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Submitted by:
Group 8 (Section-A):
Honey Chawla (2018SMF6623)
Ankush Bagley (2018SMF6628)
Vibhishek Chandar (2018SMT6631)
Gaurav Maheshwari (2018SMF6606)
1
Executive Summary
BMW is the second market leader in the luxury car segment in India after Mercedes Benz. BMW
sales stood at 10,405 units in 2018 and clocking 11% growth as compared to sales of 2017. BMW
sales are driven mainly by the BMW 5 series, BMW 6 series Gran Turismo and BMW Sports Activity
Vehicle (SAVs) range. Currently, they have a localisation level of around 50% for its product portfolio
which showcase the company’s competitive pricing strategy. Through this marketing research, we
try to develop a future strategy for BMW India to enable strong hold and sustainable competitive
growth in the Indian Market to become the market leader. The paper explains various secondary and
primary research methodologies being adopted. The secondary research helps in understanding the
current Automobile market trends and the dynamic nature of the industry due to various emerging
mobility scenarios. Further, the landscape and whitespace analysis in the market help in identifying
the gaps where BMW can utilize to further strengthen the foothold in India.
Further, the paper comes up with factors that are broadly categorized into cultural, technological,
social, economic, and political factors to understand the factors influencing Key buying behaviour
(brand appeal, status and image, price, service/support, luxury features, size, space, resale,
reliability, broad choice of models etc.) for potential premium segment customers. Based on the
above factors, a questionaire is formulated. The research design involves judgmental sampling and
the target audience chosen are the owners of luxury cars such as BMW, Mercedes Benz, Audi, Volvo,
Jaguar and Porsche etc. For understanding the various factors, the factor analysis is being done
using statistical tools and customer reviews are also taken to know about the current standing of
BMW in the minds of the customers and how likely the customers are to choose BMW as their next
car. And we found out that among Cultural factors - the Brand image, among Technological factors –
Driving comfort, style & design, among Social factors- Life style, among Economic factors-
Maintenance/After Sales Service, and among Political factors- Safety factors were perceived by the
customers as the most influential factors affecting their purchase decisions. Portfolio analysis has
been done comparing the products of BMW, Mercedes, and Audi. As the result of the analysis we
came up with the finding that most volume of sales is happening in the cost range of Rs 40-70 lakh
and we recommend BMW to release more variants of the existing models within the range in the
short-run and to launch new models specific to Indian customer in this price range in the long run.
Also, after analysing the customer preferences and to build customer relationship, BMW can adopt
differentiation strategy in providing the customized features based on customer’s requirements. In
addition to make a seamless journey from digital to retail shop, the user mobile interface of the
website can have additional features such as 360-degree view of any BMW vehicle or option of
customizing such as enabler function of changing the cars’ body colour, rims and design packages. In
making a trade-off between the price and style, the customers can make their own car and can
make a lot of selection options. This will ultimately enhance the product portfolio of BMW in an
indirect manner.
Another interesting finding that the paper explains is about the dealership network taken from
doing extensive secondary research. The dealership network involves the showrooms of both
Mercedes Benz and BMW throughout the country. This analysis has been done based on the
inference from the primary research that most of the luxury car owners came to know about their
car either through word of mouth or through consulting with a dealer. This gave a perspective to
analyse the influence of dealership showrooms influencing sales. Further the analysis has been done
taken into consideration the GDP for all states and Union territories, the dealership network for both
companies are compared and the potential gaps/regions are identified wherein the BMW can
2
expand their dealership network. The Nominal GDP in INR for all States and Union Territories in India
has been collected from various state budgets, based on which States and Union Territories are
ranked and tabulated, along with it the presence of dealership showrooms of Mercedes Benz and
BMW has been collected, mapped, and tabulated to analyse the potential regions on which BMW
should establish it’s dealership showrooms to attain increased market penetration and sales.
