University Study centre Certificate

This is to certify that the project report entitled

A study on Global trend and future market potential for Automotive Refinish market with emphasis on commercial vehicle coatings

Submitted in partial fulfillment of the requirements for the degree of masters of

Business Administration of Sikkim Manipal University of Health, Medical and

technological sciences

Subhasish Mukherjee

Has worked under my supervision and guidance and that no part of this report

has been submitted for the award of any other degree, Diploma or Fellowship

and that the work has not been published in any journal or magazine

Registration number

510919286

University Centre Address & Code No: 01831

Block BB- 36, PNB Island, Salt Lake, Kolkata 700064, 01831

Title:

A study on Global trend and future market potential for Automotive

Refinish market with emphasis on commercial vehicle coatings.

By:

Name : Subhasish Mukherjee

Course : MBA In Marketing

Registration Number : 510919286

A project report submitted in partial fulfillment of the requirements for the degree

of master of Business Administration of Sikkim Manipal University, India

Sikkim-Manipal university of Health, Medical and technological sciences

Distance education wing

Syndicate house

Manipal – 576 104

2

Declaration

I hereby declare that this dissertation entitled “A study on Global trend and

future market potential for Automotive Refinish market with emphasis on

commercial vehicle coatings”, submitted in partial fulfillment of the

requirements for the degree of Masters of Business Administration to Sikkim

Manipal University, India, is my original work and not submitted for the award of

any other degree, diploma or fellowship

Place : Kolkata

Date : (Subhasish Mukherjee)

510919286

3

Certificate of approval

The Project report titled ““A study on Global trend and future market

potential for Automotive Refinish market with emphasis on commercial

vehicle coatings” of Subhasish Mukherjee is approved and is acceptable in

quality and form

Internal Examiner External Examiner

.

4

Executive Summary

The main objective of the study is to find the present market scenario in India for the

commercial vehicles coatings products in the backdrop of global context and also to

assess the market potential for Nobel Commercial Vehicle (CV) Coatings Products in

India. In general, coating is used as a multi-purpose material – decoration, protection, to

denote a symbol or to make sign boards and other aesthetic purposes. In our study, we

deal with a painting system very specific for the commercial vehicles. The term

commercial vehicles include buses, trucks, tankers, containers, construction vehicles &

equipments, railway coaches etc. (inclusive of the vehicle components). The commercial

vehicle painting process includes original equipment manufacturer (OEM) painting,

refinishing, refurbishing, accident repairs and component.

The study was conducted as industrial marketing research to assess the market

potential, competitive analysis and forecasting sales etc. The study comprises of

a. Collection of secondary data from various sources like reports, government web

sites, magazines etc.

Typical of the industrial marketing research the study relies mainly on secondary data,

expert opinions, understanding of the technical aspects etc. Also, more emphasis for

descriptive method is made for primary data collection and the research observations

are based on small samples due to the small population available etc.

• The secondary data collected were thoroughly analyzed to understand the

background, structure, market segmentation, key players and the influencing

parameters in the Indian context. Also, we tried to understand the above

5

mentioned parameters including the positioning of the major coating products

available in the market in the global context.

Table of contentsExecutive summary

Chapter 1 Introduction

Chapter 2 Design of study

Objective of the study

Design of the study

Environmental context of the problem

Type of market research

Research design

Potential sources of error

Primary versus secondary data

Sample design process

Nature of marketing research in industrial marketing environment

Difference between consumer and industrial marketing research

Difference in survey method used between consumer and industrial

marketing research

Scope of industrial marketing research

Limitations of the study

Chapter 3 Automotive industry – Indian scenario

Economic liberalization and growth of automotive sector

Vehicle production

Vehicle export

Auto components

India as a launch pad

Automotive Refinish market in India

6

Product Type

Market Players

Industry Trends

Chapter 4 Commercial vehicle market in India

Background

CV – Market segmentation

CV – Market size

CV Domestic forays

CV Foreign forays

CV Market growth

CV Coating market

CV Coating market approach

CV Coating market trends

Chapter 5 Commercial vehicles – Global scenario

CV Global market trend

CV Coating market share and competition

CV Coating product trends

CV Coating product related regulations

CV Global coating suppliers – Analysis of product positioning

CV Coating market – Future

Chapter 6 Company profile –Nobel CR & CV

Chapter 7 Data analysis and interpretation

Chapter 8 Findings

Recommendations

Conclusions

Trend in Automotive Refinish market

7

On the Horizon

Bibliography

Abbreviations

Introduction

In general coating is used as a multi-purpose material – decoration, protection, to denote

a symbol or to make sign boards and other aesthetic purposes. Coating made its earliest

appearance about 20,000 years ago as used by cave dwelling humans. Since then,

paints and coatings (as it is widely known) had evolved from the simple cave man’s color

on the walls to a primary protective barrier between our possession and environment.

Paints and coatings comprises of resins (polymers), pigments (color), solvents (for

application ease) and additives (for special coating requirements). They are used in wide

variety of applications viz., automotives, marine, protective, industrial, containers, coils,

plastics, constructions and specialty coatings (like traffic signal paints, fluorescent paints

etc.). Automotive paints and painting process is an important segment of the coating

industry. The coatings used in automotive industry can be classified into two ways as

follows:

a. Based on the type of coating – either OEMs (baking type) or refinishing coatings

(room temperature curing)

b. Based on type of the automotives – either passenger car or commercial vehicles

(inclusive of auto components)

Automotive refinishing includes operations in auto body repair, new car dealer repair,

fleet operator repair and ready made car fabrication facilities. The refinishing work

comprises of structural repair, surface treatment and painting. For the automotive

refinishing industry the coatings used can be set into different groups that include

pretreatments, primers, sealers, precoats, specialty coatings, pigmented top coats, base

coats and clear coats.

8

In our study, we deal with the refinish painting system. The term commercial vehicles

(shortly known as CVs) include buses, trucks, tankers, containers, construction vehicles

& equipments, railway coaches etc. (inclusive of the vehicle components). The

commercial vehicle painting process includes OEM coatings, refinishing, refurbishing,

accident repairs and component.

Objective of the study

The study was undertaken to know the present market scenario and future market

potential for commercial vehicle coating products in India with respect to global

presence. This also includes the assessment of market potential for commercial vehicle

coating products for Akzo Nobel Car Refinishes India Pvt Ltd in India.

We decided to find out the following parameters to assess the same:

a. To study the consumer’s expectations of a commercial vehicle coating product

b. To find the awareness level about any CV coating product existing or entering

the market

c. To find the willingness of a consumer to change over to a new system

d. To find out the right promotional strategy for a new entrant into this market

e. To find the consumption pattern of the product in the industry and the brand

preference of the products by the consumer

Design of the study

Marketing research is the systematic and objective identification, collection, analysis,

dissemination and use of information for the purpose of improving decision making

related to the identification and solution of problems and opportunities in marketing.

Normally any organization engages in marketing research for two reasons:

a. To identify and

b. To solve marketing problem

9

Problem identification research – It is the research that is undertaken to help identify

problems that are not necessarily apparent on the surface and yet exist or likely to arise

in the future.

Problem solving research – As the problem is identified, problem solving research is

undertaken to arrive at a solution. The findings of problem solving research are used in

making decisions that will solve specific marketing problems

Environmental context of the problem

To understand the background of a marketing research problem, the researcher must

understand the client’s firm and the industry. In particular, the researcher should analyze

the factors that have an impact on the definition of the marketing research problem.

These factors encompassing the environmental context of the problem include past

information and forecast pertaining to the industry and the firm, resources and constraint

of the firm, objectives of the decision makers, buyer behaviour, legal environment,

economic environment and marketing & technological skills of the firm.

Type of marketing research

10

Problem Identification and Solving

Research design

It is a framework of blue print for conducting the marketing research project. It specifies

the details of the procedures necessary for obtaining the information needed to structure

and/or solve marketing research problem. Research designs can be broadly classified

as exploratory or conclusive.

11

The primary objective of exploratory research is to provide insights into, and an

understanding of the problem confronting the researcher. Exploratory research is used in

cases when one must define the problem more precisely, identify relevant courses of

action offering additional insights before an approach can be developed.

