The bell curve and why Maruti-Suzuki stays unbeatable: Part 2

Last week you read about how Deepesh Rathore explained why Maruti Suzuki is the most successful carmaker in the country and how it manages to have fewer unsuccessful models than the competition. This article is a continuation to the previous part.

By:Updated: March 10, 2017 12:03:24 PM

Ringing the Bell Better

In my previous write-up, I pointed out how the Bell Curve is the single biggest challenge the car industry faces.

By its very nature, the Bell curve is a monster problem. Now, as a management guru on WhatsApp tells me, every problem may be converted into an opportunity. So that is what I will also try to do.

The major problem with a curve is that it is not a straight line. If sales/production volumes are following a curve, the suppliers and the dealers both have to stay nimble. This is perhaps easy to do in the case of a single platform but spread it across 4-5 programs and the challenge multiplies. In the worst case scenario, we end up with Bell curves amplifying each other.

This happens when a brand fails to space out launches. Think of a niche brand which launches 2-3 new products within a year. In the short-term, it gives the brand a feeling of invincibility and a sparkling showroom full of fresh models.

However, in the mid & long-term it is a recipe for disaster, especially if you are a fringe brand with less than five-percent share of the market. With such closed-together launches, a fringe brand’s thin sales & marketing resources get stretched. In the mid-term, this leads to at least 1-2 new products failing to realise their potential and falling through the cracks. For every City, Amaze and Jazz that works, there is a Brio, Mobilio and BR-V that hasn’t worked for Honda India.

Similarly, Ford India’s current generation Figo hatchback and Figo Aspire sedan, both launched close to each other, together sell less than what the previous generation Figo hatchback sold…alone.

Read about: The bell curve and why Maruti-Suzuki stays unbeatable: Part 1

Evening Out Bell Curves – Options
Spacing out products spreads the Bell curves and the overall impact is one of evening out volumes through the showroom. However, this is easier said than done.

Most OEMs are global and have to align their Indian product launches with global programs. The Indian arm cannot even out Bell curves by delaying a product launch too far away from the global unveiling because of the animal called the Internet. Once the global unveiling of a product has happened, pesky automotive enthusiast bloggers will publish a 100 pictures of the new generation model…everyday. This ensures that the current generation model in the showroom has as much metropolitan appeal as a mid-90s Mithun movie.

In short, postponing a launch beyond a few weeks is pointless.

Another Option
Another way of evening out Bell curves is to bring the launch forward. In simple terms,this means doing the global unveiling in India. The problem is that when you have less than five-percent share of the Indian market, your volumes are meagre. The Indian operation does not rank very high in the global CEOs Christmas card list. In such a scenario, Indian executives are unlikely to suggest that the global engineering gets a key model ready six months earlier for the Indian market. All for something called evening-out-the-Bell-curve!

Yet Another Option
Then there is the third option and again for inspiration, I will look at the Maruti-Suzuki portfolio. The market leader has three compact hatchbacks – Swift, Baleno & Ignis in its portfolio. The Baleno was launched in end 2015, the Ignis in early 2017 and we expect to get a new Swift in end 2017-early 2018. Three fast-selling compact hatchbacks spaced out means there is never a dull moment for the suppliers and the dealers. The rest of Maruti’s large portfolio is similarly spaced out so that the Corporate Communications team always has ample time to prep up the media.

I don’t have to remind you about their impeccable Bell curves with their super stretched out Profit Plateaus.

The problem is that Mr. Fringe Brand has been battling against the mighty market leader with a single nameplate. One nameplate against three is game over before it starts and even before I even comment on the poor quality of Mr. Fringe’s Bell curve.

The solution is to develop another nameplate. Again, that is challenging and a move that is likely to make senior executives at Mr. Fringe’s global HQ roll over in laughter. Developing a new nameplate is a costly preposition and requires a lot of conviction.

Make that a whole load of conviction when your entire sales in India has been in five digits per year.

But does it have to be costly?
Let’s look at that carefully. We are asking for a new nameplate, and not a new platform. Let’s call the new nameplate B and the existing model as A. The platform, engine & transmissions and suspension & brakes in B are all carried forward from A. All we need is a new skin and new interiors. Most of the engineering is carried forward and realistically the development costs of model B should be 30-40% of that of A.

In essence, we are looking for cosmetic surgery along with a tummy tuck, botox, and teeth whitening. Sure the cosmetic surgery bit is expensive but you won’t get a new mate with just the other three.

Now, this is easier said than done. Most multinational carmakers come with global technology centres packed with expensive engineers who have, till now, done no-expenses-spared development. Burdening them with developing re-skinned models at 30% costs is like asking Michael Bay to direct a Bhojpuri movie.

However, if you time it correctly, what you will get for the money is a fuller showroom with a flatter cumulative Bell Curve. In the long-term, this leads to more consistent, high footfalls in showrooms as the new model excitement stays on longer. Some day, if you are consistent & lucky, your market share will also creep beyond 5.5%.

But do multinational brands have the conviction?

Nopes….Can you find another way?
Another way in which carmakers can introduce an additional nameplate in the same segment is to keep the previous generation rolling. However, the customer is only gullible, he is not a fool. The only way this is going to work is that we take away the previous generation model and re-skin it to launch it two years after the new generation platform has been introduced.

Convincing? No; Cheap? Yes.

Frankly, I am not very convinced about the success of this strategy as it’s easy to make a hash out of it. Look at Tata Motors – the Indica first generation sold along with Indica Vista (2nd generation) and continued to outsell the newer model thanks to the taxi market. Then the Vista was facelifted and given a new name – Bolt, while the first generation Indica was re-skinned into the Tiago. Now the Indica (1st Gen), Bolt and Tiago all sell together somehow in the Tata showroom. Yet monthly sales stay barely above the four-digit mark.

Frankly Tata Motors is not a good example as they are still fighting the demons of their past. A bigger brand like Maruti-Suzuki or Hyundai would have made a success out of this strategy. The problem is that they don’t need to.

Arguably, the strategy has a potential considering the market is changing fast. Nowadays, in the compact segment, a brand needs three models — one for the masses, one for the smart asses and the third for the app-based taxi service operator. Two generations of a platform can easily produce a medley of products to cater to everyone.

However, till now we have only seen half-hearted attempts at this strategy. Most carmakers skip the re-skin part and try to scrape through at bargain basement pricing and an added moniker. Fiesta Classic anyone? In some cases, models continue trudging along because of factors not visible to the Indian customer – Hyundai Accent continued for a long time even after the Verna was launched because of a healthy export demand from Africa.

Critical Requirements
In all of the above solutions, the critical requirement is that global carmakers give much more importance to the Indian market than they have done. This is a tough ask and a leap of faith for brands that have tasted failure for — in many cases — two decades now. For most global brands, global management will end up asking the local management tough questions on past failures. Most of the Indian management would fold up meekly even though they know the problem and the solution. Pushy Indian managers asking for changes get shunted out. Everyone goes back to the daily grind and morning cappuccinos.

Three-percent everyone then!

Author: Deepesh Rathore is a Director at Emerging Markets Automotive Advisors (EMMAAA)

Disclaimer: The views and opinions expressed in this article are solely those of the original author. These views and opinions do not represent those of The Indian Express Group or any employees.

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