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Old 6th June 2012, 20:40   #16
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Default Re: Waiting period for newly launched cars- WHY?

I guess the wait is only for diesel cars in every category. So part of the answer is the skewed demand created by skewed fuel pricing (am not getting into the fuel debate here). I'm sure most car makers would give their eyeteeth for a 100% capacity for diesel production to meet the spiraling demand at least for the present.
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Old 6th June 2012, 21:01   #17
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Default Re: Maruti Ertiga : Official Review

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Originally Posted by supremeBaleno View Post
That is not only a much-abused term on tbhp but it also belittles the Indian consumer (which includes you and me). People using the term assume that the buyer is unaware of the product and is buying it solely because others are buying. And to accept this would mean to undermine the intelligence of the Indian consumer - one of the shrewdest you can find.
I'm afraid I may stray from this topic, but since you have initiated this discussion, allow me to put forth my views.

I tend to believe that a good number of people are not fully aware of product/s that they own or wish to buy. Some buy mobile phones without any clue of its features (or lack or it). As far as cars are concerned, many people that I know of -- including my brother-in-law -- have preferred a diesel car (mainly for its better FE, cheaper fuel rates) over a petrol car without even considering the cost-benefit analysis (higher initial cost of diesel car) and despite the fact that his diesel car barely travels about 1000 kms every month.

Believe it or not, my mum who resides in a village here in Goa was unhappy that I owned a Alto and wanted me to upgrade my car to a "better car", such as an i20 or so. When prodded, I realized just why she wanted me to change my car: the baker's son opposite our house and a few others had bought an i20!

The Indian customer is certainly capable of purchasing products, given the disposable income at hand, but whether the Indian customer is "shrewder" than other customers is not something that I can affirm with certainty. In matters pertaining to purchase of products, I'd rather be practical than patriotic.

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Let me put it in a way you can relate to - Did you buy the i10 due to herd mentality ? The i10 is one well-selling hatch in the Indian market beating many MSIL hatches in sales and so was your buying decision due to everyone buying one ? Or going back in time, take your 1st car the Alto which till recently was selling 1lakh units every 3 months and is the highest selling car in India ? Did you buy the Alto due to herd-mentality ? I would assume no.
You may be surprised to know that there was a certain element of "herd mentality" in BOTH my purchases of the Alto and i10. But do note that "herd mentality" need not always be understood in the negative connotation.

You see, when I purchased my Alto in May 2008 my first requirement was that it should be a very popular and reliable car within my budget to ensure that spares, maintenance and service is easy and cheap.

Power and performance in a car were secondary to me: I'm a sedate driver who simply wanted to go from Point A to Point B in a car (which only needed to have an AC/PS).

For me, popularity of the car and manufacturer was the vital yardstick, especially since I owned a Matiz before the Alto and I had extremely restricted options to service the car.

Given my requirements, the only car that appealed to me in May 2008 was the Alto. Didn't bother to do a test drive (yes, I broke Rule #1 in GTO's rule book - Mea Culpa) and simply went and bought the Alto. Was this herd mentality? To some extent, yes.

Fast forward to December 2010: I had no reason to buy a second car, but my mum insisted on me upgrading my Alto. Was suddenly and unexpectedly in the market for a car within Rs 4.5 lakh. Check out my ownership thread of the i10 and you will note that my criterion for the i10 was no different from that of the Alto. A popular car with pan-India service coverage. One of the main reasons why I eliminated the Ford Figo was the absence of service centres (at the time) in places that I intended to travel.

And believe it, even though there was no official road test of the i10 on team-bhp, there were quite a few ownership reviews. I was aware of the pros and cons of the i10 even before I sat in the car. And these reviews were enough to seal my decision. Herd mentality? Possible.

In my opinion, I have no qualms about "herd mentality". To some extent, people rely on "herd mentality" for a lot many things in life and they are OK with it. When seen in specific context, in no way does it attempt to "undermine the intelligence of the Indian consumer."

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Originally Posted by supremeBaleno View Post
So, if there is a good product (be it i10 or Swift), there will be takers.
From my experiences, I have noticed that a good product need not always be a popular product and a popular product need not always be a good product. Various influences are at play to determine the quality and popularity of a product.

But let us not stray from this interesting topic.

Thanks,
Melvyn
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Old 6th June 2012, 21:08   #18
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Default Re: Waiting period for newly launched cars- WHY?

No manufacturer would like to intentionally keep a waiting list for their cars. None. Because it doesn't make any financial sense. They would rather take the entire money from the customer, rather than be happy with the Rs. 50,000 deposited at the dealer - the idiom "A Bird in hand is worth two on the bush" fits the bill here for the manufacturers.

So why do some cars have waiting list? Depends on the manufacturer actually.

