1553858708258_sectiona_group08.pdf

DEPARTMENT OF MANAGEMENT STUDIES INDIAN INSTITUTE OF TECHNOLOGY, DELHI

BMW LIVE PROJECT REPORT

Submitted by: Group 8 (Section-A): Honey Chawla (2018SMF6623) Ankush Bagley (2018SMF6628) Vibhishek Chandar (2018SMT6631) Gaurav Maheshwari (2018SMF6606)

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Executive Summary BMW is the second market leader in the luxury car segment in India after Mercedes Benz. BMW sales stood at 10,405 units in 2018 and clocking 11% growth as compared to sales of 2017. BMW sales are driven mainly by the BMW 5 series, BMW 6 series Gran Turismo and BMW Sports Activity Vehicle (SAVs) range. Currently, they have a localisation level of around 50% for its product portfolio which showcase the company’s competitive pricing strategy. Through this marketing research, we try to develop a future strategy for BMW India to enable strong hold and sustainable competitive growth in the Indian Market to become the market leader. The paper explains various secondary and primary research methodologies being adopted. The secondary research helps in understanding the current Automobile market trends and the dynamic nature of the industry due to various emerging mobility scenarios. Further, the landscape and whitespace analysis in the market help in identifying the gaps where BMW can utilize to further strengthen the foothold in India. Further, the paper comes up with factors that are broadly categorized into cultural, technological, social, economic, and political factors to understand the factors influencing Key buying behaviour (brand appeal, status and image, price, service/support, luxury features, size, space, resale, reliability, broad choice of models etc.) for potential premium segment customers. Based on the above factors, a questionaire is formulated. The research design involves judgmental sampling and the target audience chosen are the owners of luxury cars such as BMW, Mercedes Benz, Audi, Volvo, Jaguar and Porsche etc. For understanding the various factors, the factor analysis is being done using statistical tools and customer reviews are also taken to know about the current standing of BMW in the minds of the customers and how likely the customers are to choose BMW as their next car. And we found out that among Cultural factors - the Brand image, among Technological factors – Driving comfort, style & design, among Social factors- Life style, among Economic factorsMaintenance/After Sales Service, and among Political factors- Safety factors were perceived by the customers as the most influential factors affecting their purchase decisions. Portfolio analysis has been done comparing the products of BMW, Mercedes, and Audi. As the result of the analysis we came up with the finding that most volume of sales is happening in the cost range of Rs 40-70 lakh and we recommend BMW to release more variants of the existing models within the range in the short-run and to launch new models specific to Indian customer in this price range in the long run. Also, after analysing the customer preferences and to build customer relationship, BMW can adopt differentiation strategy in providing the customized features based on customer’s requirements. In addition to make a seamless journey from digital to retail shop, the user mobile interface of the website can have additional features such as 360-degree view of any BMW vehicle or option of customizing such as enabler function of changing the cars’ body colour, rims and design packages. In making a trade-off between the price and style, the customers can make their own car and can make a lot of selection options. This will ultimately enhance the product portfolio of BMW in an indirect manner. Another interesting finding that the paper explains is about the dealership network taken from doing extensive secondary research. The dealership network involves the showrooms of both Mercedes Benz and BMW throughout the country. This analysis has been done based on the inference from the primary research that most of the luxury car owners came to know about their car either through word of mouth or through consulting with a dealer. This gave a perspective to analyse the influence of dealership showrooms influencing sales. Further the analysis has been done taken into consideration the GDP for all states and Union territories, the dealership network for both companies are compared and the potential gaps/regions are identified wherein the BMW can

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expand their dealership network. The Nominal GDP in INR for all States and Union Territories in India has been collected from various state budgets, based on which States and Union Territories are ranked and tabulated, along with it the presence of dealership showrooms of Mercedes Benz and BMW has been collected, mapped, and tabulated to analyse the potential regions on which BMW should establish it’s dealership showrooms to attain increased market penetration and sales. Analysis has been done on the data collected and it has been found that Mercedes Benz has 91 dealership showrooms in India with average sales per dealership of 171 and BMW with 44 dealership showrooms in India with average sales per dealership of 236. So, based on the analysis of potential regions where BMW can expand its dealership on comparison with Mercedes dealership and with reference to the nominal GDP data, 20 regions has been suggested to establish new dealership showrooms. For example, Maharashtra which has a nominal GDP of Rs 27.96 lakh crore has 22 Mercedes dealership showrooms but only 13 BMW dealership showrooms. Apart from the common regions in Maharashtra, Mercedes has presence in Nasik and Kolhapur which can be understood as potential regions which the paper proposes to BMW to establish their dealership showrooms. Based on the similar lines of analysis, Tamil Nadu which has nominal GDP of Rs 17.25 lakh crore has 8 Mercedes dealership showrooms but only 5 BMW dealership showrooms. We propose to introduce an additional showroom in Salem where Mercedes already has its presence, but BMW does not, or in Tiruchirappalli where Mercedes does not have its dealership, but it could become a potential region for BMW to establish a dealership. In addition, the cost benefit analysis is also done considering various expenses like Property & Building Cost (Land Lease), Purchase of stock inventory, Salaries, Other Expenses (Insurance, Electricity & Administration expenses), Maintenance Cost, Furniture Equipment cost, Marketing & Promotional Expenses, Dealership security Deposit, interest and taxes. The NPV is calculated for Net profit/ Earnings after Tax and the dealership becomes profitable and feasible in 5 years timeframe. Hence, the payback period is 5-6 years on an average for any new dealership. BMW has a less mind share among customers in India than compared to Mercedes, this is because of the early entry of Mercedes in Indian market and Increased penetration of having 91 dealership in the country. From our primary research we were able to understand that Word of mouth and dealership showrooms turns out to be the most important parameters for creating brand awareness in the minds of the cutomers which adds a choice in their purchase decisions. Adding on dealership in potential regions increases the word of mouth feedback among potential customers and gives Increased chance of converting through dealers. From the primary research it can also be understood that luxury car owners considers maintenance and after sales service as an important factor which affects their purchasing decisions. There are 60 authorized Merecedes service centers spread across 21 states and union territories in India, whereas BMW has 29 authorized service centers spread across 18 states and union territories in India. Increasing the service centers in potential regions will positively impact the targeted customers in their purchase decisions. Hence, the long term expansion strategy will take into account opening of dealership showrooms in the strategic locations considering the demogarphic distance, cost benefit analysis and other Luxury car showrooms locations/presence.

