Company Description: J.D.
Power and Associates is a US based global marketing information services firm founded
in 1968 by James David Power III. The firm conducts surveys of customer
satisfaction, product quality, and buyer behavior for industries ranging from
cars to marketing and advertising firms. The firm is best known for its
customer satisfaction research on new-car quality and long-term dependability.
Its service offerings include industry-wide syndicated studies, proprietary
research, consulting, training, and automotive forecasting.
JD Power has been offering its
automotive consultancy services for more than a decade. How do you see your
ratings evolving vis-à-vis buying patterns in India?
GK: We started in India
with the syndicated strategy system. As an organisation, we actually invested
in our own research unlike our peers. We conduct research on behalf of our
customers and independently determine the benchmark performance for the
automobile industry. Those reports actually become a health check for the
industry. Most of our customers purchase our syndicated market reports. Today,
apart from doing a syndicated research we are actively involved with our
clients to work on improving their products’ quality as well services offered
to their customers. We also help them in enhancing the quality of the dealer
networks by proving them a health card. So we actually work with these
manufacturers to redevelop their service processes which are aligned with the
customer’s expectations.
MA: Adding to what Mr.
Kuyntjes has said, a car bought 10 years back, in terms of feature and
performance content, was very much bare bones. The distribution network of the
carmakers was not that dense at that point of time. But now, OEMs are looking
at providing not only content-rich cars but are also improving the quality of
their products and services. They are basically providing the right experience
at the dealer’s end. I think from that perspective, our offerings have also
changed dramatically over the last two years. We are looking at identifying the
gaps of the carmakers and filling it. As
the market evolves, we are now providing very sophisticated marketing solutions
which cater to car buyers with different tastes and aspirations across
different geographies.
Is India a promising market?
GK: The investments in the infrastructure sector
are already pouring in. The automotive industry is capital intensive and the
investment plans by all the global OEMs are fairly on track. These global
automakers have already understood where India is going to be in the next
decade.
MA: Yes, India is a
very promising market. Above all, we are
looking at a base of first-time buyers. Right now, 50-55pc of the customers in
India are first-time buyers. Going forward, we are going to see a larger
proportion of buyers making a first-time purchase. As a result, you will have a
bigger base of customers to service. While this is good news on one side, it
also brings its own set of challenges on the other side. Generally speaking,
India is heading into the right direction where you are looking at increased
number of vehicle sales. But whether it will hit 9.3 million units or 9.9
million units, it is very difficult to predict.
However, India will figure among the top three markets in the world in
the next decade.
Do you think global OEMs will
leverage India as an export hub to emerging markets?
MA: I think the
primary driver will be the domestic market rather than an export base for
supplies internationally. Unfortunately, India is not like Thailand where any
company can establish a manufacturing base to cater to global markets. From the
policy perspective, India clearly needs to incentivise manufacturers. Although some companies like Hyundai, Maruti,
Nissan, etc have done so to a limited
extent in the past, some sort of encouragement needs to be provided by the
government in actively wooing global companies to come to India and set up a
base for global supply. Furthermore, India offers a great opportunity for the
suppliers which has to be capitalised. India has done better when it comes to
setting up an R&D base.
You have maintained that China has
robust growth as opposed to India because it is not market driven. Can you
please elaborate?
MA: We are trying to
illustrate the fact that in India, a large percentage of sales is driven by an
individual enterprise. It is more from the domestic growth perspective that is
attracting these companies to set up a base here. In China, it is the other way
round where the government is actually incentivising the global automakers to
set up a footprint there. It is more from
their policy perspective where the government said it needs to bring in better
technology in the market and declare auto industry as one of the core sectors
of the economy.
GK: The scenario is
different in China where there is a maximum amount of FDI flowing in. The
volumes have reached a significant threshold. The OEMs have tied up with
domestic firms there.
The Indian government is
aggressively planning to price diesel at par with petrol prices. So what impact
will it have on people’s sentiments?
MA: I still think
there will be some amount of difference between the average retail price of
diesel and petrol. In terms of fuel efficiency and low-end torque performance,
diesel-driven cars definitely have an edge. Earlier, the consumers still think
that such cars are high on maintenance vis-à-vis petrol-driven ones. But these
perceptions have changed over time as some of the gaps have been bridged. As the disparity between petrol and diesel
prices reduces, consumers are going to have a greater propensity toward petrol
version of an existing model. But it is very difficult to forecast whether
there will be a radical shift to petrol or diesel run cars. This is because
consumers tend to be a bit more irrational in the purchase decision. A person who is driving 12,000km/year doesn’t
need to shift to a higher-priced diesel version as it doesn’t pay off before
three years.
