1. INTRODUCTION - FLETCHER ENGINES LTD.

1.1 ABOUT THE COMPANY

Fletcher Engines Ltd. is one of the leading car manufacturers in India, and up until recently,
held 38% market share. The company has a great reputation with consumers and employees
and is often commended for its excellent People-Centric Culture. Fletcher Engines is known
for its cutting-edge technology and is at the forefront of engineering excellence in
propulsion systems. They have quickly risen to prominence through their commitment to
innovation, reliability, and sustainability.

1.2 HISTORY OF THE COMPANY

Fletcher Engines was founded in 1949 by visionary engineers and entrepreneurs who shared
a passion for innovation and excellence in automotive design. From its humble beginnings
in a small garage, Fletcher Engines has emerged as a leader in the automotive industry. It is
known for its commitment to quality, sustainability, and cutting-edge technology.

In its early years, Fletcher Engines focused on producing compact and fuel-efficient
vehicles. These vehicles were designed for the urban commuters as the main target group.
The company gained recognition for its innovative designs and emphasis on reliability,
quickly establishing a loyal customer base.

With a reputation for quality and innovation, Fletcher Engines expanded its operations,
establishing manufacturing facilities and distribution networks in key markets around India.
The company's vehicles became synonymous with style, comfort, and advanced technology,
appealing to many consumers.

1.3 PRODUCT LINE & PRICING

Fletcher Engines invested heavily in research and development leading to pioneering

advancements in safety features and performance. This prompted the company to expand its
product lineup to include a diverse range of vehicles, from:
Compact cars to efficient, affordable options for budget-conscious consumers or urban
dwellers.
Luxury sedans: High-end vehicles equipped with advanced features and premium
materials, targeting affluent buyers seeking comfort and prestige.

SUVs: Versatile vehicles suitable for families, outdoor enthusiasts, or those needing ample
cargo space and off-road capabilities.

1.5 TARGET AUDIENCE

Middle-Class Families: Targeting families looking for reliable, affordable, and

fuel-efficient vehicles for daily use. This could include compact cars, sedans, and SUVs
with features that cater to family needs such as spacious interiors, safety features, and fuel
economy.
Urban Millennials: Offering stylish, tech-savvy, and compact vehicles suitable for urban
environments. These could include hatchbacks or smaller SUVs with advanced infotainment
systems, connectivity features, and fuel efficiency.
Businesses and Fleet Owners: Offering commercial vehicles like vans and small trucks
suitable for logistics, transportation, and delivery services. These vehicles would prioritise
durability, efficiency, and low maintenance costs.
Adventure Enthusiasts: Introducing rugged SUVs or off-road vehicles catering to
adventure seekers and outdoor enthusiasts who require vehicles capable of handling diverse
terrain and harsh conditions.

2. INDUSTRY BACKGROUND:

2.1 HISTORICAL EVOLUTION:

The historical evolution of the Indian automotive industry is characterised by significant
milestones, adapting to economic liberalisation in the 1990s with increased foreign
investments and collaborations. Tata Motors played a pivotal role, in introducing the
affordable Tata Nano, showcasing innovation.

However, challenges emerged, marked by emission scandals and recalls, prompting a shift
towards electric mobility. Fletcher Engines Ltd. encapsulates this dynamic landscape,
evolving from a commendable 38% market share to facing setbacks with regulatory fines.
The company's venture into electric vehicles, exemplified by the Roadrunner series, reflects
the industry's ongoing transformation, emphasising the need for adaptability and innovation
in response to shifting market demands.
2.4 INDUSTRY GROWTH RATE:

The growth rate of the automobile sector in India has shown resilience and potential for
expansion despite facing challenges such as economic slowdowns, regulatory changes, and
the COVID-19 pandemic. Some key points regarding the growth rate of the automobile
sector in India:

Pre-COVID Growth: Before the COVID-19 pandemic, the Indian automobile sector
experienced moderate to strong growth rates, driven by factors such as increasing
urbanisation, rising disposable incomes, easy access to financing, and government initiatives
like "Make in India" and incentives for electric vehicles.

COVID-19 Impact: The COVID-19 pandemic significantly disrupted the automobile

industry in India, leading to temporary shutdowns of manufacturing facilities, supply chain
disruptions, and reduced consumer demand due to economic uncertainties and lockdown
measures.

Recovery Phase: Following the initial impact of the pandemic, the Indian automobile sector
gradually entered a recovery phase as manufacturers adapted to new safety protocols,
implemented digital initiatives, and focused on cost optimization. Demand for personal
mobility also surged, leading to increased sales of entry-level vehicles and two-wheelers.