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Table of Contents 1 Background and Literature Review ...................................................................................................... 4 1.1 Industry Overview and Analysis .................................................................................................... 4 1.2 Mobility trends in India ................................................................................................................. 6 2. Research Objective ............................................................................................................................. 9 3. BMW Current Landscape and Analysis ............................................................................................... 9 3.1 BMW Market Scenario .................................................................................................................. 9 3.2 Product Portfolio Landscape ....................................................................................................... 10 3.3 Challenges for BMW at hand ...................................................................................................... 11 3.4 Current Initiatives taken ............................................................................................................. 11 3.5 Competitive Landscape ............................................................................................................... 11 4. Research Methodology ..................................................................................................................... 14 5. Results & Analysis ............................................................................................................................. 16 5.1 Customer Preferences – Primary Research Analysis .................................................................. 16 5.2 Product Portfolio Analysis ........................................................................................................... 21 5.3 Dealership Showrooms Analysis ................................................................................................. 23 6. References ........................................................................................................................................ 28 7. Appendix I ......................................................................................................................................... 29

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1 Background and Literature Review 1.1 Industry Overview and Analysis Automobile Industry in India is 4th largest in world. The Indian Automobile market is currently divided into two wheelers which includes motorcycles, geared and ungeared scooters and mopeds, three wheelers which includes light, medium, heavy commercial vehicles, passenger cars, utility vehicles and tractors. Indian automotive industry is about to reach 16-18 trillion by 2026. A CAGR growth of 7 percent shown in the domestic automobile production. During Apr-Sept 2018, automobile production has reached to approx. 16.7 million units. Automobile exports had grown to around 26.5 percent during Apr-July 2018. It is expecting to grow at rate of 3 percent CAGR during 2016-2026. Multiple trends impacting the Automobile sector are as follows:

Source: McKinsey a) Shifting trends in market dynamics There is a shift in the customer demands, manufacturing and operating models which results in creating a dynamic market for auto component manufacturers. Make in India Initiative - Localization Levels: The localization levels in India has indicated that India is capable enough for having a diverse portfolio of products. In four-wheeler segment i.e. hatchbacks, SUVs, premium sedans, 85% of localization can be achieved. 100% localization is achieved in developing the bikes by the market leaders.

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b) Changing Original Equipment Manufacturer (OEM) needs Due to the dynamic expectations of the end users and consolidation of platforms results in reducing complexity and alterations in vehicle such as use of electronics. Hence, the needs expected from OEM is changing. Inclinations towards Premium and higher quality vehicles: As the income levels are increasing, the people desire to buy more advanced products are increasing. So, people are upgrading from 125cc to 250cc or driving from a 2-wheeler to a 4-wheeler. The mass market vehicles are also providing the premium features has quickened the pace of this commoditization. As is evident from the below figure, the demand is shifting towards premium and higher capacity vehicles.

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c) Changing Technological Trends The technological trends have surely disrupted the automotive marketplace as it triggers competition from non- automotive industries. 95% of disclosed investments in companies focused on disruptive technologies that comes through non-automotive players.

Source: McKinsey d) Evolving regulatory norms and changing macroeconomic factors affecting trade environment The regulation being imposed by the government and changing policies are beyond the control of any industry. The changing norms impose restrictions on the manufacturers to change their component production to comply with the regulations and norms. • Emissions: Enforcement of BS-VI norms by 2020, pushing towards Electric vehicles (EV) • Safety: Mandatory Automatic Braking Systems Anti-lock braking system (ABS) on cars, two- wheelers and cabin safety The rise of tariff and non-tariff protection such as tightful testing, quality related restrictions, the lack of free trade agreements (FTA) with few countries could affect the business performance issues of these companies. 1.2 Mobility trends in India The automative industry is on the brink of disruption as the automation, new business models and digization of process has revolutionized the working in the industry. There are 4 main technology driven trends which are leading the industry to such kind of disruption.

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Shared Mobility: As we are progressing, the on-road traffic is increasing, and the parking space is reducing, which in turn is stimulating the growth of concept of shared mobility in the developed countreis. The overall size of global market was valued at $104 billion in 2017. It also predicted a CAGR of 25% from 2018 to 2025. As the business models are evolving, there is an emergence of two-wheeler shared mobility as well. Below is Pi chart showing the share of vehicle segment in context of shared mobility:

E-Mobility or Electrification: With increasing urbanisation around the globe, there are high level of emissions in the environment due to which government is going for stringent norms to control the pollution levels. Moreover, in India the crude oil imports holds a significant portion for the current account deficit and also create interdependency on the other parts of the globe. “As per a NITI Aayog report, India could save 64 percent of energy demand for road transport and 37 percent of carbon emissions by 2030 by pursuing a shared, electric and connected mobility future”

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The below chart shows us about the progress of EVs globally as well as in India.