1) Hyundai burnt their hands with their premium hatchback Getz - they just managed to sell 800 - 900 units per month. So naturally, when they launched the i20 with a higher price tag, they did not expect to see sales of 6000 per month.

2) Every month, Hyundai was barely pushing 1000 units of Accent, and then the Verna. So when they launched the new Fluidic Verna, they naturally did not expect sales of 4000 per month.

3) Fortuner has a waiting list because before its launch, the entire segment was notching up 500 units per month!

4) Scorpio was selling 2000 units per month. To their credit M&M setup a capacity of 3000 units per month for XUV 500. But still, they failed to gauge the demand for the product.

See a pattern here? The marketing/product guys have a tough job of estimating how much the demand would be. It would be suicidal to make a wrong estimate about the expected sales and invest Rs. XXXX crores. Imagine what would have happened if Tata had setup a manufacturing facility for producing 50,000 Nanos a month - based on the initial euphoria over those 100,000 bookings. Order books and waiting lists can melt away in a flash.

Maruti meanwhile has a genuine problem of not having the ability to build/acquire enough engines. In my opinion, they didn't have the ZDi versions of old Swift and current Ritz in an attempt to curb demand to some extent.
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Old 6th June 2012, 22:08   #19
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Default Re: Waiting period for newly launched cars- WHY?

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Originally Posted by smartcat View Post
No manufacturer would like to intentionally keep a waiting list for their cars. .........
..................In my opinion, they didn't have the ZDi versions of old Swift and current Ritz in an attempt to curb demand to some extent.
That is precisely what the reason is! Thanks for explaining it vividly. I believe it also acts as a mouth to mouth promotion, and we fall for stuff in good demand.
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Old 7th June 2012, 08:34   #20
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Default Re: Waiting period for newly launched cars- WHY?

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See a pattern here? The marketing/product guys have a tough job of estimating how much the demand would be. It would be suicidal to make a wrong estimate about the expected sales and invest Rs. XXXX crores.
+1.

And in most cases, the demand for a particular car is the highest when it is new to the market. And over a period of time, it slowly tapers off due to various reasons. Now, when demand forecasting is done for a new car, it is better to align the production capacity to the average demand over a period of time. So that the auto maker is not hurt by excess capacity as and when the demand tapers off. This leads to a waiting period when a new launch is a hit in the market.

And if the demand spikes over a period of time, they can always increase the production and thus the supply. But it is the lesser evil or rather a nice problem to have.

Also, I feel automakers make the maximum margin towards the end of the life-cycle of a product. No one wants excess capacity of hurt the profitability during that time.

Also, the marketing team can wrong with the product mix. The latest example is the Ertiga. MSIL simply wasn't prepared for so many bookings for the ZDi variant and can't make them enough. Now, I don't know whether it is actually the alloys that is becoming the constraint. Also, I think they thought the Ertiga 1.4 will find more takers but the recent fuel price hikes has put a torpedo to their plans.

Disclaimer: I don't have inside knowledge of any automaker. These thoughts are based on the market knowledge I have gained by watching the industry for many years now and some academic projects that I have done in the past.
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Old 7th June 2012, 08:36   #21
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Default Re: Waiting period for newly launched cars- WHY?

It is like having a long queue to have a dashan of Lord venkateshwara at Tirupati. More the queue more the demand. :-).

Having said that the real reason is de-risking. No manufacturer would want to invest in a capital intensive capacity to realise after launch that his car is a dud and can't sell even 50% capacity. this is the worst thing that can happen to a car manufacturer and he would end up in huge losses.
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Old 7th June 2012, 09:02   #22
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Default Re: Waiting period for newly launched cars- WHY?

The market today is extremely volatile; you can't really be sure whether a particular segment, concept will be a hit with the public.

Also, considering various external factors like petrol prices, it's not just about the car alone.

Look at City; the '08 City was going great guns clocking about 5+k sales a month and then suddenly, it dropped to 2-3k just because petrol shot up and there wasn't any diesel City.

Most manufacturers have a diverse range of products which don't necessarily share the same assembly line - so if they over-estimate the demand of the product, they're in for a nasty surprise.

Supply not matching up for demand of newly launched cars like Ertiga - I can still understand. But for newly launched versions of already present cars like Swift - I just can't fathom.

I guess the phenomenon is partly consciously created and partly manufacturers playing it safe.
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Old 7th June 2012, 09:32   #23
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Default Re: Maruti Ertiga : Official Review

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Originally Posted by supremeBaleno View Post
Well, if they think their product is that good, let them keep it with themselves. In Kerala everyone seems to have an Activa and this has resulted in the service-centres being overloaded - so customers queue up at 6AM to get a slot. I ain't buying a bike/car which requires me to line up at 6AM and grab a token to get a regular service done. And ofcourse better not to say anything about the attitude of the sales folk at Honda.
I completely agree. Another case is the dealer network which is in the hands of the companies. In Gurgaon for example, it is not possible to simply land up in the morning for a service. You are asked whether you have a booking for the day! And this was the case 2 years ago when I used to have a Santro Xing. The typical waiting time for a booking of a service was 3-4 days depending on the preference.

