Description
It analyse the concept of adoption-diffusion in the light of battery driven cars and to suggest changes in the marketing-mix to be initiated to increase the rate of adoption of these products.
REVA-Adoption Diffusion Process for Tubeless Tyres
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Table of Contents
Table of Contents...................................................................................................2 Executive Summary...............................................................................................4 Objective of the study........................................................................................4 Our approach......................................................................................................4 The Story so far..................................................................................................5 REVA-The Electric Car............................................................................................7 Key features.......................................................................................................7 Product Characteristics and the Rate of Adoption.................................................9 Complexity.........................................................................................................9 Easy manoeuvrability......................................................................................9 Easy Charging process..................................................................................10 Easy to maintain and Easy serviceability......................................................10 Consumer view point.....................................................................................10 Compatibility ...................................................................................................10 The societal constraints.................................................................................11 Consumer viewpoint......................................................................................11 Relative advantage...........................................................................................11 The consumer viewpoint...............................................................................13 Trialibility..........................................................................................................14 Consumer view-point.....................................................................................15 Cost..................................................................................................................15 Organization of our Study....................................................................................16 Interest ............................................................................................................17 Evaluation.........................................................................................................17 Trial..................................................................................................................18 Adoption...........................................................................................................20
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Testimonials..................................................................................................21 Conclusions..........................................................................................................21 Proposed changes in the marketing mix..............................................................24 Product.............................................................................................................24 Place.................................................................................................................25 Promotion.........................................................................................................26 Price..................................................................................................................27
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Executive Summary
An innovation is any good, service or idea that is perceived by someone as new. The idea may have a long history, but it is an innovation to the person who sees it as new. Innovations take time to spread through the social system, until they diffuse into the market and get adopted by people. Adoption is an individual’s decision to become a regular user of the product. The pace at which the products diffuse differs from one market to another depending on factors like the extent to which an economy is open to new products, media, transportation, and warehousing and distribution network. It also depends on customer awareness and knowledge. The theory and the process of adoption diffusion were first propounded by Everett M. Rogers. In 1983 he presented a paper titled ‘Diffusion of innovations’ which contained a framework to understand how innovations are adopted by any market. According to this theory, people differ in their attitude towards change and the risk-taking ability. This affects their willingness to try and adopt a new product.
Objective of the study
The purpose of this assignment is to understand and analyse the concept of adoption-diffusion in the light of battery driven cars and to suggest changes in the marketing-mix to be initiated to increase the rate of adoption of these products.
Our approach
We have tried to analyse the adoption-diffusion process of the most common battery driven car available in the Indian market- “REVA” marketed and manufactured in India by Maini Group. Though the management orientation is towards the foreign market, and only 20% of the manufacturing units are sold in India, we have concentrated on the Indian market as with rising income levels, congested road conditions, and sky-rocketing fuel prices, India can prove to be a large market for this car. Battery driven cars are certainly an innovation, not only in India, but globally. Adopters of Innovations are observed to be moving through five stages: Awareness, Interest, Evaluation, Trial, and Adoption. How soon a product is able to make the transition from being adopted by innovators
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to laggards is also dependent on product characteristics like compatibility, complexity, relative advantage, trialibility etc. We have tried to analyze the product in light of the above stated parameters, and have suggested certain changes in the marketing mix to speed up the diffusion of this innovation-“REVA-the Electric Car”
Electric Vehicle Technology
The Story so far
Imagine driving a car that emits only pure water vapour and little else. Moreover, one that used residual water for fuel thus doing away with refuelling. It is not an imaginative plot out of a Hollywood Sci-fi anymore. Life for BEV’s (battery electric vehicles, as they are popularly called) has come round a full circle. Electric cars have been around since the beginning of the automotive age. Few people realize that successful electric automobiles were being produced as early as the 1880's. For over 20 years, electric cars were commercially produced, and were for some years in heady competition with internal combustion and steam-powered carriages. Not until internal combustion technology and promotion, along with cheap fuel, had outstripped all competition, did electric cars drop out of the automotive picture. Only specialized electric vehicles that were used over short distances, like golf carts and forklifts, survived. But now there is a renewed interest in the electric automobiles primarily in variants such as “the hybrid automobiles”, “the fuel cell technology” apart from the regular BEV’s. Electric Vehicle (EV) technology is gaining ground and popularity rapidly. With depletion of oil reserves and a world characterized by smog, noise and all kinds of pollutants, governments and communities are awakening to the several benefits of EV technology. With the innumerable advantages of EVs, companies in developed countries have spent huge amounts to develop electric cars that can travel longer distances, providing high levels of comfort. In spite of this technology being available now, the cost of electric vehicles to suit driving requirements in these developed countries is prohibitively high. On the other hand, India is ready and well suited for the introduction of EVs today with the existing technologies available, making EVs cost effective. Zero emission vehicles are almost noiseless and can be charged at home or work, saving commuters endless queues at petrol stations. Charging at night when consumption is low, allows for efficient use of electricity. EVs
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are easier to service and maintain due to the absence of spark plugs, clutch and gears. Ideal for "stop - start" city driving conditions, EVs are extremely reliable and easy to drive. The average speed of travel in our cities has been steadily on the decline as the vehicle population rises. In fact, a recent study conducted by TERI (Tata Energy Research Institute) found that the average speed in Indian cities was as low as 20 km/hour. The ideal EV for India and the developing world is basic, simple and reliable - designed especially for local conditions using cutting edge technology and which is modular to incorporate and absorb newer technologies. EVs with a top speed of 40-60 kmph and a range of 50-80 km would meet over 90 percent of the city mobility requirements in India. REVA was conceptualised and designed to meet these needs and performance specifications.
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REVA-The Electric Car
Reva Electric Car Company (RECC) was established in 1994 through a joint venture between the Maini Group and Amerigon. Amerigon had a 32% stake in RECC's Rs 58 million equity and Maini Precision Products and Maini Materials Movement held the remaining 68%. The REVA Electric car was launched in May 2001 in Bangalore and is currently available in 6 cities across the country. Reva was claimed to be India's first zero-polluting, battery-driven car. REVA is currently being exported to United Kingdom, Italy, Malta, Cyprus, Norway, Spain Ireland, Japan, Srilanka etc. In addition to this, the car is being test marketed in Australia, Switzerland, Germany, and Austria, Nepal etc.
Key features
REVA is a two-door hatchback, which can comfortably accommodate two adults and two minors. The REVA uses 9 units of electricity for a single full charge that gives up to * 80 KM in city driving conditions. This works out to 40 paisa per km (less than 1 US cent). The average running cost of a petrol car is Rs.4.0 per km. Since the REVA does not have an engine, clutch or gears, or a carburettor, radiator, exhaust etc, the maintenance cost is low. Estimates show that the maintenance costs of REVA are 40 % lower than that of a small car over a 3-year ownership period. REVA can go up to 80-Km. on a single charge depending on usage. There is a battery level indicator light, which comes on when there is 15 KM of charge remaining. Subsequently, the onboard computer automatically shifts the car into an “E” or economy mode, which enhances the driving range by another 5 Km.
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REVA’s charging system, is extremely simple, very reliable and safe. It has an on- board charger along with a charge cable and can be charged anywhere, at home or at work, by simply plugging in to a 230 Volt, 15Ampere socket. A full charge an attained in 8 hours and 80% charge in 2 and a half hours. A total of eight 6-volt EV type lead acid batteries specially developed for EV`s form REVA's power pack. The battery pack has a typical life of 2-3 years depending upon usage. Designed, marketed and used as a low speed urban commuter vehicle the Reva G-Wiz has a safety record second to none, with over 20 million miles / 32 million km driven by customers globally and over 4,000 years of ownership with no reported serious injuries (As on May 2007). REVA took extra precaution in the design to incorporate many safety features such as Steel space frame with Side Impact Beams; Dent proof ABS body panels; Low Voltage (48v) system and Electronic regenerative braking. It has passed all mandatory safety tests. The REVA has been tested at ARAI (Automotive Research Association of India), Pune and has been passed for homologation and roadworthiness. Overall / Side impact - The special steel space frame and side impact beams used in the REVA cocoons the passengers shielding them from impact. Dent / Scratch proof - REVA uses ABS body panels that are dent / scratch proof. This ensures minimum damage to the car and enhances protection to passengers in the event of a collision. Front / Back impact -. Injury to passengers is also minimized in the event of a frontal collision due to the position of the spare tyre in the bonnet space where other cars usually have the engine. The front and rear bumpers are energy absorbing and retain their original shape after a minor impact. Low centre of gravity - The weight and position of the battery pack under the front seat ensures a low centre of gravity thus enhancing stability. The Company has dealer and service networks in Bangalore, Delhi, Ahmadabad, Chennai, Hyderabad, and Pune. With 90% of indigenous components in the REVA, availability of spares is not a problem. Spares are easily available at all our dealer points / service stations.
