Project Report

On

Introduction Of US as a Market for Automobile

The year 2010 saw sales level above 16 Million in the ninth straight year. The domestic Automakers continued to restructure their North American operations in order to meet challenges such as U.S. market share loss to foreign competitors, and high legacy and commodity costs. During the fall of 2009, labor negotiations were held between each of the Detroit 3 and the UAW. The resulting landmark contracts, which will reduce the Detroit 3s workforce, wages, and healthcare costs, will improve the automakers competitiveness and save the companies approximately $1,000 per vehicle.

In 2010, U.S. light vehicle sales totaled 16.1 million units, up 2.4 percent, Sales of passenger cars also increased 2.6 percent in 2010. According to the Department of Commerces Bureau of Economic Analysis (BEA), consumer expenditures on new vehicles have been in flux over the past several years. Expenditures on new cars increased 3.8 percent to $120.0 billion during 2010

Many economic indicators predicted for 2011 are mixed, as they were in 2010. Income is up, but so are debt levels. The average interest rate for new car loans in 2010 was slightly lower, mainly due to rates falling during the second half of the year. Disposable personal income (DPI) was up 5.8 percent to $10.2 billion in 2010. Per capita DPI reached $33,712 in 2010, up 4.8 percent in current dollars, and up 2.2 percent in constant dollars.3 The national unemployment rate ended the year at 5 percent, higher than the years average rate of 4.6 percent, and higher than December 2009s rate of 4.4 percent. The last peak rate was 6.3 percent in June 2003. Data from the Federal Reserve Board shows that total consumer non-revolving debt, which includes automotive loans, was projected to reach $1.58 billion dollars in 2007, up 4.2 percent from 2009s level of $1.52 billion.4 Interest rates on consumer motor vehicle loans at auto finance companies decreased last year, and were projected to average 4.54 percent for the year. For the fourth quarter of 2010, they were projected to average 4.07 percent, down from fourth quarter 2006s level of 5.62 percent.

Consumers are taking longer-term loans to finance their vehicles, with many new vehicle loans being provided for five years or more. According to Bureau of Economic Analysis data, personal outlays for all non-mortgage interest payments continue to rise, reaching $262 billion for 2010, up significantly from $238 billion in 2009.

Participants at the November 2009 Federal Reserve Bank of Chicagos Economic Outlook Symposium projected economic growth in 2010 to be restrained by a weak housing sector, with GDP forecast to grow by 2.5 percent. Both short-term and long-term interest rates are expected to increase by 17 basis points and 30 basis points respectively, and oil prices are expected to decrease slightly, but remain above $82 a barrel by the end of the year.5 Consumers confidence of current-day conditions was slightly down in January 2010, and consumers outlook for the next six months also was more pessimistic compared with December 2011.

Hybrid Cars- a revolution in the car industry Hybrid cars are one of the excellent fruits of the hard work done in the car industry. These cars utilize more than two distinct power sources. Some of the major power sources include gasoline, or diesel fuels, solar, and hydrogen. This primary power source is coupled with one, or more electric motors.

World is facing a lot of many problems due to the increased population. There is a rapid increase in the number of vehicles along the roads. This has given rise to the pollution, and problems related to the increased fuel prices. This problem is addressed by the hybrid cars.

These cars are a revolution in the car industry due to their marvelous features. These cars are environment friendly. They contribute least to the increase in the air pollution. Air pollution is

one of the major problems of the present day. Hybrid cars reduce the smog by 90 percent. Thus, the release of the pollutant is greatly reduced.

Hybrid cars are economical with respect to the fuel. World is running out of the natural fuel resources. So the need of the fuel economical vehicles is greatly increased. They are fuel efficient as compare to the traditional cars. They can get up to 60 miles per gallon in the city driving as compare to the typical cars that might travel 15 to 20 miles per gallon. These cars use three times as much fuel for travelling the same distance. The hybrid cars are better than others as a hybrid car battery recharges it as you drive. You do dont need to plug in. Moreover, they possess a greater speed as compare to the typical cars.

Hybrid cars possess two engines. One is the electric motor, and the other is the gasoline. When the car stops at the signals, the gasoline engine is automatically shut off and the electric motor is switched on. When more power is required, both engines work simultaneously.