The insights gained from exploratory research might be verified or quantified by

conclusive research. The objective of conclusive research is to test specific hypothesis

and examine specific relationship. This requires that the researcher clearly specify the

information needed. Conclusive research is typically more formal and structured than

exploratory research. It is based on larger representative samples and the data obtained

are subjected to quantitative analysis.

Potential sources of error

There exist several potential sources of error that can affect a research design and are

given below:

Total error – The total error is the variation between the true mean value in the

population of the variable of interest and the observed mean value obtained in the

marketing research

Random sampling error – The error due to the particular sample selected being an

imperfect representation of the population of interest. It may be defined as the variation

between the true mean value for the sample and the true mean value of the population.

Non sampling error – These are errors that can be attributed to sources other than

sampling and they can be random or non-random

Non response error – This is a type of non sampling error that happens when some of

the respondents included in the sample do not respond. This error may be defined as

the variation between the true mean value of the variable in the original sample and the

true value in the net sample.

12

Response error – A type of non sampling error arising from respondents who do

response but gives inaccurate answers or their answers are misrecorded or

misanalyzed. It may be defined as the variation between the true mean value of the

variable in the net sample observed to the true mean value obtained in the marketing

research process.

Primary versus secondary data

Primary data – originate with the researcher for the specific purpose of the problem at

hand.

Secondary data – the data originally collected by the researcher for other purpose.

Secondary data can be easily and quickly obtained and are relatively inexpensive.

However, they have limitations and should be carefully evaluated to determine their

appropriateness for the problem at hand. The evaluation criterion consists of

specification, error, currency, objectivity, nature and dependability.

Qualitative research – it is an unstructured, exploratory research methodology based

on small samples that provides insights and understanding of problem solving.

Quantitative research – It is a research methodology that seeks to quantify the data

and typically applies some form of statistical analysis.

Survey methods – The survey method involves a structured questionnaire given to

respondents and designed to elicit specific information. Thus, this method of obtaining

information is based on the questioning of respondents. Respondents are asked a

variety of questions regarding their behaviour, intentions, attitudes, awareness and

motivations. These questions may be asked verbally, in writing or via computer and the

responses may be obtained in any of these formats.

Target population – it is the collection of elements or objects that possesses the

information sought by the researcher and about which inferences are to be made.

13

Sampling frame – It is the representation of the elements of the target population. It

consists of a list or set of directions for identifying the target population.

Sampling technique – It may be broadly classified as non probability and probability

Non probability sampling relies on the personal judgment of the researcher

rather than chance to select sample elements. The researcher can arbitrarily or

consciously decide what elements to include in the sample. Commonly used non

probabilistic sampling techniques are as follows:

- Convenience sampling

- Judgmental sampling

- Quota sampling

- Snowball sampling

In probability sampling, sampling units are selected by chance. It is possible to

prespecify every potential sample of a given size that could be drawn from the

population as well as the probability of selecting each sample. Every potential

sample need not have the same probability of selection, but it is possible to

specify the probability of selecting any particular sample of a given size. This

requires not only a precise definition of the target population, but also a general

specification of the sample frame. Because sample elements are selected by

chance, it is possible to determine the precision of the sample estimates of the

characteristics of interest. Confidence intervals, which contain Probability

sampling techniques are classified based on

- Elements versus clustered sampling

- Equal unit probability versus unequal sampling

- Unstratified versus stratified sampling

- Random versus systematic sampling

- Single-stage versus multi-stage sampling

Sample size – It refers to the number of elements to be included in the study.

14

Execution of the sampling process – It requires a detained specification of how the

sampling design decisions with respect to the population, sampling frame, sampling unit,

sampling technique and sample size are to be implemented. An operational definition of

the subject of study is needed for the proper execution process.

Nature of the marketing research in Industrial marketing environment

Industrial marketing research is one of the parts or components of industrial marketing

intelligence. Marketing intelligence is an on-going activity to provide continuous

information for decision making. Marketing research undertake periodic projects or

studies (not on continuous basis) to collect and analyze data with specific objectives.

Some of the projects or studies on industrial marketing research are forecasting sales

and marketing potential, competitive analysis and new product research.

Difference between consumer and industrial marketing research

The basic elements of marketing research apply to both consumer and industrial

marketing. However, because of the environment of industrial markets and the nature of

industrial buying major differences exist between consumer and industrial marketing

research. They are as follows:

a. More reliance on secondary data, exploratory research and expert opinion in

industrial research. This is because the market information is concentrated

among a few knowledgeable people and the numbers of industrial buyers are

smaller.

b. Understanding technical factors is important for industrial marketing researcher

because of technical nature of many industrial products. The researcher has to

obtain information from the design engineers, production managers and

15

materials executives. Some times highly technical factors are to be studied and

hence, the industrial marketing researcher should have technical orientation

c. Managers of industrial product companies generally perform less marketing

research studies than the marketing managers of consumer companies

d. More emphasis is given to descriptive (or survey) method in industrial marketing

research compared to experimental or observational methods used for primary

data collection. In consumer goods market experimental and observational

methods are often used for collecting primary data as they are more effective.

Difference in survey method used between consumer and industrial

marketing research

Sample size – In consumer research a very large sample size due to large universe and

the individual or household buyers are geographically dispersed whereas in industrial

research a small sample size due to small universe (or population) and concentration of

buyers.

Respondent co-operation and accessibility – In industrial research to get a proper co-

operation from the respondent and have the accessibility within the working time for the

right knowledgeable person on that field is more difficult due to time constraint as

compared to the consumer research.

Defining respondent – In industrial research, it is more difficult as buying decisions are

made by several members of buying committee and not by purchase executives

whereas it is simple for consumer research as individual or household users are

generally the buyers.

Scope of marketing research

Industrial marketers mainly conduct the use of the research in the following areas:

a. Development of market potential

b. Market share analysis

c. Sales analysis

16

d. Forecasting

e. Competitor analysis

f. Benchmarking

g. New product acceptance and potential

h. Business trend studies

i. Sales quota determination

Limitations of the study

Given below are some of the possible limitations of this study:

a. This study concerns with a technical industrial market product and so all the short

comings of the industrial market research applies for this study i.e. we need to

rely more on the secondary data and experts opinion rather than practical

experiences of the consumer

Automotive Industry – Indian Scenario

Auto industries occupy a prominent place on the canvas of the Indian economy. Due to

its deep linkages with several key segments of the economy automotive industry has a

strong multiplier effect and is capable of being the driver of economic growth. The well

developed Indian automotive industry ably fulfils this catalytic role by producing a wide

variety of vehicles. passenger cars, light, medium and heavy commercial vehicles, multi

utility vehicles like jeeps, scooters, motorcycles, mopeds, three wheelers, tractors etc.

Economic liberalization and growth of automotive sector

One of the largest industries in India, automotive industry has been witnessing

impressive growth during the last two decades. Although the industry in India nearly six

decades old, until 1982, it was out of sync with the world industry owing to low volumes

and continued use of obsolete technologies. Abolishing of licensing in 1991, permitting

17

automatic approval and successive liberalization of the sector over the years have led to

all round development of this industry.

The freeing of the industry from restrictive environment has on the one hand, helped it to

restructure, absorb newer technologies, align itself to the global developments and

realizes its potential and on the other hand, this has significantly increased industry’s

contribution to overall industry growth in the country. Today, there are 12 manufacturers

of passenger cars, 5 manufacturers of MUV’s (Multi utility vehicles), 9 manufacturers of

Commercial Vehicles, 12 of two wheelers, 4 of three wheelers and 14 of tractors besides

5 manufacturers of engine.

Since delicensing and opening up of the sector in 1993, the industry comprising of the

automobile and auto component sectors have shown greater advances to FDI. The

industry has an investment of a sum exceeding Rs 50,000 crores. During the year 2003-

2004 the turnover of the automotive sector was around Rs 100,000 crores. The industry

provide direct employment to 4.5 lakhs and generate indirect employment of one crores.

The contribution of the automobile industry to GDP has risen from 2.77% in 1992-93 to

4% in 2003-04.

