The sky-rocketing price of oil in 2008 reminded the world that it needed to speed up work on technologies which helped its citizens reduce their dependency on fossil fuel. One area which got a boost due to the peak in oil prices that year was developmental work in electric vehicle (EV) technologies and usage. Still the pace of growth of the EV segment has been quite slow the world over. It is estimated that the EV market, globally, would stand at around 1.2 million vehicles by 2015.
Environmental friendly, mass mobility vehicles are not new to India. I remember visiting the Taj Mahal at Agra many years ago and travelling from one point to another in non-petrol, battery-driven vehicles. Similarly, EVs have been in use in the country for several years now. REVA Electric Car Company launched its first prototype car for the masses in 1996.
Chetan Maini, the deputy chairman and chief technology officer of the company, faced an uphill task finding buyers for his cars as well as getting recognition and support from government. In 2002 he was quoted in a leading business newspaper elaborating the help he wanted from the central government. Yet the response was lukewarm.
Unlike Karnataka, his home State and where he did get some support, Maini could not make much headway in a territory like Delhi for instance. Finally, after nearly six years Delhi listened and did something by announcing a 29.5 % subsidy for electric vehicles and this encouraged the company to launch its cars in the capital city! Since the launch of its first prototype, REVA has sold 3,500 cars till now.
Today, we have a variety of electric two-wheelers as well, some of which are being made by already well-known companies like TVS, Avon, Hero, etc. Their presence and product offerings have created multiple choices for consumers. Yet in the recently released vehicle statistics by the Society of Indian Automobile Manufacturers, the sales of electric two-wheelers fell by minus 88 per cent to 3,001 units in April-March 2010 against 26,445 units in April-March 2009. Assuming that these figures do not relate to all but a section of the manufacturers in this segment, still the picture of demand for these vehicles is dismal.
The Society of Manufacturers of Electric Vehicles in India has been asking for tax incentives to boost sales besides wanting a separate policy for the EV segment in India. Subsidies and a policy will undoubtedly be helpful but there will still be several influential challenges for EV makers and their products.
It has taken nearly 125 years for internal combustion engine-based technology to get where it has today and since the invention of the first automobile in 1885 by Karl Benz, vast technological advances have been made in automobiles for the masses in all areas of an automobile. Today, consumers can demand and then buy what they need in their vehicles.
In a highly price sensitive market such as India, it would be difficult for EV makers to take large technological strides as more technology would mean higher prices and the takers would be fewer than those who have already bought EVs. As it is, without uniform benefits from different states in India, the prices of many products are still very high.
To add to this challenge are existing low volumes, deterring benefits such as economies of scale, and this is expected to continue in the near future as well.
The Western world has enjoyed itself thoroughly and travelled a full circle economically and otherwise. So it is more receptive to curbing conventional means of mobility and looking at environmentally friendlier ways.
That will not be the case in countries like India and China where consumers are treading and will want to travel the same cycle as what the Western world travelled. In addition, peer pressure will influence mindset where a cousin or friend enjoying the speed, performance and power of a petrol-driven Bajaj “Pulsar” bike will influence someone’s buying decision between an electric or conventional fuel-driven vehicle.
To make things more difficult for EV makers, breakthrough products such as the Nano car by Tata, will make ICE-based mobility available at radically cheaper prices. Hence, instead of paying something around Rs. 40,000 for an electric two-wheeler, a consumer can stretch his or her budget and accommodate one’s whole family comfortably in a vehicle costing slightly over a lakh of rupees.
Despite these challenges and others, there is hope of gains to be had and REVA is showing the way. And that way is to look outwards -- to export. REVA expects to establish itself as a global electric vehicle brand and sell in 40 to 50 countries by 2012.
The Indian auto component industry is today a robust and technologically advanced sector primarily because it took exporting seriously. Exports brought not just earnings for companies but several other benefits. Exposure to advanced overseas markets pushed the frontiers of quality among component makers, brought in better technology and innovation into products and manufacturing and eventually also gave the desired volumes that many companies wanted.
EV makers in India, should they decide to make exports their focus as well, to my mind will benefit the same way that the Indian auto component industry did and also the way REVA will benefit once it reaches its goal of being a key exporter of electric cars.
