Please Stand In ‘Queue’

Recently the Mahindra XUV500 created a buzz, once again, when it received booking scaling more than one year of their manufacturing capacity. Many people, including Mahindra, saw it as the best thing which can happen to any product. There are some more products in the same league like the Maruti Suzuki Swift, Swift DZire, Toyota Fortuner, Innova, Hyundai Verna, Honda Brio and Jazz in cars and the Honda Activa, Royal Enfield Classic in bikes. Can we find the reason? Some cars have shown a surge in demand for diesel variants because of petrol price hikes, others saw a surge in demand because of the value for money it is offering while some got hit on production line because of natural calamities.

I remember the days of the 1980’s-90s’ when Indian automobile industry was driven by the manufacturers and not the customers. Bajaj Auto and Hindustan Motors used to say: wait for a year or two atleast, you are in queue! Just imagine you have money ready in your hands but no one to give you the product you want. So many times people would end up in buying second hand vehicles at higher price tags. The reason behind this may be the technology and the market conditions. The technology was in growing stage turning into very small scale production. There were only few companies in the market like Bajaj Auto, HM, Premier Auto, Maruti Udyog and Kinetic. All companies had their segments and market share well defined. So it all created a non-competitive atmosphere called ‘Monopoly’.

But why it is happening now, when we are having cutting edge technology, better infrastructure, better financial conditions and best manpower? Lets try and speculate a few reasons.

- The product variety and complexity has grown to such a scale that it is affecting the decision making and forecasting the market has become difficult. Take the case of Maruti Suzuki. They are offering 13 major models currently. Now multiply this with engine options, fuels options, features options, color options and many more variations. It would convert in a complex matrix of n numbers of combinations. So it is not so easy to handle that math when you are handling Indian customers.

- Then there comes the factor of Great Indian Government. Government, over past couple of years, has increased the price of petrol abruptly. Forcing many buyers to turn towards diesel option suddenly. But at the companies end, were the diesel engines ready? Answer is NO, because previously the same Indian customer preferred petrol over diesel considering price and maintenance costs. Manufacturing lines are not so flexible to cope up such a surge in demand and also adding the capacity for a short period is not advisable because it again requires many mathematical calculations to invest large amount of money.

- Come budget 2012-2013 Government is considering additional duty on diesel cars and increasing cost of diesel for non-commercial vehicles. So can you anticipate the market trend after April 2012? Again saying it is not so easy!

- Last year Maruti Suzuki saw major labor crisis at Manesar which brought down the production suddenly. This situation cannot be anticipated by anybody on Earth. And this can happen with any other manufacturer in the world. Many say we have skilled labor available in large numbers but political influence/ workers union is what drives them. It’s better we do not get into that mess.

-  Natural calamities: Honda India, inspite of very few models and variants on offer, is having 4-6 months waiting on some models. Honda decided to correct their products prices and they did it with City and Jazz (the decision, Honda, should have taken way back). Results are visible to all of us. Also they brought in their small car Brio at an attractive price tag. But the problem came to them from their mother land and Mother Nature. Japan and Thailand consequently got hit by nature and all activities came to an abrupt stand still. Influence of Mother Nature cannot be denied by anyone and nobody can do anything to change or stop that.

- Global financial unrest is what we are seeing very frequently in this decade. Since 2000 we have seen three such financial slowdowns. Capital is the backbone of any company, so small turbulence in finance has direct impact over production.

Finally we have seen some major factors affecting automobile production and its consequences. But the case with Mahindra XUV500, Royal Enfield Classic 500, Honda Activa, Maruti Swift appears little different. Before launching any product the process of product design not only includes the product but also system, infrastructure support required to manufacture. So while designing a XUV500, where did the Mahindra fall short? Didn’t they realize that they are going to receive such overwhelming response? Or they should have launched XUV500 at a slightly higher price? Was the XUV500 launched in a hurry? Something is wrong for sure because current condition is not ideal for a product which deserves much more. XUV500 is new in the market, let’s say it will need some time to manage the situation. But what’s wrong with Honda or Royal Enfield or even Maruti Suzuki? The answer may be one of the factors mentioned above or something unknown which only God knows.

Are you satisfied with such a long waiting period? Is it justified to wait so long even when you are having everything ready?