Cielo -A Car in Trouble

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Case Details:

Case Code : MKTG010
Case Length : 8 Pages
Period : 1995-2000
Pub Date : 2001
Teaching Note : Available
Organization : Daewoo Motors India Limited
Industry : Automobile & Automotive
Countries : India

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"Daewoo is good at making cars, but rotten at marketing them."

- An automobile industry analyst, in 2000.

The Entry of Daewoo

The entry of the Korean automobile major, Daewoo Motors India Ltd. (Daewoo) in the Indian passenger car market was heralded as a milestone for the industry.

This was because Daewoo was the multinational to challenge the might of the market leader Maruti Udyog Ltd. (MUL). Daewoo's first vehicle, the 1500 cc Cielo was launched in three versions (Cielo, Cielo GLX and Cielo GLE) in July 1995.

Consumers who until now had no other option besides the Maruti Esteem in the mid-size segment (Refer Exhibit I), rushed to buy the Cielo.

Bookings for the three models reached 114,000 in a short span of time. With the car registering high initial volumes and its plans to become a Rs 100 billion company by 1998-99, Daewoo seemed all set to give MUL serious competition.

However, Daewoo was in for a major shock as around 70,000 customers cancelled their bookings within a few months.

Daewoo had predicted an annual turnover of over Rs 10 billion and sales of 20,000 cars by March 1996 - but managed to record a turnover of Rs 6.05 billion and sales of only 9,044 cars. During April-December 1996, only 13,776 Cielos were sold against the targeted 52,000.

During April 1997-February 1998, 9006 Cielos were sold, a decline of 41% from the corresponding period previous year. In 1998-99, 5500 Cielos were sold, a fall of nearly 50% over the previous year...

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