Cielo – A Car In Trouble
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SHIFTING THE FOCUS TO MATIZ Contd..Analysts
claimed that Daewoo seemed to be neglecting Cielo after the launch of Matiz.
In May 1999, Daewoo stopped production of the GLE and GLX versions of Cielo
and replaced them with the Cielo Executive and the Nexia. While the former
was positioned as the basic Cielo version with the best features of both GLE
and GLX, the Nexia was promoted as being an upgraded version of the Cielo.
The move failed badly because the dealers as well as the customers failed to
see any worthwhile additions to the earlier Cielo model.
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Referring to Nexia as a slightly modified Cielo, a
Daewoo dealer commented, “We have the Rs 0.4 million Cielo and the Rs
0.6 million Cielo (i.e. the Nexia).” This was not surprising, for while
Nexia's engine and interiors had been substantially changed, Nexia's
exterior was very similar to Cielo.
Daewoo said that it was not able to create a perceptual difference
between the two cars amongst the consumers. Nexia failed to catch the
customer's fancy and sales never really picked up. Daewoo attributed the
low sales to the fact that the market for mid-size cars had become
rather crowded. |
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During the pre-launch and launch period of Nexia, Daewoo
completely stopped advertising for Cielo. This created the impression that the
Cielo was going to be completely phased out. This prevented the company from
positioning both cars independent of each other. From 2553 cars sold during
April-December 1999, Cielo sales declined by 45.8% to 1385 cars during
April-December 2000. Daewoo's plans to launch a Compressed Natural Gas (CNG)
version of the Cielo were yet to materialize even in mid 2001.
Matiz had a 70% market share in the Korean market and had received a good
response in most of the 114 countries it was sold in. However, its performance
in India was nowhere near its global success and Daewoo continued to run into
losses. In 1999-00, the company had a loss of Rs 1.16 billion on gross sales of
Rs 12.78 billion. The loss increased to Rs 3.4 billion on gross sales of Rs
11.84 billion in 2000-01. Daewoo's rivals were quick to comment that the Matiz
was also bearing the brunt of the company's poor marketing skills, adding that
the poor legacy of the Cielo experience would be hard to shake off.
Daewoo though, was still hopeful of succeeding in the Indian car market. The
company expected the market to reach the one million mark by 2005-2006. Kim
said, “Who would want to lose an opportunity to be part of that?” He added that
Daewoo would break even in 2001-02. To meet this target, Daewoo was working
towards enhancing its dealership and sales and servicing network as part of the
restructuring programme. The company also undertook a massive cost cutting
exercise, which involved cutting down on staff strength. In order to reduce the
wage bill, Daewoo reduced the working hours and also reduced the number of
workers from 3000 in 1998 to 1951 in 2001.
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QUESTIONS FOR DISCUSSION
EXHIBIT I CATEGORIZING INDIAN CARS
ADDITIONAL READINGS & REFERENCES
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