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Product Characteristics and the Rate of Adoption
The transition of a product from being adopted by innovators to laggards is very strongly dependent on the product characteristics. A marketer can influence the rate of adoption by making conscious decisions in product formulation. The rate of adoption for an innovation is affected by:
Complexity
If the product features are too complex customers might take longer to understand them and consequently the rate of adoption will be much slower. While delivering on the benefit the product must be simple to know and use. “REVA is designed to be unique and stands out on the road as a genuine city car with a mature expression. It has highly simplistic design, with all the inherent benefits of an Electric Car and is indeed a revelation in city mobility” This is how the Reva electric car co. website describes their product formulation. REVA has been uniquely developed to be highly simplistic in use and maintenance to give the product a differentiated look. Some of the key features of the car as projected by the company are listed below:
Easy manoeuvrability
Reva is a fully automatic with no clutch and gears making it quite suitable for Indian scenario with low speed, and congested, road conditions .A small turning radius of just 3.5 metres makes it easy to park and manoeuvre in difficult city traffic conditions.
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Easy Charging process
As compared to other Electric Vehicles, Reva has an onboard charger to facilitate easy charging which can be carried out by plugging into any 15 Amp socket at home or work. The onboard charger ensures the safety of the car in case of any voltage fluctuation or any electric spikes. The auto cut off mechanism ensures that the customer does not have to worry about overcharging or any other issues related to charging.
Easy to maintain and Easy serviceability
REVA requires extremely low maintenance because of the minimum number of moving parts. From service point of view, advanced systems such as the two onboard computers and remote diagnostic capabilities (carried out with the help of a Palm Pilot) enable quick vehicle analysis, prompt service and improve REVA's.
Consumer view point
Our consumer research revealed that people have very low awareness about Reva and its features. A very strong positive point about Reva is its intrinsic simplicity, but people have a very different perception of the product. With no existing promotional campaigns and advertisements, most of the people have formed opinions of their own about the product. The concept of charging the battery, and the car running on it, is a concept which is new in India, and as such people have formed the opinion that it has to be very complicated. In fact, some of the people even suggested the need for exclusive charging stations, for the car to succeed. The concept of an electric car and low technical knowledge of Indian people has further contributed to the idea of the whole product being very complicated.
Compatibility
Compatibility may be defined as the degree to which innovation matches the values and experiences of individuals. As far as possible the product should be compatible with the one presently used by the customer. This enables the customer to get improved performance without discarding the existing product. Reva is designed for low speed, congested, urban conditions. Being efficient and cost-effective, the REVA has the lowest running cost in the world. In fact, Reva is much suited to Indian needs than any other country in the world.
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The societal constraints
However, in India, despite the stupendous economic growth, a car is still a commodity for the middle and upper middle class community, and it’s more of a status symbol than a necessity. Indian people are more conservative, when it comes to spending money than any other country in the world. What an Indian commoner needs is Value for Money and here the truth is: “Reva lacks the practicality and convenience of an everyday car”. This is one factor which is reflected in the consumer attitude. However, with the rising income level of the Indian society, the rising status of women and constantly improving technology, India in future can be a potentially large market for electric cars.
Consumer viewpoint
Almost all the people we surveyed, out rightly rejected the prospects of using Reva as an everyday car. Some of the people, who were willing to buy the car, were interested primarily because of a strong desire to save our blue planet.
Relative advantage
If the advantage offered by the product is significant a customer may be more induced to try the product. If any product offers a marginal increase in benefit the customer may not be willing to adapt to the newer way of doing something. Reva being an electric car has its own potential advantages against the more common petrol/diesel cars.
•
The car is fully automatic. It has no clutch and no gears. This feature renders it a significant relative advantage over the other cars in the Indian market, as the concept of automatic transmission in lowpriced cars is rare and not many companies offer such models. Operating costs for the car work out to be as low as 40 paisa/km in contrast to the petrol-driven cars for which the operating expenses work out to be about Rs.4/km. With minimum number of moving parts, Reva is almost maintenance free and the two on-board computers further improve performance and efficiency. Estimates show that the maintenance costs of REVA are 40 % lower than that of a small car over a 3-year ownership period. The body is made from Acrylo-Butadiene-Styrene (ABS) panels that are bolted onto a stout space-frame. The ABS body panels are dent
•
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proof thus making it more suitable for Indian roads and traffic conditions. • Customers can choose from over 2000 shades in contrast to only about 5-10 shades offered by other companies, and can customize their REVA by mixing 'n' matching these to add a personal touch; a concept which has been non-existent in India till now. The car runs on battery, is low on emissions, and employs environment friendly technologies Under the Income Tax Act, the REVA qualifies for 80% depreciation on a Written down Value (WDV) basis, as compared to 20% for other cars. This means an unbelievable excess tax saving of over 21% of the cost of the car in the first year itself. In cash flow terms this means that the REVA makes the most car sense.
•
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The table listed below gives an idea of the tax saving on purchasing Reva vs. the conventional cars:
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Cost saving per In Rs. month ITEMS REVA On Road Cost 322000 Depreciation allowed 257600 Tax Benefit 90160 Tax savings 67620 Fuel cost Electricity cost 4 Maintenance Cost 320 Total operating Cost 675 Cost Savings for REVA 4305 Total savings on 71925 REVA
CONVENTIONAL CAR 322000 64400 22540 42 800 4500
Assuming that a person travels 1500 kms a month The average fuel economy achieved in city driving condition 14km/ lts Average maintenance
The consumer viewpoint
We carried out a consumer survey to determine relative advantage people see in buying an electric car like Reva over the conventional cars. Most of the people feel that the only competitive advantage the car has, is that it’s eco-friendly and cuts down on the operating costs. There were a few people who were well aware of the product features, like good maintenance and safety standards. However, largely the people stand unaware of the benefits the car has to offer. While the product offers a no. of advantages over the existing petrol/diesel driven cars, there is a large communication gap that exists. This is largely due to the company’s slack attitude towards promotion of product in India. The Reva electric car co. is concentrating solely on the export market. About 80% of the manufactured units are exported to United Kingdom, Italy, Malta, Cyprus, Norway, Spain Ireland, Japan, Srilanka etc. In addition to this, the car is being test marketed in Australia, Switzerland, Germany, and Austria, Nepal etc. In fact, most of the features of the car which the company projects as the unique selling propositions are considered by the people to be potential hazards. This would be discussed in more detail under the “Observeability” section.
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Observeability
The product innovation and its benefits must be readily observable. If the customer can see the change a product will bring beforehand there is higher possibility of acceptance. Now, this is one area where the product is losing out. Since there is a lack of awareness about the product in India, the Indian market remains largely untapped. However, there is a significant scope of expansion in India, as the income levels are low, roads are congested and people look forward for products with economic advantage. Our consumer research revealed that largely people are unaware of the benefits Reva offers. In fact they have their own misconceptions about the product, and therefore, even though it has been 6 years since the product was commercialised, it is still in its nascent stage.
The consumer viewpoint
Most of the people we talked to about Reva are either unaware of the price or state the price of the car to be between Rs. 1-1.5 lakhs against the actual price which is well above Rs. 3 lakhs. As they have a very low cost perception they feel that Reva is a Toy car, still in the experimental stage, and is not feasible for day-to-day use. Though Reva has a very easy charging mechanism, most of the people feel that charging the car is a very cumbersome task and even felt the need of charging centres on the lines of petrol and diesel stations. “The concept of electric cars definitely interests me, but I feel cars like Reva are not feasible in the current scenario. It has a plastic body which would tend to damage, charging facilities are lacking, and after sales service is lacking. If I want to buy a car, I would like to buy one, which gives me the value for money, not a toy car”- says Vasu Gopal, Senior Product Executive, Ramco Systems. The statement clearly indicates the lack of awareness that exists in the market, about Reva. This is largely due to lack of promotional campaigns about the car. Most of the people we surveyed, heard about Reva from sources like Internet, friends/family, TV documentaries, which are prone to personal misinterpretations and garbled facts.
