Wheels of Fortune
Joint ventures seemed to be the norm for entering the Indian auto sector. Yet, many did not live up to the potential. Why did the past unfold as it did? Was there another model that could have been adopted? In Santro: The Car that Built a Company, author B.V.R Subbu shares the approach, strategy and execution plan followed by Hyundai Motors India in the late 1990s leading to the launch of the Santro in 1998 and the roll-out of the one millionth car in 2006.
There are interesting details on the start of the South Korean private sector investments in India that eventually led to Hyundai announcing plans to set up manufacturing in India, its participation in the Auto Expo 1996 to make "its presence felt" and tracing the events from the signing of the MoU to discussions with the Central and state governments as well as potential partners. Subbu tells us why Hyundai decided to do it alone - invest in a manufacturing facility with a capacity of 1,00,000 units with a commitment of 70 per cent indigenisation in the fourth year of production. The process of selection of the product for the Indian market was based on several factors such as culture, body type, ease of getting in and out of the vehicles, engine power and performance using Indian fuel. The company also decided to make India an export hub. These strategies were never followed by other entrants.
The book details the human resource challenges - recruitment and training of employees including some former Tata Motors managers as well as the team from South Korea. At one point, there was a clash of cultures between the Indian and South Korean managers and staff, which impacted the company's performance. However, lessons were learnt fast. According to Subbu, it is important not to choose nationality over professional competence. He highlights how the speed of decision making due to the "absence of layers" between India and South Korea enabled Hyundai to address business-critical issues.
Subbu details Hyundai's decision to follow a single vendor policy and work with the vendor base to improve quality. A pan-India dealer network and the decision to go for "frugal dealerships" in a capital-scarce country helped Hyundai dealers break even early. A well-thought out media strategy to keep competition guessing on next moves, and efforts towards positive coverage for the company and its products also helped shape consumers' mind.
Subbu writes extensively about the selection of the brand ambassador and the marketing strategy. The marketing approach was not without its share of controversy and excitement, what with "comparative" advertising, signaling price increases to clear stocks, three-day sales - like what Flipkart hosts now - and a retrospective two-year warranty.
Yet with all of this, Hyundai's Indian arm was very nearly sold. Subbu reminisces about how luck in the form of a Supreme Court order that only allowed Euro 2 compliant vehicles to be registered in the capital played a part. The Santro was Euro 2 compliant and was positioned as a technologically superior product. The rest, as Subbu recounts in the book, is history.
Would it have been different had he stayed on? Will a similar story play out currently in terms of Euro VI? We don't know, but my answer to his question 'whether it is possible for just anyone to do a Santro all over again' is an unequivocal yes, just as it is for him. Subbu's reason for believing so is that "building blocks for success remain unaltered". Companies need to have the humility to listen and treat Indian customers at par with global consumers in terms of product and quality - something several automakers failed to latch on to.
The story of Santro is even more relevant today for firms that are entering the Indian automobile market as well other sectors. The book has important lessons for aspiring market leaders and young managers.
