Chapter-1

Introduction

ElasticityPrice Elasticity of demand is a measure of responsiveness of the quantity of a good or service demanded to changes in its price.

(1) Price Elasticity of Demand:

The concept of price elasticity of demand is commonly used in economic literature. Price elasticity of demand is the degree of responsiveness of quantity demanded of a good to a change in its price."The ratio of proportionate change in the quantity demanded of a good caused by a given proportionate change in price".Formula:The formula for measuring price elasticity of demand is:Price Elasticity of Demand = Percentage in Quantity Demand Percentage Change in Price

Types:The concept of price elasticity of demand can be used to divide the goods in to three groups.(i) Elastic. When the percent change in quantity of a good is greater than the percent change in its price, the demand is said to be elastic. When elasticity of demand is greater than one, a fall in price increases the total revenue (expenditure) and a rise in price lowers the total revenue (expenditure).(ii) Unitary Elasticity. When the percentage change in the quantity of a good demanded equals percentage in its price, the price elasticity of demand is said to have unitary elasticity. When elasticity of demand is equal to one or unitary, a rise or fall in price leaves total revenue unchanged.(iii) Inelastic. When the percent change in quantity of a good demanded is less than the percentage change in its price, the demand is called inelastic. When elasticity of demand is inelastic or less than one, a fall in price decreases total revenue and a rise in its price increases total revenue.

(2) Income Elasticity of Demand:Income is an important variable affecting the demand for a good. When there is a change in the level of income of a consumer, there is a change in the quantity demanded of a good, other factors remaining the same. The degree of change or responsiveness of quantity demanded of a good to a change in the income of a consumer is called income elasticity of demand. Income elasticity of demand can be defined as:"The ratio of percentage change in the quantity of a good purchased, per unit of time to a percentage change in the income of a consumer".

Formula:The formula for measuring the income elasticity of demand is the percentage change in demand for a good divided by the percentage change in income. Putting this in symbol gives.Ey = Percentage Change in Demand Percentage Change in Income

(3) Cross Elasticity of Demand:The concept of cross elasticity of demand is used for measuring the responsiveness of quantity demanded of a good to changes in the price of related goods. Cross elasticity of demand is defined as:"The percentage change in the demand of one good as a result of the percentage change in the price of another good".Formula:The formula for measuring, cross, elasticity of demand is:Exy = % Change in Quantity Demanded of Good X % Change in Price of Good Y

(i) Substitute Goods. When two goods are substitute of each other, such as Polo and I-20, an increase in the price of one good will lead to an increase in demand for the other good. The numerical value of goods is positive.(ii) Complementary Goods. However, in case of complementary goods such as car and petrol, cricket bat and ball, a rise in the price of one good say cricket bat by 7% will bring a fall in the demand for the balls (say by 6%). The cross elasticity of demand which are complementary to each other is, therefore, 6% / 7% = 0.85 (negative).(iii) Unrelated Goods. The two goods which are unrelated to each other, say apples and pens, if the price of apple rises in the market, it is unlikely to result in a change in quantity demanded of pens. The elasticity is zero of unrelated goods

Indian MidSize Car IndustryBefore the 1990s when the Indian economy was not global. Monopoly was the major time problem that India was facing at that point of time. Hindustan Motors and Maruti was enjoying the monopoly, whatever they manufacture, at any cost people has to buy their products. But after 1991 when Indian economy get globalize, It was the sun rise for Mid-Size car sector in India. Ford Fiat India Chevrolet Hyundai-motors-India Tata motors San motorsThese were some major companies which has started approaching India and now...The mid-size car market in India has grown tremendously in the last few years. A mid-size car is an automobile which have a size that is between a compact and a car of full size. It typically has the capacity to carry 4 passengers. In India the mid-size car price ranges between ` 3-8 lakh. Although the automobile market in India is growing at 7% per year, the mid-size car market in India is growing at the rate of around 20% per year. This shows how fast the growth is taking place in the market of mid-size car in India. It is no wonder therefore, that most of the latest car launches in India have been in the mid-size segment.

The various reasons for the growth of the mid-size car market in India are: The economy in the country is rising leaving the people with a lot of disposable income. This money is being spent by the people in buying the mid-size car.

Various loan schemes have been launched by the automobile manufacturers and financial institutions giving a boost to the market of mid-size car in India.

The government in relation to the automobile industry have taken out various polices such as reducing the import tariffs and also relaxing the equity regulations. This has led to the reduction in the prices of the mid-size cars.

The youth in the country are earning high pay packages due to the IT boom in the country. This enables them to buy the mid-size car which further boosts the mid-size car market in India.