Why the hell can't Hyundai wake up and realize that they need additional dealers / service centers. This was one sure way of prospects turning away to other car manufacturers since you do know that 3-4 times a year, you will face this issue of servicing.
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Old 7th June 2012, 09:48   #24
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Default Re: Waiting period for newly launched cars- WHY?

I guess as far as Ertiga's waiting period is concerned this is second (Actually third if count Eeco here) MPV/LUV which they have launched, however around 10 yrs back when they have Launched Versa in the similar price range & though they have roped in Big B for its advertisement even then Versa didn't do well & within a less than years time Maruti slashed its price by 1-1.20 lac. This could be a one of the reason why there has been a waiting period for Ertiga, as producing a vehicle & keeping it in stock & later on disposing it at lac rupee discount is something every Manufacturer would like to avoid at its best, at least they don't have to bear the carrying cost on unsold stock.
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Old 7th June 2012, 10:23   #25
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Default Re: Waiting period for newly launched cars- WHY?

A very good topic.

I also fail to understand the waiting period and somehow feel it is a hand-in-glove situation of manufacturers supporting sales outlets.

Now-a-days for every new vehicle launch there is a waiting period of 3-4 months. The time period is always 3-4 months. Even after you book the car you still have to put up with a uncertain wait period. I mean if you have a confirmed booking can't you give a confirmed date the vehicle will be delivered. Plus minus a week is acceptable but something vague like 3-4 months is not.
8-9 months waiting period reflects poor management of the company. Sometimes I feel that they are not even ready for launch in terms of manufacturing and the cars are launched to get that "first-movers" advantage. Something like Ertiga, declare to the world that we have launched the vehicle and created the market but in fact market is created 8-9 months later. This time is used by company to pass on a few batches of vehicle to paying tester i.e the customers and based on their feedback do some under-the-carpet changes.

Also it becomes a good business for sales outlets. Show the waiting period create hype and demand . Then ask for cash upfront and lo suddenly "one booking got cancelled" and a vehicle is assigned to customer who pays upfront. The manufacturer looks the other way in such matters.

All and all I am against uncertain waiting periods for any model new or old. I am ok if they say there is a 3-months waiting and the car will be delivered on "X" date under any circumstances. Maybe it is a wishful thinking on my end.
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Old 7th June 2012, 10:34   #26
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Default Re: Waiting period for newly launched cars- WHY?

Adding to @smartcat, post

It would be suicidal to commit huge capital and then not see the numbers coming in and then sit on truckloads of unsold inventory, which later is sold through discounts and freebies.

So most of them take a pessimistic view about the numbers a particular model will bring in and then make adjustments/investments later on.

To top it, there is this favorite variant and color, which if investments made early on may mean loads of unsold inventory of unfavorable variant or/and color.

I know its irritating and as a customer i dislike it, but my guess is its healthier for the business in general and manufacturer in particular.
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Old 7th June 2012, 10:43   #27
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Default Re: Maruti Ertiga : Official Review

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Originally Posted by misquitas
I tend to believe that a good number of people are not fully aware of product/s that they own or wish to buy. In matters pertaining to purchase of products, I'd rather be practical than patriotic
Actually given the innumerable range of goods available for purchase, I doubt there is anyone one out there who can (even assuming he has the time) make a complete study of all the available products and make the best decision. We win some - we lose some. Most of us here might (or so we like to think) make a good purchase decision when it comes to cars, but fail with other products. Also, awareness/research does not guarantee that you will end up buying the best of the options out there. I am the kind that compares all available options using an excel sheet, arriving at the product that meets my needs best and then searching out the best deal. Has worked most of the times, but has also failed with the SE mobile phone I bought. So, let's give credit to the guys out there, instead of talking about them like we would about a herd of wildebeest in Serengati crossing a croc-infested stream, which incidentally is what herd mentality is. And not sure where the patriotic part came in from.

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Originally Posted by misquitas
From my experiences, I have noticed that a good product need not always be a popular product and a popular product need not always be a good product. Various influences are at play to determine the quality and popularity of a product.
If you are thinking just "good", then there is actually no issue at all because almost all products are good today. Take for eg. the hatch segment and list all the cars available today - aren't they all good ? Is there any one in the list which does not meet the mediocre demand imposed by the term "good" ? But things change when we try to look at the perfect or best product. And all of us know that there is no such thing as the best car - atleast till we come across a car whose official tbhp review has no bullet-points under the "What you won't" section. Each has strong points and weak areas - we just select the one that ticks most boxes for us. Your i10 is a good car for sure, but is it the best car out there ? No. It just met your requirements like a Jazz would do for someone else.