Shift towards Electric Vehicles (EVs): The Indian government's push towards electric
mobility and the introduction of various incentives and subsidies for EV adoption has led to
increased investments and interest in the electric vehicle segment. However, the growth of
EVs is still in its nascent stage compared to traditional internal combustion engine vehicles.

Supply Chain Challenges: Despite the recovery, the automobile sector continued to face
challenges related to global supply chain disruptions, semiconductor shortages, fluctuating
raw material prices, and regulatory changes such as stricter emission norms and safety
standards.

Long-Term Outlook: Despite short-term challenges, the long-term outlook for the Indian
automobile sector remains positive, driven by factors such as population growth,
urbanisation, infrastructure development, increasing consumer aspirations, and the shift
towards electric and connected vehicles.

The Analysis Of Automobile Industry In India Market is expected to register a CAGR of

8.10% during the forecast period 2024-2029. India's Automotive Market was valued at Rs.
8,331.6 crores in 2021 and is expected to reach Rs.13,333,9.36 Cr in 2027
2.3 ECONOMIC FACTORS

Oil Price Hike and Input Costs: A hike in global oil prices (specifically relevant for an
oil-importing nation like India) increased input costs for manufacturing. Higher fuel costs
influenced consumer preferences, potentially favouring more fuel-efficient vehicles.

Government Tax Policies and Subsidies: Changes in government tax policies or the
introduction of subsidies for electric vehicles directly impacted the automotive industry.
Incentives for green technologies influenced consumer choices and market dynamics.

Inflation and Consumer Purchasing Power: Inflationary pressures, especially on essential

commodities, influenced consumer purchasing power. Higher inflation may have affected
the affordability of vehicles for the general population.

Government Emission Regulations: Stringent emission regulations imposed by the

government impacted the product development strategy for Fletcher Engines.

3. COMPETITIVE LANDSCAPE:

The market type is oligopolistic, with a few dominant players like Fletcher Engines Ltd,
Vortex Motors, and Quantum Vehicles each holding a significant market share.

3.1 MARKET POSITIONING:

Vortex Motors: A recent addition to the market, focusing on Hi-Tech and sustainable
vehicles, it is headquartered in Delhi, India. Setting itself apart through inventive
advancements in electric and autonomous vehicle technology, it appeals to consumers who
prioritise environmental consciousness and are looking for next-gen vehicles.

Quantum Vehicles: A mid-tier player focusing on affordability and value, targeting

budget-conscious consumers, headquartered in Bangalore, India.
It highlights affordability and value proposition, targeting price-sensitive segments in the
market.

DRIVE: Entering the market with a lineup of cost-effective and cutting-edge electric
vehicles, DRIVE capitalised on government incentives for EV startups and a rising desire
for eco-friendly transport solutions. However, the company struggled with operational
hurdles and fierce rivalry from established automakers. Limited resources, production
scalability issues, and distribution challenges compounded financial strains.
Despite efforts, DRIVE succumbed to stagnant sales and funding setbacks, leading to its
withdrawal from the market in 2023.

3.2 MARKET SHARE & RANKING:

Vortex Motors: Gradually gaining market share(currently around 12.6%) through

innovative products and aggressive marketing strategies.
Quantum Vehicles: Holding a modest market share of 5.53%, aiming to expand through
strategic partnerships and regional expansion.

3.3 MERGER & ACQUISITION:

Fletcher Engines Ltd.: No recent significant mergers or acquisitions.

Vortex Motors: Actively seeking partnerships with technology companies and investment
firms to accelerate growth.
Quantum vehicles: exploring potential mergers with other mid-tier players to strengthen
market position.

3.4 FINANCIAL PERFORMANCE:

Vortex Motors:
- Revenue (2023): Rs. 9300.18 Crores
- Profit Margin (2023): 8%
- Market Capitalization (2023): Rs. 46500.90 Crores

Quantum Vehicles:
- Revenue (2023): Rs. 3910.26 Crores
- Profit Margin (2023): 5%
- Market Capitalization (2023): Rs. 15650.04 Crores

4. CHALLENGES FACED BY FLETCHER ENGINES LTD:

In October 2019, when the company launched the Roadrunner series, it was found out by
the Central Pollution Control Board(CPCB) that the Roadrunner models had faulty devices
installed. The CPCB had said that the engines had computer software that could sense test
scenarios by monitoring speed, engine operation, air pressure, and the position of the
steering wheel as well.
When the cars were operating under the company’s controlled laboratory conditions - which
typically involve putting them on a stationary test setup - the device appears to have put the
vehicle into a safety mode in which the engine ran below normal power and performance.
Once on the road, the engines switched out of this test mode and this was unknown to the
consumer.