Hybrid cars are based on power split technology. It is based on the gearbox. The electric motor along with the internal combustion engine provides additional power to assist the engine in accelerating, passing, or climbing. In some of the drives, where less power is required, the motor provides the only power source. Thus, the consumption of gasoline is reduced in such cases. Hybrid cars possess an efficient regenerative braking system. When the brakes are applied, the energy is dissipated. This energy turns on the motor, which functions as the generator. Thus, the otherwise wasted energy is converted into electricity. This energy is stored in the battery, and is available for the electric motor.

Hybrid cars have firm and puffed up tires. They are filled at a higher pressure to smoothen the ride. So due to the texture, they offer a less bumpy, and comfortable ride. The texture of the tires reduce the friction, thus the life of the tire is increased. The other marvelous feature of the car is reduced air drag. For this purpose, these cars utilise the reduced frontal area, and sometimes a stream lined texture. Thus, all the above- mentioned features rank their invention a revolutionary step in the vehicle industry.

Development of Hybrid Cars in US Hybrid system is an answer to the environmental problems of the 21st century. It achieves fuel economy that is twice that of conventional cars of the same class, emitting half as CO2.

Recognizing consumer demand for better fuel economy and reduced emissions, both Toyota and Honda have introduced hybrid vehicles to the American market. Toyota introduced the Prius to the U.S. in 2000. Honda began selling the hybrid two-seater Insight in the U.S. in 1999. U.S. Sales in the hybrid vehicle industry have increased over 570 percent since model year 2000 till the year 2010. Today, hybrid vehicles hold a 3% market share in the U.S.

Market share of various companies in Hybrid cars

General Motor 2% Daimler Chrystler 1 % Honda Insight 3 % Honda Civic Hybrid 55 % Toyota 39 %

What the several Competitors are doing in the Hybrid car arena?

General Motors-

General Motors plans to release 1 Hybrid car every 3 months. GM unveiled its first plug-in hybrid vehicle, the Chevrolet Volt, which is powered by lithium-ion batteries. Designed to run on the

batteries for 40 miles, the vehicle can handle approximately two-thirds of daily commutes for American drivers on battery power alone. GM also announced that it plans to invest 300 Million dollars in the Hybrid cars section

Ford Motors-

Ford is investing heavily in developing various types of hybrid One of them is the new TDV7 (the seventh in a series of Technology Demonstration Vehicles), version of the concept car introduced at the January 2009 Washington D.C. auto show. It uses a version of the power plant envisioned in the Ford Airstream concept auto unveiled at the Detroit auto show in 2008. Ford is planning to invest 200 Million Dollars in the Hybrid Cars section.

Toyota-

Toyota began its first hybrid vehicle production in North America with the Camry in late 2006 at its Toyota Motor Manufacturing Kentucky (TMMK) plant in Georgetown, Kentucky. The automaker invested an additional $10 million towards production of the hybrid option for this vehicle, and capacity currently stands at 48,000 units. Given demand, this will reportedly increase to 60,000 vehicles a year. Further advancement of hybrid technology is a top priority for Toyota.

Honda-

According to the 2010 vision of Honda one of the top priorities of Honda is to introduce Hybrid cars The Honda is planning to invest 400 Million Dollars.

The Political environment of Hybrid cars President Obama has been touting plug-in vehicles for a while now beginning, in fact, with his campaign pledge to get a million plug-in hybrids on the road by 2015 but words and a bunch of federal spending aren't enough for some people. Recently, auto industry lobbyists called for more incentives for plug-in vehicles and, today, a number of business organizations are calling on the President to "establish a new National Electric Fuel Task Force to help accelerate the adoption of plug-in electric vehicles and the necessary infrastructure."

The Energy Policy Act of 2005, had granted up to $3,400 as a tax credit for the most efficient hybrid carsand $4,000 for a compressed natural gas vehicle. The Energy Policy Act of 2005 called for a phase-out of tax credits when any specific automaker sold more than 60,000 hybrid or clean-tech vehicles. Toyota and Lexus hybrids became ineligible in September 2007. Honda lost its eligibility on Jan. 1, 2009, and Ford's expired March 31, 2010.