Trialibility
All changes involve a risk, if the customer can try the new product for a limited period or a part of the product it’s much easier for the adoption
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process. In other words, the degree to which the innovation can be tried on a limited basis. Now, this presents a sizable challenge for Reva as it can be only tried at a service centre or a showroom. Reva has a pretty limited network of
Wholesale/retail distributors in only 6 cities in India i.e. Bangalore, Hyderabad, Pune, Ahmedabad, Goa and Delhi. As such the availability of Reva cars for trial is very low.
Consumer view-point
The results of our survey reveal that most of the people, who knew about the product, were willing to try the car on a limited basis, as the concept interested them. However, they lacked the willingness to visit a showroom/service center to try the car. They were willing to test-drive the car, if approached. When asked, whether they were willing to rent the car for a few days, only a fraction of the people agreed that they would, but added that the rent amount would be a key factor.
Cost
We contacted Mr. Soneji, the in-charge for Madhu automobiles, a Reva Seva authorized service center, to determine the prices for various models of Reva. Listed below is the pricing structure for the various model offerings of Reva: Model Reva Standard Reva A/C Reva Classe Basic
Rs.3,49,705
Transportatio Taxes(appro n x.) Rs. 10,000 Rs. 40000 Rs.10,000 Rs. 10,000 Rs. 45000 Rs. 48,500
Total Rs.3,99,705 Rs. 4,52,919 Rs. 4,86,989
Rs.3,97,919 Rs.4,28,489
As can be observed the prices for the various model offerings, are pretty high as compared to the other conventional small cars available like Maruti 800. The lack of cost differentiation is one of the major reasons for the product failure in India.
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Organization of our Study
Our study has been organized according to the classic Everett Rogers Framework for Diffusion of Innovations. Accordingly, we have attempted to study how each person in the potential market goes through some changes in attitude towards a Reva electric car leading ultimately to its adoption. These changes are classified into distinct steps called –
Awareness
A person becomes aware of the innovation. The new product or service has to be noticeably different than those available. Due to this difference the product is noticed and awareness is created. To check awareness of the Reva battery driven car, we have attempted to answer the following questions through market research. 1. Do you know or have heard about battery driven cars? Everyone in our sample size had heard of battery driven cars, though people were more aware of hybrid cars such as the Toyota Prius. 2. Can you name some brands/companies producing battery driven cars? Awareness of battery driven car brands is quite high (only 6 people out of the 30 surveyed could not name any car). 3. Have you heard about Reva? Just 2 people out of the 30 surveyed said they had not heard of the Reva, which is quite remarkable considering that Reva does not concentrate on advertising. 4. Do you know its cost and have you seen it? Of our total sample of 30 people, 15 people said they had no idea of the cost of a Reva; 4 people said the Reva costs Rs. 1 lakh; 10 people estimated it to be around 3 lacs; while 1 person thought it was 5 lakhs. Only a few people we surveyed knew the rough cost of a Reva; this is a significant factor illustrating unawareness about the product because
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most of the people have at least a rough idea of the cost of a Maruti 800, Indica or Getz for example. 5. From where did you hear about Reva? People had different sources of information about the Reva. 13 people said they had seen it running on the road, 11 people had read about in a newspaper, while 4 people had seen a program on Reva on the Discovery channel. 1 person had heard about it from friends and 1 person had seen a program on the NDTV channel about Reva.
Interest
If the innovation offers more benefits than the present product it may interest the customer. the following questions. 1. Does the concept interest you? Our survey indicated that 25 of the 30 people we asked were interested in the concept, with 6 claiming to be very interested. It is relevant to mention that while many people found the concept interesting, the low penetration of Reva on the Indian roads indicate that few people are moving beyond this stage. 2. Does anybody you know own a Reva? No one we surveyed knew anyone who owned a Reva, except one person who had had actually driven a Reva. This indicates very low level of diffusion of the car in the Indian markets. Accordingly, our market research has focused on
Evaluation
If the product is interesting enough, a customer compares the benefits expected from the new product with those currently available. In this evaluation, the new product should hold a promise of some important benefits.
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1.
Do you want to try Reva or any other battery car? Why? Almost all (29 out of 30) the people we surveyed were interested in a trial, to check out drive quality, economic usage and eco friendliness, if approached. However, they lacked the willingness to visit a showroom/service centre for a trial run.
2.
Do you mind paying a certain cost to try Reva for a few The views here were quite varied, some people said yes, depending on the cost and comparing to existing car rentals. Other people were clearly against the idea.this in itself is suggestive of the lack of desire in people to test drive the car.
days?
Trial
After evaluation the customer needs to have a ‘trial’. Any innovation invokes ‘fear of the unknown’. There is always a risk that a product may not actually be able to deliver on its promise in actual use. A trial lets the customer minimise risk. In line with this thinking, we asked people in our study if they would be interested in trying the Reva to get a better feel for it. Also, we contacted the Reva dealer in Pune, Mr. Soneji, who was very kind in helping us understand the product better. Mr. Soneji also mentioned that trial drives of the Reva can be arranged for people interested in the car. Our questions were: 1. Reva. 2. Do you think there are risks involved in buying a battery Most people (about 24) felt there are significant risks, such as breakdown/fire in case of short-circuit, some risk in all new
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Have you driven any of the battery run cars? Only one person, out of the people we surveyed had driven the
driven car today?
scientific ideas, vague feeling of risk, to lack of value for money, to inconvenience, and danger in accidents. 3. What do you think are the plus points of battery driven cars? About 90% of the people surveyed said that the biggest plus point is that the Reva is an eco-friendly car. Other typical responses were that the cost of petrol is going up, the Reva is cheap to run, low Fuel Usage, no pollution, easy to drive with low speed as a road safety feature, cost efficiency and no need for petrol. 4. cars? Many of those surveyed said low speed and low performance of the Reva were a concern. People were also very concerned that the plastic body may be expensive to replace etc. Some people also said that charging facilities are lacking, after sales service is uncertain, accidents, slow, driving pleasure, low speed & obviously battery charging, no thrill in driving due to lack of power. 5. Would you like to own a Reva? Why? People had somewhat mixed views about this. One person said he would like to own a Reva at around 1.25 lacs if it’s an alternative to my two wheeler (similar idea expressed by 5 people), 12 people said not at the current price, 4 people said they would like to buy a Reva but not for regular use, 5 people were absolutely against the idea, and four people were enthusiastic. 6. How do you feel about owning and driving a Reva on a dayThe responses here were somewhat varied. Twelve people said they would feel pretty good about it due to it being an eco friendly car etc, 11 persons were not interested in buying a Reva.
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What do you think are the negative points of battery driven
to-day basis?
Five people felt it’s a good option for small families but not at the current cost. In the case of 2 people, having something rare is a factor. 7. How do you think battery driven cars compare to
petrol/diesel cars? As of now, petrol/diesel cars give much better performance. Also, convenience with regard to refuelling (recharging) and repairs were the most often heard responses. 8. Do you think it’s important to have/develop battery driven Of our respondents, 26 felt that it is important to develop this technology further, due to it being eco friendly, decreasing stocks of petrol and low running costs. 4 people had no strong view on the matter. 9. What do you think of battery driven cars as a proven and Most (23 of our respondents) felt the technology is proven. 28 people felt the Reva electric car is not feasible today. We think one of the main factors affecting the rate of diffusion of the Reva is its perceived impracticality. 10. Do you think battery driven cars will catch on? Generally, people thought that battery driven cars will not catch on for at least 20 years. Almost everyone said that Hybrid cars are the wave of the future.
cars further? Why?
feasible technology?
Adoption
Only when all the preceding steps are crossed does a customer become ready to adopt the product. Our research indicates that there are 76 Reva cars in Pune, this number has gone up from 55 cars in October 2006. We attempted to contact some Reva owners to have their views on this car, but unfortunately, we were not able to contact any Reva owners to date.
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Stated below are the feedbacks from customers as listed on the company’s website.