The considerate effect of all the push and pull factors have been depicted in the above chart which includes Govt. norms, advancements in technology, Infrastructure development for fast charging, customer demand and drop in battery prices. Factors Stimulating E-Mobility in India: ➢ Government: o

Environmental targets and strategic intent: Stable policies to keep in check the carbon emission levels and crude oil substitution.

o

Incentives and subsidies: The FAME scheme launched by Indian government to support the Hybrid development. Other such initiatives like tax breaks, technology localisation should be launched. Long-term direction: Long term Commitment like achieving 30% of new sales in electric passenger cars and other vehicles. Collaborations with Automotive Research Association of India (ARAI), the Indian Space Research Organization (ISRO), and Bharat Heavy Electricals Limited (BHEL) should be done to find new ways of exploiting the technology for the good use.

o

➢ Infrastructure o

o

Alternate business models: As the EVs industry in growing at a rapid state, the power generation and transmission companies should look for alternate models to compensate the loss of conventional revenues. Power generation and grids: EVs may need only 3 to 4 % of present power generation. So, government should investigate the additional requirements to prevent issues with network infrastructure.

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o

Charging infrastructure: In 2016, India had only 500 EV charging stations. But if the projected growth seems to be accurate, then India should keep the target of around 3 lakh charging stations only across Delhi.

➢ Automotive industry players o o o

Change the mix in the ecosystem Build new competencies Improve performance

2. Research Objective To analyse the current automobile scenario in India, mobility trends, BMW current Market Scenario, initiatives taken up by the company, changing customer buying behaviour patterns, and to develop a future strategy for BMW India to enable a ten-fold growth in next seven years.

3. BMW Current Landscape and Analysis 3.1 BMW Market Scenario •

BMW has maintained its double digit growth rate as compared to last year. They have delivered 10,405 cars and have a growth rate of 11% which includes both BMW and MINI.

•

BMW brand alone sales stood at 10,405 units in 2018 – clocking 11% growth as compared to 2017

•

2018, BMW sales are driven mainly by the BMW 5 Series, BMW 6 Series Gran Turismo and BMW Sports Activity Vehicle (SAVs) range

•

Led by the BMW X1, X3 and X5, BMW’s Sports Activity Vehicle (SAV) range has contributed to nearly 50% in overall BMW sales

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3.2 Product Portfolio Landscape Series

PORTFOLIO AND PRICING

Model

Sedan 3

Varient 330i M Sport Shadow edition

BMW’s growth was driven by the 5 Series and the 6 Series GT. The German carmaker additionally observed its locallyassembled SUV range contribute more than 50 percent to its overall sales in India with solid demand for the X3 and X1 is also popular among the customers. BMW is preparing another model strike for India this year which incorporates 10 new models and two facelifts. Its 2019 innings is probably going to start with the dispatch of the X4 and will incorporate the new 3 Series, the new X5, X7, X6, X4M, X3M, Z4, M8 Coupe, M8 Cabriolet, 7 Series facelift and X1 facelift

5

6

Sedan

45,30,000

320d Prestige

39,80,000

M sport

51,90,000

50,70,000

530d M sport

66,20,000

530i Sport line

53,80,000

520d Luxury Line

58,70,000

630d M sport

73,70,000

630i Luxury Line

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Sedan

X1

X3

Sedan

68,90,000 Gran Turismo 63,90,000 1,34,60,000 1,31,50,000

1,34,60,000

sDrive20i xLine

38,30,000

sDrive20d xLine

39,30,000

sDrive 20d Expedition

35,20,000

sDrive 20d M sport

42,40,000

xDrive 20d M sport

45,40,000

xDrive20d xLine

56,00,000 58,80,000

8- Speed Steptronic Sport Automatic Transmission 8- Speed Automatic Transmission 8- Speed Steptronic Sport Automatic Transmission 8- Speed Steptronic Sport Automatic Transmission 8- Speed Steptronic Sport Automatic Transmission 8- Speed Steptronic Sport Automatic Transmission 8- Speed Steptronic Sport Automatic Transmission Steptronic transmission with gearshift paddles 8- Speed Sport Automatic Transmission 8- Speed Sport Automatic Transmission 8- Speed Sport Automatic Transmission Steptronic Transmission

Steptronic Transmission

Sedan

1,22,40,000

730 Ld M sport

xDrive20d Luxury Line xDrive30i Luxury Line

Sedan

Steptronic Transmission Steptronic Sport Transmission Steptronic Sport transmission with double clutch Steptronic Sport transmission

SAV

Steptronic transmission Steptronic Sport transmission Steptronic Sport transmission Steptronic transmission with gearshift paddles

SAV

Steptronic transmission with gearshift paddles

58,80,000

Steptronic transmission with gearshift paddles

xDrive 20d M sport X

63,50,000

Steptronic transmission with gearshift paddles

xDrive 30d M sport X

65,90,000

xDrive 30i M sport X

60,60,000

xDrive 30d Design Pure Experience

77,90,000

xDrive 30d Edition X

69,40,000

xDrive 30d M sport

82,90,000

X6

xDrive35i M Sport

M2

Competition

M4

X

X4

SAV

8-Speed Steptronic Sport Automatic Transmission with gearshift paddles on the steering wheel 8-Speed Steptronic Sport Automatic Transmission with gearshift paddles on the steering wheel 8-Speed Sport Automatic Transmission

SAV

8-Speed Steptronic Automatic Transmission 8-Speed Sport Automatic Transmission

92,20,000

Sports Activity CoupA (SAC)

8-Speed Sport Automatic Transmission

81,80,000

CoupA

Coupe

1,35,90,000

CoupA

M5

Sedan

1,43,90,000

Sedan

X5

M

1,77,00,000

SAV

X5

M

740 Li Design pure Excellence Signature 730 Ld Design pure Excellence Signature 730 Ld Design pure Excellence

Transmission 8- Speed Steptronic Sport Automatic Transmission

47,70,000 Gran Turismo

Luxury Line

Gran Turismo 630d Luxury Line

Body Type

47,30,000

320d Luxury Line

Gran Turismo Edition Sport

BMW India has a wide variety of models segmented into series 3, 5, 6, 7, X, and M providing 35 different variants with Sedan, Gran Turismo, Sports Activity Vehicles. BMW cars price starts with 35.20 lakhs for the cheapest car model X1 sDrive 20d Expedition and 2.67 crores for the top model of M X5.