Therefore it is a good opportunity for Mahindra to enter the market and avail the tax benefit when others cannot avail it.

About Mahindra

Founded in 1945 as a steel trading company, Mahindra entered automotive manufacturing in 1947 to bring the iconic Willys Jeep onto Indian roads. Over the years, theyve diversified into many new businesses in order to better meet the needs of our customers. They follow a unique business model of creating empowered companies that enjoy the best of entrepreneurial independence and Group-wide synergies. This principle has led their growth into a US $11.1 billion multinational group with more than 117,000 employees in over 100 countries across the globe. Today, their operations span 17 key industries that form the foundation of every modern economy: aerospace, aftermarket, agribusiness, automotive, components, consulting services, defense, energy, farm equipment, finance and insurance, industrial equipment, information technology, leisure and hospitality, logistics, real estate, retail, and two wheelers.

Employees across the Group constantly challenge conventional thinking to create solutions that make a significant difference in the lives of their customers. Thats why everything they build be it a tractor, financial service, solar-powered lamp, or softwareis designed to empower the customers to reach their potential.

Internally, they follow three basic tenetsaccepting no limits, thinking alternatively, and driving positive change in everything we do. These brand pillars guide all our actions and business decisions from deciding whether or not to enter a new field or planning a portfolio of services.

Mahindra and an independent India began their rise together. In 1945, two enterprising brothers named J.C. Mahindra and K.C. Mahindra joined forces with Ghulam Mohammed and started Mahindra & Mohammed as a steel company in Mumbai. Two years later, India won its independence, Ghulam Mohammed left the company to become Pakistans first finance minister, and the Mahindra brothers ignited the company's enduring growth with their decision to manufacture Willys jeeps in Mumbai. The companys new name then became Mahindra & Mahindra, of course.

The Mahindra brothers believed that new modes of transportation could be a key to Indias prosperity, so one of their first goals was to build rugged, simple vehicles capable of tackling the Indian terrain. Early pioneers of globalization, the brothers collaborated with a wide range of international companies and before long, Mahindras reach extended to steel, tractors, telecom, and more.

Its been quite an adventure so far, and theyre proud of their global leadership in utility vehicles, tractors, and information technology, as well as their significant presence in financial services, leisure and hospitality, engineering, trade, and logistics. As they accelerate into the 21st century, theyll continue to pursue innovative ideas that enable people to rise. Theyve come a long way, but the journey has just begun.

The products and services support their customers ambitions to improve their living standards; their responsible business practices positively engage the communities they join through employment, education, and outreach; and our commitment to sustainable business is bringing green technology and awareness into the mainstream through their products, services, and lightfootprint manufacturing processes.

This commitment to sustainabilitysocial, economic, and environmentalrests upon a set of core values. They are an amalgamation of what we have been, what we are, and what we want to be. These values are the compass that guides their actions, both personal and corporate. They are:

1. Good corporate citizenship 2. Professionalism 3. Customer first 4. Quality focus 5. Dignity of the individual 6. Thinking global is part of our identity

They operate in the following regions: North America From tractors to airplanes, automobiles to IT consulting, we support key American industries and bring better products and services to thousands of Americans every year. South America They provide South American consumers with important products and services in transportation, defense, energy, and farm equipment. Europe Their farm equipment, agribusiness, automotive products and services, and consulting services are supporting prosperity in Europe.

Middle East and Africa Their energy, farm equipment, steel, and aerospace businesses are helping catalyze growth in emerging markets in the Middle East and Africa. Asia Their activities in Asia span almost the entire range of our business activities. Australian They build aircraft, supply rugged SUVs, and provide trustworthy tractors in the Australian market.

Mahindra Automotive: In 1947, they introduced India to the utility vehicle. More than 65 years later, they're still India's premier utility vehicle (UV) company, but they've also grown quite a bit. In addition to making groundbreaking UVs like the Scorpio and Bolero, Mahindra offers cars, pickups, and commercial vehicles that are rugged, reliable, environmentally friendly, and fuel-efficient. Their global presence means you can find Mahindra vehicles on the roadsboth paved and unpaved of Australia, Europe, Latin America, Malaysia, and South Africa. And are seeking out new terrains every day.