Analysis has been done on the data collected and it has been found that Mercedes Benz has 91
dealership showrooms in India with average sales per dealership of 171 and BMW with 44
dealership showrooms in India with average sales per dealership of 236. So, based on the analysis of
potential regions where BMW can expand its dealership on comparison with Mercedes dealership
and with reference to the nominal GDP data, 20 regions has been suggested to establish new
dealership showrooms. For example, Maharashtra which has a nominal GDP of Rs 27.96 lakh crore
has 22 Mercedes dealership showrooms but only 13 BMW dealership showrooms. Apart from the
common regions in Maharashtra, Mercedes has presence in Nasik and Kolhapur which can be
understood as potential regions which the paper proposes to BMW to establish their dealership
showrooms. Based on the similar lines of analysis, Tamil Nadu which has nominal GDP of Rs 17.25
lakh crore has 8 Mercedes dealership showrooms but only 5 BMW dealership showrooms. We
propose to introduce an additional showroom in Salem where Mercedes already has its presence,
but BMW does not, or in Tiruchirappalli where Mercedes does not have its dealership, but it could
become a potential region for BMW to establish a dealership. In addition, the cost benefit analysis is
also done considering various expenses like Property & Building Cost (Land Lease), Purchase of stock
inventory, Salaries, Other Expenses (Insurance, Electricity & Administration expenses), Maintenance
Cost, Furniture Equipment cost, Marketing & Promotional Expenses, Dealership security Deposit,
interest and taxes. The NPV is calculated for Net profit/ Earnings after Tax and the dealership
becomes profitable and feasible in 5 years timeframe. Hence, the payback period is 5-6 years on an
average for any new dealership.
BMW has a less mind share among customers in India than compared to Mercedes, this is because
of the early entry of Mercedes in Indian market and Increased penetration of having 91 dealership in
the country. From our primary research we were able to understand that Word of mouth and
dealership showrooms turns out to be the most important parameters for creating brand
awareness in the minds of the cutomers which adds a choice in their purchase decisions. Adding on
dealership in potential regions increases the word of mouth feedback among potential customers
and gives Increased chance of converting through dealers.
From the primary research it can also be understood that luxury car owners considers maintenance
and after sales service as an important factor which affects their purchasing decisions. There are
60 authorized Merecedes service centers spread across 21 states and union territories in India,
whereas BMW has 29 authorized service centers spread across 18 states and union territories in
India. Increasing the service centers in potential regions will positively impact the targeted
customers in their purchase decisions. Hence, the long term expansion strategy will take into
account opening of dealership showrooms in the strategic locations considering the demogarphic
distance, cost benefit analysis and other Luxury car showrooms locations/presence.
3
Table of Contents
6. References ........................................................................................................................................ 28
7. Appendix I ......................................................................................................................................... 29
4
A CAGR growth of 7 percent shown in the domestic automobile production. During Apr-Sept 2018,
automobile production has reached to approx. 16.7 million units.
Automobile exports had grown to around 26.5 percent during Apr-July 2018. It is expecting to grow
at rate of 3 percent CAGR during 2016-2026.
Source: McKinsey
The localization levels in India has indicated that India is capable enough for having a diverse
portfolio of products. In four-wheeler segment i.e. hatchbacks, SUVs, premium sedans, 85% of
localization can be achieved. 100% localization is achieved in developing the bikes by the market
leaders.
5
Inclinations towards Premium and higher quality vehicles: As the income levels are increasing, the
people desire to buy more advanced products are increasing. So, people are upgrading from 125cc to
250cc or driving from a 2-wheeler to a 4-wheeler. The mass market vehicles are also providing the
premium features has quickened the pace of this commoditization. As is evident from the below
figure, the demand is shifting towards premium and higher capacity vehicles.
6
Source: McKinsey
The rise of tariff and non-tariff protection such as tightful testing, quality related
restrictions, the lack of free trade agreements (FTA) with few countries could affect the
business performance issues of these companies.
There are 4 main technology driven trends which are leading the industry to such kind of disruption.
7
Shared Mobility:
As we are progressing, the on-road traffic is increasing, and the parking space is reducing, which in
turn is stimulating the growth of concept of shared mobility in the developed countreis. The overall
size of global market was valued at $104 billion in 2017. It also predicted a CAGR of 25% from 2018
to 2025.
As the business models are evolving, there is an emergence of two-wheeler shared mobility as well.