Base Price(INR)

M Double Clutch Transmission with Drivelogic M Double Clutch Transmission with Drivelogic 8-Speed M Steptronic with Drivelogic Steptronic Sport transmission

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3.3 Challenges for BMW at hand There are many challenges to talk about which in someway are the responsible for BMW to not replicate the same success in India as they have done in other countries. Some of them are: • • •

The basic customs duty on Completely build Units (CBUs) has increased from 20% to 25% in 2018 Taxation policy in India is not at par with global standards in various other markets that discourages the luxury vehicle segment (LVS) from achieving its real potential Increase in Customs duty on Completely Knocked Down (CKD) units from 7.5%-10% to 15%. Similarly, hike in duty on vehicle parts, which are an essential element of these units, from 10% to 15%.

3.4 Current Initiatives taken The various initiatives taken by the company in India for promoting growth and sustainability are: a) Localisation: A higher level of localisation also means a pathway to competitive pricing. BMW India currently has a localisation level of around 50% for its product portfolio which showcase the company’s competitive pricing strategy. Moreover, by having localisation, not only saves costs but also it is about giving convenience and flexibility. b) Concept of BMW Mobile Studio: For enhancing the customer experience, BMW came up with the concept of Mobile Studio which is exclusively designed for showcasing BMW products as well as services. c) Skill Next Initiative: BMW India as part of its Corporate Social Responsibility (CSR), came up with the initiative ‘Skill Next’. The initiative helps the company in providing around 365 engines and transmissions to premier engineering and technical colleges across every state and Union territories in the country so that students will get hand-on training and experience working on advanced technology.

3.5 Competitive Landscape Even though the luxury car market worldwide execution has been on the peppier side in 2018, extravagance carmakers in India observed 2018 to be a testing one. Contrasted with created markets where luxury vehicles regularly represent around 5-6 % of the general market, their offer in India is a little more than 1%. In 2018, luxury car market has seen the slowest growth rate as to last 10 years. 2016 growth rate is a one-off exceptional event wherein 2000cc + diesel engine cars were prohibited for lesser period in New Delhi. Growth rate has become more linear in last five years i.e. 2014-2018.

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Luxury vehicle producers in India finished the calendar year 2018 on a lukewarm note as various factors, for example, high import costs, devaluation of the rupee and a liquidity crunch affected interest extensively. By and large volumes are assessed to have totalled 40,688 units, up scarcely three percent from Calendar year 2017's 38,989 units.

Source: Autocarindia BMW Group India figured out how to prop the energy up as it sold 11,105 vehicles (counting MINI), enlisting YoY development of 13 percent. Of the aggregate, BMW models represented 10,405 units, up 11 percent. BMW said that development was driven by the 5 Series and the 6 Series GT. The German carmaker additionally observed its locally assembled SUV run contribute more than 50 % to its general deals with solid interest for the X3. It additionally affirmed that the new X4 and X7 will be locally assembled at its Chennai plant. BMW is preparing another model strike for India this year which incorporates 10 new models and two facelifts. Its 2019 innings is probably going to begin with the dispatch of the X4 and will incorporate the new 3 Series, the new X5, X7, X6, X4M, X3M, Z4, M8 Coupe, M8 Cabriolet, 7 Series facelift and X1 facelift (in no specific order). The Mini brand sold 700 units in 2018, posting a growth of 66 %, yet on a low base. The Countryman and the three-door hatchback represented 60 % of overall volumes.

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The major competitor for BMW is Mercedes-Benz who is the market leader in India who holds 38% of market share followed by Audi with 16%, Jaguar with 11%, and Volvo with 6%. a) Mercedes-Benz: The luxury vehicle market leader sold a record 15,538 units in CY2018, posting YoY development of 1.4 % (2017: 15,330). Even though it saw solid demand for its models in the primary portion of 2018, volumes went underweight in the second half and burdened overall growth. Indeed, the lull in development additionally influenced overall luxury vehicle sales in India since Mercedes represents a vast offer of the absolute market. The organization finished 2018 as the nation's highest selling luxury carmaker for the fourth straight year with 38 % share of the overall industry. Growth was driven by the long-wheelbase E-Class, which remained the most astounding moving model for the brand in 2018. Mercedes additionally has seen solid demand for the C-class vehicle; the GLC was the brand's most astounding moving SUV. Mercedes-Benz India intends to support a solid item force with plans to launch around 10 models in 2019, starting with the V-Class MPV on January 24, 2019. b) Audi: 2018 was a testing year for Audi India as deals fell 18 % YoY to 6,463 units (2017: 7,876 units). It was the second continuous year in which the brand attempted to discover footing after being tormented by the GST cess climb in 2017, when it posted 2% growth. The carmaker credited this drop-in sale to the closing of its biggest dealership, situated in Delhi NCR, where it normally records greatest conveyances. Audi India had fewer launches in 2018 as compared with the fellow players. It presented Q5 oil and diesel, RS5 Coupé and two special edition models each, for the Q3 and Q7. Regardless of the drop-in numbers, Audi India hopes to get the energy moving this year and has arranged models like the all-new A8 and the updated R8 for launch. It is planning to present the allelectric E-tron in India. c) Jaguar: For Jaguar Land Rover India, 2018 was a record year as it sold 4,596 units, its most elevated ever in a year, posting growth of 16.23 % (2017: 3,954 units). In the same way as other carmakers in the nation, SUVs drove the growth charge for JLR too, representing more than 50 % of the volumes. Growth was driven by models, for example, Discovery Sport, Range Rover Evoque, and Jaguar F-Pace just as the XE and XF. d) Volvo: Volvo India recorded the most astounding growth rate among all luxury carmakers, yet on a much lower base. It sold a record 2,638 units, up 30% YoY (2017: 2,029), driven by the XC60 and new XC40 SUVs. Strangely, Volvo India outperformed the number of vehicles sold in 2017 in the initial 10 months of 2018 itself, scoring sales of 2,194 units (up 40%) amid a similar period. The Swedish carmaker is relied upon to launch the all-new S60, which will go up against the new BMW 3 Series, Audi A4 and Mercedes-Benz C-class, by end-2019. It as of late declared plans to