The graphs below indicate the growth rates and number of vehicles produced in India in

the past decade:

Automotives Growth Rates in Indian Market

0

2

4

6

8

10

12

14

16

18

2001-2002 2002-2003 2003-2004 2004-2005

Year of production

% G

row

th R

ates

Automotives Production (in millions)

0

2

4

6

8

10

12

1998-1999 2003-2004 2007-2008

Year of Production

Num

ber o

f Veh

icle

s

The automotive manufacturers have put up a robust manufacturing capacity of 10 million

plus vehicles per annum since 1993. Today India is the world’s second largest

manufacturers of two wheelers, fifth largest manufacturers of commercial vehicles and

manufactures largest number of trucks in the world. Also the country offers the fourth

18

largest passenger car market in Asia today. The installed capacity of the automotive

sector during the year 2003-04 is as follows:

Vehicle Production

Overall, automobile sector bogged a growth of 15 % in 2003-04. During the year 2004-

05 the industry registered a growth of 15.1% and the details of the various units set-up in

the Indian sub-continent are as follows (as on 2004-2005):

S. No. Name of the sector No. of manufacturing units

1 Commercial vehicles 92 Passenger cars 123 Multi-utility vehicles (MUVs) 54 Two wheelers 125 Three wheelers 4 Total 42(Source: Ministry of Heavy Industry & Public Enterprises)

The details of the actual production during 2003-04 and 2004-05 (till September 2004)

are given below:

Automobile Production (Numbers)

Category 2008-09 2009-10 2010-11*

Passenger Car 608,851 842,437 699,082

Multi Utility Vehicles 114,479 146,103 178,187

Commercial Vehicles 203,697 275,224 247,797

Two Wheelers 5,076,221 5,624,950 4,758,639

Three Wheelers 276,719 340,729 271,983

Total 6,279,967 7,229,443 6,155,688

Percentage Growth 18.1 15.1 16.0

* Figures relate to April-Oct, 2010Source: Ministry of Heavy Industry & Public Enterprises

Vehicle Exports

19

Automotive industry of India is now finding increasing recognition worldwide and a

beginning has been made in exports of vehicles as well as components. During the year

2002-03 the export of automobile industry had registered a growth rate of 65% while it

was 56% during the year 2003-04. The details of exports during 2003-04 and 2004-05

(till September 2005) are given below:-

Automobile export (Numbers)

Category 2008-09 2009-10 2010-11*

Passenger Car 70,828 126,249 121,478

Multi Utility Vehicles 1,177 3,067 3,892

Commercial Vehicles 12,255 17,227 19,931

Two Wheelers 179,682 264,669 256,765

Three Wheelers 43,366 68,138 51,535

Total 307,308 479,350 453,601

Percentage Growth 66.4 56.0 32.8

* Figures relate to April-Oct, 2010Source: Ministry of Heavy Industry & Public Enterprises

Auto components

Surge in automobile industry since the nineties has led to robust growth of the auto

component sector in the country. Responding to emerging scenario, Indian auto

component sector has shown great advances in recent years in terms of growth, spread,

absorption of newer technologies and flexibility, despite multiplicity of technology

platforms and low volumes. India's reasonably priced skilled workforce, large population

of technology workers coupled with strengths gained by the country in IT and electronics

all build up an environment for significant leap in component industry.

The Indian auto component sector is being written up as the next industry, after software

that has the potential of becoming globally competitive. Indian Auto Component Industry,

with a turn over of an approx Rs. 36,300 crores (2004-05) and manufacturing all the key

components required for vehicle manufacturing, is an important sector of the Automotive

industry. The Phased Manufacturing Policy (PMP) followed in the 1980s enabled the

component industry to induct new technologies, new products and a much higher level

20

of quality in their operations that enabled quick and effective localization of the

component base.

The Indian auto component sector today has 420 key players who contribute more than

85% of the output of this sector. The vital statistics of the auto component sector during

2002-03 and 2003-04 are as under:

Indicators 2008-2009 2009-2010Investment Rs 12,500 Crores Rs 13,400 CroresOut-put Rs 24,500 Crores Rs 30,640 CroresExports Rs 3,800 Crores Rs 4,550 CroresEmployment 5,00,000 People 5,00,000 People

Indian auto component industry has seen major growth with the arrival of global vehicle

manufacturers from Japan, Korea, US and Europe. Several export units have reached

rejection rate below 5 parts per million (PPM) with many of them touching a zero PPM.

On export front, auto component industry has registered a growth of 29% in the year

2003-04 which is expected to be around 30% in the year 2004-05.

India as a lunch pad

Rising sales and strong growth prospects heightened the popularity of auto stocks in

July 2004 as foreign institutional investors (FIIs) increased their stakes in key automobile

companies like Mahindra & Mahindra, Ashok Leyland, Maruti Udyog, TVS Motors and

Hero Honda. Global players such as Daimler Chrysler, Volvo, Volkswagen, Porsche etc

have begun introducing their new offerings in India.

Automotive Refinish market in India

The automotive refinish paints segment is one of the fastest growing areas in the

Industrial paints market in India. Automotive industry has been the major consumer of

industrial paints, propelled by the rapidly increasing passenger car, commercial vehicles,

and two-wheeler markets. OEM coatings constitute 76 percent of the total automotive

paints market in revenues today (2004). Refinish paints, a comparatively smaller market,

21

is witnessing tremendous growth in revenues as well as in unit shipments. Main drivers

for this growth are:

Fast growing second-hand used vehicles market in the country

Preference for high value-high performance coating technologies such as

polyurethane paints, substituting the traditional forms of refinishing paints such

as nitrocellulose and synthetic alkyds.

Market Size

In the year 2004, automotive refinish paints market in India was valued at $ 64 million.

Market is expected to grow annually at a rate of more than 20 percent for the next 2

years. By the year 2006, the market size in revenues is expected to grow by almost 50

percent from the current value. As mentioned above, the driving factors are the

increasing number of vehicles on the road compounded with a gradual shift to the usage

of high value products like polyurethane paints.

Polyurethane paints presently constitute 57 percent in revenues and almost 28 percent

in unit shipments of the total refinish paints market (year 2004). According to industry

22

experts, this market is growing at a phenomenal rate of over 25 percent (in unit

shipments) and would continue to do so during the next two years. Other product types

like nitrocellulose coatings are likely to witness a slower growth during this period.

Product Types

Polyurethane based paints were introduced relatively late in the Indian market but due to

their superior product quality, demand has picked up fast. Average price of polyurethane

paints is more than double the price of nitrocellulose, but the product has certain

advantages over nitrocellulose: it gives a better finish, has a longer life, and is less

hazardous.

Market Players

Competition existing in the refinish paints market can be divided on the basis of sales

revenues and geographical coverage of the market participants.

Tier I category players are large multinational companies (MNC) with worldwide

operations. These companies are either present directly in the market or have strategic

tie-ups with Indian counterparts. These players constitute more than 60 percent of the

country’s market for refinish paints. Companies in this category operate on a national

scale and form the core part of the organized market.

Some important market participants in this tier are Goodlass Nerolac, ICI Autocolor,

End users

Second-hand vehicles require refinishing either in the form of touch-up jobs or complete

re-painting. Vehicles that have been damaged by accidents constitute the major part of

the end-user segment. End users can also be divided on the basis of vehicle types:

Passenger vehicles and Commercial vehicles.

Commercial vehicles on the other hand are the major buyers of low priced paints though

the consumption in volume has always been much higher. Rising demand for these

vehicles in the past few years has ensured a steady growth in paint markets too.

Besides this, state transport regulation authorities have made it mandatory to obtain an

annual clearance for plying on road and painting the vehicle has been compulsory for

23

vehicle owners. This has been another major driver for the commercial vehicles refinish

paints market. In 2004, refinish paints market for commercial vehicles was valued at

approximately $17 million.

Industry Trends

Frost & Sullivan had conducted a survey across authorized service stations,

independent repair shops and car owners, in the city of Mumbai and Pune. The research

elucidated some important findings on the decision making process in choosing a

refinish paint brand.

