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Old 5th June 2012, 19:24   #1
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Default Waiting period for newly launched cars- WHY?

I fail to understand why companies launch a new vehicle when they can't meet the demand for it or even the demand for their existing vehicles like Swift/Dzire. What is the whole point of launching a car and then plonking a 9-month waiting period board in front of customers ?

And to top it, I fail to understand why they do advertising for the Ertiga when they can't supply cars. Such a waste of good money that could be avoided, since they know well in advance that they can't cater to the demand (given their backlog for Swift/Dzire).
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@Honda, bring on the diesel Brio/Jazz/City so that frustrated-customers in queue can help reduce the MSIL wait-list and move to manufacturers who can supply based on demand.

Mod Note: Very interesting topic- spun off from the Ertiga TD thread into a new discussion for all carmakers in general.

Last edited by noopster : 6th June 2012 at 18:24.
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Old 5th June 2012, 21:24   #2
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Default Re: Maruti Ertiga : Official Review

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Originally Posted by supremeBaleno View Post
I fail to understand why they launch a new vehicle when they can't meet the demand for it or even the demand for their existing vehicles like Swift/Dzire. What is the whole point of launching a car and then plonking a 9-month waiting period board in front of customers ?

And to top it, I fail to understand why they do advertising for the Ertiga when they can't supply cars. Such a waste of good money that could be avoided, since they know well in advance that they can't cater to the demand (given their backlog for Swift/Dzire).

@Honda, bring on the diesel Brio/Jazz/City so that frustrated-customers in queue can help reduce the MSIL wait-list and move to manufacturers who can supply based on demand.
Just read this on Zigwheels.

Delivery of top-end Maruti Suzuki Ertiga variants delayed Page - 1| Zigwheels.com

Ertiga is proving to be quite the success story, just like MS had hoped it would be. I'm sure the top honchos are racking their brains to address this issue. "Hot Cakes" - that's the phrase that comes to mind when one reads about the sales of Ertiga - 32,000 (surely more now) bookings and counting.
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Old 6th June 2012, 02:05   #3
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Default Re: Maruti Ertiga : Official Review

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Originally Posted by supremeBaleno View Post
I fail to understand why they launch a new vehicle when they can't meet the demand for it or even the demand for their existing vehicles like Swift/Dzire. What is the whole point of launching a car and then plonking a 9-month waiting period board in front of customers ?

And to top it, I fail to understand why they do advertising for the Ertiga when they can't supply cars. Such a waste of good money that could be avoided, since they know well in advance that they can't cater to the demand (given their backlog for Swift/Dzire).

@Honda, bring on the diesel Brio/Jazz/City so that frustrated-customers in queue can help reduce the MSIL wait-list and move to manufacturers who can supply based on demand.
+1. Problem is, most manufacturers (either through advertising or otherwise) primarily want to create demand; meeting this demand is secondary. Some even capitalize on highlighting this demand: if you recall, Honda scooters had the audacity of claiming that it was worth the wait for their two-wheelers, simply because they are that good.

Besides, Indians generally tend to have a herd mentality. It is not unusual to find a crowd of mute spectators (who will do little or nothing) around an accident site, or a crowd of buyers (who make little or no purchase) around a particular vendor/trader with an unusual product. People tend to associate demand with quality of the product.

In my opinion, Maruti in general, and Ertiga, in particular, encounters these issues. Having opened up a new segment with the Ertiga (a hatch-like, sedan-like and MUV-like vehicle with a Maruti tag), Maruti has succeeded in creating, and sustaining, the demand for Ertiga. Whether or not it can deliver the product on time, or even deliver the product at all, may not be Maruti's concern, at least, at this juncture. Unless of course, a competitor provides an equal or better rival to the Ertiga.