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locally assemble the module crossover variations of its leader SUV, the XC90, at its plant in Bangalore by end of 2019. Furthermore, the organization likewise said that designs are in progress to present four new hybrid model throughout the following three years, alongside another allelectric model not long after its global launch. Brand BMW MercedesBenz Audi

Jaguar

Volvo

Lowest Price

Highest Price 2.6 Crore for top 35.2 Lakh for model 7 series and low end X1 M X5 29.90 Lakh 2.73 Crore for top for low end Amodel S-class Class 33.10 Lakh 9.15 Crore for top for low end model A8 A3 40.61 Lakh 2.80 Crore for top for low end model F-type XE 31.91 Lakh 1.31 Crore for top for the low model XC90 end V40

4. Research Methodology Research Methodology is a way to find the solution and analyse the data. It contains all the research methods and approaches to get the solution. The descriptive research is being used specially to describe the characteristics of the consumer’s perception about BMW segment and to develop a future strategy for BMW India. After doing extensive secondary research on automobile sector analysis, looking into current growth structure and market trends of BMW in India and drilling down further into current product marketing strategy, we have come up with few of the theoretical frameworks and application part of them that could help in identifying the portfolio, product and channel strategies that the company can adopt in the future. We have come up with factors that are broadly categorizes cultural factors, technological factors, social factors, economic factors political factors to understand the factors influencing Key buying behaviour for potential premium segment customers (brand appeal, status and image, price, service/support, luxury features, size, space, resale, reliability, broad choice of models etc.). For understanding the various factors, we will use various statistical tools and will do Factor Analysis. There are five major factors that influences the consumer behaviour 1. Cultural factors 2. Technological factors 3. Social factors 4. Economic factors 5. Political factors

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1) Cultural factors Cultural factors guide the consumer purchase decision with its values, believes and customs. The factors that we have decided to come under this category are brand image, references from friends, advertisements and publicity, user reviews. 2) Technological factors Technological factors guide the consumer purchase decision to follow latest technology and ease of operating. The factors that come under this category are mileage, style, comfort, power. 3) Social factors Social factors guide the consumer purchase decision by the social group they belong to, roles and status. The factors that come under this category are life style, trend, status, social influence. 4) Economic factors Economic factors guide the consumer purchase decision by factors that are causing him/her to spend money on a product. The factors that come under this category are price, maintenance, EMI availability and ease of service. 5) Political factors Political factors guide the consumer purchase decision by the compatibility that the consumer can use the two-wheeler and influencing factors that are driving them. The factors that come under this category are tax, environmental impact, safety factors, infrastructure. Brand image References from friends Cultural factors Advertisements and publicity

Technological factors

Social factors

Economic factors

Political Factors

User reviews Mileage Style Comfort Power Life style Trend Status Social influence Price Maintenance EMI availability Ease of service Tax Environmental impact Safety factors Infrastructure

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Sampling Method

Based on the above factors, a questionaire is formulated (Please Refer to Appendix) and the target audience is owners of luxury cars such as BMW, Mercedes Benz, Audi, Volvo, Jaguar and Porsche etc.

Item

Description

Sampling Technique Population

Judgmental Sampling

Sampling Frame

Luxury Car Owners in Delhi NCR

Owners of Luxury Cars (costing Rs. 30 lakhs and above)

5. Results & Analysis 5.1 Customer Preferences – Primary Research Analysis The Research design consists of data collection and data analyzing stage after the sampling technique being chosen and the questionaire being formulated. The number of samples taken is around 32 people. Following is the analysis of Customer preference behaviour from the Primary Research being conducted.

Scores

Cultural Factors 120 100 80 60 40 20 0

79

98

Advertisements Brand image and publicity

93

90

Seating Capacity

User reviews

Factors

Insights: Among the cultural factors, the most important factor for Customer preference for Luxury cars is Brand Image of the car

17

120

100

100

Technological Factors 90

81

100

Scores

80 60 40 20 0

Driving Comfort

Mileage Factors Power

Style & Design

Insights: Among the Technological factors, the most important factor for Customer preference for Luxury cars is Driving Comfort & Style - Design of the car

Scores

Social Factors 100 95 90 85 80 75 70

96 89

84

Country of Origin

81

Life style

Social influence

Trend

Factors

Insights: Among the social factors, the most important factor for Customer preference for Luxury cars is because of the Life style

Scores

Economic Factors 96 94 92 90 88 86 84

95

94 92

88

EMI availability Maintenance/After Sales Service

Price

Spare Part Availability

Factors

Insights: Among the Economic factors, the most important factor for Customer preference for Luxury cars is Maintenance/After Sales Service

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Scores

Political Factors 83

91

100

Environmental impact

Infrastructure

Safety factors

120 100 80 60 40 20 0

82

Tax

Factors

Insights: Among the Political factors, the most important factor for Customer preference for Luxury cars is the safety factors that the car provides

Scores

Relative Importance of Factors 180 160 140 120 100 80 60 40 20 0

143

Cultural

166

159 133

Economic

Political

143

Social

Technological

Factors

Insights: Among all the factors, the most important factor for Customer preference for Luxury cars is the technological factors.

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The survey gives another interesting finding that the most of the car owners like to self drive the cars in the Indian Segment.

The above graph show that the word of mouth marketing is still effcetive one in the luxury car market segment. After analyzing the customer preference in the luxury segment, lets look at the customer behaviour towards BMW. For drilling down further into customer behaviour, we took samples of those car owners having Luxury car in most of the cases other than BMW in order to find out the switching behaviour towards BMW series models

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How likely are you willing to purchase BMW car in future?