Consumers and car owners are not the primary decision makers in selecting a paint

brand. In most cases, availability of a paint brand at the service station determined the

selection of the paint. In an authorized service station, this depends upon the

certification provided by the automobile paint manufacturer for a particular brand of

paint. In an independent automobile repair shop, the repair shop owner decides a brand

or type of paint. Availability of the appropriate color shade becomes important in the

selection process for touch up jobs.

Commercial Vehicles Market in India

Background

The commercial vehicle manufacturing sector is the primary contributor to India’s GDP

among the automotive sector and the fastest growth in volumes has come from

commercial vehicles in the recent years. The first and foremost commercial vehicle set-

up in India was by Tata Motors Limited way back in 1945. The company's

manufacturing base is spread across Jamshedpur, Pune and Lucknow, supported by a

nation-wide dealership, sales, services and spare parts network comprising about 1,200

touchpoints. It is the leader by far in commercial vehicles in each segment and the

world's fifth largest medium and heavy commercial vehicle manufacturer. The other

major commercial vehicle manufacturers in India are as follows:

24

a. Ashok Leyland Limited

b. Mahindra & Mahindra Limited

c. Bajaj Tempo limited

d. Eicher Motors Limited

e. Swaraj Mazda Limited

f. Volvo Buses and Trucks Limited

Apart from the above mentioned, there are a sizeable number available in the regional

markets like Prakash Auto, Sutlej, Azad Coaches, HMM Coaches, Hinduja Group

Sundaram Industries etc.

CV Market Segmentation

The market segment details are as follows:

S. No. Class of commercial vehicles % Total vehicle population1 Buses 202 Trucks 553 Tractors & Trailers 154 Dual Purpose Vehicles & Others 55 Railways 26 Construction Equipments 3

The volume of commercial vehicles produced in India since 1960’s is as follows:

Number of Commercial Vehicles Manufactured in India

0

50

100

150

200

250

300

350

400

1961 1971 1981 1991 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Year of Manufacture

Nu

mb

er in

Th

ou

san

ds

25

Commercial Vehicles – Market Size

The commercial vehicles sector is still less visible inspite of its bigger contribution to the

Indian economy among the automotive industry. Between 1998-99 and 2003-04, output

of commercial vehicles has grown 2.8 times compared to the 2.2 times increase in

passenger cars. The market size as against the passenger cars and other utility vehicles

is quite big.

Given below are some examples of the recent developments in the Indian commercial

vehicles market sector as a result of the aggressiveness shown by these companies

both in the domestic as well as the foreign markets:

Domestic Forays

a. Tata Motors tapped into large sales with its mini-truck, ACE replacing the

traditional three wheelers in the meantime and by the end of 2005 the company

had double the production capacity

b. Volvo, a global giant in the commercial vehicles sector is becoming a generic

name on trunk bus routes

c. Tata Motors also launched its Globus/Starbus range

d. Mahindra & Mahindra transferred its commercial vehicles business into a joint

venture with International Truck and Engine of USA

e. Tata-Daewoo’s Novus truck was introduced in the domestic market

f. Other major global players like Force Motors, MAN, Scania, Daimler Chrysler are

also interested in making commercial vehicles (based on local as well global tie-

ups)

Foreign forays

Tractor and utility vehicle maker Mahindra & Mahindra (M&M) has emerged as

the fourth-largest tractor brand in the US in the 15-90 horse power (HP) segment.

During 2004, Mahindra US clocked sales of US$128m. Sales are expected to

cross US$ 250m by December 2008. It has created a market for itself in the Latin

26

American and South African markets too. It has opened an assembly line for its

Bolero range pick-up vehicles in Uruguay. The firm also launched its sports utility

vehicle, the Scorpio, in Kuwait in July 2004. The Scorpio model in Kuwait comes

equipped with a Renault petrol engine.

Tata Motors Ltd, the country’s leading truck maker, acquired a Daewoo truck

manufacturing unit in South Korea in 2004. The firm plans to introduce its heavy

duty trucks in India in the next 12 months. These 200-400 horse power trucks

with 49-tonne freight capacity will be launched in India and select countries as

part of Tata’s strategy to enter the global transportation market

Ashok Leyland Limited, the country’s second leading commercial vehicle

manufacturer, planning to set-up a new bus assembly unit in Middle East with a

capacity of 2,000 numbers; also in Sri Lanka expecting to improve volume growth

through tie-ups with local finance companies; entering into tie-ups with CV

companies in Italy and Spain

Commercial Vehicles – Market Growth

The current trend in the commercial vehiles market of India is given below:

S. No. Description 2008 2009 20101 Domestic sales (units) 1,54,395 1,90,812 2,33,8212 % Growth over base 36.5 23.59 22.543 Exports (units) 17,000 28,831 42,9584 % Growth over base 40 69.5 49

In the fiscal 2005, the growth rate of the domestic automobile sales was 12.86% wherein

the commercial vehicle showed a growth of 15.1%. The growth rates are slower in the

current fiscal year – LCVs (20.56% as against the value of 24.21% last year) MCVs &

HCVs it slid to a standstill almost at 0.99% as against the 27.29% last year). The slower

growth rate had been attributed to higher base volume, competing investment needs

with the customer and a likely sulking of demand by incentives. Nevertheless, the

27

industry has managed to stay almost at par in growth with fiscal 2005, particularly given

the larger base from which growth is now measured and despite the high crude oil

prices, fear of inflation etc.

However, the uptrend in the sales of passenger carrying commercial vehicles is very

fascinating which may be the sign of things to come in the near future. In the M&HCV

category it was up 6.05% and in LCVs up by 14.42%.

Commercial vehicles – Coating Market

Overall, the automotive refinish coating market in India is estimated at 15 million US

dollars of which 1K products represents 80% and 2K products represents 20% of the

total market. The anticipated growth rate is 12% per annum. The major market players

are

a. ICI (Imperial Chemical Industries Plc.)

b. Dupont Refinishes Inc.

c. PPG Refinishes Inc.

d. Akzo Nobel Coatings Bv.

e. Standox Paints Inc.

f. Kansai Paints Ltd.

The CV coating products are available in three ranges – high segment, medium segment

and low segment to suit the technical and economic requirements of the different levels

of available customers in the market. ICI is the market leader with growth rate of 14%

p.a. (high, medium & low segments). The others in the high segment include Dupont

with a growth rate of 11% p.a. followed by Akzo Nobel with growth prospects of 6.5%

and others like PPG, Standox, Kansai etc. There are influential regional players like

Esdee, Duxone, Bilux, Belco etc for the medium and low segment markets. The market

shares for the high as well as the medium & low segments are graphically represented

as follows:

28

CV High Segment Paint Suppliers Market Share

0

5

10

15

20

25

30

35

ICI Dupont Akzo PPG Kansai Standox Others

Paint Suppliers (High Segm ent)

% M

arke

t sha

re (v

olum

e sa

les)

CV Paint Suppliers Market share (Medium and Low Segment)

0

5

10

15

20

25

30

35

ICI Akzo Nobel Esdee Duxone Bilux Others

Paint Suppliers (Medium & Low Segm ent)

% M

arke

t Sha

re (V

olum

e sa

les)

CV Market Approach (Coating supplier’s perspective)

The commercial vehicles coating market needs to be approached with the following

points in consideration:

• OEM approvals

• Direct supply to organized bus body builders

• Network expansions through Distributors

• Appointing dedicated resource to capture and maintain the market share

• Focusing on Passenger Commercial Vehicles (like buses, railway coaches etc.)

Constructions equipments

• Global standards

• Possible environmental regulations

Commercial Vehicles Coating Market Trends

The CV refinish coating market is currently in the upward swing in terms of growth due to

the following reasons:

Bus Segment

• Getting organized & quality conscious due to pressure from the OEM’s

(benchmarking international standards like Volvo buses )

29

• Increased competition and easily available financing services

Trucks & LCVs

• Transition from high bake to low bake 2K systems (indispensable need for

refinish systems)

• Consistent growth of goods transport by road due to government’s thrust on

public / private investment in infrastructure, rural roads, highways (for example

the Golden Quadrilateral Project)

• Easy finance options available

Construction Equipments

• Increase in infrastructure activities as well as the need to repaint the units for

increased lifecycle

Passenger CVs (Railway coaches)

• Increase in requirement of public mass transport systems (especially in Metros

and other industrial townships)

• Working towards achieving international quality standards along with increased

lifecycle

Commercial Vehicles – Global Scenario

The relation between prosperous growth of the economy, products transported and the

sales of commercial vehicles is a proven fact. Consequently, it is reflected in a decline of

the sales of commercial vehicles. That has been the case for the last one and half years.

