Extent of Product Cannibalization in Indian Automobile Sector

The perception and preferences of the consumers regarding products has been altered due to rapid changes in macro-economic environment such as increase in Growth Domestic Products and Purchasing Power Parity in last two decades. These changes lead majority of consumers to shift their demand frequently for purchasing a new car and compelled some existing car models to cannibalize with new/modified models (fully or partially) from the market. The cannibalization occurred in company portfolio as well as in competitors’ portfolio, made shorter the life cycle of existing products. Therefore identification of product cannibalization and its extent become important. In this study product cannibalization has been identified in passenger car market particularly regarding small and compact car segment with the help of estimate of expected share of purchase by Straight share Order Effect (SOE) model and Deviation from Expected Share Movement (DESM) method. The extent of cannibalization has also been calculated. The products of major car manufacturers in India such as Marti Udyog Ltd., Hyundai Motor Ltd., and Tata Motor Ltd., have been considered. The study has found the existence of first and second order cannibalization on excessive and expected levels in Indian passenger car market.