US government rules for hybrid cars

When it comes to using car pool lanes, only the most fuel-efficient hybrids need apply, the US government said Thursday.

The Environmental Protection Agency proposed new criteria for certifying vehicles as clean and energy efficient for states that let hybrid drivers use the special lanes for avoiding rush-hour traffic.

Hybrid vehicles would need to achieve 25 percent higher combined fuel efficiency compared to similar gasoline-fueled vehicles to qualify for high occupancy vehicle lanes, or HOV lanes.

Only four manufacturers - Toyota Motor Corp., Honda Motor Co., Ford Motor Co. and Mazda Motor Corp. - produce vehicles that would qualify. A limited number of natural gas vehicles built by Honda and Ford would also meet the standards. The qualifying vehicles include: 2004-07 Toyota Prius, 2006-07 Toyota Highlander Hybrid, 2006-07 Lexus RX400h, 2006 Mazda Tribute Hybrid, 2005-07 Ford Escape Hybrid, 2006-07 Mercury Mariner Hybrid, 2003-07 Honda Civic Hybrid, 2003-06 Honda Insight and 2005 and 2007 models of the Honda Accord Hybrid. Natural gas versions of the 2003-05 Honda Civic and 2003-2004 Ford Crown Victoria would also apply.

The proposal seeks to balance the government's interest in promoting the fuel-efficient vehicles with concerns that an influx of hybrids could clog up car pool lanes in congested cities.

Most states require HOV (high occupancy vehicles) lanes to carry two or more occupants, but the federal highway bill signed in 2005 allowed an exemption for fuel efficient vehicles carrying only the driver.

States that allow solo hybrid drivers in car pool lanes include Arizona, California, Florida, Utah and Virginia.

Lawmakers in Georgia and Colorado have approved similar plans, and the vehicles can also be used in HOV lanes on a Long Island, New York highway.

The EPA (environmental protection agency) measure allows states to choose stricter rules. California, which has an estimated 140,000 hybrid registrations, requires the vehicles to get 45 mpg (miles per gallon) to use HOV lanes.

Hybrids could also qualify as energy-efficient by achieving 50 percent or better in-city fuel economy. Dedicated alternative fuel vehicles could also qualify to use the lanes.

To be considered low-emission, the EPA said the vehicles would need to meet federal and California emissions standards.

Scott Stapf, executive director of the Hybrid Owners of America, said 37 states have the hybrid HOV provisions or are studying the concept.

U.S. Secretary of Energy Steven Chu announced on December 16th that the Department of Energy will start accepting applications up to $184 million to accelerate the development and deployment of new efficient vehicle technologies. Projects will span the broad spectrum of

technology approaches, including advanced materials, combustion research, hybrid electric systems, fleet efficiency, and fuels technology. Ultimately, the projects will reduce U.S. dependence on foreign oil, save drivers money, and limit carbon air pollution.

The U.S. remains the largest vehicle market in the world, according to market analyses by energy research firm SBI Energy. Of the 204 million personal vehicles, the average U.S. household owns 1.9 vehicles, which is slightly more than the average number of drivers per household. Most personal vehicles rely on the internal combustion engine and burn gasoline fuel at an average rate of one gallon every 20 miles. Compare that to hybrid electric vehicles (HEV) fuel consumption and its a completely different picture. SBI Energy estimates that HEVs consume an estimated 6.3 million gallons (in gasoline equivalents) compared to 198 million gallons of compressed natural gas and 138 million gallons of liquefied petroleum gasoline. By 2014, SBI Energy expects electric fuel consumption in the U.S. to grow to nearly 9 million gallons.

According to the SBI Energy report, Electric Vehicle (EV) and Plug-In Hybrid Electric Vehicle (PHEV) Markets Worldwide , in the six years between 2004 and 2009, the number of HEV available models around the world has tripled to 29 and the number of brands producing hybrids has jumped from six to fourteen. In fact, almost a third of the hybrids being offered in the U.S. have 2010 as their first model year.