The above chart shows that most of the car owners who owned other than BMW luxury cars are very much satisfied with their brand and doesnot want to switch over to BMW.

Some of the customer Reviews that we got from the survey are tabulated as follows

“Car for driving pleasure” “Pathetic car with very high maintenance” “Driving comfort but not suitable for Indian condition” “Box car (no style and design) with High maintenance” “Less ground clearance and Poor driving comfort” “Its a great sports sedan car but not a long run car” “In love with BMW 5 series” “Unreliable” “Not for self driving. Mismatch between power and road handling” “Poor customer relationship at showroom” “High maintenance and less capacity”

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Strategy to adopt after analyzing the primary research Since most of the important factor for the customers is technological factor. Hence, BMW can adopt differentiation strategy in providing the customized features based on customer’s requirements. In addition to make a seamless journey from digital to retail shop, the user mobile interface of the website can have additional features such as 360-degree view of any BMW vehicle or option of customizing such as enabler function of changing the cars’ body colour, rims and design packages. In making a tradeoff between the price and style, the customers are able to make their own car and can make a lot of selection options. This will ultimately enhance the product portfolio of BMW in an indirect manner. The main problem the customers are facing is about the comfort level, therefore BMW should focus more on comfort rather than making a car having focused much on the driving pleasure since the road infrastructure anyways is a delimiting factor for them. For enhancing the maintenance/ after sales service which is most crucial economic factor for the customers, we have done the cost benefit analysis of having more dealerships in the next section

5.2 Product Portfolio Analysis High volume high potential zone

Product Potfolio Analysis

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Relative Volume

10 8 6 4 2 0 0

50

100

150

200

250

Price in Lakhs BMW Volume

Mercedies Benz volume

Audi Volume

Top Selling Varient BMW Mercedes Benz Audi X3 Mercedes-Benz CLA Audi Q3 Series 6 GT Mercedes-Benz GLA Class Audi A4 5 Series Mercedes-Benz E-Class Audi A6

➢ Max volume of units sold in luxury car segment is within 40-70 Lakhs range

300

22

➢ Presently, Mercedes Benz is leading this segment Mercedes and Audi variants Model

Mercedes Benz CLA

Variants 200 CDI Style (Diesel) 200 CGI Sport (Petrol) 200 CDI Sport (Diesel) Urban Sport 200 (Petrol) Urban Sport 200d (Diesel) AMG 45 (Petrol)

GLA 200 CDI Style GLA 200 CDI sport Mercedes Benz GLA Series GLA 200 Sport GLA 220 D 4Matic DCT GLA 45 AMG

Audi Q3

Audi Q3 30 TFSI Premium Audi Q3 35 TDI Premium Plus Audi Q3 35 TDI Technology

Audi A4

Audi A4 30 TFSI Premium Plus Audi A4 30 TFSI Technology Pack Audi A4 35 TDI Premium Plus Audi A4 35 TDI Technology Pack

Competitor

3 Series and 3 Series GT

BMW X1 and BMW X3

BMW X1

BMW 4 Series GT

BMW variants

Model BMW 6 Series GT

BMW X3 Series

BMW 5 Series

Variants 630i Gran Turismo Luxury Line 630d Gran Turismo Luxury Line 630d Gran Turismo M Sport X3 xDrive20d xLine X3 xDrive30i Luxury Line X3 xDrive20d Luxury Line BMW 520d (Diesel) BMW 530d (Diesel) BMW 530i (Petrol)

➢ So, BMW must build strong portfolio in this range by ▪ Bringing in more variants in the already existing petrol models as people are switching from Diesel to Petrol cars due to GOI policies especially in Delhi NCR region given that it is one of the major markets for luxury car segment ▪ For the long run, launch new India specific models in this range

23

5.3 Dealership Showrooms Analysis Analysis for potential regions to establish dealerships

Mercedes Benz

BMW

Rank

Nominal GDP(INR) State

City

Dealership(City)

Dealership(State)

Dealership(City)

Dealership(State)

1

₹27.96 lakh crore

Maharashtra

Tamil Nadu

3

₹15.88 lakh crore

Karnataka

4

₹15.79 lakh crore

Uttar Pradesh

5

₹14.96 lakh crore

Gujarat

6 7 8

₹13.14 lakh crore ₹8.70 lakh crore ₹8.75 lakh crore

West Bengal Andhra Pradesh Kerela

9 10

₹8.43 lakh crore ₹8.26 lakh crore

Telengana Madhya Pradesh

11 12

₹7.84 lakh crore ₹7.80 lakh crore

Haryana Delhi & NCR

13

₹7.67 lakh crore

Rajasthan

14

₹5.77 lakh crore

Punjab

15 16

₹5.15 lakh crore ₹4.43 lakh crore

Bihar Odisha

17 18 19

₹3.74 lakh crore ₹3.63 lakh crore ₹2.82 lakh crore

Assam Chhattisgarh Jharkhand

20 21 22

₹2.63 lakh crore ₹1.69 lakh crore ₹1.57 lakh crore

23 24 25 26 27 28 29 30 31 32 33

₹70,400 crore ₹34,368 crore ₹32,215 crore ₹31,823 crore ₹27,228 crore ₹22,248 crore ₹21,488 crore ₹21,066 crore ₹20,259 crore ₹17,613 crore ₹6,649 crore

34 35

No Data No Data

36

No Data

Uttarakhand Himachal Pradesh Jammu and Kashmir Union Territory Goa Tripura Puducherry Union Territory Chandigarh Meghalaya Sikkim Nagaland Manipur Arunachal Pradesh Mizoram Union Territory Andaman and Nicobar Islands Union Territory Lakshadweep Union Territory Dadra and Naga Haweli Union Territory Daman and Diu