In the following graph the registration of trailers, semi trailers and buses are compared

with the development of the GDP over the last years; a trend line can be identified.

30

Graph: GDP versus sales registrations (trailers, semi-trailers and buses)

Commercial vehicles – Market trend

The CV market is on its upturn after having faced a decline in the last two years. Current

recovery of the economy in Europe is reflected in the increase of the registration of

trailers and semi-trailers. The increased sales of commercial vehicles are not only due to

the positive outlook in West Europe alone but also on the favorable economic situation in

Eastern Europe and Asia. The increase expected is however going to be slow and less

profound. In USA, political events like 9/11 and slow economy affected the CV market

growth. Currently, the trend is on the upswing.

Given below are some trends typical for the commercial vehicle market as a whole:

a. Severe competition between transport companies

b. The registrations for the first quarter of 2004 increased with 3.6% over last year’s

first quarter. The biggest growth comes from Germany, which was the first

market encountering recession four years ago and that is the first to show a

comeback. France and Italy still encounter weak conditions; US and UK have

seen a modest increase while Spain and Portugal were made up for a strong

demand

c. The favorable economic developments in the first part of 2004 have led to an

upgrading of the forecast expectations of global insight; despite the concerns

about high oil prices, truck registrations are expected to increase of around 5%

with a stronger gain anticipated by 6% for the heavy truck sector

31

OEM Truck builders

In general, the sales of trucks increased with overall improving trend of the commercial

vehicles market. Companies like Volvo and Scania become more dominant as they have

the capacity to offer more than the sales of the trucks alone i.e. offering of all sorts of

service related products with complete network of service shops and also finances for

purchasing a truck resulting in a long term commitment to a certain manufacturer.

Quality builders and refinishers

The segment of quality builders and refinishers will be largely influenced by the trends in

the OEM truck sales.

Trailer and tanker builders

In general, trends recognizable for the truck market are recognizable for the trailer and

tanker market as well.

Bus Builders

The European Bus market is strongly influenced by global factors like direct export,

overseas subsidiaries, joint ventures and licensees of the European bus manufacturers.

Within Europe, the German market can be identified as Europe’s biggest coach/bus

market with France and the UK in the pursuit. Also, the emerging markets like Russia,

China, Brazil, Eastern Europe etc may play a major role in the coming future.

There are three concepts of manufacturing buses:

a. The complete integral vehicle is build by one manufacturer

b. The combination of a chassis build by one builder mounted with the bodywork of

another manufacturer

c. The chassis manufacturer and the bodywork builder work closely together to get

the best vehicle.

32

The most important factor that will impact the bus market in the European Union is the

Bus directive. This directive aims at harmonization of specifications like:

low floors to increase the accessibility of (city)buses for elderly people

The low noise requirements from 2001

The maximum length of 15 meters and double axle buses

Another issue that seems to end in the near future is mergers and acquisitions of bus

builder companies, under the anti thrust directives.

Constructional Equipment

Construction Equipments are used for general construction, road construction and

maintenance, forestry, demolition, waste handling and mining activities. The total world

market for heavy and compact construction equipment increased by 17% during the

second quarter of 2004, compared with the corresponding period in the preceding year.

Specifically for Western Europe, the market increased by 8%, while other markets were

up with 18%. The increase in the total market was driven by both heavy and compact

equipment that rose respectively 17% and 16%. Market shares of the biggest

manufacturers are as follows: Caterpillar 36%, Komatsu 18% and Volvo Construction

Equipment 8%. Volvo CE continues to gain market shares, mainly due to a series of

new products equipped with new fuel-efficient and environmentally friendly Volvo diesel

engines.

Conclusion

The Commercial Vehicles market can currently be depicted as:

Even though the market outlook is positive the market can not be seen as stable

(mergers, takeovers, bankruptcies)

The economic recovery is noticed in Europe and this will result in higher

registrations

Under heavier regulations (weight, driving hours, toll roads, etc)

Facing new substrates (plastics, aluminum) to fulfill the weight regulations

33

Commercial Vehicles – Coating Market Shares and Competition

The coating market for commercial vehicles is known for its high number of players.

Besides the well known international operating coating companies, Akzo Nobel, PPG

(including Nexa), Dupont (including Spies Hecker) and BASF (Glasurit), an immense

number (approximately 200) of local paint companies are active in the CV market. These

local companies have, however small on the grand total, a significant market share in

the region in which they are active.

CV Coating Products – Trends

In general, wide range of products are available and because of the VOC directive in the

European Union as well as North America, all the CV coating suppliers are focusing on

completing their assortment with VOC complaint products.

There is also a trend that international CV coating suppliers are promoting their

(Commercial Vehicle) fleet approach in a new system. Good examples in this are:

Standofleet by Standox, RATIO Truck system by Glasurit, new Delfleet system by PPG

Global market shares of the paint suppliersPPG25%

Dupont22%

Akzo Nobel15%

BASF10%

Others28%

34

Autocoat BTLV 350 assortment by Akzo Nobel and the Imron Fleet Line by Dupont.

Following are the various types of products available for CV market from various coating

suppliers:

Primers & fillers

Solid Color Topcoats

Clear coats

Standox Standofleet- “the new art of finishing” is the new binder-tinter system for CV.

The systems consist of in total 22 tinters and 2 binders – MS and HS. Standox claims

high gloss and polish ability, also because of the reactive hardeners completing the

system.

35

Standox Multimix is the industrial coatings line, both 1 pack and 2-pack finishes,

including a textured finish PUR, synthetic, cellulose and plasticized finishes and clear

coats. Color ranges from BS and RAL. Special colors are also possible on demand.

DuPont’s Imron Fleet Line was launched already in September 2003 and the official

roll out in Europe was done in 2004. The system consists of 2 topcoat lines: Imron Elite,

the HS system characterized by the short drying times and the MS system Imron Traffic.

Both topcoats make use of the 23 DuPont Power-Tints.

Glasurit launched in January 2004 the Reihe 68, which is the compliant version of the

Reihe 18 which has been in the market for 15 years. Glasurit claims a better opacity,

gloss and an improved hardness (scratch resistance) with a single coat application. Both

the material and the times savings compared to Reihe 18 are about 30%. The drying

time is 30 minutes at 60°C., which is also 25% faster than Reihe 18.

Value added package, Network

Glasurit offers efficiency audit covering both economical and technical issues –

alternative for Focwa CBM (continuous business monitor). Spies Hecker’s Truck &

Trailer International is a new concept for the operators and repairers of commercial

vehicles. The program will provide specialist advice and management systems to help

the body shops to control and use their information technology, business proposals,

marketing, technology and business administration. The Warranty system gives the

possibility to give a 5 year warranty to all the paintwork. To give a warranty, the body

shop has to meet certain quality demands and use the Spies Hecker systems which will

be audited. Each vehicle will receive a Warranty Passport which clearly identifies the

terms and conditions of the warranty. All defects are repaired by the body shop free of

charge. If the product has caused the problem, the company will take over the costs

under the terms of the warranty.

CV Coating Products Related Legislation

The paragraph on legislation currently only refers to the solvent emission regulations.

Emission legislation

36

In the European directive 99/13/EG the reduction of solvent emission in the entire

industry is regulated. The requirements in the coating industry can be summarized

according to the table below.

Rule number Type of vehicles Solvent< 15 ton/year Solvent> 15 ton/year4.3 Trucks Reduction plan

(See VOC legislation EU) 70 g/m2

4.4 Busses Reduction plan(See VOC legislation EU)

150 g/m2

4.5 Railways Reduction planca.> 60% solid content

130 g/m2

5 Repair (CR Classic) Reduction plan(See VOC legislation EU)

70 g/m2 exhaust cleaning

8 Metal/Plastic Reduction planca.> 60% solid content

Reduction planca.> 75% solid content

VOC Legislation EU

For simplification of the above the EC has introduced VOC regulations directive to

become effective per October 2007 (new final draft version was released). This directive

sets product limits to the various product groups based on current state of the art

technologies. This directive does no longer allow thresholds and changes

implementation of the legislation from buyers-into a sellers- law.