Below is Pi chart showing the share of vehicle segment in context of shared mobility:
E-Mobility or Electrification:
With increasing urbanisation around the globe, there are high level of emissions in the environment
due to which government is going for stringent norms to control the pollution levels. Moreover, in
India the crude oil imports holds a significant portion for the current account deficit and also create
interdependency on the other parts of the globe.
“As per a NITI Aayog report, India could save 64 percent of energy demand for road transport and
37 percent of carbon emissions by 2030 by pursuing a shared, electric and connected mobility
future”
8
The below chart shows us about the progress of EVs globally as well as in India.
The considerate effect of all the push and pull factors have been depicted in the above chart which
includes Govt. norms, advancements in technology, Infrastructure development for fast charging,
customer demand and drop in battery prices.
➢ Government:
o Environmental targets and strategic intent: Stable policies to keep in check the
carbon emission levels and crude oil substitution.
➢ Infrastructure
o Alternate business models: As the EVs industry in growing at a rapid state, the
power generation and transmission companies should look for alternate models to
compensate the loss of conventional revenues.
o Power generation and grids: EVs may need only 3 to 4 % of present power
generation. So, government should investigate the additional requirements to
prevent issues with network infrastructure.
9
o Charging infrastructure: In 2016, India had only 500 EV charging stations. But if the
projected growth seems to be accurate, then India should keep the target of around
3 lakh charging stations only across Delhi.
2. Research Objective
To analyse the current automobile scenario in India, mobility trends, BMW current Market Scenario,
initiatives taken up by the company, changing customer buying behaviour patterns, and to develop a
future strategy for BMW India to enable a ten-fold growth in next seven years.
• BMW brand alone sales stood at 10,405 units in 2018 – clocking 11% growth as compared to
2017
• 2018, BMW sales are driven mainly by the BMW 5 Series, BMW 6 Series Gran Turismo and
BMW Sports Activity Vehicle (SAVs) range
• Led by the BMW X1, X3 and X5, BMW’s Sports Activity Vehicle (SAV) range has contributed
to nearly 50% in overall BMW sales
10
• The basic customs duty on Completely build Units (CBUs) has increased from 20% to 25% in
2018
• Taxation policy in India is not at par with global standards in various other markets that
discourages the luxury vehicle segment (LVS) from achieving its real potential
• Increase in Customs duty on Completely Knocked Down (CKD) units from 7.5%-10% to 15%.
Similarly, hike in duty on vehicle parts, which are an essential element of these units, from
10% to 15%.
In 2018, luxury car market has seen the slowest growth rate as to last 10 years. 2016 growth rate is a
one-off exceptional event wherein 2000cc + diesel engine cars were prohibited for lesser period in
New Delhi. Growth rate has become more linear in last five years i.e. 2014-2018.
12
Luxury vehicle producers in India finished the calendar year 2018 on a lukewarm note as various
factors, for example, high import costs, devaluation of the rupee and a liquidity crunch affected
interest extensively. By and large volumes are assessed to have totalled 40,688 units, up scarcely
three percent from Calendar year 2017's 38,989 units.
Source: Autocarindia
BMW Group India figured out how to prop the energy up as it sold 11,105 vehicles (counting MINI),
enlisting YoY development of 13 percent. Of the aggregate, BMW models represented 10,405 units,
up 11 percent. BMW said that development was driven by the 5 Series and the 6 Series GT. The
German carmaker additionally observed its locally assembled SUV run contribute more than 50 % to
its general deals with solid interest for the X3. It additionally affirmed that the new X4 and X7 will be
locally assembled at its Chennai plant.
BMW is preparing another model strike for India this year which incorporates 10 new models and
two facelifts. Its 2019 innings is probably going to begin with the dispatch of the X4 and will
incorporate the new 3 Series, the new X5, X7, X6, X4M, X3M, Z4, M8 Coupe, M8 Cabriolet, 7 Series
facelift and X1 facelift (in no specific order). The Mini brand sold 700 units in 2018, posting a growth
of 66 %, yet on a low base. The Countryman and the three-door hatchback represented 60 % of
overall volumes.