And given the herd mentality, people are prepared to wait for weeks or even months for that vehicle which everyone craves for. Take, for example, the Honda Activa/Dio or Suzuki Access. Despite the huge waiting period, at least here in Goa, potential customers are willing to wait for months on end, rather than opting for equally capable products like TVS Wego or Hero Maestro.
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Old 6th June 2012, 12:50   #4
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Default Re: Maruti Ertiga : Official Review

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The reason quoted for delay of the ZDi variant seems to be non availability of Alloy wheels. The reason most of the people (at least Bhpians) would opt for ZDi is the safety features and not alloy wheels. The common sense would tell you that easiest thing for Maruti would be to introduce a variant ZDi - Allow wheels. Wonder why they don't do that.
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Old 6th June 2012, 15:21   #5
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Default Re: Maruti Ertiga : Official Review

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Originally Posted by misquitas
Some even capitalize on highlighting this demand: if you recall, Honda scooters had the audacity of claiming that it was worth the wait for their two-wheelers, simply because they are that good.
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. So the next auto-gear bike would be a Wego in all probability for us. My FIL has an Activa which I use occasionally and I frankly do not see anything extra-ordinary in it for me to wait months for it.

Quote:
Originally Posted by misquitas
Indians generally tend to have a herd mentality. People tend to associate demand with quality of the product. And given the herd mentality, people are prepared to wait for weeks or even months for that vehicle which everyone craves for.
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. Another thing is the old adage - you can't fool all the people all the time. So, there is only so much a product can run based on hearsay - after that it better have some attributes to stay on track.

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.

So, if there is a good product (be it i10 or Swift), there will be takers. But my point was that MSIL knew from the time they launched Swift that it is a hit and if even 5-6 years later they have a waiting list, there is something they are not doing well. And they better pull up their socks and get to work, because once Honda marches in with their diesel line-up, the so-called herd might migrate to Honda pastures. Add Korean pasture (diesel i10, Eon etc) to the list and then when MSIL wakes up and smells the coffee, it would be too late.
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Old 6th June 2012, 15:33   #6
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Default Re: Maruti Ertiga : Official Review

Herd mentality, mostly was used by a certain Italian car fans to describe others. People know the value for their hard earned money (since most of these cars belong to that category).

One problem could be with the manufacturer's low confidence on sustainability of numbers in the long term. Our market is not big enough for one car to be keep selling big numbers for a long time (exception of Alto or 800). Hence they don't increase the capacity.

Also, our market is not that old enough for a car model to become a continuous success even with complete relaunch of new versions.
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Old 6th June 2012, 17:50   #7
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Default Waiting period for newly launched cars- WHY?

This is a very interesting discussion. Having waited 3 months for my own VW Vento AT, booked only days the TD car arrived in the showroom, I really fail to see why a car launched with all fanfare and presumably enough back-office calculations should not be available in sufficient numbers at the showrooms for customers to drive off in!

I could probably understand it in the case of an extremely chartbusting performer but this is turning out to be the norm these days: Vento, Fortuner, XUV5OO, Swift, Dzire, Ertiga---all of them face the same problem of badly mismanaged demand management. It is really unbelievable

Last edited by noopster : 6th June 2012 at 17:55.
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Old 6th June 2012, 18:08   #8
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Default Re: Waiting period for newly launched cars- WHY?

My 2 pence here:
It always makes better business sense to have a waiting period than to over-anticipate the demand and then later, be stuck with lots of unsold inventory.

But why Swift still has such a long waiting period is not justified by my reasoning above.
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Old 6th June 2012, 18:09   #9
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Default Re: Waiting period for newly launched cars- WHY?

I'm speculating here but
1. if the demand is aggregated and well known, the uncertainty is less, and more accurate planning and forecasting = less costs
2. Higher waiting period = higher resale value = even more demand. If there is a scarcity of the new product, then the older ones also continue to have a high resale
3. A delayed sale is still better than a lost one.
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Old 6th June 2012, 18:17   #10
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Default Re: Waiting period for newly launched cars- WHY?