For the various product groups, the maximum product VOC limits as accepted by the EC

directive are:

37

US and Canadian regulations for refinishing technology

Concerns over VOC emissions started with the EPA Clean Air Act of 1990. Different

state and local jurisdictions instituted their own VOC rules for automotive refinishing

based on the Clean Air Act. These rules ranged from requiring HVLP spray equipment to

setting specific VOC limits for products used. The EPA put its first national VOC rule, the

"National Volatile Organic Compound (VOC) Emission Standards for Automotive

Refinish Coatings" into effect January 11, 1999. The "National Rule," as it is called,

placed limits on the VOC content of refinish products used during the collision repair

process and was an attempt to standardize VOC regulations across the country.

Because of localized air pollution problems, even stricter limits were adopted in southern

California and then throughout the state of California in 2000. California regulations can

vary between counties. In California, the California Air Resources Board (CARB) sets a

model rule that must then be adopted by over 40 individual air districts in the state.

Some air districts may decide to place regulations that exceed the statewide model rule.

The South Coast Air Quality Management District (SCAQMD) has the strictest

regulations to date.

in the 2002 Survey (ARB, 2005).

Top Seven Coatings Manufacturers

Akzo Nobel

BASF

DuPont

Ellis Paint

PPG

Sherwin Williams

Standox/Spies Hecker

The automotive refinishing facilities vary greatly in size and level of sophistication. Some

automotive refinishing facilities are medium to large, well run, relatively automated

facilities while others are family-run shops, which may have one or two employees.

Table below shows the estimated number of automotive refinishing facilities in the larger

districts. (DuPont, 2005)

38

Estimated Number of Automotive Refinishing Facilities by District

DistrictNumber

of facilities

South Coast Air Quality Management District (SCAQMD) 1,790Bay Area Air Quality Management District (BAAQMD) 934San Joaquin Valley Air Pollution Control District (SJUVAPCD) 330Sacramento Metropolitan Air Quality Management District (SMAQMD) 171Other Districts 888Total Statewide 4,113

Although there are some similarities in the district rules, the rules vary from district to

district. Some of the differences include: definitions of terms, coating categories, VOC

limits, exemptions allowed, and recordkeeping requirements. Following table

summarizes the key VOC limits from four district rules.

A similar set of rules and regulations exists in the other parts of the globe – Australia,

Japan etc. Besides the above mentioned VOC legislation, some of the countries have

introduced local emission legislations, such as Bundes emission in Germany and Dansk

Miljo regeler in Denmark.

Global CV Coating Suppliers – Analysis of Product Positioning

Product positioning is developing a distinct image for the product or service in the mind

of the consumer, an image that will differentiate the offering from competing ones and

squarely communicate to consumers that the particular product or services will fulfill their

needs, better than competing brands.

Successful positioning centers around two key principles.

Communicating the benefits that the product will provide rather than the product

features

Because, there are many similar products in almost all market place, an effective

positioning strategy must develop and communicate a “unique selling

proposition” – a distinct benefit or point of difference for the product or services.

Based on the analysis of the advertisement given by the major player in the coating

industry the product positioning strategy was evaluated based on the following attributes.

39

Product quality

Service quality

Rational motive

Emotional motive

Product quality

This is the attribute focusing on the perception of the quality of the coating in the end

users mind.

Service quality

This attribute is defined as the partnership proposition of the company along with the

product supplied. That is how an organization is willing to give service for a particular

product.

Rational motive

This is the motive or goals of the consumer based on economic or objective criteria. That

is, the consumers behave rationally by carefully considering all alternatives and

choosing those that give them the greatest utility. The selection criteria such as price,

coverage, time saving will be determining for factors for decision.

Emotional motive

The emotional motive involves selection of goals as per the wishes of personal or

subjective criteria for example, the desire for individuality, affection, status etc.

Brand Positioning Strategy

40

CV Coating Market - Future

In the present scenario, the CV coating market faces the following challenges:

Increased focus on the CV market by both global as well as local players

Improved product quality of the low VOC products

Network focus of the international coating suppliers

Improved product offers form the local paint suppliers

Also, the legislation may provide the following challenges for the coming years:

The complexity of the legislation will increase and will require specific expertise

Fulfilling the legislation will not only require special (waterborne) products, but

also the knowledge and skills to introduce them efficiently

Partnership

Paint Quality

Ra

tio

nal

DupontQuality

BASF - GlasuritSpeed

ICIColor

LechlerSpeed

ICI - NexaPartnership

PPGReliability

Sherwin Williams - AAMCredibility

Spies HeckerColor

StandoxColor

Akzo Nobel - LesonalEfficiency

Akzo Nobel - SikkensPartnership

E m oti

on

al

41

Company profile

Akzo Nobel is a global fortune 500 company based in the Netherlands. It is a multi-

cultural organization serving continuous throughout the world with health care products,

coatings and chemicals. It employs around 61,500 people and conduct its activities in

four segments − human and animal health care, coatings and chemicals −subdivided

into 13 business units, with operating subsidiaries in more than 80 countries.

Consolidated revenues for 2005 totaled €13.0 billion.

Akzo Nobel coatings unit is one of the four conglomerates forming the group and is the

largest paint company in the world. The company’s history dates back to 1792 when

painter and decorator Wiert Willem Sikkens started the production of Sikkens lacquers in

the town of Groningen, The Netherlands. In 1837 the company was named as Sikkens &

Co., and the name became synonymous with quality and craftsmanship. The business

continued to expand with the development of fast drying car lacquers (1924) enabling to

refinish a car in just six days. With the need for more space, in 1939 the entire company

moved to the west of the country wherein a completely new, modern complex was

acquired in Sassenheim, The Netherlands.

The various customers include:

a. Distributors

b. Body shops

c. Fleet owners

d. Automotive suppliers

e. Major bus and truck producers

Akzo Nobel coatings division is a € 6.5 billion unit and car refinishes is an integral part of

the same. In modern markets, success depends increasingly on alliances with strong

and reliable partners who can help to run businesses profitably and win loyal, satisfied

customers.

Akzo Nobel Car Refinishes (ANCR) understands this principle better than anyone. For

42

decades, the core of the business' global vision and strategy has been to serve

customers as partners in business. As a leading international supplier for the car repair

and commercial vehicle industry ANCR has the technologies and innovative capacity to

offer all the products needed to operate in today's markets.

Data analysis and interpretation

The study was conducted as a pure industrial marketing research to assess the market

potential, competitive analysis and forecasting sales etc. This study was based on

collection of secondary data from various sources like internal reports, government web

sites, magazines etc

Typical of the industrial marketing research the study relies mainly on secondary data,

expert opinions, understanding of the technical aspects, more emphasis for descriptive

method for primary data collection, research observations based on small sample due to

the small population available etc.

• The secondary data collected were thoroughly analyzed to understand the

background, structure, market segmentation, key players and the influencing

parameters in the Indian context. Also, we try to understand the above

mentioned parameters including the positioning of the major coating products

available in the market in the global context.

Results

1. Customer expectation from the CV product

This data is of primary importance for any company like Akzo Nobel trying to establish a

new market in the Indian sub-continent (inspite of its wider global presence) wherein the

43

customer feed back or expectations about the product will help in getting a better launch

as well as better advantage over the existing CV product suppliers. The details of the

survey are given below:

Customer expectation from any CV product in the market

Low price35%

High quanlity40%

Product warranty5%

Product support20%

Interpretation

The above data clearly indicates that in the context of the Indian market the two

parameters – low price and better quality are the main expectations from the customer

point of view. This is followed by the need of product support and surprisingly the

parameter of product warranty occupies the last position (reports on the global CV

market indicates that the product warranty term is the primary requirement from the

customer point of view).