Testimonials
Mr. Ananth Narayan, Siddhi Entertainment Inc. "All my apprehensions about charging the vehicle and using it are passé. Today, I cannot think of driving any car other than the REVA. It is such a pleasure to drive even on congested roads. It is an exhilarating experience." Wg Cdr VC Vasishta: "My aspirations of the car was more than adequately rewarded when I sat behind the wheel and found the REVA to be silent, highly manoeuvrable with an acute turning radius capability and a peppy pickup." PM Ananth Narayan: "When I drove the Indica, it would jerk to stop, but with REVA, I have had no such problems while going shopping or to the library. It’s easy to park, very light and therefore very easy to manoeuvre."
Conclusions
Our study indicates that the Reva battery car market in India is still in the early introductory stage of its anticipated Product Life Cycle. As such, the Adopters of the Reva are typically Innovators and Early Adopters, with the means to finance their interests.
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Since the Reva is still in the Introduction stage a limited number of models/variants are offered but features are changed frequently attempting to improve product acceptance. As such, the Reva is currently offered in about 2000 shades depending on customer choice. The emphasis is on promoting the principal benefit offered by the product. The Reva is clearly focused on a niche market, both in India and overseas. The suggested strategy is to continue to promote exports and build a strong brand image globally. The results of our consumer study lead us to the conclusion that over 90% of people have heard about the Reva. However, this awareness is very limited. Most of the people surveyed have limited and wrong information about the product and its features. Similarly, looking at the Interest parameter, over 80% of our respondents said they were interested in the benefits offered by the Reva. An overwhelming majority of the people surveyed said they would like to have an opportunity to evaluate and try the car, but were not excited by the concept .They agreed that if approached they would like to try the car. The company must focus on this area. As they have a product which generates a great deal of Interest, there must be an opportunity for people to evaluate and try it. Our research indicates that there are 76 Reva cars in Pune; this number has gone up from 55 cars in October 2006. We see that the Adoption of the Reva is increasing at a steady rate, though it is likely to remain very much a niche product for the foreseeable future.
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The graph below indicates a rough estimate of the stages of the diffusion process in light of the product. It is just a rough estimate and is just meant as an illustration. The results of our study illustrate that Reva is still stuck in between the interest and evaluation stage as far as the majority in India is concerned. There are a few innovators and early adopters that exist in the market but the exposure is limited. Therefore considerable changes need to be initiated in the marketing mix to facilitate penetration of the product in the Indian market.
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Proposed changes in the marketing mix
Product
The problems: Reva as a product has many relative advantages as compared to the conventional petrol/diesel driven cars. However, Reva lacks the practicality of a regular car. It lacks basics like comfort and space. Walk up to the Reva and the first thing that strikes are its dinky dimensions. It is a small car by any standards with an overall footprint comparable to an auto rickshaw. Chetan Maini, the young brain behind the Reva, says he did consider a four-door model but that would have meant more weight, required more power and a larger battery. Though Maini has the technology, it would have pushed the costs up disproportionately. Reva has a fibre structure, which makes it dent-free. However, at the same time it may prove to be risky in case of a major traffic collision. The car when fully charged can run only a distance of about 80-110 kms. It also suffers from problems of low pick-up and power. The distance limitation is the chief drawback of the commuter car. In fact, the real problem associated with the car is concerning the battery technology. An improved battery technology would allow more weight to be added on to the car, making the four-door model more feasible and giving the car the look of conventional cars. An improved battery would enable the car to cover larger distances and would allow it to be run at speeds comparable to the conventional cars, thus diluting the major drawbacks associated with such cars. Ford's director of electric vehicles, Dennis Wilkie, said: "The fundamental challenge in electric vehicles is in the batteries and propulsion technology." There are many candidates for electric car batteries out there, all competing to meet the criteria. However, the improved efficiency is associated with very high costs. In fact, the electric vehicle technology employed by Reva, is facing a number of technological challenges and considerable amount of research is required in this field.
Proposed changes:
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1. Reva employs conventional lead-acid battery which is low on efficiency. There are nickel-metal-hydride "Ovonic" battery developed by Energy Conversion Devices, Ind. of Troy, Michigan,nickel iron and nickel cadmium batteries which are more efficient than lead acid batteries . Using such batteries would take the car closer to the conventional cars, and hence facilitate fast adoption rate. However, cost can be a constraint in this case as most of these batteries use expensive components as compared to lead-acid batteries. 2. Our consumer research revealed that most of the people were interested in hybrid cars, than electric vehicles. In fact, the RECC can explore the possibility of launching a hybrid –Reva car, which would solve the issues related to the current version. 3. Indian passenger vehicle is largely dominated by the two-wheeler segment, with no-gear, low power scooters constituting a large majority. RECC can use its expertise in electric vehicle technology to enter this sector, which has the potential of being a large market.
4.
The Local Picture (source: www.siam.com)
(Number Vehicles) 2003-04 2004-05 2005-06 2006-07 of 2001-02 2002-03
Automobile Domestic Sales Trends Category
Scooters Motorcycles Mopeds
908268 2887194 408263
825648 3647493 338985 -
886295 4170445 307509 -
922428 4964753 322584 -
909051 5810599 332741 -
940673 6553664 355870 7341
Electric Two Wheelers -
Total Two Wheelers 4203725 4812126 5364249 6209765 7052391 7857548 Grand Total 5225788 5941535 6810537 7897629 8906428 10109037
Indian passenger vehicle is largely dominated by the two-wheeler segment, with no-gear, low power scooters constituting a large majority. RECC can use its expertise in electric vehicle technology to enter this sector, which has the potential of being a large market. 5. Considerable efforts need to be done to revamp the design of the car, to give it a more real look. The Reva's styling has a certain appeal to it in a comical and cute sort of way. However, to target the mass market, the styling needs a rethinking process.
Place
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Reva has a very limited network of Wholesale/retail distributors with centres in only 6 cities in India i.e. Delhi. The car is exported to Europe in significant numbers; this indicates the company is segmenting geographically. Last year Reva was the highest selling on-road electric vehicle globally. The existing model of the EEC-certified REVA is currently available in India and marketed in U.K. Italy, Malta, Sri Lanka, Cyprus & Greece. With over 1800 vehicles on the road, REVA is also being test marketed in USA, Norway, Spain and other European countries. Now, in order to create awareness and reach the consumers in India, the company needs to revamp its distribution network. In fact, some of the people surveyed revealed that they wanted to try the car to see its utility, but were unable to do so. This is one aspect which requires considerable attention. Bangalore, Hyderabad, Pune, Ahmedabad, Goa and
Promotion
Now, this is one aspect the company needs to pay due attention to, if it wants to position the brand in India. Due to lack of promotional campaigns, most people learn about Reva from the word-of-mouth, documentaries, internet which are prone to misinterpreted and garbled facts. There is a very low degree of awareness about the product. We suggest a steady promotion and advertising campaign to gradually build up the brand image of the product. Also, the Reva Electric Car Company should emphasize that many governments internationally give incentives to Reva car users. For example, in the U.K., G-Wiz (REVA is sold under the name G-Wiz in the UK) is supported by the government where owners are exempt from paying parking fees, congestion taxes, sales and road tax exemptions, 100% depreciation in the first year etc. In France the Government gives 5,000 FF to each buyer of an EV, low road tax are applicable, 100% depreciation for corporate, 20% of all public transport has to be electric, free parking for EV’s, EV’s encouraged to be used as rental cars in public. No taxes are imposed on electricity used for charging EV’s.
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In fact, Reva is very promising in the Indian scenario, and what is required is awareness about the product. The company needs to shift its focus from the niche segment to the mass market. This necessitates the need for an steady and well-thought-of promotional campaign.
Price
As discussed above, most of the models of Reva are priced close to Rs. 44.5 lakhs. In fact, the company orientation is towards the foreign markets, and it is not adopting a price-differentiation strategy in India. In fact the company is not adopting a mass marketing approach rather it is targeting a very niche segment. In India, despite the stupendous economic growth, a car is still a commodity for the middle and upper middle class community, and it’s more of a status symbol than a necessity. Indian people are more conservative, when it comes to spending money than any other country in the world. What an Indian commoner needs is “Value for Money” and in order to gain market share in India, the company needs to slash down the prices.