13
The major competitor for BMW is Mercedes-Benz who is the market leader in India who holds 38%
of market share followed by Audi with 16%, Jaguar with 11%, and Volvo with 6%.
a) Mercedes-Benz:
The luxury vehicle market leader sold a record 15,538 units in CY2018, posting YoY development of
1.4 % (2017: 15,330). Even though it saw solid demand for its models in the primary portion of 2018,
volumes went underweight in the second half and burdened overall growth.
Indeed, the lull in development additionally influenced overall luxury vehicle sales in India since
Mercedes represents a vast offer of the absolute market. The organization finished 2018 as the
nation's highest selling luxury carmaker for the fourth straight year with 38 % share of the overall
industry.
Growth was driven by the long-wheelbase E-Class, which remained the most astounding moving
model for the brand in 2018. Mercedes additionally has seen solid demand for the C-class vehicle;
the GLC was the brand's most astounding moving SUV.
Mercedes-Benz India intends to support a solid item force with plans to launch around 10 models in
2019, starting with the V-Class MPV on January 24, 2019.
b) Audi:
2018 was a testing year for Audi India as deals fell 18 % YoY to 6,463 units (2017: 7,876 units). It was
the second continuous year in which the brand attempted to discover footing after being tormented
by the GST cess climb in 2017, when it posted 2% growth. The carmaker credited this drop-in sale to
the closing of its biggest dealership, situated in Delhi NCR, where it normally records greatest
conveyances.
Audi India had fewer launches in 2018 as compared with the fellow players. It presented Q5 oil and
diesel, RS5 Coupé and two special edition models each, for the Q3 and Q7.
Regardless of the drop-in numbers, Audi India hopes to get the energy moving this year and has
arranged models like the all-new A8 and the updated R8 for launch. It is planning to present the all-
electric E-tron in India.
c) Jaguar:
For Jaguar Land Rover India, 2018 was a record year as it sold 4,596 units, its most elevated ever in a
year, posting growth of 16.23 % (2017: 3,954 units). In the same way as other carmakers in the
nation, SUVs drove the growth charge for JLR too, representing more than 50 % of the volumes.
Growth was driven by models, for example, Discovery Sport, Range Rover Evoque, and Jaguar F-Pace
just as the XE and XF.
d) Volvo:
Volvo India recorded the most astounding growth rate among all luxury carmakers, yet on a much
lower base. It sold a record 2,638 units, up 30% YoY (2017: 2,029), driven by the XC60 and new XC40
SUVs. Strangely, Volvo India outperformed the number of vehicles sold in 2017 in the initial 10
months of 2018 itself, scoring sales of 2,194 units (up 40%) amid a similar period.
The Swedish carmaker is relied upon to launch the all-new S60, which will go up against the new
BMW 3 Series, Audi A4 and Mercedes-Benz C-class, by end-2019. It as of late declared plans to
14
locally assemble the module crossover variations of its leader SUV, the XC90, at its plant in
Bangalore by end of 2019. Furthermore, the organization likewise said that designs are in progress
to present four new hybrid model throughout the following three years, alongside another all-
electric model not long after its global launch.
4. Research Methodology
Research Methodology is a way to find the solution and analyse the data. It contains all the research
methods and approaches to get the solution.
The descriptive research is being used specially to describe the characteristics of the consumer’s
perception about BMW segment and to develop a future strategy for BMW India. After doing
extensive secondary research on automobile sector analysis, looking into current growth structure
and market trends of BMW in India and drilling down further into current product marketing
strategy, we have come up with few of the theoretical frameworks and application part of them that
could help in identifying the portfolio, product and channel strategies that the company can adopt in
the future.
We have come up with factors that are broadly categorizes cultural factors, technological factors,
social factors, economic factors political factors to understand the factors influencing Key buying
behaviour for potential premium segment customers (brand appeal, status and image, price,
service/support, luxury features, size, space, resale, reliability, broad choice of models etc.). For
understanding the various factors, we will use various statistical tools and will do Factor Analysis.
There are five major factors that influences the consumer behaviour
1. Cultural factors
2. Technological factors
3. Social factors
4. Economic factors
5. Political factors
15
1) Cultural factors
Cultural factors guide the consumer purchase decision with its values, believes and customs. The
factors that we have decided to come under this category are brand image, references from friends,
advertisements and publicity, user reviews.