Global sales of hybrid electric vehicles rose 33% in 2009 with 700,000 vehicles sold in an unfavorable climate that saw the overall auto market plunge worldwide. SBI Energy calculates that sales of hybrids accounted for 99% of all electric vehicle sales in 2009 worldwide. The DOE (department of energy) awards will help ensure America leads the world in the development of advanced vehicle technologies that support cost-competitive, convenient, and comfortable fuel-efficient vehicles, said Secretary Chu in the DOE press release. Investments in the next generation of vehicle technologies are laying the groundwork for a sustainable

transportation sector in America that strengthens our economy and improves our economic competitiveness.

According to SBI Energy, future growth of the electric vehicle market on a global scale will depend on three key motivators:

1. Government incentives to consumers to purchase fuel efficient vehicles; 2. Any increase in the price of crude oil and gas prices at the pumps; and 3. A reduction in the price differential between hybrids and non-hybrids.

SBI Energy's first

EV

market

study

entitled, Electric

Vehicle

(EV)

Infrastructure

Manufacturing projects North America will hold 20% of the electric vehicle infrastructure manufacturing market by 2014, driven by government incentive programs and the movement toward eco-friendly consumer lifestyles, says Shelley Carr, publisher for SBI Energy. While government capital is vital, growth also depends heavily on the investment interests of the private sector and the adoption of electric vehicles and plug-in hybrid electric vehicles by consumers.

Why should Mahindra start Manufacturing in USA?

In increasing numbers, foreign companies are choosing the United States as the location for their production facilities, partly in response to the more competitive value of the dollar versus foreign currencies. The United States has one of the most favorable and least restrictive investment climates in the world. While the Detroit-3 (GM, Ford and Chrysler) share of U.S. production has declined, more foreign automotive direct investment has increased light vehicle production.

Moreover, since the Korean manufacturer Hyundai began production in 2005, it has also experienced successive increases in production.

And steadily United States is attracting Investments from German, Japanese and Korean auto manufacturers and are increasingly relying on their U.S manufacturing facilities to supply the U.S. market. The result has been a substitution of local production for imports. A dramatic example of this is Hyundai. After increasing by 17 percent in 2003 and 26 percent in 2004, the value of imports from Korea fell by almost 13 percent in 2005 and 1 percent in 2006 as a result of a new Hyundai manufacturing facility in the United States. U.S. consumers are increasing their purchases of import brands that are made in the United States.

Globalization and foreign competition continue to impact the U.S. economy, particularly the automotive industry. With a weak dollar, increased U.S. exports, and decreased U.S. imports, the U.S. automotive trade deficit decreased 11 percent last year to $97.5 billion. Auto parts sourcing, engineering decisions, plant operations, and quality will be increasingly based on globalization and global benchmarks. In addition to the unknown factors mentioned above, international trade patterns and the industry will also inevitably be influenced by foreign currency values, new investments in the United States and abroad, service and delivery costs, and the demand in individual markets and product segments.

India and the US have multi faceted relations in the field of politics, economics and commerce. India-US economic relations in the form of bilateral investments and trade constitute important elements in India-US bilateral relations particularly because India is now the second fastest growing economy in the world and USA is the world's largest economy.

Another Excellent opportunity by having production plant is export in other North American countries

Implementation of the NAFTA has had a tremendous impact on automotive trade in North America. Shipments of new passenger vehicles and light trucks between the United States and its two partners have grown tremendously. In 2010, cross-border trade hit a new record high, reaching $88.4 billion. U.S. exports also have more than doubled. Most trade in automotive products between Canada and the United States was liberalized by two bilateral agreements enacted well before the NAFTA agreement was implemented. Therefore, little of the growth in trade between the two countries can be attributed directly to the NAFTA agreement. Bilateral trade with Canada in these products, $32.1 billion in 1993, reached $64.1 billion in 2007. U.S. exports have increased by 152 percent to $20 billion, while imports from Canada grew 82 percent above 1993's total to $44.1 billion.

However, the growth in U.S. exports can be directly credited to the agreement, since there were significant changes in market access for goods heading to Mexico, with the removal of Mexican restrictions that constrained U.S. shippers. For example, a Mexican requirement that producers assemble vehicles in Mexico and export a certain percentage of them in order to import vehicles into Mexico was immediately phased out for commercial vehicles and reduced for passenger vehicles. On January 1, 2004, the remaining restrictions were entirely eliminated. Strict quotas, high tariffs, and minuscule import market share allocations that applied to motor vehicle imports from the United States have been eliminated.

