Daewoo Cielo a Car in Trouble

8/2/2019 Daewoo Cielo a Car in Trouble

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Cielo: A Car in Trouble

Compiled By:

Astha Dhall

Atul SinghalCharu NayyarChitra SinghGaurav Manocha

Mahesh PratapPrateek Arun


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

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 , 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 Rs100 billion company by 1998-99, Daewoo seemed all set to give MULserious competition.

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

Daewoo had predicted an annual turnover of over Rs 10 billion and sales of20,000 cars by March 1996 - but managed to record a turnover of Rs 6.05billion and sales of only 9,044 cars.


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Major Problems


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The timing of entry into Indian market

was wrong as there was a liquidity crunch

due to the recession in the Economy

which resulted in demand declining

sharply.


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Availability of spare parts was a big issue as the

company entered the market with a high import

content, thereby not being able to keep the prices

significantly lower than the competitors.

The low indigenization level also translated into high

cost of spare parts.


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The lack of a focussed approach and

inconsistent policies were reported to be

the two main reasons that led to the

Cielo's poor performance.

Imposition of Strategies successful in

European and Korean market. Market survey was inappropriate.


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The mileage the car gives is nothing to write home

about. Well maintained cars usually return 6-7kpl incity.

Economy? Only a CNG conversion agenda makesCielo worthwhile.

At the time of its launch in 1995, the Cielo was thefirst car to offer fuel injection in its class. But bad

quality fuel meant that the injectors would easily getclogged dropping mileage to an abysmal 4-5kpl incity.


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Test Drive Scheme

In April 1997, Test drive scheme was introduced to lure buyers.

Option of buying car with 70% payment or returning back.

Scheme entitled all car owners to participate in a draw where 200cars were given to the winner for 18 months to test and experiencethe car.

Diwali Bonanza Scheme Offered one Cielo free on purchase of every 10 cars.

The promotional scheme was pushed by Daewoos marketing headfrom Korea.

Low Finance Rates Scheme Finance rate offered was 14.33% as compared to the prevailing

23%.

Desperation to increase sales led to offers of unheard incentives.


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A hefty price cut of 0.15 million in Jan98 with the

failure of schemes.

Price in Delhi showrooms.

Model LaunchPrice(in

Millions)

ReducedPrice (inMillions)

GLE 0.62 0.49

GLX 0.68 0.57


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To educate the customers on the new positioning,

highlighting the cars features.

Idea was to convey that Cielo offered more value for

less money.

Aspects of technology val-you, comfort val-you and

safety val-you were emphasized on.


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Brand Positioning

Frequent change in the positioning of Cielo leading

customers confused.

Initial positioning - technology with aesthetics

to premium family car to Val you. Family car positioning did not match with the

premium image.


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MATIZ


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Oct 1998- MATIZ was launched .

23,265 units in April-Dec 1999, demandincreased by 52.2% to 35,398 units April-Dec

2000.

Further CIELO took a back seat after Matizsuccess globally.

MATIZ was going places operating in 114countries.

Failure in INDIA due to SANTRO.


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May99 Nexia was launched in two variants.

Replaced GLE & GLX version of Cielo withCielo Executive & Nexia.

Exterior similar to Cielo though interior waschanged.

Cielo & Nexia couldnt be positioned differently.

Stopped advertising for Cielo leavingimpression of phasing it out.


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Thank You

Daewoo Cielo a Car in Trouble

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