2) Technological factors
Technological factors guide the consumer purchase decision to follow latest technology and ease of
operating. The factors that come under this category are mileage, style, comfort, power.
3) Social factors
Social factors guide the consumer purchase decision by the social group they belong to, roles and
status. The factors that come under this category are life style, trend, status, social influence.
4) Economic factors
Economic factors guide the consumer purchase decision by factors that are causing him/her to
spend money on a product. The factors that come under this category are price, maintenance, EMI
availability and ease of service.
5) Political factors
Political factors guide the consumer purchase decision by the compatibility that the consumer can
use the two-wheeler and influencing factors that are driving them. The factors that come under this
category are tax, environmental impact, safety factors, infrastructure.
Brand image
References from friends
Cultural factors
Advertisements and publicity
User reviews
Mileage
Style
Technological factors
Comfort
Power
Life style
Trend
Social factors
Status
Social influence
Price
Maintenance
Economic factors
EMI availability
Ease of service
Tax
Environmental impact
Political Factors
Safety factors
Infrastructure
16
Sampling Method
Based on the above factors, a questionaire is formulated (Please Refer to Appendix) and the target
audience is owners of luxury cars such as BMW, Mercedes Benz, Audi, Volvo, Jaguar and Porsche etc.
Item Description
Following is the analysis of Customer preference behaviour from the Primary Research being
conducted.
Cultural Factors
120 98 93 90
100 79
Scores
80
60
40
20
0
Advertisements Brand image Seating User reviews
and publicity Capacity
Factors
Insights: Among the cultural factors, the most important factor for Customer preference for Luxury
cars is Brand Image of the car
17
Technological Factors
120 100 100
100 90
81
80
Scores
60
40
20
0
Driving Comfort Mileage Factors Power Style & Design
Insights: Among the Technological factors, the most important factor for Customer preference for
Luxury cars is Driving Comfort & Style - Design of the car
Social Factors
100 96
95 89
Scores
90 84
85 81
80
75
70
Country of Life style Social influence Trend
Origin
Factors
Insights: Among the social factors, the most important factor for Customer preference for Luxury
cars is because of the Life style
Economic Factors
96 95
94
94 92
92
Scores
90 88
88
86
84
EMI availability Maintenance/After Price Spare Part
Sales Service Availability
Factors
Insights: Among the Economic factors, the most important factor for Customer preference for
Luxury cars is Maintenance/After Sales Service
18
Political Factors
120 91 100
100 83 82
Scores
80
60
40
20
0
Environmental Infrastructure Safety factors Tax
impact
Factors
Insights: Among the Political factors, the most important factor for Customer preference for Luxury
cars is the safety factors that the car provides
100
80
60
40
20
0
Cultural Economic Political Social Technological
Factors
Insights: Among all the factors, the most important factor for Customer preference for Luxury cars is
the technological factors.
19
The survey gives another interesting finding that the most of the car owners like to self drive the cars
in the Indian Segment.
The above graph show that the word of mouth marketing is still effcetive one in the luxury car
market segment.
After analyzing the customer preference in the luxury segment, lets look at the customer behaviour
towards BMW. For drilling down further into customer behaviour, we took samples of those car
owners having Luxury car in most of the cases other than BMW in order to find out the switching
behaviour towards BMW series models
20
The above chart shows that most of the car owners who owned other than BMW luxury cars are very
much satisfied with their brand and doesnot want to switch over to BMW.
Some of the customer Reviews that we got from the survey are tabulated as follows
“Its a great sports sedan car but not a long run car”
“Unreliable”
“Not for self driving. Mismatch between power and road handling”
Since most of the important factor for the customers is technological factor. Hence, BMW can adopt
differentiation strategy in providing the customized features based on customer’s requirements. In
addition to make a seamless journey from digital to retail shop, the user mobile interface of the
website can have additional features such as 360-degree view of any BMW vehicle or option of
customizing such as enabler function of changing the cars’ body colour, rims and design packages. In
making a tradeoff between the price and style, the customers are able to make their own car and can
make a lot of selection options. This will ultimately enhance the product portfolio of BMW in an
indirect manner.