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doc_642387286.doc
It analyse the concept of adoption-diffusion in the light of battery driven cars and to suggest changes in the marketing-mix to be initiated to increase the rate of adoption of these products.
REVA-Adoption Diffusion Process for Tubeless Tyres
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Table of Contents
Table of Contents...................................................................................................2 Executive Summary...............................................................................................4 Objective of the study........................................................................................4 Our approach......................................................................................................4 The Story so far..................................................................................................5 REVA-The Electric Car............................................................................................7 Key features.......................................................................................................7 Product Characteristics and the Rate of Adoption.................................................9 Complexity.........................................................................................................9 Easy manoeuvrability......................................................................................9 Easy Charging process..................................................................................10 Easy to maintain and Easy serviceability......................................................10 Consumer view point.....................................................................................10 Compatibility ...................................................................................................10 The societal constraints.................................................................................11 Consumer viewpoint......................................................................................11 Relative advantage...........................................................................................11 The consumer viewpoint...............................................................................13 Trialibility..........................................................................................................14 Consumer view-point.....................................................................................15 Cost..................................................................................................................15 Organization of our Study....................................................................................16 Interest ............................................................................................................17 Evaluation.........................................................................................................17 Trial..................................................................................................................18 Adoption...........................................................................................................20
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Testimonials..................................................................................................21 Conclusions..........................................................................................................21 Proposed changes in the marketing mix..............................................................24 Product.............................................................................................................24 Place.................................................................................................................25 Promotion.........................................................................................................26 Price..................................................................................................................27
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Executive Summary
An innovation is any good, service or idea that is perceived by someone as new. The idea may have a long history, but it is an innovation to the person who sees it as new. Innovations take time to spread through the social system, until they diffuse into the market and get adopted by people. Adoption is an individual’s decision to become a regular user of the product. The pace at which the products diffuse differs from one market to another depending on factors like the extent to which an economy is open to new products, media, transportation, and warehousing and distribution network. It also depends on customer awareness and knowledge. The theory and the process of adoption diffusion were first propounded by Everett M. Rogers. In 1983 he presented a paper titled ‘Diffusion of innovations’ which contained a framework to understand how innovations are adopted by any market. According to this theory, people differ in their attitude towards change and the risk-taking ability. This affects their willingness to try and adopt a new product.
Objective of the study
The purpose of this assignment is to understand and analyse the concept of adoption-diffusion in the light of battery driven cars and to suggest changes in the marketing-mix to be initiated to increase the rate of adoption of these products.
Our approach
We have tried to analyse the adoption-diffusion process of the most common battery driven car available in the Indian market- “REVA” marketed and manufactured in India by Maini Group. Though the management orientation is towards the foreign market, and only 20% of the manufacturing units are sold in India, we have concentrated on the Indian market as with rising income levels, congested road conditions, and sky-rocketing fuel prices, India can prove to be a large market for this car. Battery driven cars are certainly an innovation, not only in India, but globally. Adopters of Innovations are observed to be moving through five stages: Awareness, Interest, Evaluation, Trial, and Adoption. How soon a product is able to make the transition from being adopted by innovators
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to laggards is also dependent on product characteristics like compatibility, complexity, relative advantage, trialibility etc. We have tried to analyze the product in light of the above stated parameters, and have suggested certain changes in the marketing mix to speed up the diffusion of this innovation-“REVA-the Electric Car”
Electric Vehicle Technology
The Story so far
Imagine driving a car that emits only pure water vapour and little else. Moreover, one that used residual water for fuel thus doing away with refuelling. It is not an imaginative plot out of a Hollywood Sci-fi anymore. Life for BEV’s (battery electric vehicles, as they are popularly called) has come round a full circle. Electric cars have been around since the beginning of the automotive age. Few people realize that successful electric automobiles were being produced as early as the 1880's. For over 20 years, electric cars were commercially produced, and were for some years in heady competition with internal combustion and steam-powered carriages. Not until internal combustion technology and promotion, along with cheap fuel, had outstripped all competition, did electric cars drop out of the automotive picture. Only specialized electric vehicles that were used over short distances, like golf carts and forklifts, survived. But now there is a renewed interest in the electric automobiles primarily in variants such as “the hybrid automobiles”, “the fuel cell technology” apart from the regular BEV’s. Electric Vehicle (EV) technology is gaining ground and popularity rapidly. With depletion of oil reserves and a world characterized by smog, noise and all kinds of pollutants, governments and communities are awakening to the several benefits of EV technology. With the innumerable advantages of EVs, companies in developed countries have spent huge amounts to develop electric cars that can travel longer distances, providing high levels of comfort. In spite of this technology being available now, the cost of electric vehicles to suit driving requirements in these developed countries is prohibitively high. On the other hand, India is ready and well suited for the introduction of EVs today with the existing technologies available, making EVs cost effective. Zero emission vehicles are almost noiseless and can be charged at home or work, saving commuters endless queues at petrol stations. Charging at night when consumption is low, allows for efficient use of electricity. EVs
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are easier to service and maintain due to the absence of spark plugs, clutch and gears. Ideal for "stop - start" city driving conditions, EVs are extremely reliable and easy to drive. The average speed of travel in our cities has been steadily on the decline as the vehicle population rises. In fact, a recent study conducted by TERI (Tata Energy Research Institute) found that the average speed in Indian cities was as low as 20 km/hour. The ideal EV for India and the developing world is basic, simple and reliable - designed especially for local conditions using cutting edge technology and which is modular to incorporate and absorb newer technologies. EVs with a top speed of 40-60 kmph and a range of 50-80 km would meet over 90 percent of the city mobility requirements in India. REVA was conceptualised and designed to meet these needs and performance specifications.
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REVA-The Electric Car
Reva Electric Car Company (RECC) was established in 1994 through a joint venture between the Maini Group and Amerigon. Amerigon had a 32% stake in RECC's Rs 58 million equity and Maini Precision Products and Maini Materials Movement held the remaining 68%. The REVA Electric car was launched in May 2001 in Bangalore and is currently available in 6 cities across the country. Reva was claimed to be India's first zero-polluting, battery-driven car. REVA is currently being exported to United Kingdom, Italy, Malta, Cyprus, Norway, Spain Ireland, Japan, Srilanka etc. In addition to this, the car is being test marketed in Australia, Switzerland, Germany, and Austria, Nepal etc.
Key features
REVA is a two-door hatchback, which can comfortably accommodate two adults and two minors. The REVA uses 9 units of electricity for a single full charge that gives up to * 80 KM in city driving conditions. This works out to 40 paisa per km (less than 1 US cent). The average running cost of a petrol car is Rs.4.0 per km. Since the REVA does not have an engine, clutch or gears, or a carburettor, radiator, exhaust etc, the maintenance cost is low. Estimates show that the maintenance costs of REVA are 40 % lower than that of a small car over a 3-year ownership period. REVA can go up to 80-Km. on a single charge depending on usage. There is a battery level indicator light, which comes on when there is 15 KM of charge remaining. Subsequently, the onboard computer automatically shifts the car into an “E” or economy mode, which enhances the driving range by another 5 Km.
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REVA’s charging system, is extremely simple, very reliable and safe. It has an on- board charger along with a charge cable and can be charged anywhere, at home or at work, by simply plugging in to a 230 Volt, 15Ampere socket. A full charge an attained in 8 hours and 80% charge in 2 and a half hours. A total of eight 6-volt EV type lead acid batteries specially developed for EV`s form REVA's power pack. The battery pack has a typical life of 2-3 years depending upon usage. Designed, marketed and used as a low speed urban commuter vehicle the Reva G-Wiz has a safety record second to none, with over 20 million miles / 32 million km driven by customers globally and over 4,000 years of ownership with no reported serious injuries (As on May 2007). REVA took extra precaution in the design to incorporate many safety features such as Steel space frame with Side Impact Beams; Dent proof ABS body panels; Low Voltage (48v) system and Electronic regenerative braking. It has passed all mandatory safety tests. The REVA has been tested at ARAI (Automotive Research Association of India), Pune and has been passed for homologation and roadworthiness. Overall / Side impact - The special steel space frame and side impact beams used in the REVA cocoons the passengers shielding them from impact. Dent / Scratch proof - REVA uses ABS body panels that are dent / scratch proof. This ensures minimum damage to the car and enhances protection to passengers in the event of a collision. Front / Back impact -. Injury to passengers is also minimized in the event of a frontal collision due to the position of the spare tyre in the bonnet space where other cars usually have the engine. The front and rear bumpers are energy absorbing and retain their original shape after a minor impact. Low centre of gravity - The weight and position of the battery pack under the front seat ensures a low centre of gravity thus enhancing stability. The Company has dealer and service networks in Bangalore, Delhi, Ahmadabad, Chennai, Hyderabad, and Pune. With 90% of indigenous components in the REVA, availability of spares is not a problem. Spares are easily available at all our dealer points / service stations.
