Saturday, May 03, 2008

Marketing Q&A : Automobile Market segmentation

Marketing Practice Reader Krishnan asks this question :

"Is Indian automobile market (car) driven by family ? Is family influence more when someone buys a small car or a sedan ?"

The answer to the first question is both Yes & No. The major segment in the Indian car market is driven by family. This is because of the current state of Indian automobile market. The market is still evolving .

During the initial stages , every market will be unsegmented . But as the market matures, segments evolve. Marketers devise new methods /variables to segment the market. In the car market also, we had the market dominated by the family segment. The first attempt to segment was by Tata Sierra which tried to bring in the SUV segment. But the market was not ready to accept that product.

Indian car market is predominantly family oriented. In the developed market, we can see different family members owning different types of cars. One of my colleagues say that a typical American family will have a small car/office car , an offroader( or a truck) and a sedan . Our market is still to evolve to that stage. Still for most of us, cars are a luxury rather than a mode of transportation.

Hence , here the primary segmentation was based on the price of the car and also the nature of the car. So we have A segment, B segment, D segment etc and segments like MUV, SUV, Sedan, Hatchback ,small car etc .

The dominant segment ( small car/ hatchback) is driven by family. So the entire family takes part in deciding the purchase of the car. The major determinants being the size of the family, price, cost of maintaining like mileage , brand , type of car etc.

The buoyant economy and the emergence of neo-rich class has changed the dynamics at the upper end of the market. I know families which own more than 3 different types of cars to serve different purposes. In the case of such affluent family, the purchase considerations are different.

My feeling is that the launch of Tata Nano will also see some change in the way Indian car market is segmented. Now even middleclass can afford to have more than one cars. And cars may move from a luxury product to a mode of transportation.

7 comments:

  1. Harish,
    Adding to your answer.. Another segment in Indian market is the people who buys cars for Taxi/Cab service.. e.g. Ambassador, TATA Indica, Sumo, etc..
    But the Indian car companies hate this segment because it is very costly for them to provide the extra service and maintenance of this vehicle leading to an economic unviability..

    Also if a vehicle is brought by a family, the future maintenance & service costs for the company is pretty low.. So most of the car companies target this segment because it is the one with the most welcome.. Also for Indian weather conditions, a car is really not needed for an individual transport.. So i don't think such a segment will ever rise..


    - Robin

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  2. The analysis that you have made is absolutely correct. The Indian Market will open up with the Nano.

    The huge middle class population to a tune of 300 Mn Indians with about 70 Mn house hold are waiting to go for new car.

    Maruti made a real success with its advertisement of 2599( Panchis ninety nine) as EMI for 84 months for Maruti 800.A well drawn auto loan scheme by banks can help it a lot if the EMI can be kept at Rs 1500/- per month with initial down payment of Rs 10,000.

    Carlos Goson of Nissan is also eying this market the value will be in between US$2500-US$3000.

    With nucleus families and huge disposable income and the point of inflection in the Indian economy is round the corner small car segment will be a huge success.

    Tire -I and Tire-II cities of India will be the target market for these auto manufacturers.

    BMW, Ford,Toyota , Nissan are all working for electric operated cars by 2012, if these can be possible and emission rate can be reduced then small cars will be ideal as these will be no environmental pollutions thru emission.
    Small cars have become a necessity .

    With Warm Regards

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