The main problem the customers are facing is about the comfort level, therefore BMW should focus
more on comfort rather than making a car having focused much on the driving pleasure since the
road infrastructure anyways is a delimiting factor for them.
For enhancing the maintenance/ after sales service which is most crucial economic factor for the
customers, we have done the cost benefit analysis of having more dealerships in the next section
High volume
high potential zone Product Potfolio Analysis
12
10
Relative Volume
0
0 50 100 150 200 250 300
Price in Lakhs
➢ Max volume of units sold in luxury car segment is within 40-70 Lakhs range
22
Model Variants
630i Gran Turismo Luxury Line
BMW 6 Series GT 630d Gran Turismo Luxury Line
630d Gran Turismo M Sport
X3 xDrive20d xLine
BMW X3 Series X3 xDrive30i Luxury Line
X3 xDrive20d Luxury Line
▪ Bringing in more variants in the already existing petrol models as people are switching from
Diesel to Petrol cars due to GOI policies especially in Delhi NCR region given that it is one of
the major markets for luxury car segment
▪ For the long run, launch new India specific models in this range
23
The Nominal GDP in INR for all States and Union Territories in India has been collected from various
state budgets, based on which States and Union Territories are ranked and tabulated, along with it
the presence of dealership showrooms of Mercedes benz and BMW has been collected, mapped,
and tabulated to analyse the potential regions on which BMW should establish it’s dealership
showrooms to attain increased market penetration and sales.
Analysis:
Mercedes Benz has 91 dealership showrooms in India concentrated on States and Union Territories
with high potential according to the nominal GDP data. Though their Average sales per delearship is
171, they have expanded all throughout the nation which gives them increased market penetration
with sales of 15538 cars in 2018.
BMW despite of having an average sales per dealership as 236 has very low market penetration
covering comparitively fewer part of the country than Mercedes with only 44 dealerships all
throughout the nation. The yearly sales of BMW cars in India is 10405.
BMW has not established centers in potential tyre-2 cities and has less dealership showrooms in
tyre-1 cities compared to Benz which makes BMWs presence among the potential customers less
and a few of the potential market has less brand awareness about BMW cars.
Suggestions:
Based on our analysis we propose to establish 20 Dealership showrooms in potential regions where
BMW does not have its presence . The shortlisted locations based on the analysis has been
represented in the table below
Rank Nominal GDP(INR) State and Union No. of Dealerships New dealerships Location of proposed
Territories Mercedces Benz BMW proposed Dealerships
1 ₹27.96 lakh crore Maharashtra 22 13 3 Nashik, Kolhapur
2 ₹17.25 lakh crore Tamil Nadu 8 5 1 Salem/Tiruchirappali
3 ₹15.88 lakh crore Karnataka 8 3 2 Hubballi, Mangalore
5 ₹14.96 lakh crore Gujarat 7 2 2 Rajkot, Vadodara
8 ₹8.75 lakh crore Kerela 8 1 3 Kozhikode,Thrissur,Trivandram
10 ₹8.26 lakh crore Madhya Pradesh 2 1 1 Bhopal
11 ₹7.84 lakh crore Haryana 1 0 1 Karnal
12 ₹7.80 lakh crore + Delhi & NCR 10 3 3 Ghaziabad, Delhi(2)
NCR
14 ₹5.77 lakh crore Punjab 4 1 2 Jalandhar, Mohali
15 ₹5.15 lakh crore Bihar 0 0 1 Patna
17 ₹3.74 lakh crore Assam 1 0 1 Guwahati
20 ₹2.63 lakh crore Uttarakhand 1 0 1 Dehradun
Maharashtra which has a nominal GDP of Rs 27.96 lakh crore has 22 Mercedes dealership
showrooms but only 13 BMW dealership showrooms. Apart from the common regions in
maharashtra, Mercedes has presence in Nasik, Navi Mumbai, and Kolhapur which can be understood
as potential regions which we propose to BMW to establish their dealership showrooms.
25
Based on the similar lines of analysis, Tamilnadu which has nominal GDP of Rs 17.25 lakh crore has 8
Mercedes dealership showrooms but only 5 BMW dealership showrooms. We propose to introduce
an additional showroom in Salem where Mercedes already has its presence but BMW does not, or in
tiruchirappali where Mercedes does not have its dealership, but it could become a potential region
for BMW to establish a dealership.
