The new buzz word in Motown: Affordable luxury

 The Indian automobile industry is facing one of its toughest periods in over a decade. In the period between April 2012 and February 2013, the industry registered a negative growth of -4.64% in the passenger cars segment. Sales of small and medium automobile segments are slacking off, which is in sharp contrast to the scorching pace of growth witnessed till a couple of years ago. Between FY2005-06 and FY2010-11, passenger car sales blazed at 15.2% per annum. That fell to 4.7% in FY2011-12, before languishing this past financial year.

The only silver lining has been the luxury end of the car market, which has been an exception to this anaemic trend. While the overall passenger vehicle industry has grown at a CAGR of 19.04% in the past four years, and the luxury vehicle segment has grown at a CAGR of 32.02% during the same period. Currently, of total car sales of 2.5 million, the luxury segment contributes only 1.2%. But the segment has been growing steadily over the past couple of years and is expected to contribute 4% of the total car sales in the next eight years. Experts believe that demand for luxury cars will rise to at least 50,000 vehicles by 2015, from 25,000 units sold in 2012.


Mercedes-Benz, which came to India in 1994, was the largest seller of luxury cars in India till a couple of years ago when fellow German rival, BMW, beat the company to the numero uno position in 2009. That year, Mercedes recorded 3,202 units in sales whereas BMW sold a good 3,587 units, topping the sales chart. Audi, which was then just making its presence felt in the Indian market, registered 58% of whopping yoy growth in 2009, selling 1,987 units. Since 2009, the competition has gotten more intense and scalding hot. The German players have been at each other’s throat, straining their muscles to outperform in the competitive luxury car market, which has grown thicker with the entry of newer players like Volvo and Jaguar Land Rover.

On one hand we have the entry level luxury brands like BMW, Audi, Mercedes and Volvo; on the other hand there are the mid-level luxury brands like Jaguar and Land Rover (starting from about Rs.5 million) and then there are the ultra-luxe brands, some of the biggest names in the sports car and super luxury segment, like Bentley, Lamborghini, Rolls Royce, Ferrari, Aston Martin, Maserati and Bugatti. The arrival of these big guns in the Indian market over the past two years has further redefined and segmented the luxury car market. So we now have the entry-level, mid-level, super luxury, sports cars and SUVs. Another key trend in this luxury space is the sudden upsurge in the entry level cars starting as low as Rs.2.2 million.

The trend was kicked off with BMW launching its X1 SUV model and lowering the entry level of its luxury cars to about Rs.2.2 million (ex-showroom). The idea is to generate volumes and so players like BMW are launching new products in the affordable luxury segment, where the demand actually is. In the process, the traditional luxury segment has now morphed into the premium category with most luxury car makers moving towards affordable luxury. In order to vroom ahead in this new “affordable luxury” category, BMW has introduced its sub-brand Mini Cooper, which it introduced at last year’s auto show in Delhi. It is planning to launch three models of this sub-brand in India − Mini Cooper, Mini Cooper convertible and Countryman, priced aggressively between Rs.2.49 million to Rs.3.19 million. Rivals Audi and Mercedes have also taken steps to create excitement in the entry level luxury segment. Last year saw Audi introduce its Q3 model (priced at Rs.2.67 million) while Mercedes has launched its B-class priced competitively at Rs.2.10 million, which competes with BMW X1 (priced at Rs.2.24 million).

As the churn in the luxury car market gets thicker, players are pulling out all the tricks to stay ahead in the competition by creating new segments and looking for new markets to generate demand. “As we move into the future, we are well positioned with a forward-looking strategy, progressive roadmap along with an exciting and emotional portfolio to tap the available market opportunities,” says Philipp Von Sahr, President, BMW India. So, BMW is tapping the market for commercial use of luxury cars such as premium hotels and cab owners and has gone for selling the stripped versions of its traditional luxury cars to generate incremental demand.

Likewise, Audi is contemplating to launch several initiatives on the pro\duct front this year. It plans to assemble the entry level Q3 SUV, which is giving good competition to the BMW X1, in India by the second quarter of this year. The price of Audi Q3, which starts from Rs.2.6 million, is expected to come down further once Audi starts assembling the Q3 in India. The car maker at present assembles sedan A4, A6 and SUV Q5, Q7 in India. Even, Mercedes has plans for expanding its product portfolio. “We would be launching one or two products, starting this year, with a B-class launch. And soon we would be launching an A-class product as well. Secondly, we are investing heavily on production at our factories. We want to make our CKD (complete knocked down) units because it take 2-3 years to get the CKD portfolio ready,” says Debashis Mitra, who was Director, Sales & Marketing, Mercedes India, before quitting just a few days ago.