2. Perception about Akzo Nobel’s CV product in India

Akzo Nobel is very young in the Indian automotive market, especially the CV sector but

its global presence is a well known fact. This point will help us to identify the perception

of the Indian customer about the company’s product assortment and do the needful to

get a big chunk of the market in the years to come. The details of the survey are given

below:

44

Cusotmer Perception about Akzo Nobel's CV product assortment

High60%

Medium35%

Low5%

Interpretation

The results clearly indicate the high perception level of the Indian customer base about

Akzo Nobel’s CV product assortment. This will make the product acceptance easier in

the market but may pose the challenge of maintaining the same on a long term

perspective (i.e. with better quality and competitive prices).

3. Potential customer of the CV products in India

This point is to segregate the Indian market into different segments in terms of the

various segments of the commercial vehicles available viz. OEMs, CV body builders,

refinishing body shops etc. This will help us in targeting the customer base in a proper

and calculated way with more winning opportunities. The details are represented below:

45

Potential customer base for the CV products in India

OEMs40%

CV Body Builders50%

Refinishing units5%

General Finishes5%

Interpretation

The analysis of data reveals that the major chunk of the CV product market comes from

the OEMs (especially commercial vehicles manufacturers) and CV body builders. This

makes it very essential for the products to have the prior approvals by the concerned

OEMs either globally or for the local regions. Akzo Nobel needs to focus on this

parameter to get a wider acceptance in the Indian CV market. The rest 10% comprising

the refinishing as well as the general finishing units can be taken care of easily.

4. Estimated market potential for Akzo Nobel’s CV product assortment in India

The point may give us an idea of the market potential as well as growth for Akzo Nobel’s

CV products in the Indian subcontinent. The survey includes the opinion from all the

regions of India and the details are given below:

46

Estimated market potential for Akzo Nobel's CV product assortment in India

High50%

Very high30%

Average3%

Medium17%

5. Desired Principal Strategy for the CV Product Promotion in India

This point was taken up to get an idea by which the product can be carried over to the

customer base. The details are given below:

Pirncipal promotional strategy for CV products in India

Offering complete system solution

20%

Promotional ads in industrial magazines,

trade shows etc.15%

Approach customer directly

2%

Techincal support / support contract with

an approved distributor

63%

Interpretation

47

The data collected reveals that the major promotional strategy is by focused technical

support (along with support contract through approved distributors). This is followed by

offering of complete system solutions and promotional ads through relevant sources.

Once again the Indian market differs from the global market in terms of its more focus for

the technical support whereas in global scenario the modes of offering of complete

system solutions and promotional ads enjoy primary attention as promotional strategies.

6. Possible challenges for Akzo Nobel’s CV product assortment in India

Based on the data collected the following points are considered to be the possible

challenges for Akzo Nobel’s CV products:

a. Competition against low cost local products

b. Preference of low cost products irrespective of the quality by the unorganized

sector of the CV market (which forms a sizeable chunk of the market in Indian

scenario)

c. Timely delivery of the product and support

d. Trouble shooting at customer end

Change-over of the customer base from the usage of conventional cheap low

7. Future trends for Akzo Nobel’s CV product assortment in India

The Akzo Nobel product assortment for the commercial vehicles is a market specific,

complete and dedicated system. Also, the availability of total package system offering

complete solutions, standardized product offer and product warranty will help to outsmart

the competition. In addition, Akzo Nobel offers eco-friendly products in the form of

complete waterborne package system in the CV product assortment.

The survey indicates better growth prospects for Akzo Nobel CV assortment in Indian

market keeping in mind to care for the following parameters:

a. Complete technical support

b. Competitive pricing of the products against both the global as well as local

competition

c. Sincere and faster efforts to get the OEM approvals

8. Commercial vehicles industry segmentation

48

For the ease of identification and analysis purpose the CV industry can be segmented

as follows:

a. Bus body builders

b. Truck manufacturers

c. Railway coaches and components manufacturers

d. Powder coating and liquid coatings (components manufacturing)

.

9. Major competitors in the Indian market

The commercial vehicle coating product launch of Akzo Nobel started in the fiscal year

2005. The details of the Indian CV market position in the prior and post launch of Akzo

Nobel CV products are as follows:

CV Market share of Akzo Nobel in India**

24

15

35

2

12

12

14

15

20

33

8

10

DuPont

PPG

ICI

Akzo Nobel

BASF

Others* Year 2005

Year 2004

* Include Standox, Kansai, Jotun and regional players like Esdee etc.

** The data belongs to selected band of body shops and CV body builders currently the customers

of Akzo Nobel

Interpretation

49

The data reveals that the position of Akzo Nobel in the Indian market shows appreciable

rising trend. The willingness of the customers for new products in the market is the

reason behind the same.

The data is not a real picture of the current Indian market scenario, but the information

collected based on the selected customers currently using the products of Akzo Nobel

(since 2005). However, the share of Akzo Nobel in the Indian CV market has risen from

nothing to 14% (inclusive of high as well as medium & low segment products).

10. Production rate of vehicles in the organization

The analysis would give us the production capacity as well as productivity of the

customer.. The observations are as follows:

40

15

10

35

0

5

10

15

20

25

30

35

40

Upto 400 per year 400 - 800 per year 800 - 1000 per year above 1000 per year

No. of vehicles produced per annum*

* Data collected from commercial vehicles component manufacturers are converted into equivalent number

of vehicles after discussion with the industry experts

Interpretation

The data reveals that the market is divided into two extreme but distinguished segments

– body building units producing either smaller quantity (regional body shops) or very high

quantity (OEMs). This has a real big significance in terms of planning the marketing

strategy to capture the market. The two ways are as follows:

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a. Targeting the bigger customer means to meet their requirements very stringently

and this can be taken care off with the high segment portion (quality) of our

product assortment while

b. Targeting the smaller body shops means, we can help them to make use of our

process to improve their productivity as well as work efficiency (economy and

ease of work) and propagate the low segment portion of our product assortment.

11. Work force strength and the ratio of unskilled to skilled labor in the CV

industry

The division of work force strength in the Indian CV industry is uniformly distributed

among the wide ranges studied i.e. from small body building units to major OEMs.

Significant portion of the work force is employed as contract jobs i.e. work done through

small outside units to minimize cost and to improve productivity.

12. Consumption data

Overall CV product consumtion data in the Indian market

Putties26%

Primers26%

Top coats20%

Basecoats13%

Clear coats15%

Interpretation

The data splits up the consumption of CV products as follows:

a. 53% by the undercoats (primers and putties) and

51

13. Export oriented production

It is possible that the commercial vehicles manufactured in India may be exported to the

near by countries (SAARC) as well as to distant lands like Middle-east, African nations

etc. As a part of the survey we decided to know the orientation of the customer whether

the vehicles produced belongs to the export category or not. The available data shows

that 45 – 50% of the commercial vehicles are manufactured for the export sector. The

survey details are as follows:

Interpretation

The survey data shows that 45% of the vehicles produced belongs to the export sector.

The target countries are Srilanka, Iraq, Africa and other Asia-Pacific regions. This data

gives us an important feed back that the CV product supplied in the market need to fulfill

the stringent specification of the export oriented production units.

14. Lookout for special features in the CV product currently under use

The currently used product at the consumer end may possess certain undesirable

parameters with passing time and the consumer may be looking out for an improvement

in relation to the same. The survey details are as follows:

25

42

25

8

0

5

10

15

20

25

30

35

40

45

Time savings on workprocedures

Availability of completepackage from the same

supplier

Relevant training onhandling different

products efficiently

Others (like meetingspecifications, cost

etc.)

Expected special features in the CV product assortment

Interpretation

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Among the special features expected with any new product in the market, majority of the

customers demand that the complete package be available with the same supplier. This

makes things easier for them in terms of time savings, cost efficiency and managing

technical support from the supplier. The same is again reflected in other sections of

customers, wherein 25% demand primarily time savings as the main target and another

25% demand relevant training in handling the new products from the supplier.

