uniqueness. This is supported by the fact that several manufacturers feel that the future is in
customizing. As young Indians spending on lifestyle products increases, the sky seems to be the limit for DCD.
[1] DC Designs DC:S and Ambierod to be launched at Auto Expo,
http://www.dancewithshadows.com/autoindia/dc-s-ambierod.asp, January 7th 2008
[2] Indias Best Known Automobile Designer-Dilip Chhabria,
http://www.dancewithshadows.com/automobile_design.asp
[3] Theres Nothing Sexier Than a Great Car, http://www.rediff.com/money/2000/dec/19inter.htm
[4] Ganguly Mehta, Shramana Dilip Chhabrias Futursitic Car to Rock Hollywood, http://economic
times.indiatimes.com/articleshow/msid-2503831,prtpage-1.cms, October 31st 2007
[5] Theres Nothing Sexier Than a Great Car, op.cit.
[6] Dilip Chhabrias Aston Martin DB7 Vantage, http://www.indiacar.com/infobank/oener_dilip_chhabria.htm
[7] DC Designs DC:S and Ambierod to be launched at Auto Expo, op.cit.
[8] DC Designs DC:S and Ambierod to be launched at Auto Expo, op.cit
[9] Ariba supplies parts to Tata, BMW, Toyota and other carmakers.
[10] Anand Giridharadas, Four Wheels for the Masses: The $2,500 Car,
http://www.nytimes.com/2008/01/08/business/worldbusiness/08indiacar.html?ref=worldbusiness, January 8th 2008
[11] Welch, David, et.al, My Other Car is a Tata,
http://www.businessweek.com/magazine/content/08_02/b4066033073739.htm?chan=search , January 3rd 2008
[12] Dilip Chhabrias Futursitic Car to Rock Hollywood, op.cit.
[13] Dilip Chhabrias Futursitic Car to Rock Hollywood, op.cit.
[14] Luxury Market in India is Growing, http://www.india-news.in/india-business/luxury-market-in-india.php#stats
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[15] 60 new cars coming in 08. Take your pick, http://www.autoexpo.in/news_s2_1247.asp, December 31st 2007
[16] DC Designs DC:S and Ambierod to be launched at Auto Expo, op.cit.
[17] Neeraj Saxena, DCfrom district Columbia? No its Dilip Chhabria silly!,
http://www.indianexpress.com/resweb/pIe/ie/daily/19980115/01550514.html, January 15th 1998








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