Maruti Suzuki IndiaThe largest automobile manufacturer in South Asia, Maruti Suzuki India Ltd., is a publicly listed automaker in India and a subsidiary of Suzuki Motor Corporation of Japan, incorporated in February, 1981. Largely credited for having brought in a revolution in the Indian automobile industry, the automaker began its production in 1983 with Maruti 800. on September 17, 2007, Maruti Udhyog Limited was renamed Maruti Suzuki India Limited, while locating its headquarters in Delhi. The manufacturer exports approximately 50,000 cars annually and has a large domestic market of 730,000 sales annually. The manufacturer is presenting its customers with applaudable models like A-star, Swift, Estillo, Wagon R, Alto, Grand Vitara, etc. In February 1981 Maruti Udyog Limited (MUL) was incorporated under the provisions of the Indian Companies Act, 1956. It was established to meet the growing demand of a personal mode of transport caused by the lack of an efficient public transport system. A license and Joint Venture Agreement was signed between Government of India and Suzuki Motor Company (now Suzuki Motor Corporation of Japan) in October 1982. It manufactured India's first affordable cars. In the past twenty years it has diversified into various type of passenger cars catering to the need of different section of the population.The Maruti models on road now are: - Maruti 800 Maruti Omni Maruti alto Maruti Zen Maruti Wagon- R Maruti Esteem

Hindustan Motors LimitedHindustan Motors Limited (HML) was established just before independence in 1942 by Mr. B.M. Birla. It is a flagship company of the C.K. Birla Group. In 1948 the manufacturing moved to Uttarparadesh, West Bengal, where it began the production of the Ambassador. Over the years it has equipped itself with state-of-the-art facilities for the production of passenger cars, trucks and multi-utility vehicles.Hindustan Motors have three manufacturing units. These are: - Tiruvallur (Tamil Nadu): This exclusive state-of-the art plant is dedicated to the manufacturing of Mitsubishi Lancer in technical collaboration with Mitsubishi Motors, Japan. Uttarpara (West Bengal): This division is engaged in the manufacture of passengercars (Ambassadors and Contessa) and Multi Utility Vehicles (Trekker, Porter and Pushpak). Pithampur (Madhya Pradesh): This plant has the Road Trusted Vehicle (RTV) division that manufactures "RTV" brand of multi-utility vehicles, in technical collaboration with OKA Motor Company, Australia.The vehicles manufactured by Hindustan Motors are: - Ambassador Lancer Pajero Porter Pushpak RTV Trekker

Hyundai-motors-IndiaThe South Korean automobile manufacturer of India, Hyundai Motors is ranked as sixth biggest car maker in the world. Its subordinate, Hyundai Motor India Limited (HMIL), is the second biggest car producer in India with popular brands such as Getz, Sonata Embera, Santro, Elantra, Accent and Tuscon under it. The firm has been certified under ISO 14001 for entailing sustainable eco-friendly administration practices.Initiated in the year 1967, Hyundai Motor Company (HMC), has its headquarters at the capital of South Korea - Seoul. HMC is a segment of Hyundai Kia Automotive Group and administers the world's biggest incorporated vehicle service at Ulsan situated in South Korea.

Hyundai Motor India Limited (HMIL), currently has more than 30 modifications of passenger cars in six sections. The various cars feature in different divisions such as Santro is B type car, Getz a B+ type car, Accent C type, Elantra D type, Tucson SUV type, etc.Hyundai Motors India - Products Hyundai Santro Xing Recognized for its power competence and consistency, Hyundai Santro Xing, is an improved version of Hyundai Santro that comes with added characteristics for Indian families. Hyundai Getz Recognized for its European appeal, Hyundai Getz is an amalgamation of comfort, expertise and functionality. Hyundai Accent Set with improved engine machinery, high-tech design and security features, Hyundai Accent spells style, opulence, control and top performance.

ChevroletChevrolet is one of the top most players in the automobile market in India. Chevrolet is an American Company and a subsidiary of the General Motors Company in United States. In India, the first office of Chevrolet was established in Mumbai and an assembling unit was also set up in Sewree.Chevrolet has become very popular for its cars in the Indian market. The power, efficiency, and economy of the cars produced by Chevrolet have attracted more and more consumers over the years. Some of the popular models in the Indian market are, Aveo in the mid size segment, Aveo U-VA in the small size segment, and Optra in the premium segment.Chevrolet Spark: The small car segment was lit with fire when this car was introduced. Its small, compact, beautiful yet powerful, economic, efficient. It may well be the ultimate statement in the small car segment in the Indian market. It comes in eye popping colors like Fiery red, Icy blue, Casablanca white, Mint green, Platinum metallic. The variants are: Spark 1.0 Spark 1.0 E Spark 1.0 LT Spark 1.0 LS

Ford IndiaFord India Ltd is one of the finest automobile manufacturing companies in India. Ford Motors is originally an American company that excels in manufacturing and selling automobiles all across the world. It was founded by Henry Ford in 1903.Currently the eight largest car manufacturer in India Ford entered India in1988 with its much acclaimed Ford Escort. In the year 1926, Ford India was established, but the operations were discontinued in 1954. It was in 1995, that Ford Motor Company received government approval to establish Mahindra Ford India, Limited (MIFL).