Quote:
Originally Posted by misquitas
You may be surprised to know that there was a certain element of "herd mentality" in BOTH my purchases of the Alto and i10. But do note that "herd mentality" need not always be understood in the negative connotation.
You know as well as I do that it is used in a -ve meaning here and your initial usage was also on that plane. But if you look at it in a +ve way also, good for you and we can move on from this discussion.

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Originally Posted by smartcat
The marketing/product guys have a tough job of estimating how much the demand would be. Maruti meanwhile has a genuine problem of not having the ability to build/acquire enough engines.
I dont deny that there needs to be caution when estimating demand for a new product, whose acceptability is not known. But if the marketing / product / purchase guys cannot put in place measures to meet the demand of a product that has been selling well for 5 years and more, then they really have an issue. And since every kid knows that diesel-cars sell here, how many more years would they need to set in place the capacity for meeting the demand ? While the examples you gave for the other cars are valid, IMO it is sheer incompetence on the part of MSIL when it comes to the Swift/Dzire backlog.
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Old 7th June 2012, 11:24   #28
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Default Re: Waiting period for newly launched cars- WHY?

In general, I would like to believe that the long waiting list is because of wrong gauge of the demand. I feel this could be a case with something like the XUV 5OO, or the Verna.

That said, there are some curious cases as well:
1) During the initial months of Fortuner launch, my neighbour in India mentioned that there is a long waiting period, but the dealer can work it around if a premium is paid. So not sure if dealers create a waiting period.
2) There were cases were some of our fellow members have to do some waiting to get hold of cars like New Fiesta, New Jetta etc. These cars sell in minimum numbers, but still there was a waiting period!
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Old 7th June 2012, 11:30   #29
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Default Re: Maruti Ertiga : Official Review

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IMO it is sheer incompetence on the part of MSIL when it comes to the Swift/Dzire backlog.
I'm not sure if this has got anything to do with 1.3 Multijet's production issues - but as a stock market investor, I have checked out the balance sheets of all the listed auto component suppliers. They are in a terrible shape - most of them are loss making or having 3 to 4% net profit margins. They are saddled with huge debts, and when interest rates are this high, they get whacked. Their overall RoE (Return on equity) less than 10%. But strangely, their topline (sales) is growing very well.

What does this mean? This means although the manufacturers are giving new orders to the component suppliers, they are squeezing them badly on the margin front. These guys are facing issues like rising steel costs & 10 - 12% bank loan interest rates. Where will they get money to invest in their business? Auto companies cannot have it both ways - squeeze the auto component guys on the margin front and then expect them to invest in new capacities at the same pace as the auto manufacturers.

Last edited by smartcat : 7th June 2012 at 11:32.
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Old 7th June 2012, 11:31   #30
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Default Re: Maruti Ertiga : Official Review

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Supply not matching up for demand of newly launched cars like Ertiga - I can still understand. But for newly launched versions of already present cars like Swift - I just can't fathom.
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Originally Posted by supremeBaleno View Post
I dont deny that there needs to be caution when estimating demand for a new product, whose acceptability is not known. But if the marketing / product / purchase guys cannot put in place measures to meet the demand of a product that has been selling well for 5 years and more, then they really have an issue. And since every kid knows that diesel-cars sell here, how many more years would they need to set in place the capacity for meeting the demand? While the examples you gave for the other cars are valid, IMO it is sheer incompetence on the part of MSIL when it comes to the Swift/Dzire backlog.
The old Swift was selling around 12K+ units. With the new one, MSIL has increased the production to around 18K+. Is it not a 50% increase already? Maybe they could have increased it further more. But what guarantee is there that the Swift will continue to do 20K+ throughout its planned life cycle?

There is always a fine line between risk & reward. And, many suppliers are at stake here as well. And automakers simply can't risk them by creating excess capacity. Also, don't forget the 3 back to back strikes also crippled production and spiked the demand in case of the Swift.

Quote:
Originally Posted by supremeBaleno View Post
And since every kid knows that diesel-cars sell here, how many more years would they need to set in place the capacity for meeting the demand? While the examples you gave for the other cars are valid, IMO it is sheer incompetence on the part of MSIL when it comes to the Swift/Dzire backlog.
What if the proposed 80K duty on Diesel cars had been implemented in budget this year? Would it not have tamed the demand for Diesel to a large extent?

With so much uncertainty, it is a very challenging task to come up with production capacity. And we have a gift when we talk here now.

And that is hindsight.

Last edited by deetjohn : 7th June 2012 at 11:39. Reason: typo.
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