Automotive September 2017

Identifying new growth frontiers in Indian passenger vehicle market through digitization

Building a case to develop an online platform leveraging used-car sales data to penetrate tier-three cities in India

Identifying new growth frontiers in Indian  passenger vehicle market through digitization

Identifying new growth frontiers in Indian passenger vehicle market through digitization

India may be the third-largest passenger vehicle market by 2020, clocking 5 million units in annual sales. A strong demand, growing market and a thriving supplier ecosystem have attracted several players in the Indian passenger market in the last 8 years, the most recent being Jeep and Kia Motors.

Increased competition is healthy as it fosters innovation, productivity and growth however such is the case only when the competitors are balanced.This is not the case with the Indian car industry, which is dominated by Maruti Suzuki (MSIL: 47 percent) and Hyundai (17 percent) that control 64 percent of the market leaving only one-third for remaining players. Such a lop-sided distribution puts other players and entrants at significant disadvantage as these OEMs cannot match the specialized assets such dealer network, spare part availability and brand created by MSIL and Hyundai. While recent entrants have tried to establish new growth frontiers through efforts in tier-3 cities, none have been majorly successful. Arthur D. Little explores the market penetration in tier-3 city through a unique strategic lever: digitization. We recommend creating an online platform integrated with OEMs' new car business and dealers/OEMs used-car business.This would call for a different engagement strategy with tier 3 consumers that demand a personalized touch and interaction, opening avenues for differential pricing and personalized service packages.

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