Mahindras Entry into US Hybrid Cars Market:

Chrysler LLC is also cooperating with Mercedes and BMW to speed up deployment of hybrid technology. The Hybrid Development Center opened in Troy, Michigan in 2006, after a $300 million investment by the automakers. The center now employs more than 500 engineers technicians and specialists, including more than 150 engineers from Europe. The center is focusing on development of a two-mode, dual hybrid system.

Mahindra can partner with Hybrid Development Center in collaboration with Mercedes and BMW with Chrysler as a partner. The other brands wouldnt have a problem as Mahindra would be targeting a segment in which there is no competition at present that is Mid-size Hatchback (96101 cu ft).

Such a tie up will help Mahindra develop cars with superior technology and also how to be economical in doing so.

What should be the marketing strategy of Mahindra and Mahindra? Mahindra should show their concept car in the Detroit Auto Expo so that people become a little eager to know more about the car and the company also gets some publicity.

Mahindras initial marketing strategy for the Hybrid cars should target innovators and early adopters of new technologies. The Mahindras campaign should focus on highlighting commitment to creating environmentally responsible vehicles and on using online space to engage technophiles early on in the production process.

Mahindra should enable interested customers to visit a special website about Hybrid development about 1 year before launching the product so that it creates a buzz around in the market. Mahindra should use focus groups with target consumers to evaluate different aspects of the Hybrid cars. It has been found that the consumers valued high technology, affordable price, clean operation, comfort, quality, convenient design, and safety. . Mahindras television and print ads should underscore the aspects of hybrid technology and freedom from dependence on oil. They should create online e-brochures with a video clip that should be sent to people about their new hybrid car Astute.

Mahindra should target targeting the early majority of consumers who tend to demand reliable, affordable and hi tech products.

In order to promote the benefits of Astute, Mahindra can visit a number of schools with youth oriented presentations and materials. Youth will have a chance to learn about the vehicle, compete for prizes, and participate in vehicle demonstrations. The vehicle Astute can also be featured in several local energy conservation awareness events.

Why Should Mahindra launch/target US as a market?

1. Nuclear families: The culture there is of nuclear families so Mahindra Astute will have a

lot of growth opportunities in the US. 2. Budget: The car will lower down the budget of people on fuel, it will be much more healthier for their pockets.

3. Like to travel in their own personal cars: People there like to travel in the own cars and

they also travel frequently to distant places so Astute can be a good substitute instead of the fuel guzzling cars.
4. No competitor in the target segment: In US the segment Mahindra Astute is targeting does

not have any competitors at present.

5. Largest market for hybrid Cars: US at present is the largest market for hybrid cars in the

whole world.
6. Technological advancements and more growth opportunities: As Mahindra will be

working with BMW, Mercedes in the Hybrid Development Centre; it will have access to better technology. 7. There are other segments in the US market where hybrid cars are not present so Mahindra can capitalize on those segments too.
8. Almost a third of companies into hybrid cars in the US have just commenced their

business in 2010.

Regions in the US where Mahindra would launch Astute

The fleet of hybrid electric vehicles in the United States is the largest in the world and since their inception in 1999, a total of 1.9 million hybrid electric automobiles and SUVs have been sold until December 2010.

California has been the state leading hybrid sales in the U.S. with 55,553 vehicles sold in 2009, 74,932 in 2008, and 91,417 in 2007. In 2009 it was followed by New York (15,438) and Florida (14,949).

In terms of new hybrids sold per capita, the District of Columbia was the leader in 2009 with 3.79 hybrids per 1000 residents, followed by California (1.54) and Washington (1.53).

The top 5 U. S. metropolitan area markets for sales of hybrid electric vehicles in 2009 were Los Angeles (26,677), New and Chicago (8,990). York (21,193), San Francisco (15,799), Washington, D.C. (11,595),

Hence according to above data, Mahindra would launch Astute in California, New York and Florida.