Karnataka has a nominal GDP of Rs 15.88 lakh crore with 8 Mercedes and 3 BMW showrooms,
Hubballi and Manglore are the potential regions for BMW to pitch in. Gujarat with a nominal GDP of
14.96 lakh crore has 7 Mercedes and 2 BMW showrooms, Rajkot and Vadodara are the potential
suggested regions were BMW can establish its dealership.
In Madhya Pradesh BMW can open it’s dealership in Bhopal, and in Haryana BMW can establish its
showroom in karnal as Haryana is a potential market with nominal GDP of 7.84 lakh crore where
BMW does not have its presence.
Delhi and NCR region which is a high potential region were Mercedes has capitalised with 10
dealership showrooms, but BMW has currently only 3 dealership showrooms in the region.
Establishing a dealership showroom in Ghaziabad and 2 dealership showrooms in Delhi will increase
its market share.
BMW can strengthen its position in punjab by adding two showrooms in Jalandhar and Mohali,
making it 3 dealership in punjab including the dealership at Ludhiana. As Mercedes is having 4
dealership in punjab region.
Establishing a dealership in patna in Bihar as the Bihar market with Rs 5.15 lakh crore nominal GDP
has not been explored both by Mercedes and BMW, so this could be a critical move for BMW.
BMW can establish a Dealership showroom in Guwahati and Dehradun each, to make its presence in
Assam and Uttarakhand where Mercedes has its dealership showrooms.
BMW has a less mind share among customers in India than compared to Mercedes, this is because
of the early entry of Mercedes in Indian market and Increased penetration of having 91 dealership in
the country. From our primary research we were able to understand that Word of mouth and
dealership showrooms turns out to be the most important parameters for creating brand awareness
in the minds of the cutomers which adds a choice in their purchase decisions. Adding on dealership
in potential regions increases the word of mouth feedback among potential customers and gives
Increased chance of converting through dealers.
From the primary research it can also be understood that luxury car owners considers maintenance
and after sales service as an important factor which affects their purchasing decisions, There are 60
authorized Merecedes service centers spread across 21 states and union territories in India, whereas
BMW has 29 authorized service centers spread across 18 states and union territories in India.
Increasing the service centers in potential regions will positively impact the targeted customers in
their purchase decisions.
26
Profit/Loss Statement 1st Year 2nd Year 3rd Year 4th Year 5th Year
Accessories
110 115.5 121.275 127.3388 133.7057
Expenses
Salaries2
21.5 23.65 26.015 28.6165 31.47815
Operating Income
181.5 302.95 505.185 737.8405 1005.5
-
EBT -2.0524 170.0127 368.0046 595.8348
345.068
-
EAT -2.0524 119.0089 257.6032 417.0843
345.068
27
-
CFAT -1.90052 101.9906 204.5369 306.557
345.068
NPV 266.11
Assumptions:
• 1
indicates the cars sales which is calculated by
= Number of cars sales per year* Average price of top selling models
= 100*50 lacs
=50 crores
• 2
indicates 2 sales executive, 1 sales manager, 1 CRM manager, 1 Accounting manager
Salaries Figure
Sales
executive (2 6 lacs
persons)
Sales
5.5 lacs
Manager
CRM
4 lacs
manager
Accounting
6 lacs
Manager
• Assumption of 10% growth and 15% growth in sales in cars in subsequent years
• 10% hike in the land lease rates
• 10% increase in the salaries of employees
The NPV becomes positive in 5 years. Hence, the dealership becomes profitable and feasible in 5
years timeframe.
28
6. References
1. (2019). Retrieved from
https://www.mckinsey.com/~/media/McKinsey/Featured%20Insights/Asia%20Pacific/The%20auto%
20component%20industry%20in%20India%20preparing%20for%20the%20future/ACMA%20Vertical
_Onscreen_Final.ashx
2. Global Shared Mobility Market Size | Industry Growth Report, 2019-2025. (2019). Retrieved from
https://www.grandviewresearch.com/industry-analysis/shared-mobility-market
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7. Appendix I