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Originally Posted by supremeBaleno View Post
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.
This is true in Chennai too. Honda has very few showrooms for the mass sales that they do. Somehow people have associated with Honda from KH and hence this mad rush.
On the other hand, Maruti is a company that has the pulse of the people and knows what they are doing. Yes, it is frustrating, but they are still making their money, in spite of the competition. Honda is way too snobby to be a competition for Maruti anyway.
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Old 6th June 2012, 18:31   #11
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Default Re: Waiting period for newly launched cars- WHY?

If Tata had actually gone ahead and ramped up the supply chain (like shoe manufacturers do before the "season") for the nano bookings, they would have been bankrupt.

Overcaution makes for hype and less commitment of capital.

Think of people's (or organizational) selfish incentives or risk-aversion and their behavior is quite obvious, no?

/FWIW, Ertiga launched in a slightly bearish market, no?
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Old 6th June 2012, 18:39   #12
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Default Re: Waiting period for newly launched cars- WHY?

With the Automobile industry in doldrums for quite some time, i disagree that its just bad management. i think we should look deeper.

1) An automobile assembley line is planned to the last nut & bold, so its not easy to shift cars production by fluctuation demand. it requires long term planning & investment. If excess investment is made, it has to have minimum returns at least. The XUV is classic example: they build a capacity of 2000 cars but got 8000 bookings in first 10 days (4 months sold-out). To build extra 1000 cars capacity, they needed to spend 100 crs as investment. So imagine the amount of cars they have to sell to recover the 100 cr investment (even assuming 1 lakh (which is unrealistic considering the VFM pricing it has) profit per XUV, so it would take 10000 (10 months) XUVs to breakeven on the 100 cr investment & then think of profit). So no one will increase supply without knowing it they can sustain it for atleast 2-3 years at least.

2) All of them build cars expecting them to be hits but we all know the success ratio is far less. So they will always build with safe targets incase it fails (New Ford Fiesta for example)

3) No one wants to delay since they know at least few customers will go elsewhere. The ertiga for example was a new segment and maruti could have100 customer workshops but yet cannot gaurantee success with 100% confidence. This kind of phenomenon responce was unexpected and it would take time to know the actual monthly demand of this vehicle before planning capacity.

4) The Swift for example was doing well but with rapid dieselization of market has killed Alto and skewed the demand for Diesel swift. Maruti cannot suddenly shut petrol engine assembly & start diesel engine assembly. They still smartly went to Fiat to manufacture engines for them but it cannot happen overnight.

So in my view, the debate is like asking "Why are good films not being released inspite of the directors knowing what films succeed in India"

Last edited by urajkumar : 6th June 2012 at 18:44.
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Old 6th June 2012, 18:48   #13
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Default Re: Waiting period for newly launched cars- WHY?

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Originally Posted by noopster View Post
I could probably understand it in the case of an extremely chartbusting performer but this is turning out to be the norm these days: Vento, Fortuner, XUV5OO, Swift, Dzire, Ertiga---all of them face the same problem of badly mismanaged demand management. It is really unbelievable

Baring the Vento, all others are the undisputed leaders of their segments. There is nt any real competition to take advantage of these companies lack of supply.

The swift sells almost double than the nearest competitor. Ditto with the dezire. The etios Liva combination has nt managed to dent the swift dzire combo, despite looking good on paper and having the 'T' badge. The day we have a real swift beater to take advantage of the supply backlog in Maruti stable, they ll learn a lesson.
The I10 and the Brio if they launch competent diesel engines may just end up doing so. Despite being Petrol only, they notch up pretty decent figures, infact I10 may be selling more than the Swift P.
The same can be said about The Jazz. At current price levels it defenitely is a steal. The only reason they still sell lower than potential is supply issues and Honda not being really interested in selling the Jazz at those prices.

Bring an I10 diesel a Jazz diesel and a city diesel into picture we ll see how the famed waiting queues of some of the other products may just shrink.