1 1 Nashik 1 8 Kolhapur 2 1 1 Salem 3 Hubballi Mangalore 1 2 1 1 Rajkot 1 Vadodara 1 2 1 Kozhikode Thrissur 1 Trivandram 2 1 Bhopal Karnal Ghaziabad Delhi 1 2 1 1 Jodhpur 1 Jalandhar Mohai Patna 1 1 Guwahati 1 1 Jamshedpur Dehradun

13

₹17.25 lakh crore

2 1 1 2 11 1 4 1 2 1 4 1 2 1 4 2 1 1 3 1 2 2 1 2 1 3 2 4 1 1 1 1 6 1 2 2 Udaipur 1 1 2 1 Patna Cuttak 2 1 1 Ranchi 1 1

22

2

Nagpur Aurangabad Nashik Navi Mumbai Mumbai Kolhapur Pune Madurai Coimbatore Salem Chennai Hubballi Mangalore Mysore Bangalore Lucknow Kanpur Rajkot Ahmedabad Vadodara Surat Kolkata Vijaywada Kozhikode Thrissur Kochi Trivandram Hyderabad Indore Bhopal Karnal Ghaziabad Delhi Noida Gurugram Jaipur Udaipur Jodhpur Ludhiana Jalandhar Mohai Patna Cuttak Bhubaneswar Guwahati Raipur Ranchi Jamshedpur Dehradun

1

1

8

8

3 7

2 1 8

4 2 1 10

3

4

Bihar 2 1 1 1

1 Himachal Pradesh Jammu and Kashmir 1 1 Tripura Puducherry 1 1 Meghalaya Sikkim Nagaland Manipur Arunachal Pradesh Mizoram Andaman and Nicobar Islands Lakshadweep Dadra and Naga Haweli Daman and Diu

5

3

2 2

2 1 1

2 1 Haryana 3

2

1

Bihar 2 Assam 1 1 Uttarakhand Himachal Pradesh Jammu and Kashmir 1 Tripura Puducherry 1 Meghalaya Sikkim Nagaland Manipur Arunachal Pradesh Mizoram Andaman and Nicobar Islands Lakshadweep Dadra and Naga Haweli Daman and Diu

24

The Nominal GDP in INR for all States and Union Territories in India has been collected from various state budgets, based on which States and Union Territories are ranked and tabulated, along with it the presence of dealership showrooms of Mercedes benz and BMW has been collected, mapped, and tabulated to analyse the potential regions on which BMW should establish it’s dealership showrooms to attain increased market penetration and sales. Analysis: Mercedes Benz has 91 dealership showrooms in India concentrated on States and Union Territories with high potential according to the nominal GDP data. Though their Average sales per delearship is 171, they have expanded all throughout the nation which gives them increased market penetration with sales of 15538 cars in 2018. BMW despite of having an average sales per dealership as 236 has very low market penetration covering comparitively fewer part of the country than Mercedes with only 44 dealerships all throughout the nation. The yearly sales of BMW cars in India is 10405. BMW has not established centers in potential tyre-2 cities and has less dealership showrooms in tyre-1 cities compared to Benz which makes BMWs presence among the potential customers less and a few of the potential market has less brand awareness about BMW cars. Sales/Dealership/Comparision Mercedes Benz BMW

Total Annual Sales(2018) 15538 No. of Dealerships 91 Average Sales Per Dealership 170.75

10405 44 236.47

Suggestions: Based on our analysis we propose to establish 20 Dealership showrooms in potential regions where BMW does not have its presence . The shortlisted locations based on the analysis has been represented in the table below Rank Nominal GDP(INR) 1 2 3 5 8 10 11 12 14 15 17 20

₹27.96 lakh crore ₹17.25 lakh crore ₹15.88 lakh crore ₹14.96 lakh crore ₹8.75 lakh crore ₹8.26 lakh crore ₹7.84 lakh crore ₹7.80 lakh crore + NCR ₹5.77 lakh crore ₹5.15 lakh crore ₹3.74 lakh crore ₹2.63 lakh crore

State and Union Territories Maharashtra Tamil Nadu Karnataka Gujarat Kerela Madhya Pradesh Haryana Delhi & NCR

No. of Dealerships Mercedces Benz BMW 22 13 8 5 8 3 7 2 8 1 2 1 1 0 10 3

New dealerships proposed 3 1 2 2 3 1 1 3

Location of proposed Dealerships Nashik, Kolhapur Salem/Tiruchirappali Hubballi, Mangalore Rajkot, Vadodara Kozhikode,Thrissur,Trivandram Bhopal Karnal Ghaziabad, Delhi(2)

Punjab Bihar Assam Uttarakhand

4 0 1 1

2 1 1 1

Jalandhar, Mohali Patna Guwahati Dehradun

1 0 0 0

Maharashtra which has a nominal GDP of Rs 27.96 lakh crore has 22 Mercedes dealership showrooms but only 13 BMW dealership showrooms. Apart from the common regions in maharashtra, Mercedes has presence in Nasik, Navi Mumbai, and Kolhapur which can be understood as potential regions which we propose to BMW to establish their dealership showrooms.