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Product Characteristics and the Rate of Adoption
The transition of a product from being adopted by innovators to laggards is very strongly dependent on the product characteristics. A marketer can influence the rate of adoption by making conscious decisions in product formulation. The rate of adoption for an innovation is affected by:
Complexity
If the product features are too complex customers might take longer to understand them and consequently the rate of adoption will be much slower. While delivering on the benefit the product must be simple to know and use. “REVA is designed to be unique and stands out on the road as a genuine city car with a mature expression. It has highly simplistic design, with all the inherent benefits of an Electric Car and is indeed a revelation in city mobility” This is how the Reva electric car co. website describes their product formulation. REVA has been uniquely developed to be highly simplistic in use and maintenance to give the product a differentiated look. Some of the key features of the car as projected by the company are listed below:
Easy manoeuvrability
Reva is a fully automatic with no clutch and gears making it quite suitable for Indian scenario with low speed, and congested, road conditions .A small turning radius of just 3.5 metres makes it easy to park and manoeuvre in difficult city traffic conditions.
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Easy Charging process
As compared to other Electric Vehicles, Reva has an onboard charger to facilitate easy charging which can be carried out by plugging into any 15 Amp socket at home or work. The onboard charger ensures the safety of the car in case of any voltage fluctuation or any electric spikes. The auto cut off mechanism ensures that the customer does not have to worry about overcharging or any other issues related to charging.
Easy to maintain and Easy serviceability
REVA requires extremely low maintenance because of the minimum number of moving parts. From service point of view, advanced systems such as the two onboard computers and remote diagnostic capabilities (carried out with the help of a Palm Pilot) enable quick vehicle analysis, prompt service and improve REVA's.
Consumer view point
Our consumer research revealed that people have very low awareness about Reva and its features. A very strong positive point about Reva is its intrinsic simplicity, but people have a very different perception of the product. With no existing promotional campaigns and advertisements, most of the people have formed opinions of their own about the product. The concept of charging the battery, and the car running on it, is a concept which is new in India, and as such people have formed the opinion that it has to be very complicated. In fact, some of the people even suggested the need for exclusive charging stations, for the car to succeed. The concept of an electric car and low technical knowledge of Indian people has further contributed to the idea of the whole product being very complicated.
Compatibility
Compatibility may be defined as the degree to which innovation matches the values and experiences of individuals. As far as possible the product should be compatible with the one presently used by the customer. This enables the customer to get improved performance without discarding the existing product. Reva is designed for low speed, congested, urban conditions. Being efficient and cost-effective, the REVA has the lowest running cost in the world. In fact, Reva is much suited to Indian needs than any other country in the world.
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The societal constraints
However, in India, despite the stupendous economic growth, a car is still a commodity for the middle and upper middle class community, and it’s more of a status symbol than a necessity. Indian people are more conservative, when it comes to spending money than any other country in the world. What an Indian commoner needs is Value for Money and here the truth is: “Reva lacks the practicality and convenience of an everyday car”. This is one factor which is reflected in the consumer attitude. However, with the rising income level of the Indian society, the rising status of women and constantly improving technology, India in future can be a potentially large market for electric cars.
Consumer viewpoint
Almost all the people we surveyed, out rightly rejected the prospects of using Reva as an everyday car. Some of the people, who were willing to buy the car, were interested primarily because of a strong desire to save our blue planet.
Relative advantage
If the advantage offered by the product is significant a customer may be more induced to try the product. If any product offers a marginal increase in benefit the customer may not be willing to adapt to the newer way of doing something. Reva being an electric car has its own potential advantages against the more common petrol/diesel cars.
•
The car is fully automatic. It has no clutch and no gears. This feature renders it a significant relative advantage over the other cars in the Indian market, as the concept of automatic transmission in lowpriced cars is rare and not many companies offer such models. Operating costs for the car work out to be as low as 40 paisa/km in contrast to the petrol-driven cars for which the operating expenses work out to be about Rs.4/km. With minimum number of moving parts, Reva is almost maintenance free and the two on-board computers further improve performance and efficiency. Estimates show that the maintenance costs of REVA are 40 % lower than that of a small car over a 3-year ownership period. The body is made from Acrylo-Butadiene-Styrene (ABS) panels that are bolted onto a stout space-frame. The ABS body panels are dent
•
•
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proof thus making it more suitable for Indian roads and traffic conditions. • Customers can choose from over 2000 shades in contrast to only about 5-10 shades offered by other companies, and can customize their REVA by mixing 'n' matching these to add a personal touch; a concept which has been non-existent in India till now. The car runs on battery, is low on emissions, and employs environment friendly technologies Under the Income Tax Act, the REVA qualifies for 80% depreciation on a Written down Value (WDV) basis, as compared to 20% for other cars. This means an unbelievable excess tax saving of over 21% of the cost of the car in the first year itself. In cash flow terms this means that the REVA makes the most car sense.
•
•
The table listed below gives an idea of the tax saving on purchasing Reva vs. the conventional cars:
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Cost saving per In Rs. month ITEMS REVA On Road Cost 322000 Depreciation allowed 257600 Tax Benefit 90160 Tax savings 67620 Fuel cost Electricity cost 4 Maintenance Cost 320 Total operating Cost 675 Cost Savings for REVA 4305 Total savings on 71925 REVA
CONVENTIONAL CAR 322000 64400 22540 42 800 4500
Assuming that a person travels 1500 kms a month The average fuel economy achieved in city driving condition 14km/ lts Average maintenance
The consumer viewpoint
We carried out a consumer survey to determine relative advantage people see in buying an electric car like Reva over the conventional cars. Most of the people feel that the only competitive advantage the car has, is that it’s eco-friendly and cuts down on the operating costs. There were a few people who were well aware of the product features, like good maintenance and safety standards. However, largely the people stand unaware of the benefits the car has to offer. While the product offers a no. of advantages over the existing petrol/diesel driven cars, there is a large communication gap that exists. This is largely due to the company’s slack attitude towards promotion of product in India. The Reva electric car co. is concentrating solely on the export market. About 80% of the manufactured units are exported to United Kingdom, Italy, Malta, Cyprus, Norway, Spain Ireland, Japan, Srilanka etc. In addition to this, the car is being test marketed in Australia, Switzerland, Germany, and Austria, Nepal etc. In fact, most of the features of the car which the company projects as the unique selling propositions are considered by the people to be potential hazards. This would be discussed in more detail under the “Observeability” section.
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Observeability
The product innovation and its benefits must be readily observable. If the customer can see the change a product will bring beforehand there is higher possibility of acceptance. Now, this is one area where the product is losing out. Since there is a lack of awareness about the product in India, the Indian market remains largely untapped. However, there is a significant scope of expansion in India, as the income levels are low, roads are congested and people look forward for products with economic advantage. Our consumer research revealed that largely people are unaware of the benefits Reva offers. In fact they have their own misconceptions about the product, and therefore, even though it has been 6 years since the product was commercialised, it is still in its nascent stage.
The consumer viewpoint
Most of the people we talked to about Reva are either unaware of the price or state the price of the car to be between Rs. 1-1.5 lakhs against the actual price which is well above Rs. 3 lakhs. As they have a very low cost perception they feel that Reva is a Toy car, still in the experimental stage, and is not feasible for day-to-day use. Though Reva has a very easy charging mechanism, most of the people feel that charging the car is a very cumbersome task and even felt the need of charging centres on the lines of petrol and diesel stations. “The concept of electric cars definitely interests me, but I feel cars like Reva are not feasible in the current scenario. It has a plastic body which would tend to damage, charging facilities are lacking, and after sales service is lacking. If I want to buy a car, I would like to buy one, which gives me the value for money, not a toy car”- says Vasu Gopal, Senior Product Executive, Ramco Systems. The statement clearly indicates the lack of awareness that exists in the market, about Reva. This is largely due to lack of promotional campaigns about the car. Most of the people we surveyed, heard about Reva from sources like Internet, friends/family, TV documentaries, which are prone to personal misinterpretations and garbled facts.