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Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri

and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles

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David vs Goliath!

In Maharashtra, domination of the Sharad pawar family over Cooperatives is being challenged, reports Chandran Iyer

People in Maharashtra are “cut up” at the Nationalist Congress Party (NCP) for two reasons. One is the infamous foot-in-mouth comment by the Deputy Chief Minister Ajit Pawar whose crass  `urine' remark at a rally to denigrate a farmer who was on hunger strike at Mumbai's Azad Maidan demanding relief from drought, has put the party in a corner. The other and potentially more dangerous - the terrible state of affairs in the state’s powerful cooperative sector which is mainly controlled by the NCP.

Sharad Pawar’s dream of becoming prime minister in a coalition government after the 2014 General Elections stands significantly dented with nephew Ajit Pawar's  freewheeling speech at a rally at Indapur where he  said, “If there is no water in the dams of Maharashtra, how can we release it? Should we urinate into it? If there is no water to drink, even urinating is not possible”.

While the crowd present there cheered momentarily at Ajit’s crass remarks, NCP supremo and his uncle, Union Agriculture Minister Sharad Pawar, distanced himself from his nephew,  pulling him up publicly at a rally. Ajit, quick to recognize the gaffe, sat on a ‘fast’ to  “atone” for his sins, describing it as “One of the worst political blunders of his life.’’

The token repentance fast which Ajit Pawar undertook under media glare may, perhaps, help soothe the frayed nerves of farmers facing an unprecedented drought this season. But what could take a long time to heal – if it does – is the festering wound in Maharashtra’s cooperative sector, well in control of the Pawar clan and its minions.

But this carefully choreographed family rule and utter domination of the state's cooperative sector is under threat for the first time. The one-man demolition army who has taken on the might of Sharad Pawar’s political muscle is Raju Shetty, farmer and independent MP from Hatkangale constituency of Maharashtra who has been snapping at the big man’s heels giving him sleepless nights by mobilizing farmers against him.

Shetty looks prepared to go all the way. He told TSI, “Until a few years ago, people in western Maharashtra  regarded Sharad Pawar as messiah of the Cooperative movement. His strangle-hold on the state’s sugar lobby and the Maharashtra State Cooperative Banks made him immensely powerful. But that grip is now slipping as I and my organization are holding rallies and exposing the NCP for what it is – a party more interested in feathering their own nests rather than look at the welfare of farmers”.

Like the David versus Goliath story, Shetty has considerably eroded the domination of Sharad Pawar in  western Maharashtra by spearheading a successful agitation for higher sugar-cane prices from sugar cooperatives.

Shetty’s first serious challenge to Pawar came before General Election, 2009. His Swabhimani Paksha party, which was set up the same year, defeated NCP’s Nivedita Mane by 95,000 votes despite a severe fund crunch. It is true though that Shetty has not been able to replicate this success in subsequent elections to local self-government bodies and continues to remain the lone MP from his party.


Says Ashok Kulkarni, top notch consultant to most sugar industries in Maharashtra, “Cooperative sugar factories (CSF) in Maharashtra are the fountainhead of corruption. What is shocking is that the state government doles out sugar factories to MLAs, MLC’s and other political leaders in which 90 per cent of the money invested is that of the public. The CSF and the District Cooperative Banks in Maharashtra often work hand-in gloves as both are under the direct control and tutelage of politicians”.

Since Cooperative sugar factories and Cooperative district banks are not run professionally – their sole existence is to rake in the money – many of them are in a complete mess.

Kulkarni, who has also conducted an in-depth study of corruption in sugar factories, had filed a writ petition in the Bombay High Court to inquire into the working of these factories. Based on his petition the high court on December 13, 2010, had asked the Comptroller and Auditor General of India (CAG) to submit ‘performance audit report’ of management of cooperative sugar factories in Maharashtra for the period between April 2007 and March 2010.

In 2006, Kulkarni had written a letter to the Bombay High Court pointing out to wide-spread malpractices in the Cooperative sector. It was turned into public interest litigation (PIL). Among other things, Kulkarni had complained that government was allowing new Cooperative factories to come up in areas where there was no sugarcane available.

Said Kulkarni, “Sugar factories in Maharashtra and District Cooperative banks have more often than not made news for the wrong reasons: corruption, nepotism, favoritism and gross mismanagement.  The state is losing hundreds of crores of rupees in subsidies and soft loans which are provided to the Cooperative factories because of mismanagement. Licences are issued for starting factories in areas where enough sugarcane is not available. Several Cooperative sugar factories in the state have shut down or making severe losses while many district cooperative banks have been dissolved”.