Talking about a specific company,
don’t you think Tata Motors needs to come out with some revival strategies to
arrest the sagging sales of its passenger vehicles?
MA: At this point of
time, from a vehicle sales strategy point of view, many companies need to
relook at their portfolios. But Tata Motors is clearly a bigger case in point.
I think they are trying to look inside to improve their operational
effectiveness, product quality and distribution efficiency and the overall
experience that is provided to its customers. But I think some of these
initiatives have come a bit late in the day. I can say that the brand name
‘Tata’ enjoys a huge amount of thrust and is very formidable. Tata enjoys a
huge amount of trust among the average Indian population. Everything is not
lost for them as there is clearly some opportunity for them to turn around. A
strong product lineup, a dramatic improvement in product quality, and a massive
improvement in the network performance in terms of morale, effectiveness, etc
are the areas they need to focus on. Let see how it goes.
Considering the fact that an
ultra-cheap car like Nano has not done too well, do you still think that brands
like ‘Datsun’ will be a proven success?
MA: First of all, I
would like to state that Nano is still a ‘Tata’ brand. It is one of the
products under the Tata stable. With the ‘Datsun’, it is an arrival of a new
brand coming in. It is an old brand (in overseas countries) which will now be
revived in emerging countries like India. From that perspective, the dual-brand
strategy has not really worked in India because the market is not matured
enough. While a brand continues to be a very strong reason to purchase, its positioning
is not very clear in the minds of the customer. With the Nissan, what I can say
is that its brand positioning is itself not very clear. It is very early days
for them. It’s a fairly large country and it takes a lot of time for the people
to really associate with the brand. So
from that perspective, it is too early for Datsun. But again, the automobile market is all about
experimentation and trying out new things. Maybe we can create a case study out
of that. Looking at the marketplace at
this point of time, it is definitely going to be a challenge for them.
Do you think multi-branded service
outfits can find favour in India?
MA: For an average
Indian customer, a greater choice is always good. But at the same time you need
to understand that such outfits should be able to provide you the right options
with the right kind of an experience. For that such outfits need to have a
regular traffic in order to be commercially viable. Moreover, dealers of
existing car brands are also looking at ways to hedge their risks by focusing
on other brands. That appears to be a
stronger strategy.
Besides compact SUVs, which are the
other segments that will witness unprecedented growth?
MA: If the market
moves in the direction that we are expecting, then I think there will be growth
across all the segments. But clearly, people movers or compact MPV segments
like the Ertiga or lifestyle products like compact SUVs will see increased
traction. Luxury cars are also seeing a lot of traction with the rising
disposable income of the consumers and positive GDP growth.
With the recent announcement of
National Electric Mobility Mission Plan 2020 by the Indian government, do you
think electric mobility in this country will get a fillip?
MA: Governments around
the world are focusing on electric mobility. I think countries in Asia Pacific
like Singapore and China, and also countries like Israel, United States, Japan,
etc have some kind of an electric vehicle policy. At this point of time, we have
not really seen actions to support the policy directions or the policy vision.
As it’s a recently announced electric vehicle policy by the government, it’s
too early to comment about it. The
question is that do we really have that infrastructure support and are we
shifting the source of pollution from the road to the factories (run on
coal). The hybrid vehicles would
definitely be a good alternative at this point of time as it reduces the carbon
footprint. But again, the affordability question comes into play.
In the next few years how do you see
the Indian automotive market progressing?
MA: India is currently
the sixth or the seventh largest market in the world. But you will clearly see
a movement up north. The single reason that will drive the growth is that the
current penetration levels are pretty low from an international perspective.
With the improving GDP and per capita income, we find a clear correlation to
increasing penetration of car ownership per 1,000 people (presently 10). So
there is a latent demand.
The biggest
challenge is that it is not that you can realise the demand by any product that
you bring out and hope that you will be successful just because you were doing
good (with the same product) in China, Europe, United States or Japan for that
matter. That may not be a recipe for
success. That is the biggest challenge. So it calls for resources, logistics,
gestation periods, investment, etc. So the business cases for many OEMs have
not worked here because they have not garnered adequate volumes. A carmaker
clearly needs to understand local market requirements and the finer nuances of
the country. An increasing amount of focus is also on regional nuances and
building that into your product portfolio, performance and quality requirements.
A customer is also looking at a network which is responsive and is in tune with
global standards.