An overview of indian car market


Despite of the present economic, the Indian Automobile Industry also showed a steady growth during the year 2006-2007. This is evident from the dramatic increase in the turnover of both domestic players and international players.

During the fiscal year of March 2006 to March 2007, the Indian automobile industry showed an upbeat performance with each segment showed a record growth. According to Society of Indian Automobile Manufacturers (SIAM India), the domestic sales of Cars have grown steadily over the year 2001-2007. During the year 2001 the annual sales of cars for domestic market was about 6, 75,000 Units, and it has increased dramatically to 13, 75,000 units by the year 2007.


Not only the domestic market, which showed the upbeat trend in the sales of cars, but the export market in the cars have also showed a very positive trend during the year of 2001-2007, as we can see that the number of units exported during the year 2001 was approximately 52,500 and it steadily increased to approximately 2,00,000 in the year 2007.

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From the graph shown below, it is evident that the major force behind the sales and export increase in the Indian automobile industry is the considerable increase in the sales of Passenger cars. The sales in the passenger cars also recorded a high rate of growth during the year 2001-2007


History of Honda -

Honda is a leading Japanese company which manufactures world class range of motorcycles and automobiles for the world market.

The Birth of Honda motor company starts with the launching of a Research institute for developing small and efficient internal- combustion engine by an engineer Honda Soichiro. Later in 1948 it was integrated as Honda Motor Company and began producing motorcycles in 1949. In 1953 Honda introduced a small engine motor cycle code named as C-100 and by the year of 1959.

Though, Honda is a pioneer in producing motorcycles, the major part of the company's revenue comes from automobiles, which the company began producing in 1963, the company also have other major product areas include farm machinery and small engines. Honda is a major Japanese exporter to the United States and to other parts of the world. It also has assembly plants in a number of other countries and is engaged in joint ventures and technology-licensing agreements with several foreign companies.

Honda entered India with a Joint venture with "Hero group", who were prominent producers of Hero cycles in India. With Hero group, Honda began to produce and market 100 CC motor cycles, under the name tag of Hero Honda. Hero Honda became the leader in the two wheeler segment in India, after making a formidable position in the two wheeler segment, in December 1995; Honda formed another Joint venture with Shriram group, and formed Honda Siel cars and entered four wheeler market segments in India, with a vision of making world class passenger cars for Indian customers.

Internationalization of Honda - Uppsala model and Lead Market concept

Honda made their first move towards internationalization, by exporting their products to United States of America. In the year 1959 Honda opened their first U.S. production plant in 1979 and has evolved into a company that directly employs more than 25,000 Americans. More than 100,000 workers are employed at authorized Honda automobile, motorcycle and power-equipment dealerships in the United States. Tens of thousands of additional Americans are employed by more than nearly 600 U.S. suppliers from which Honda purchases parts and materials. The pattern of labours and suppliers, chosen by Honda in host country shows Honda's strategy in building a commitment with the Host country.

Early contribution of 'Uppsala model': Johanson &WiedersheimPaul 1975; Johanson & Vahlne 1977. According to this model there are two modes for a firm to start internationalization;

First method of internationalization described by Johanson and Weidersheim-Paul (1975) involves a sequence of steps including and establishment chain,

At first, no regular export activities are performed in the market

Export via independent representatives

Sales through Subsidiaries

Manufacturing unit through direct foreign investments.

Along with the Uppsala model, some of the Japanese automakers also incorporate Lead Country or Lead market method of internationalization. It is a unique model of Internationalization, that a company produce vehicles targeting a lead market, then they modifies and facelift the base model, with the aid of feedbacks they get from the customers of the launched country. This information they utilize for the error detection and to solve the problem. This method of trouble shooting enables the product compatible for launching in another market.