Trialibility
All changes involve a risk, if the customer can try the new product for a limited period or a part of the product it’s much easier for the adoption
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process. In other words, the degree to which the innovation can be tried on a limited basis. Now, this presents a sizable challenge for Reva as it can be only tried at a service centre or a showroom. Reva has a pretty limited network of
Wholesale/retail distributors in only 6 cities in India i.e. Bangalore, Hyderabad, Pune, Ahmedabad, Goa and Delhi. As such the availability of Reva cars for trial is very low.
Consumer view-point
The results of our survey reveal that most of the people, who knew about the product, were willing to try the car on a limited basis, as the concept interested them. However, they lacked the willingness to visit a showroom/service center to try the car. They were willing to test-drive the car, if approached. When asked, whether they were willing to rent the car for a few days, only a fraction of the people agreed that they would, but added that the rent amount would be a key factor.
Cost
We contacted Mr. Soneji, the in-charge for Madhu automobiles, a Reva Seva authorized service center, to determine the prices for various models of Reva. Listed below is the pricing structure for the various model offerings of Reva: Model Reva Standard Reva A/C Reva Classe Basic
Rs.3,49,705
Transportatio Taxes(appro n x.) Rs. 10,000 Rs. 40000 Rs.10,000 Rs. 10,000 Rs. 45000 Rs. 48,500
Total Rs.3,99,705 Rs. 4,52,919 Rs. 4,86,989
Rs.3,97,919 Rs.4,28,489
As can be observed the prices for the various model offerings, are pretty high as compared to the other conventional small cars available like Maruti 800. The lack of cost differentiation is one of the major reasons for the product failure in India.
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Organization of our Study
Our study has been organized according to the classic Everett Rogers Framework for Diffusion of Innovations. Accordingly, we have attempted to study how each person in the potential market goes through some changes in attitude towards a Reva electric car leading ultimately to its adoption. These changes are classified into distinct steps called –
Awareness
A person becomes aware of the innovation. The new product or service has to be noticeably different than those available. Due to this difference the product is noticed and awareness is created. To check awareness of the Reva battery driven car, we have attempted to answer the following questions through market research. 1. Do you know or have heard about battery driven cars? Everyone in our sample size had heard of battery driven cars, though people were more aware of hybrid cars such as the Toyota Prius. 2. Can you name some brands/companies producing battery driven cars? Awareness of battery driven car brands is quite high (only 6 people out of the 30 surveyed could not name any car). 3. Have you heard about Reva? Just 2 people out of the 30 surveyed said they had not heard of the Reva, which is quite remarkable considering that Reva does not concentrate on advertising. 4. Do you know its cost and have you seen it? Of our total sample of 30 people, 15 people said they had no idea of the cost of a Reva; 4 people said the Reva costs Rs. 1 lakh; 10 people estimated it to be around 3 lacs; while 1 person thought it was 5 lakhs. Only a few people we surveyed knew the rough cost of a Reva; this is a significant factor illustrating unawareness about the product because
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most of the people have at least a rough idea of the cost of a Maruti 800, Indica or Getz for example. 5. From where did you hear about Reva? People had different sources of information about the Reva. 13 people said they had seen it running on the road, 11 people had read about in a newspaper, while 4 people had seen a program on Reva on the Discovery channel. 1 person had heard about it from friends and 1 person had seen a program on the NDTV channel about Reva.
Interest
If the innovation offers more benefits than the present product it may interest the customer. the following questions. 1. Does the concept interest you? Our survey indicated that 25 of the 30 people we asked were interested in the concept, with 6 claiming to be very interested. It is relevant to mention that while many people found the concept interesting, the low penetration of Reva on the Indian roads indicate that few people are moving beyond this stage. 2. Does anybody you know own a Reva? No one we surveyed knew anyone who owned a Reva, except one person who had had actually driven a Reva. This indicates very low level of diffusion of the car in the Indian markets. Accordingly, our market research has focused on
Evaluation
If the product is interesting enough, a customer compares the benefits expected from the new product with those currently available. In this evaluation, the new product should hold a promise of some important benefits.
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1.
Do you want to try Reva or any other battery car? Why? Almost all (29 out of 30) the people we surveyed were interested in a trial, to check out drive quality, economic usage and eco friendliness, if approached. However, they lacked the willingness to visit a showroom/service centre for a trial run.
2.
Do you mind paying a certain cost to try Reva for a few The views here were quite varied, some people said yes, depending on the cost and comparing to existing car rentals. Other people were clearly against the idea.this in itself is suggestive of the lack of desire in people to test drive the car.
days?
Trial
After evaluation the customer needs to have a ‘trial’. Any innovation invokes ‘fear of the unknown’. There is always a risk that a product may not actually be able to deliver on its promise in actual use. A trial lets the customer minimise risk. In line with this thinking, we asked people in our study if they would be interested in trying the Reva to get a better feel for it. Also, we contacted the Reva dealer in Pune, Mr. Soneji, who was very kind in helping us understand the product better. Mr. Soneji also mentioned that trial drives of the Reva can be arranged for people interested in the car. Our questions were: 1. Reva. 2. Do you think there are risks involved in buying a battery Most people (about 24) felt there are significant risks, such as breakdown/fire in case of short-circuit, some risk in all new
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Have you driven any of the battery run cars? Only one person, out of the people we surveyed had driven the
driven car today?
scientific ideas, vague feeling of risk, to lack of value for money, to inconvenience, and danger in accidents. 3. What do you think are the plus points of battery driven cars? About 90% of the people surveyed said that the biggest plus point is that the Reva is an eco-friendly car. Other typical responses were that the cost of petrol is going up, the Reva is cheap to run, low Fuel Usage, no pollution, easy to drive with low speed as a road safety feature, cost efficiency and no need for petrol. 4. cars? Many of those surveyed said low speed and low performance of the Reva were a concern. People were also very concerned that the plastic body may be expensive to replace etc. Some people also said that charging facilities are lacking, after sales service is uncertain, accidents, slow, driving pleasure, low speed & obviously battery charging, no thrill in driving due to lack of power. 5. Would you like to own a Reva? Why? People had somewhat mixed views about this. One person said he would like to own a Reva at around 1.25 lacs if it’s an alternative to my two wheeler (similar idea expressed by 5 people), 12 people said not at the current price, 4 people said they would like to buy a Reva but not for regular use, 5 people were absolutely against the idea, and four people were enthusiastic. 6. How do you feel about owning and driving a Reva on a dayThe responses here were somewhat varied. Twelve people said they would feel pretty good about it due to it being an eco friendly car etc, 11 persons were not interested in buying a Reva.
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What do you think are the negative points of battery driven
to-day basis?
Five people felt it’s a good option for small families but not at the current cost. In the case of 2 people, having something rare is a factor. 7. How do you think battery driven cars compare to
petrol/diesel cars? As of now, petrol/diesel cars give much better performance. Also, convenience with regard to refuelling (recharging) and repairs were the most often heard responses. 8. Do you think it’s important to have/develop battery driven Of our respondents, 26 felt that it is important to develop this technology further, due to it being eco friendly, decreasing stocks of petrol and low running costs. 4 people had no strong view on the matter. 9. What do you think of battery driven cars as a proven and Most (23 of our respondents) felt the technology is proven. 28 people felt the Reva electric car is not feasible today. We think one of the main factors affecting the rate of diffusion of the Reva is its perceived impracticality. 10. Do you think battery driven cars will catch on? Generally, people thought that battery driven cars will not catch on for at least 20 years. Almost everyone said that Hybrid cars are the wave of the future.
cars further? Why?
feasible technology?
Adoption
Only when all the preceding steps are crossed does a customer become ready to adopt the product. Our research indicates that there are 76 Reva cars in Pune, this number has gone up from 55 cars in October 2006. We attempted to contact some Reva owners to have their views on this car, but unfortunately, we were not able to contact any Reva owners to date.
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Stated below are the feedbacks from customers as listed on the company’s website.