Markets abroad, especially in the developed world, will challenge Indian EV makers on several fronts -- aesthetics, quality, technology and innovation, among other things – and these will translate into learnings. More importantly, the eagerness to buy environmentally-friendly vehicles and that too at higher prices would be greater in the Triad markets of North America, Western Europe and Japan, thus giving volumes that Indian manufacturers need. The gains could be applied in products for the domestic market eventually, as demand for electric vehicles increases in India.
However till such time demand does sizeably increase in India and with technology of EVs still being limited especially in the two-wheeler segment, a key ingredient for an EV maker to strike big in the domestic market would be the seriousness in which it takes its branding and in building and conveying the brand value of its products. And as one of India’s most respected executives and co-founder of MindTree Consulting, Subroto Bagchi, says in his book The High-Performance Entrepreneur, “without great value, you cannot build a great brand”. Value, he says, should not only be reflected in the company’s product but inside the enterprise and what it does for its external environment as well. The company will have to bear this in mind.
(Published in Auto Monitor magazine's April 16, 2010 edition)
Sunday, April 11, 2010
Monday, March 29, 2010
Renault’s branding challenge in India
Two years ago, as a former automotive industry professional and a keen observer of the sector, I had made a clear diagnosis of the reason that was adversely impacting Renault’s business and visibility in India.
After carefully studying and observing the company’s entry into the market, its selection of a partner, the product, advertising campaigns and finally the performance of its Logan in terms of sales, my conclusion had been that Renault suffered from a serious branding problem in India. And so when the company’s top India official was quoted in the Financial Express newspaper in early February this year, as saying “Building brand awareness and our image in the market will be our utmost priority now”, I was not surprised. Though this realisation has been late in coming as a lot of damage has already been done, it is better late than never for the company’s survival in India.
Having had the opportunity of working closely in building Indo-French linkages in the automotive sector and being associated with the visit of a French automotive delegation in the early 1990s, which included representation from Renault to study the market; it was heartening to know in early 2005 that the company had finally announced its plans to enter the passenger car market in a joint-venture with Mahindra and Mahindra (M&M).
Peugeot, as we all know, had a bitter experience in India earlier and its exit severely impacted the huge investments made by Indian vendors to the project as well as the buyers of its 309 car. When Renault announced its plans, I thought it would have surely looked closely at the mistakes that its rival in France had made in the Indian market.
However, from the beginning itself, signs were becoming evident that Renault’s foray would not be smooth. What went wrong?
The first mistake, to my mind, was that the awareness and product advertising campaign did not consider certain realities and did not possess a strategy of foresight – and even if it did, then it was not reflected in the final outcome. The Renault name, unlike iconic ones such as BMW or VW, was not known in India. Peugeot’s failure and exit had left a poor image, in the minds of both consumers as well as the automotive industry, about French auto makers in general. M&M, on the other hand, was primarily known as a tractor and utility vehicle maker and its brand recall in no way featured cars. Its core competence as a UV maker was ably demonstrated in its Scorpio.
Instead of first creatively and strategically trying to work on these issues through an awareness campaign, the advertisements ran headlong into selling the USPs of the product.
The second mistake made was in the choice of product itself. When the Logan was finally launched, its design was disappointing. Being a wide body car was fine but the overall design of the Logan was staid and not exciting. In a market which had already tasted contemporary technology in tastefully designed cars, the Logan, I felt, would not be able to sustain long-term demand due to a lack of appeal in the product. Initially there was a lot of excitement in how well the car was selling, but after about a year its sales started falling.
The third mistake was Renault’s own lack of initiative in sitting in the driver’s seat to quickly repair its branding in India. A yardstick to the branding problem was apparent in the way people would make a brand recall of the car. When referring to the Logan, people would invariably say “Mahindra Logan”. Apart from this, the cropping up of Renault’s name in other business ventures, such as its plans with Bajaj and with Nissan, was adding to the confusion in the minds of consumers and affecting the brand recall further.
In my opinion, Renault should have articulated its mind and plans in greater detail from the beginning itself, through the media or other ways. A messaging which would, among other things,
oSpell out Renault’s business plans for India and its elements in as much detail as
possible.
oConvey specific points on how India is important for Renault in its global plans.
oElaborate on Renault’s core competencies as a global company and the value it has
created through its partnerships in other emerging economies.
oExplain in what way Renault would bring value to other businesses in India, the
Indian people and the country.