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Raffee and Kreutzer (1989) describes that lead markets is the country in which a subsidiary of a multy national company takes up the responsibility of a global product and with their R&D and innovation; they modify the base or the core model, susceptible to the global market or to another country. While Bartlett and Goshal (1990) argue that lead markets are the first markets that provide stimuli for most of the global products. Kotabe and Helsen (1998) Identifies that Lead Markets are the country in which the process of an innovation takes off. Marian and Thomas (2004) comments that Lead market shouldn't be chosen according to marketing perspective only, it should also reflects the Goal and capabilities of the company.

Honda also adopts the same method of internationalization, they produce automobile suitable for a particular target market (Lead country or Lead Market).For e.g. Civic, Accord and CRV were targeted the US markets as the leading country, and then they entered other country with suitable modifications (Product adaptations and marketing communication- adaptations) while Honda city was to Asian markets comprising India, Thailand, Indonesia and Philippines.

The market, where the product is first launched is known as "Lead Market" and the Country and the market which it enters later is known as "Lag Market".

Market selection method of Honda- Why India?

Kumar et al, 1994, describes International Market Selection is a practice of implementing a principle for selecting markets and researching about how much a market can offer, or researching market potentials, grouping them according to their returns and the order of which should be served primarily. While Sayed.H.Rahman (2003) considers choosing a right market to enter is critical in the future success of a firm. Poul and Jesper (1998) argue International Market Selection as one of the major factors which determines the success or failure of an international firm in an international market.

From the findings of these brilliant academics, it is clear that the success of a global company is very much depending upon the market or the country which it chooses to serve. As far as Honda is concerned, choosing India, was never a fault or mistake; Major positive and negative aspects of Indian automobile markets are described hereunder;

Automobile industry is one of the fastest growing industries in the India. Each year more than 2 million new automobiles enter on the roads of India and the industry is set to grow further.

Automobile industry made its silent entry in India in the nineteenth century. Since the launch of the first car in 1897, India automobile industry has come a long way. Today India stands at the position of the fourth largest car market in the world.

There are many factors which attracted the Automakers all over the world to tap in the Indian Auto Market, they are;

Political &Economical Factor

Political factors which influence the global investments are having a stable government, to keep their investment and economy safe. At the moment, India holds a relatively strong and stable government in the region. India was facing a political instability during the year 2004-2009, because of the coalition with Left Democrats. The allied democrats were not ready for the economic liberalization process put forward by Prime Minister Dr.Manmohan Singh. After the national election of 2009, UPA allies got majority, under the leadership of Dr.Manmohan Singh. This stable government condition in India makes global investors to feel confident to invest in India.

Until 1991, Indian economy was virtually closed to fresh foreign investment, as the government levied a high import tax on the imported foreign goods. The "Monopoly and Restrictive Trade Practices" (MRTP) Act or "Licence raj" passed in 1969 became an obstacle for multinational companies, operating in India to expand their Indian operations and during these periods, even Indian subsidiaries of these multinational companies were not permitted, to make foreign exchanges against rupees payment to pay dividends to their particular mother concerns situated abroad. All these stringent rules and regulations in India provided a great opportunity for domestic business to grow. However, when the Indian economy opened up in 1991, a number of leading global automotive companies entered into joint ventures with domestic manufacturers of India and thus started the large-scale production of automobiles in India. The production of automobiles in India is mainly for the domestic customers.

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India's Open door policy and the ease in availing new and up-to-date models and the availability of Hassle free Car Loans made Indian Automotive market to flourish (Economic- Watch)

Keystone consultancy (US) - a subsidiary of LaSalle Consulting Associates-has forecast that India will become the world's third largest automobile market by 2030, behind just China and the US.

The first and prominent reason for foreign companies to invest in India is because of India m is one among the upcoming economic powers in future, an "Emerging Economy".

India can be regarded as an emerging market because it is a potential market which promises an extensive growth in future, it has a successful communications and facilities, which facilitates marketing transaction, perfect competition market, the high standard of living, and high per-capita income, development of infra structure...

It is predicted that, in next few years Emerging markets like India and China will replace the mature markets of America, Europe and Japan as the primary driver of sales growth and will account for 69% of industry and 87% vehicle registrations.