15. Possible challenges and future of a new product

The survey at the customer end reveals that the future acceptance level of a new

product in the market will be good if the product meets the following features:

a. Needs to meet the various specifications laid out

b. Should be supportive in maintaining the inventory level in case of OEM

customers as per desired levels

c. Competitive pricing and optimized product quality

d. Complete technical support

e. Better consistency in achieving the desired shades

Findings

The findings and analysis of the survey are as follows:

a. In the Indian scenario, low price and better quality are the main expectations

from the customer; issues like product support and product warranty are

desirable

b. The survey indicates that the major portion of the CV product market is controlled

by the OEMs and big CV body builders

c. The market potential of Akzo Nobel’s CV product assortment falls in the range of

high to very high

d. The major promotional strategy desired is by focused technical support

e. The possible challenges for Akzo Nobel’s CV products in the Indian market

include – competition against low cost local products, preference for low cost

products irrespective of the quantity in the unorganized sector of the CV market,

timely delivery of the product and support, trouble shooting at customer end,

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change-over of the customer base from the usage of conventional cheap low

quality system to a modern sophisticated system, complete product assortments

for different range of application requirements, OEM approvals and meeting other

international standards, cost of the products against other global players in the

market

f. The survey indicates better growth prospects for Akzo Nobel CV assortment in

Indian market keeping in mind to care for complete technical support, competitive

pricing of the products against both the global as well as local competition

followed by sincere and faster efforts to get the OEM approvals

g. The data reveals an appreciable growth trend for any new but able entrant into

the Indian CV market. For example, in case of Akzo Nobel, a global giant in

coating industry but a new entrant in Indian market, the market share has risen

from nothing to 14% since its official launch in the year 2005 (with respect to CV

market alone)

h. The market is clearly divided into two main segments – CV body building units

located in various parts of the country manufacturing vehicles in smaller

quantities and the OEMs producing vehicles in very high numbers; this demands

a different marketing strategy for bringing into loop both sections of the

customers

i. The survey indicates uniform demand for the entire product range present in the

company’s complete CV product assortment and also the customers’ willingness

irectly approach the customer to introduce the product rather looking out for

promotional ads in industrial magazine and trade shows... This helps to affirm the

suppliers’ total support for the customer at all stages of the product performance.

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Recommendations

Based on the survey findings the following recommendations are made for a better

growth potential in the CV coating product industry in India for any new entrant like Akzo

Nobel CR-CV:

a. Market segmentation – The customer base need to be segmented into two

main categories viz. OEMs and Bus/Truck body builders. The customer

expectation must be met with, apart from offering complete package, a flexible

strategy to accommodate their specific requirements.

b. Product awareness - The customer awareness about the new product entering

the market is good and so the coating supplier like Akzo Nobel CR-CV, needs to

directly approach the customer to introduce the product rather looking out for

promotional ads in industrial magazine and trade shows. This helps in affirming

the suppliers’ total support for the customer at all stages of the product

performance (Akzo Nobel’s CV promotion theme is “Experts working with

Professionals”).

c. Product pricing – This should be online with the segmentation of the customer

base and product positioning i.e. the low segment customer should have a value

product with economy (to pull him out from the local suppliers) while the high

segment customer should be satisfied with a product with assured quality,

meeting the laid down specifications and focused technical support.

d. Product handling – Proper care should be taken to give hands-on training to

both the skilled and unskilled work force sections of the customer base to avoid

mis-handling of the newly introduced products and also to enhance its

acceptance level.

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Conclusions

The prime objective of this project work is to assess the market potential of commercial

vehicle coating products in India. The conclusions are based on two kinds of data,

secondary and primary data respectively.

The need for painting the commercial vehicles is directly related to the growth of the

commercial vehicles market. The secondary data analysis shows that the overall growth

in GDP (India) is consistently above 5%, with the growth in CV sector at 8.1% and an

appreciable growth rate of truck sales in the past three years. Government thrust on

public/private investment in infrastructure, rural roads and highways will boost demand

for trucks and buses. Also, the trend in moving towards a low bake coating system,

availability of easy finance, increase in infrastructural activities, increased demand for

the public transport systems, increasing trend in vehicles export etc. show a potential

growth for the commercial vehicle coating system in the Indian market.

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Trend in Automotive Refinish market

Even as the number of miles traveled by car increases each year, the number of

accidents has remained flat. In addition, the number of damaged vehicles being declared

total losses is growing. These factors have contributed to a net loss of work for

bodyshops, leading to the decline of the collision repair market. This, in turn, has caused

the market for repair paint to fall. Not boding well for the automotive refinish market, the

decline in the volume of repair work is not expected to halt any time soon.

Another factor contributing to the market's drop-off is the decline of paint volume, which

has been falling since 2003. Due to technological developments, less paint is needed to

spray a car these days. Furthermore, stricter speed limit checks, heavier drinking-and-

driving penalties and the introduction of 'points-based' licenses, have led to a declining

rate of accidents in the U.S. and Europe. In addition, car manufacturers and insurance

companies are investing in safety equipment and other mechanisms to lower the

accident rate further.

While the decline of the mature European and NAFTA markets is substantial, the

developing regions of Asia and Eastern Europe offer the brightest market opportunities

for automotive refinish manufacturers. Increasing competition by budget suppliers has

led to the introduction of high- and low-end brands by multinationals in order to compete

regionally in these less industrialized markets, said Chris Wall, director of global

marketing for Akzo Nobel Car Refinishes. Akzo Nobel Car Refinishes already has a

strong presence in these markets and will continue to develop our business there. Some

areas like Thailand, China and India are showing impressive growth figures because of a

growing car park. In other countries such as Japan and Taiwan the refinish market is

only growing with very modest figures.

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Also the use of higher solids coatings, better or more efficient spraying equipment, and

enhanced life of original equipment manufacturer (OEM) coatings are other contributing

facotrs. It becomes increasingly important for coating manufacturers to better According

to Johnston, the largest opportunity for growth may come from non-traditional segments,

such as the commercial transportation segment, custom painting and small-damage

repair. BASF has already taken significant steps to capitalize on these largely untapped

areas of the market. On the service side of the business, which is where the most

opportunities for differentiation lie, it will continue to grow in importance, as it is a

determining factor for collision centers in deciding who to partner with to help ensure

business success, said Johnston.

VALUE ADDED SERVICES FOR AN EVOLVING CUSTOMER BASE

The typical customer base of paint suppliers has evolved. While paint companies are

used to having a strong position with individual body shops—which still represent a large

customer base—they have now begun to realize that new customers are arising, and all

have different needs.

Insurance companies today are taking more control of the automotive repair process. As

a result, insurers are now customers of paint suppliers too. The needs of insurance

companies greatly differ from individual body shops, as they are more interested in

establishing bodyshop networks, controlling repair and claim costs, increasing customer

(car drivers) loyalty and maximizing bodyshop capacity, said Wall. Since Akzo Nobel has

great experience with our Sikkens Acoat Selected network, we can help insurance

companies with establishing a repair network, monitoring repair costs and quality and

continuous training to improve the quality of the total repair process.

For BASF's refinish customers, increased margin pressures, value-added programs and

training are key issues. BASF is addressing these issues in multiple ways, including

development of market-appropriate products and streamlined production techniques

ON THE HORIZON

Moving forward, the automotive refinish market will rely heavily upon technological

advances to create greater market opportunities. UV-curable primers continue to rise in

popularity, creating opportunities for more productive paint shops and there continues to

be a growing interest in water-borne basecoat color technology in a number of markets.

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Bibliography

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1. www.researchandmarkets.com

2. www.tn.gov.in

3. www.allbusiness.com

4. www.thefreelibrary.com

5. www.dupont.com

6. www.ppg.com

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19. Rene Hause, Nico Postma, Faridoon Qazi, Marketing Plan Commercial Vehicles

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List of Abbreviations

OEM – Original Equipment Manufacturer

CV – Commercial Vehicle

CR – Car Refinishes

1K – One component paint system

2K – Two component paint system

MUV – Multi Utility Vehicle

PMP – Phase Manufacturing Process

PPM – Parts per Million

FII – Foreign Institutional Investors

HCV – Heavy Commercial Vehicle

MCV – Medium Commercial Vehicle

LCV – Light Commercial Vehicle

VOC – Volatile Organic Compound (solvent present in the paints)

PUR – Polyurethane

EC – European Commission

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