25

Based on the similar lines of analysis, Tamilnadu which has nominal GDP of Rs 17.25 lakh crore has 8 Mercedes dealership showrooms but only 5 BMW dealership showrooms. We propose to introduce an additional showroom in Salem where Mercedes already has its presence but BMW does not, or in tiruchirappali where Mercedes does not have its dealership, but it could become a potential region for BMW to establish a dealership. Karnataka has a nominal GDP of Rs 15.88 lakh crore with 8 Mercedes and 3 BMW showrooms, Hubballi and Manglore are the potential regions for BMW to pitch in. Gujarat with a nominal GDP of 14.96 lakh crore has 7 Mercedes and 2 BMW showrooms, Rajkot and Vadodara are the potential suggested regions were BMW can establish its dealership. In Madhya Pradesh BMW can open it’s dealership in Bhopal, and in Haryana BMW can establish its showroom in karnal as Haryana is a potential market with nominal GDP of 7.84 lakh crore where BMW does not have its presence. Delhi and NCR region which is a high potential region were Mercedes has capitalised with 10 dealership showrooms, but BMW has currently only 3 dealership showrooms in the region. Establishing a dealership showroom in Ghaziabad and 2 dealership showrooms in Delhi will increase its market share. BMW can strengthen its position in punjab by adding two showrooms in Jalandhar and Mohali, making it 3 dealership in punjab including the dealership at Ludhiana. As Mercedes is having 4 dealership in punjab region. Establishing a dealership in patna in Bihar as the Bihar market with Rs 5.15 lakh crore nominal GDP has not been explored both by Mercedes and BMW, so this could be a critical move for BMW. BMW can establish a Dealership showroom in Guwahati and Dehradun each, to make its presence in Assam and Uttarakhand where Mercedes has its dealership showrooms. How new dealership will lead to Increase in Sales: BMW has a less mind share among customers in India than compared to Mercedes, this is because of the early entry of Mercedes in Indian market and Increased penetration of having 91 dealership in the country. From our primary research we were able to understand that Word of mouth and dealership showrooms turns out to be the most important parameters for creating brand awareness in the minds of the cutomers which adds a choice in their purchase decisions. Adding on dealership in potential regions increases the word of mouth feedback among potential customers and gives Increased chance of converting through dealers. From the primary research it can also be understood that luxury car owners considers maintenance and after sales service as an important factor which affects their purchasing decisions, There are 60 authorized Merecedes service centers spread across 21 states and union territories in India, whereas BMW has 29 authorized service centers spread across 18 states and union territories in India. Increasing the service centers in potential regions will positively impact the targeted customers in their purchase decisions.

26

Cost Benefit Analysis

Cost Benefit Analysis

Profit/Loss Statement Revenue

all figures (in lacs) 1st Year

2nd Year

3rd Year

4th Year

5th Year

5000

5500

6325

7273.75

8364.813

110

115.5

121.275

COGS (75% * sales + 60%*Accessories)

3816

4194.3

4816.515 5531.716 6353.833

Property & Building Cost (Land Lease (2000 sq. foot)

36

39.6

43.56

47.916

52.7076

1000

1000

1000

1000

1000

21.5

23.65

26.015

28.6165

31.47815

50

50

50

50

50

5

5

5

5

5

181.5

302.95

505.185

737.8405

1005.5

50

10

10

10

10

40

40

40

40

40

200

0

0

0

0

EBIT

-108.5

252.95

455.185

Interest in loans

236.568

EBT

345.068

-2.0524

Income Tax (30* EBIT)

0

0

EAT

345.068

-2.0524

Net Sales Annually1 Accessories

127.3388 133.7057

Expenses

Purchase of stock inventory Salaries2 Other Expenses (Insurance, Electricity & Administration expenses) Maintenance Cost Operating Income Furniture Equipment cost Marketing & Promotional Expenses Dealership security Deposit

687.8405 955.4996

255.0024 285.1723 319.8359 359.6649 170.0127 368.0046 595.8348 51.0038

110.4014 178.7504

119.0089 257.6032 417.0843

27

PV factor at 8%

1

0.926

CFAT

345.068

-1.90052

0.857

0.794

101.9906 204.5369

NPV

0.735 306.557 266.11

Assumptions: •

1

indicates the cars sales which is calculated by

= Number of cars sales per year* Average price of top selling models = 100*50 lacs =50 crores •

2

indicates 2 sales executive, 1 sales manager, 1 CRM manager, 1 Accounting manager

Salaries Sales executive (2 persons) Sales Manager

Figure

6 lacs 5.5 lacs

CRM manager

4 lacs

Accounting Manager

6 lacs

Total = 21.5 lacs • • •

Assumption of 10% growth and 15% growth in sales in cars in subsequent years 10% hike in the land lease rates 10% increase in the salaries of employees

The NPV becomes positive in 5 years. Hence, the dealership becomes profitable and feasible in 5 years timeframe.

28

6. References 1. (2019). Retrieved from https://www.mckinsey.com/~/media/McKinsey/Featured%20Insights/Asia%20Pacific/The%20auto% 20component%20industry%20in%20India%20preparing%20for%20the%20future/ACMA%20Vertical _Onscreen_Final.ashx 2. Global Shared Mobility Market Size | Industry Growth Report, 2019-2025. (2019). Retrieved from https://www.grandviewresearch.com/industry-analysis/shared-mobility-market 3. Automobiles - February 12, 2. (2019). Indian Automobiles Industry Report - Automobiles Sector Research & Analysis in India - Equitymaster. Retrieved from https://www.equitymaster.com/research-it/sector-info/auto/Automobiles-Sector-AnalysisReport.asp 4. Bureau, F. (2019). BMW India posts 11% growth in Jan-Sept sales. Retrieved from https://www.financialexpress.com/industry/bmw-india-posts-11-growth-in-jan-sept-sales/1339443/ 5. Detail, A. (2019). BMW India plots new strategy to accelerate sales. Retrieved from http://www.autocarpro.in/feature/bmw-india-plots-strategy-accelerate-sales-29455 6. Luxury car market feels the sting of a challenging 2018. (2019). Retrieved from https://www.autocarindia.com/car-news/luxury-car-market-feels-the-sting-of-a-challenging-2018411136 7. Home. (2019). Retrieved from https://www.bmw.in/en/index.html 8. New Cars in India 2019, N., & Cars, N. (2019). New Cars in India 2019, See Car Prices, Images, Offers, New Models @ ZigWheels. Retrieved from https://www.zigwheels.com/newcars 9. Delhi, D. (2019). A STUDY ON CUSTOMER PREFERENCE TO PREMIUM CATEGORY TWO WHEELERS [pdf] (1st ed.). Delhi: DMS IIT Delhi.

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7. Appendix I The format of questionaire is as follows:-

30

31

32