Over the few years there has been a significant growth of the Indian market has resulted in the high gross domestic production (GDP). The Annual growth rate of the Indian economy is ranged in between 6-7%.

Demographic Factors

India is the second largest population in the world with a total population of 967 million peoples. This population is expected to grow steadily and to reach at a total population of 1.2 billion peoples by the year 2040. According a government survey, Youth contributes about 41.05% of total Indian population. A relative amount of youth population is always a target segment for global marketers, as the spending and influencing power of youth is imperative.

The rise in the Middle class population is another factor. The rapid economic growth has staged for the fundamental change among the countries consumers.

Geographical factor

Development of Infrastructure and interconnectivity between cities well developed communication system are a major factor for the inward flow of foreign investment.

Market Entry Strategy

6.1. Entering Indian Automobile market

Honda Siel Cars India Ltd., (HSCI) was formed in December 1995 as a joint venture between Honda Motor Co. Ltd., Japan and Siel Limited, a Siddharth Shriram Group company, with a vision to providing Honda's latest passenger car models and technologies, to cater the needs of the Indian customers.

Honda Siel cars made their debut in Indian market with the world famous model- Honda City in 1997, Honda city has revolutionized the Indian passenger car market and has ever since been recognized as an engineering marvel in the Indian automobile industry. The success of City as well as all its other models has led HSCI to become the leading premium car manufacturer in India.

After the success of Honda city, Honda Siel cars introduced a range of products to feed the affluent consumers of India, the products including Honda Accord, Honda CRV, Honda Jazz.

With up-to-date models and constant innovations, face lift and re launch in their existing models, Honda Siel cars became the leaders in passenger car segment.

In India HSCI made a huge investment of Rs. 1620 crores, further investment of RS. 1000 crore is planned and being currently invested for the coming second plant in Rajasthan. The company has a capacity of manufacturing 100,000 cars. HSCI registered a sales increase of 11% during December 2009.

Bruce Kogut (1988) describes a joint venture as a process of incorporating a portion of capabilities or resources of two more companies into a common legal organization

6.2. Entering Small car market -

"If you want to be a major player in the India, in the mass market, small cars are the way to go" says Jochem Heizmann cited in

According to Mr. Koichi Kondo, crowded roads and traffic problems are forcing peoples to buy small cars. So Honda understands the global trend towards automobile selection is downsizing and Fuel conservation. So to raise Honda's presence further in this market a small car like this necessary says Mr.Koichi Kondo Executive vice president of Honda.

The successful launching of Honda Jazz marks the entry of Honda Siel Cars into the small car segment, which was once the monopoly of Maruti Suzuki, a Joint venture of another Japan Automobile giant, Suzuki and Indian company Maruti Udyog Limited.

Marketing mix of Honda in India -

Product, Honda jazz in India.

"A product is anything that is offered to a market for attention, acquisition, use or consumption that might satisfy a want or need" (Armstrong, 2008, p500).

Honda always incorporates the latest technology in their cars and this always becomes a fair competition with its competitors.

Honda introduced the second generation of Jazz in Indian market, which is a face lifted model of the first generation. The Jazz's dynamic performance is achieved by a recently designed and developed four-cylinder 1.2-liter i-VTEC (Intelligent Variable Valve Timing and Electronic Lift Control) engine, featuring Programmed Fuel Injection that delivers maximum output. This engine is specially developed for the Indian Market. This specially designed engine, yielded a fuel economy of 16 KMPL in a test drive conducted by ARAI

Since the safety of passengers and pedestrians is a top priority for Honda and all the safety equipment is standard across all variants. Honda Jazz comes with fully loaded with various active and passive safety features including ABS (Anti locking breaking system) with EBD (Electronic brake distribution system) Dual SRS airbags and pre- tensioned seat belts. Honda's Advanced Compatibility Engineered body (ACE) and G-CON (G-Force control technology) provide a high integrity survival zone that enhances self protection and better compatibility in collisions with other vehicles.