Testimonials
Mr. Ananth Narayan, Siddhi Entertainment Inc. "All my apprehensions about charging the vehicle and using it are passé. Today, I cannot think of driving any car other than the REVA. It is such a pleasure to drive even on congested roads. It is an exhilarating experience." Wg Cdr VC Vasishta: "My aspirations of the car was more than adequately rewarded when I sat behind the wheel and found the REVA to be silent, highly manoeuvrable with an acute turning radius capability and a peppy pickup." PM Ananth Narayan: "When I drove the Indica, it would jerk to stop, but with REVA, I have had no such problems while going shopping or to the library. It’s easy to park, very light and therefore very easy to manoeuvre."
Conclusions
Our study indicates that the Reva battery car market in India is still in the early introductory stage of its anticipated Product Life Cycle. As such, the Adopters of the Reva are typically Innovators and Early Adopters, with the means to finance their interests.
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Since the Reva is still in the Introduction stage a limited number of models/variants are offered but features are changed frequently attempting to improve product acceptance. As such, the Reva is currently offered in about 2000 shades depending on customer choice. The emphasis is on promoting the principal benefit offered by the product. The Reva is clearly focused on a niche market, both in India and overseas. The suggested strategy is to continue to promote exports and build a strong brand image globally. The results of our consumer study lead us to the conclusion that over 90% of people have heard about the Reva. However, this awareness is very limited. Most of the people surveyed have limited and wrong information about the product and its features. Similarly, looking at the Interest parameter, over 80% of our respondents said they were interested in the benefits offered by the Reva. An overwhelming majority of the people surveyed said they would like to have an opportunity to evaluate and try the car, but were not excited by the concept .They agreed that if approached they would like to try the car. The company must focus on this area. As they have a product which generates a great deal of Interest, there must be an opportunity for people to evaluate and try it. Our research indicates that there are 76 Reva cars in Pune; this number has gone up from 55 cars in October 2006. We see that the Adoption of the Reva is increasing at a steady rate, though it is likely to remain very much a niche product for the foreseeable future.
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The graph below indicates a rough estimate of the stages of the diffusion process in light of the product. It is just a rough estimate and is just meant as an illustration. The results of our study illustrate that Reva is still stuck in between the interest and evaluation stage as far as the majority in India is concerned. There are a few innovators and early adopters that exist in the market but the exposure is limited. Therefore considerable changes need to be initiated in the marketing mix to facilitate penetration of the product in the Indian market.
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Proposed changes in the marketing mix
Product
The problems: Reva as a product has many relative advantages as compared to the conventional petrol/diesel driven cars. However, Reva lacks the practicality of a regular car. It lacks basics like comfort and space. Walk up to the Reva and the first thing that strikes are its dinky dimensions. It is a small car by any standards with an overall footprint comparable to an auto rickshaw. Chetan Maini, the young brain behind the Reva, says he did consider a four-door model but that would have meant more weight, required more power and a larger battery. Though Maini has the technology, it would have pushed the costs up disproportionately. Reva has a fibre structure, which makes it dent-free. However, at the same time it may prove to be risky in case of a major traffic collision. The car when fully charged can run only a distance of about 80-110 kms. It also suffers from problems of low pick-up and power. The distance limitation is the chief drawback of the commuter car. In fact, the real problem associated with the car is concerning the battery technology. An improved battery technology would allow more weight to be added on to the car, making the four-door model more feasible and giving the car the look of conventional cars. An improved battery would enable the car to cover larger distances and would allow it to be run at speeds comparable to the conventional cars, thus diluting the major drawbacks associated with such cars. Ford's director of electric vehicles, Dennis Wilkie, said: "The fundamental challenge in electric vehicles is in the batteries and propulsion technology." There are many candidates for electric car batteries out there, all competing to meet the criteria. However, the improved efficiency is associated with very high costs. In fact, the electric vehicle technology employed by Reva, is facing a number of technological challenges and considerable amount of research is required in this field.
Proposed changes:
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1. Reva employs conventional lead-acid battery which is low on efficiency. There are nickel-metal-hydride "Ovonic" battery developed by Energy Conversion Devices, Ind. of Troy, Michigan,nickel iron and nickel cadmium batteries which are more efficient than lead acid batteries . Using such batteries would take the car closer to the conventional cars, and hence facilitate fast adoption rate. However, cost can be a constraint in this case as most of these batteries use expensive components as compared to lead-acid batteries. 2. Our consumer research revealed that most of the people were interested in hybrid cars, than electric vehicles. In fact, the RECC can explore the possibility of launching a hybrid –Reva car, which would solve the issues related to the current version. 3. Indian passenger vehicle is largely dominated by the two-wheeler segment, with no-gear, low power scooters constituting a large majority. RECC can use its expertise in electric vehicle technology to enter this sector, which has the potential of being a large market.
4.
The Local Picture (source: www.siam.com)
(Number Vehicles) 2003-04 2004-05 2005-06 2006-07 of 2001-02 2002-03
Automobile Domestic Sales Trends Category
Scooters Motorcycles Mopeds
908268 2887194 408263
825648 3647493 338985 -
886295 4170445 307509 -
922428 4964753 322584 -
909051 5810599 332741 -
940673 6553664 355870 7341
Electric Two Wheelers -
Total Two Wheelers 4203725 4812126 5364249 6209765 7052391 7857548 Grand Total 5225788 5941535 6810537 7897629 8906428 10109037
Indian passenger vehicle is largely dominated by the two-wheeler segment, with no-gear, low power scooters constituting a large majority. RECC can use its expertise in electric vehicle technology to enter this sector, which has the potential of being a large market. 5. Considerable efforts need to be done to revamp the design of the car, to give it a more real look. The Reva's styling has a certain appeal to it in a comical and cute sort of way. However, to target the mass market, the styling needs a rethinking process.
Place
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Reva has a very limited network of Wholesale/retail distributors with centres in only 6 cities in India i.e. Delhi. The car is exported to Europe in significant numbers; this indicates the company is segmenting geographically. Last year Reva was the highest selling on-road electric vehicle globally. The existing model of the EEC-certified REVA is currently available in India and marketed in U.K. Italy, Malta, Sri Lanka, Cyprus & Greece. With over 1800 vehicles on the road, REVA is also being test marketed in USA, Norway, Spain and other European countries. Now, in order to create awareness and reach the consumers in India, the company needs to revamp its distribution network. In fact, some of the people surveyed revealed that they wanted to try the car to see its utility, but were unable to do so. This is one aspect which requires considerable attention. Bangalore, Hyderabad, Pune, Ahmedabad, Goa and
Promotion
Now, this is one aspect the company needs to pay due attention to, if it wants to position the brand in India. Due to lack of promotional campaigns, most people learn about Reva from the word-of-mouth, documentaries, internet which are prone to misinterpreted and garbled facts. There is a very low degree of awareness about the product. We suggest a steady promotion and advertising campaign to gradually build up the brand image of the product. Also, the Reva Electric Car Company should emphasize that many governments internationally give incentives to Reva car users. For example, in the U.K., G-Wiz (REVA is sold under the name G-Wiz in the UK) is supported by the government where owners are exempt from paying parking fees, congestion taxes, sales and road tax exemptions, 100% depreciation in the first year etc. In France the Government gives 5,000 FF to each buyer of an EV, low road tax are applicable, 100% depreciation for corporate, 20% of all public transport has to be electric, free parking for EV’s, EV’s encouraged to be used as rental cars in public. No taxes are imposed on electricity used for charging EV’s.
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In fact, Reva is very promising in the Indian scenario, and what is required is awareness about the product. The company needs to shift its focus from the niche segment to the mass market. This necessitates the need for an steady and well-thought-of promotional campaign.
Price
As discussed above, most of the models of Reva are priced close to Rs. 44.5 lakhs. In fact, the company orientation is towards the foreign markets, and it is not adopting a price-differentiation strategy in India. In fact the company is not adopting a mass marketing approach rather it is targeting a very niche segment. In India, despite the stupendous economic growth, a car is still a commodity for the middle and upper middle class community, and it’s more of a status symbol than a necessity. Indian people are more conservative, when it comes to spending money than any other country in the world. What an Indian commoner needs is “Value for Money” and in order to gain market share in India, the company needs to slash down the prices.
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