Mahindra Ford India, Limited was a 50:50 joint venture between Mahindra and Mahindra Limited (M & M) and Ford Motor Company. In November 1998 Ford received approval to increase its stake in the joint venture to 92.18%. The Company was re-christened as Ford India Limited.

Popular Models by Ford India Private Ltd. Escort (MIFL) Zetec (MIFL) Ford Ikon Ford Ikon Flair Ford Endeavour Ford Mondeo Ford Fusion Ford Fiesta

REVA Electric Car CompanyThe petrol price is ever rising and the scarce resource is being depleted at an alarming rate. Adding to the problem is the fact that the demand for personal automobile, especially cars is rising. With the availability of easy car finance and rising income of the middle class in India, the demand for cars has noted a sharp increase. In this situation, the most innovative idea of a car that runs, not on the conventional fuel i.e. petrol and diesel, but on electricity is more than welcomed. The REVA Electric Car Company manufactures environment friendly, cost effective electrical vehicles for city mobility.

The REVA Car Company was incorporated in 1995. The first car was launched on 11th May 2001. The manufacturing unit of REVA is located at Bommasandra Industrial Area, Bangalore. The car is still in its infancy and the manufacturers hope that it'll grow strong in the coming time.The REVA models are: - REVA Standard REVA AC REVA Classe REVA Spl. Ed. (Coming Soon)

RESEARCH METHODOLOGY

2.1 INTRODUCTION

Research is an art of scientific investigation through search for new facts in any branch of knowledge. It is a moment from known to unknown. Research always starts with a question or a problem. Its purpose is to find answers to questions through the application of the scientific method. It is a systematic and intensive study directed towards a more complete knowledge of the subject studied. As marketing does not address itself to basic or fundamental question, itdoes not qualify as basic research. On the contrary, it tackles problems, which seem to have immediate commercial potential.It is conceptual structure within which the research is conducted. Its function is to provide for the collection of relevant evidence with minimal expenditure of effort, time and money. But, how this can be achieved depends on the research purpose. In my study the research purpose is as follow:Price Elasticity in Mid-Size car Industry..

2.1.1 Descriptive Research:-Research Study i.e. to portray accurately the characteristics of a particular situation or a group.

2.1.2 Type of the Universe:-

It is the first step in developing any sample design; it is to clearly define the set of objects, technically called Universe 2.1.3 Population: -It includes all the residents having Interest in purchasing a small or mid segment car in Delhi.

2.1.4 Sampling Unit:-

It is the unit, which would be considered for the purpose of study .To conduct an analysis; the unit would be the individuals who are having or willing to purchase a small or mid segment car.

2.1.5 Sample Size:-

This refers to the number of the items to be selected from the universe to constitute the sample. To commence the study sample size is taken because these are persons who have or who are willing to purchase a small or mid segment car. For this study a sample Size of 50 persons were selected.

2.1.6 OBJECTIVES OF THE STUDY :-

1. To study the factors those are considered by the individuals while making a purchase decision for a car particularly in the small or mid size segment.2. To know peoples awareness about different brands in mid-size car sector.3. Price Elasticity in mid-size car industry.

2.1.7 Data Collection:-

In order to obtain the required information the data has been collected from various secondary and primary sources.To do an analysis of various automobile companies, secondary data was collected from newspapers and websites. In order to carry the research to know the price elasticity in car industry, primary data was collected in the form of questionnaires and analysis was done to arrive on the conclusion.

CHAPTER :-3DATA ANALYSIS

Q Do you own any car

Yes48

No2

Q Are You planning to buy a new car?

Yes40

No10

Q In which segment you are planning to buy the car?

Small7

Mid30

Large3

Q How much do you travel in a day?

Less than 3010

30km-50km5

More than 50km35

Q5 What are the main factors you take into consideration while purchasing a new car?

Price04

Maintenance02

Comfort01

Mileage01

All32

None00

What are the main brands you are aware in automobile sector?

Maruti Suzuki

Hyundai

Tata

Chevrolet

Toyota

All