Honda's pedestrian- Injury reduction body design helps protect pedestrians from injury in the event of a collision. This feature is also developed for the Indian market, where there are lots of pedestrian travellers.

In response for global call for reducing carbon footprints, the new engine developed by Honda is E10 compatible and has euro IV emission levels. Honda also introduced various kinds of safety features for the safety of both passengers and pedestrians.

Pricing and Positioning of Honda Jazz in India

Kotler (2008, p639) identified "price is the amount of money charged for a product or service, or the sum of the values that consumers exchange for benefits of having or using the product or service".

According to Mr. Masahiro Takedagawa, Vice president and CEO, Honda Siel Cars India Ltd, "Price should be justified by the value which, in turn, is determined by the costumer"

Honda Jazz comes with a premium price tag of Rs.7, 00,000/- plus. Though Honda jazz is completely manufactured in India, with the sourcing of 70% raw materials from local suppliers, the price of Rs.7, 00,000/- is because, Honda jazz is equipped with the latest and up to date technologies for the Safety of passengers and pedestrians

Honda jazz is positioned at a segment of Premium Hatch Back, with its competitors as Skoda Fabia, Suzuki Swift.

Honda faced a challenge during positioning of Honda Jazz. The Jazz itself qualifies as a small car (in India) by its virtue of size and Engine power, but it's priced at Rs.7, 000, 00/- plus which valued than some midsized Sedan. In Thailand it is high positioned than City. Since Honda city is the flagship product of Honda in India, it became a hurdle for Honda Siel Cars to promote Honda Jazz over Honda City.

The Ex showroom price of Honda jazz at the capital city of India, New Delhi is from Rs.6,93,000 to Rs.7,33,000. Prior to its launching the price tag of Honda Jazz was about Rs.8,20,960/- which is near to or more than the widely accepted Honda City, the sedan product of Honda. The base model of Honda city 1.5 S Manual Transmission cost about Rs.8, 40,000/- (Ex. Showroom Delhi).

Honda dealt with the problem by making some slight changes in its engine. Honda compromised with the global engine of Honda Jazz, they lowered the engine capacity to 1.2 L i-VTECH, while majority of other markets enjoy Honda Jazz with 1.5 L i-VTECH. This compromise with the engine power has made Honda jazz eligible for a reduction of 12% in excise duty, with Excise duty incentive of 12% Honda managed to position the Honda Jazz below its best seller sedan Honda City Honda managed to price Honda jazz in between Rs.6,98000 and Rs.7,33000. As a result of new engine, Honda Jazz became Economical in fuel consumption as well.


According to Kotler and Armstrong, (2008), a Place is described as the location, where a consumer can obtain the service or a product, which a firm offer.

Honda Siel Cars India Ltd. distributes their cars through their network of dealerships along the nation. Since Honda Products comes under premium range, they maintain state of the art Showrooms to uphold the premium value of Honda products.

HSCI has already expanded and strengthened its dealer network in preparation for the launch of the Jazz. Distribution of the Honda Jazz is done with the aid of company's vast distribution network of 105 authorised dealership facilities, across the country. This network is likely to go up to 112 facilities by the end of the current financial year.

Promotion Of Honda Jazz in India

Kotler and Armstrong, (2008) describes the marketing promotion as a set of information about the product, which is delivered to customer to induce sales or a positive response.

Honda is always unique in marketing communication. Considering the advertisement Honda, they were very careful and precise in their advertisement. Honda always projected their image as the most important thing. In their advertisement, they project the latest advanced technology, eco friendliness the brand name they project through the advertisement is Honda, than the Product.

Honda promotes their products in majority through print media compared to the other players. Majority of the advertisement comes in national daily and magazines because they believe; it could educate the target customers in a better way. They promotes their product through the Honda websites as well, in the company website, Honda gave the awards and other honours they received in their excellence.