The mess appears to be getting worse. For instance the Reserve Bank of India (RBI) on May 29, 2012 dissolved the board of directors of the NCP-controlled Sangli District Central Cooperative Bank for rampant irregularities and blatant violation of the Banking Regulation Act.  This was done following a recommendation made by the National Bank for Agriculture and Rural Development (Nabard).

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Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri

and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles

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A nation of tax dodgers?

India needs an immediate solution to the tax evasion problem

If filing tax to the government by an individual can anyhow be connected with the degree of patriotism of a person, India presents a dark picture to the world. The Revenue Department recently issued notices to 35,000 assessees who have failed to file I-T returns. Similar notices were sent a few weeks ago to an equal number of people. But the bigger shock was that among those 70,000, only 10,000 felt it necessary to disclose their incomes and filed tax returns in response to the letters. This is putting tremendous pressure on the Revenue Department, which has a target to generate revenue of Rs.5.65 lakh crore under the direct taxes category for the current fiscal year. Evading taxes is more of a norm than an exception in India. Everyone, starting from an individual to a giant corporation, finds it conevenient to cheat the government by evading taxes. This is why in spite of being a country of 120 crore people, there are only 3 crore people who pay taxes. How much does this evasion cost the nation and its economy?

Tax to GDP ratio is a very relevant indicator to understand the strength of an economy. Unfortunately, India scores poorly at it. While 70% of the nation’s income comes from income tax for developed countries, it is only 18% for India. Moreover, the direct tax contribution is 60-65% for rich countries while India gets merely 35%.

That is why India is termed as a ‘poor tax performance’ country, ranking at the bottom even among the BRIC nations in tax collections. However, all this dodging affects the economy severely. According to a research article published by Businessweek, India losses Rs.14 trillion ($314 billion) every year due to tax evasion. For the uninitiated, income tax rate has dropped down to 30% from 97.5% in 1971. In fact, the corporate tax incentives too are diluting our tax collection. For instance, states like Uttarakhand and Himachal Pradesh provide tax rebate for setting up manufacturing units. So many manufacturers open their subsidiaries in those states only to fully exploit the tax benefits. This way, India ends up losing Rs.800 billion every year.

Thus, the government cannot ignore the implications of revenue foregone as a result of tax evasion. There is a need for spreading greater awareness of tax payment. At the same time it has to show people that it is making the right use of the tax collected as people have lost faith in the government and have no idea how the money is spent.

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Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri

and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles

2012 : DNA National B-School Survey 2012
Ranked 1st in International Exposure (ahead of all the IIMs)
Ranked 6th Overall
Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri’s Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year

BBA Management Education

Brian Keith to Dave

The following moving love letter was written by American World War II veteran Brian Keith to Dave, a fellow soldier he met and fell in love with in 1943 while stationed in North Africa, on the occasion of their anniversary. It was reprinted in September of 1961 by ONE Magazine – a groundbreaking pro-gay magazine first published in 1953. The original letter is held by the Library of Congress.

October 27th, 1945

Dear Dave,

This is in memory of an anniversary — the anniversary of October 27th, 1943, when I first heard you singing in North Africa. That song brings memories of the happiest times I’ve ever known. Memories of a GI show troop — curtains made from barrage balloons — spotlights made from cocoa cans — rehearsals that ran late into the evenings — and a handsome boy with a wonderful tenor voice. Opening night at a theatre in Canastel — perhaps a bit too much muscatel, and someone who understood. Exciting days playing in the beautiful and stately Municipal Opera House in Oran — a misunderstanding — an understanding in the wings just before opening chorus.

Drinks at "Coq d'or" — dinner at the "Auberge" — a ring and promise given. The show 1st Armoured — muscatel, scotch, wine — someone who had to be carried from the truck and put to bed in his tent. A night of pouring rain and two very soaked GIs beneath a solitary tree on an African plain. A borrowed French convertible — a warm sulphur spring, the cool Mediterranean, and a picnic of "rations" and hot cokes.

Two lieutenants who were smart enough to know the score, but not smart enough to realize that we wanted to be alone. A screwball piano player — competition — miserable days and lonely nights. The cold, windy night we crawled through the window of a GI theatre and fell asleep on a cot backstage, locked in each other’s arms — the shock when we awoke and realized that miraculously we hadn't been discovered. A fast drive to a cliff above the sea — pictures taken, and a stop amid the purple grapes and cool leaves of a vineyard.
The happiness when told we were going home — and the misery when we learned that we would not be going together. Fond goodbyes on a secluded beach beneath the star-studded velvet of an African night, and the tears that would not be stopped as I stood atop the sea-wall and watched your convoy disappear over the horizon.

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Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri

and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles

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