Mahindra War Room 2014

Automotive Business Caselet

MAHINDRA AUTOMOTIVE & FARM SECTORS

AUTOMOTIVE BUSINESS
BUSINESS BACKGROUND
Mahindra Automotive & Farm Equipment Sectors (AFS) comprise businesses ranging from
Automotive (including Cars, UVs, Trucks and Buses), Agri-business (including Seeds and
Applitrac equipments), Construction Equipment, Powerol (Engines & Gensets) to Tractors. This
caselet pertains to the Automotive Business of Mahindra AFS, and is one of the two optional
caselets that may be chosen for this business.
Founded in 1945 with commencement of discussions to manufacture of Willys Jeep, the
Automotive business has grown to be among the oldest and the largest business of Mahindra
Group, contributing to 54% of the Groups revenue. Mahindras Automotive Business spans
Alpha range of 3-Wheelers, Gio, Bolero Maxxi Truck and Maxximo range of Small Commercial
Vehicles, Verito, Vibe range of cars, e2O electric Cars; Thar, Bolero, Scorpio, Xylo, Quanto,
XUV 500 and Rexton range of Utility Vehicles, and Mahindra Trucks & Buses. The Automotive
business R&D efforts are concentrated at Mahindra Research Valley in Chennai, with
Manufacturing facilities across 9 plants worldwide. In 2011, Mahindra acquired Ssangyong
Motors of Korea and Reva Electric Car Company, surging ahead towards their Big Hairy,
Audacious Goal of being among the Top Globally renowned Automotive companies. Mahindra
vehicles now ply both the paved and unpaved roads of Australia, Europe, Latin America,
Malaysia, South Korea, and South Africa.
LIVE CHALLENGE: STRATEGY FOR RURAL MARKETS
For global automakers, the dusty backroads of rural India could be the new El Dorado. As
economic torpor suffocates demand for new cars in India's megacities, incomes are growing
faster in small towns and country areas. That's pushing the likes of Global OEMs such as
General Motors, Honda Motor Co to fan out in search of buyers in places where fewer than 20
people in every thousand own a car - for now.
Mahindra & Mahindra due to its early association with rural markets once had a monopoly.
Gradually, there were the likes of Tata Motors, Maruti Suzuki India Ltd entering this market.
With local services plentiful and repairs cheap, today Mahindra and Mahindra Ltd, Tata Motors
Ltd, Maruti Suzuki India Ltd, dominate the rural vehicle market where foreign automakers are
seen as expensive and distant.
Foreign companies are investing billions of dollars into factories, product development and
marketing in Indian automobile market. Global Auto OEMs see success in rural areas as vital,
as slow economic growth, high interest rates and rising fuel prices mean overall sales are
headed for their second straight year of decline.
While most of the MNC OEMs have been present in the Urban and at most some semi-urban
markets, Mahindra, Maruti Suziki & Tata traditionally had higher reach and presence in Rural
India.
As the urban market gets more & more crowded, Auto OEMS are utilizing varied strategies as
far as rural markets goes. Whether defined by income, town population or distance from nearest
mega-mall or multiplex, many a car maker have doubled or even tripled their efforts in territories
mapped outside metros. Maruti Suzuki primarily consider places with less than 10,000
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Mahindra War Room 2014

Automotive Business Caselet

population as rural. For Renault, the target is the 200 million strong middle class, of which 50
million have the potential to buy a car. For Honda, locations which fall into Tier III, include
Tirupati, Kollam, Mathura and Asansol, as opposed to the top 6 cities of Tier I and 27 major
cities that constitute Tier II. For Mahindra the engine of their rural drive is 3000 tehsils or subdistricts, spread across the country, identified based on two wheeler and tractor data, vehicles
that act as a surrogate for small passenger cars.
Internet penetration in smaller towns has also contributed to increase in the customer
awareness. People are driven by opinion blogs and websites. From an online behaviour
perspective, currently 65% is from Tier I. Tier II and III account for the rest but it's gaining
ground with an increase in internet penetration." Consumer expectations have begun to change
because more information is available in small towns through the internet, digital and social
media along with more conventional forms of broadcast.
OEMs are focusing on creating a seamless customer experience across the sales process.
While products and prices remain mostly consistent, marketers tweak everything from
campaigns (to suit local sensibilities and tastes in celebrities) to outlet formats. Mahindra has
even provided salesman traipsing about the countryside with low-cost tablets pre-loaded with
everything from a sales pitch to customer records.
Mahindra enjoys a strong brand equity in Rural India due to its strong value proposition of
ruggedness and durability. Products like Bolero & PU and Scorpio are known in every village.
While Mahindra & Mahindra is a leading brand in the heartlands of India, and with the
competition increasing in the rural roads, the Indian Rural markets will be the segment from
where the next wave of growth will come.
With this background, suggest the strategy to Mahindra & Mahindra for its rural markets.
How does Mahindra & Mahindra reinvent its strategy for rural markets and remain an
undisputed leader? How does Mahindra & Mahindra create entry barriers for the
competition? How does Mahindra & Mahindra create a sustaining ecosystem which is
difficult to enumerate by others?

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