Compared to Honda's Competitors, Honda was never into the aggressive promotional activities but the company always tried to maintain the quality and the created brand image by providing the best customer service

Standardization V/S Adaptation of Honda Jazz in India

Hamel and Prahalad (1985) argued that markets have become so homogenized that firms can market identical products and services across the globe through standardization. Standardization of the market is a firm's movement towards homogenization of the market and to save cost of alteration (Cavusgil, Zou, Naidu, 1993)

Kotler (1986) has advised the marketers not to be ignorant or biased while implementing standardization. While Boddewyn, Soehl and Picard (1986) has criticised that the social, political and cultural aspects are different across the borders and hence, the marketing program should be an adapted one to cater the diverse local situation and condition of the host country. Buzzell (1968) said, since the marketing program is entirely depending up on the local scenario of the market, so it should be adapted according to the local condition.

There are many internal factors which determines the degree of standardization or adaptation a company should make in a market (wind, 1986)

Product Adaptation and Standardization

Honda introduced fairly standardized product, when we look at the exteriors periphery of Honda Jazz introduced in India. We can see the degree of standardizations in the dimensions and specification of the car they introduced in Indian market.

However, Honda made a remarkable Product adaptation for the Indian market. In Japanese and some of the other European market the first generation of Honda Jazz is equipped with a 1.5 Litre

i-VTEC engine, while in India the second generation Honda Jazz comes with a specially launched 1.2 Litre i-VTEC engine, specially designed for the Indian market. This engine enables the car to be economical in fuel consumption without compromising much of power. Honda incorporated incredible spacious interiors for the Indian customers, who prefer lots of space for comfort and to store things inside their vehicles. Another important adaptation Honda made in Jazz for Indian market is, they only introduced manual transmission cars for the Indian market while other markets like Japan and Europe has its i-Shift transmission Model as well.

In India, Honda kept the principle of approach of "man maximum and machine minimum" in designing, which enables maximum space for the passengers and reduce the space consumed for machine components

Adaptation and Standardization of the Marketing Communication

In India Honda made a standardization of their marketing communication up to an extend by avoiding celebrity endorsement. In India, Honda projected their brand image as the important thing for other models, while they made adaptations in conveying marketing message For Honda Jazz in Indian market, Honda made a remarkable adaptation, by giving a Slogan "only one life, why so serious?" with this slogan, they are clearly targeting the Jazzy youth of India (NDTV, Car and Bike Show), which constitutes major part of Indian population. Through their commercials they also demonstrate the space they incorporated inside the cars, especially for family person, who have to do multy tasking as a professional and a family person same time. "Honda Jazz also came with another slogan of "Magic Seat" which stands for incredible storage space inside the car. According to the slogan they convey to the customers that with "Magic seats, you can stuff your Jazz with anything you want"

India is a country of festivals, so the promotions of Honda are a bit adopted for catching the religious consumers of the market. Honda for the first time introduced a "great Honda fest" during Dussera festival. Honda introduced "win a car" contest for the costumers of India. Costumer who purchase during the season of Dussera, will be eligible for participating in the contest. The grand price for the contest was to win a Honda car. Customers can also win accessories for free during their purchase on the festive season. And it was a successful adaptation to catch the customers during the festive season.

Future of Honda in India

Honda's new family car based on the "Honda new small car concept" unveiled in Delhi and will hit the showrooms in and India and Thailand by 2011.Honda Identifies India as the launch pad for its global small car which will debut during the next two to three years. The car, code-named 2CV, will have a maximum engine size of 1.2 litres to meet requirements for lower taxes and is expected to also be priced below 500,000 rupees. This car will be positioned under Honda Jazz and the vehicle is being developed for India as the lead country, it will enter other country.


So to sum up, we can say that the introducing up to date model and technology in India and their successful positioning and "flexi factory network" (Andrew Mair, 1994) and the "glocolization" process implemented by Honda, along with successful adaptation and standardization, for the Indian market made the Honda Siel Cars India Ltd. To overcome the marketing challenges, it faced during the launching of Honda Jazz in India.


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