In a scenario where auto demand in Europe is expected to fall further and with Renault SA having reported an annual loss, the French auto maker’s plans in emerging markets such as India will logically get priority in the hope that such markets sustain demand for its products and add to the company’s revenues in the future. The company has announced further investments in the country as well as the introduction of other car models.
However, Renault needs to act fast and take bold decisions to repair its branding in the country while moving with its new strategies and business plans. Though all these will have to move in tandem, working on an enhanced awareness and a clearer image will be paramount for the company if it wants to benefit faster in a market which is seeing the levels of competition grow along with the number of buyers who are increasingly becoming more discerning and sensitive about brand value.
(Published in Auto Monitor magazine's April 1, 2010 edition)
After carefully studying and observing the company’s entry into the market, its selection of a partner, the product, advertising campaigns and finally the performance of its Logan in terms of sales, my conclusion had been that Renault suffered from a serious branding problem in India. And so when the company’s top India official was quoted in the Financial Express newspaper in early February this year, as saying “Building brand awareness and our image in the market will be our utmost priority now”, I was not surprised. Though this realisation has been late in coming as a lot of damage has already been done, it is better late than never for the company’s survival in India.
Having had the opportunity of working closely in building Indo-French linkages in the automotive sector and being associated with the visit of a French automotive delegation in the early 1990s, which included representation from Renault to study the market; it was heartening to know in early 2005 that the company had finally announced its plans to enter the passenger car market in a joint-venture with Mahindra and Mahindra (M&M).
Peugeot, as we all know, had a bitter experience in India earlier and its exit severely impacted the huge investments made by Indian vendors to the project as well as the buyers of its 309 car. When Renault announced its plans, I thought it would have surely looked closely at the mistakes that its rival in France had made in the Indian market.
However, from the beginning itself, signs were becoming evident that Renault’s foray would not be smooth. What went wrong?
The first mistake, to my mind, was that the awareness and product advertising campaign did not consider certain realities and did not possess a strategy of foresight – and even if it did, then it was not reflected in the final outcome. The Renault name, unlike iconic ones such as BMW or VW, was not known in India. Peugeot’s failure and exit had left a poor image, in the minds of both consumers as well as the automotive industry, about French auto makers in general. M&M, on the other hand, was primarily known as a tractor and utility vehicle maker and its brand recall in no way featured cars. Its core competence as a UV maker was ably demonstrated in its Scorpio.
Instead of first creatively and strategically trying to work on these issues through an awareness campaign, the advertisements ran headlong into selling the USPs of the product.
The second mistake made was in the choice of product itself. When the Logan was finally launched, its design was disappointing. Being a wide body car was fine but the overall design of the Logan was staid and not exciting. In a market which had already tasted contemporary technology in tastefully designed cars, the Logan, I felt, would not be able to sustain long-term demand due to a lack of appeal in the product. Initially there was a lot of excitement in how well the car was selling, but after about a year its sales started falling.
The third mistake was Renault’s own lack of initiative in sitting in the driver’s seat to quickly repair its branding in India. A yardstick to the branding problem was apparent in the way people would make a brand recall of the car. When referring to the Logan, people would invariably say “Mahindra Logan”. Apart from this, the cropping up of Renault’s name in other business ventures, such as its plans with Bajaj and with Nissan, was adding to the confusion in the minds of consumers and affecting the brand recall further.
In my opinion, Renault should have articulated its mind and plans in greater detail from the beginning itself, through the media or other ways. A messaging which would, among other things,
oSpell out Renault’s business plans for India and its elements in as much detail as
possible.
oConvey specific points on how India is important for Renault in its global plans.
oElaborate on Renault’s core competencies as a global company and the value it has
created through its partnerships in other emerging economies.
oExplain in what way Renault would bring value to other businesses in India, the
Indian people and the country.
In a scenario where auto demand in Europe is expected to fall further and with Renault SA having reported an annual loss, the French auto maker’s plans in emerging markets such as India will logically get priority in the hope that such markets sustain demand for its products and add to the company’s revenues in the future. The company has announced further investments in the country as well as the introduction of other car models.
However, Renault needs to act fast and take bold decisions to repair its branding in the country while moving with its new strategies and business plans. Though all these will have to move in tandem, working on an enhanced awareness and a clearer image will be paramount for the company if it wants to benefit faster in a market which is seeing the levels of competition grow along with the number of buyers who are increasingly becoming more discerning and sensitive about brand value.
(Published in Auto Monitor magazine's April 1, 2010 edition)
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