Similarly the case with Ertiga, XUV 500 and Fortuner. Ertiga has absolutely no competition in its segment. Aria despite being a good product is percieved to be a tad expensive when XUV 500 is considered to be well priced. Fortuner again is pretty well perched in its segment without any others providing much competition. You need competitive products to take advantage of any chinks in the competitors armour, and you ll see how things start going from bad to better.
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Old 6th June 2012, 18:50   #14
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Default Re: Waiting period for newly launched cars- WHY?

Quote:
Originally Posted by srishiva
Herd mentality, mostly was used by a certain Italian car fans to describe others.
You are right, but I intentionally did not reference them to avoid the discussion sliding into pointless bickering. If no one flocks to those cars inspite of them being equally good, there would be valid reasons for the customer-decision. So to say that anyone not buying those cars is influenced by herd-mentality is ludicrous to say the least.

Quote:
Originally Posted by noopster
I could probably understand it in the case of an extremely chartbusting performer but this is turning out to be the norm these days: Vento, Fortuner, XUV5OO, Swift, Dzire, Ertiga---all of them face the same problem of badly mismanaged demand management. It is really unbelievable
Indeed, this is kinda becoming the norm and something that is very frustrating. A colleague is waiting for his Scorpio for more than a month now - we would think all the demand is for XUV and so Scorp should be easy, but No. Another colleague waited 5 months for a Swift-ZDi, got frustrated and cancelled the booking and booked a Jazz - again a month or so of waiting for the Jazz. And the most ridiculous is the waiting for the Swift/Dzire - cars that have been around for 5-6 years now and if they still could not make corrections to address this demand, there is either something wrong or fishy.

Quote:
Originally Posted by greenhorn
A delayed sale is still better than a lost one.
Maybe, but for the thousands clinging onto their bookings, they are also loosing customers. Eg. our Chennai office with 300 employees of which maybe 100 own cars and of these we have around 5 Puntos and 3 Lineas. Compared to the few hundred that Fiat sells every month, this ratio is astounding and these guys are no hard-core Fiat fans. Infact except for 1 guy who owned a Palio earlier, the rest are all 1st time car buyers who have no idea about the Fiat brand. And it all started from a guy who had booked a Swift, got irritated with the delay in delivery and switched to a Punto90 hp. He takes the credit for converting the other buyers to Fiat. So, yes there would be lost sales.

Quote:
Originally Posted by esteem_lover
Honda is way too snobby to be a competition for Maruti anyway.
They might be snobby, but that hasn't stopped them from attacking MSIL where it will hurt it most - the hatch segment, with the Brio which seems to be a good product & decently priced. And if they roll out the diesel avataor Brio (and Jazz/City), MSIL would surely be hurt. Both are Jap cars and people associate reliability with them and the snobbiness that most Indians associate with Honda would help them for sure.
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Old 6th June 2012, 18:57   #15
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Default Re: Waiting period for newly launched cars- WHY?

I agree that production is usually not ramped up till a number of bookings are received. For every Ertiga/ Swift success story, Maruti has seen an Estilo dampener (relatively).

I also suspect that at the dealer end, some of the bookings for popular colours (silver/ white) are reassigned to different people. The pessimist in me would point to 'premium' payments, but it can also be attributed to other factors such as overall business relationship with the dealer, business case history, etc.

For some of the rarer colours, say a blue or a brown a delay of a few weeks is expected but not sure why things run into months. Perhaps everyone takes their own sweet time in forwarding the booking details to the next in line.

Also, I dont think it should be a problem of parts acquisition as supply chain management is quite strong. Especially with multiple vendors being used. Perhaps the quality factor and some strikes can be apportioned some blame too.

Overall quite an intriguing story. Someone somewhere will have to take responsibility. Which they will only do once the sales numbers start dipping. What they dont realise is the opportunity loss. Despite booming sales, they are still losing customers to competition.
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