The result was that the engines emitted nitrogen oxide pollutants up to 20 times above the
permitted levels in India. Thus, the consumers were asked to pay fines while being on the
road which led to their dissatisfaction and breach of trust.

The company was asked to pay a hefty fine of Rs. 3780 crores by CPCB. This news of fraud
created a public setback and the company’s image was tarnished which also led to a
significant erosion in the market share. Moreover, a board meeting was held where there
was a discussion among the board members to deny the accusation of fraud which was
leaked by undercover reporting which further aggravated the current situation.

The customers’ and public’s trust was immensely broken. The company's market standing,
now diminished, reflects a challenging period, marked by a 8% decline in market share and
a share price hitting an all-time low. The once commendable market position has been
adversely affected, necessitating strategic interventions to navigate the complexities of the
competitive automotive landscape.

5. TRANSITION TO ELECTRIC VEHICLES:

5.1 INDUSTRY GROWTH RATE:

In examining the automotive industry in India, a nuanced growth trend emerges, particularly
in the electric vehicles (EVs) segment. The EV industry in India is witnessing significant
growth, driven by changing consumer preferences and crucially supportive government
policies, which actively promote the shift to EVs. Regulatory frameworks and innovation
are the key factors shaping the industry's sustainable expansion. Tax incentives and
subsidies for EVs underscore a collective commitment towards sustainable technologies.
The EV industry is projected to have such a positive future as electric vehicles promise zero
tailpipe emissions and a reduction in air pollution in cities. India's dire air pollution
situation mandates a swift transition to electric vehicles (EVs).

This imperative shift is essential for safeguarding public health and the environment,
underscoring the urgent need for sustainable transportation solutions.
The Indian government has acknowledged this need and has initiated momentum through
schemes like Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles.
These schemes encourage, and in some segments, mandate the adoption of EVs to achieve
30% EV penetration by 2030. Various fiscal demand incentives have been implemented to
stimulate the production and consumption of EVs and charging infrastructure.

\For instance, income tax rebates of up to INR 150,000 ($2,100) on interest paid for EV
loans incentivize customer purchases. To bolster the production of lithium-ion cell batteries,
customs duties exemption is proposed to lower their costs.

Presently, EV market penetration stands at only 1% of total vehicle sales in India, with
electric two-wheelers comprising 95% of sales. However, consumer willingness to adopt
EVs at affordable prices signals future market potential. This underscores the importance of
investing in local research and development to bolster EV adoption and further drive
sustainable transportation efforts.

5.2 SHIFT TO EV:

Fletcher Engines Ltd. has been planning to shift to EV manufacturing for a long time and
started its research and development for the same pre-COVID. The company is navigating
towards a future dominated by electric mobility, with regulatory policies shaping its growth
trajectories.

5.3 VALUE CHAIN :

A comprehensive review of the EV value chain components and rate each of these
components on key operational and strategic parameters. Such an analysis will provide them
with a shortlist of opportunities that are more relevant to them. The starting point hence is a
comprehensive review of the EV ecosystem. There are two types of value chains in EV
The EV OEM value chain- The electric vehicle value chain consists of raw material
extraction, processing, manufacturing, final assembly, and recycling. After their extraction,
the raw materials are processed and sent to further manufacturing. The materials are then
used for the production of the vehicle components.

Initially, raw materials such as metals, plastics, and electronics are extracted and processed.
These materials then undergo further manufacturing to produce various vehicle components,
including electric motors, power electronics, chassis, and interiors.

The components are assembled into complete electric vehicles through final assembly
processes. Throughout this value chain, rigorous quality control measures are implemented
to ensure safety and performance standards are met.

After vehicles are manufactured and sold, they eventually reach the end of their lifecycle,
leading to the recycling stage where materials are reclaimed for reuse or environmentally
responsible disposal.
The EV Li-ion Battery Value Chain: This value chain focuses specifically on the
production, distribution, and recycling of lithium-ion batteries used in electric vehicles and
other applications. The li-ion battery value chain consists of four main stages, which include
extraction and production of raw materials, cell component (electrodes) manufacturing, cell
assembly, and, finally, recycling, which impacts the cost structure.

Extraction and Production of Raw Materials: This stage involves sourcing raw materials
such as lithium, cobalt, nickel, manganese, and graphite from mining operations or recycling
facilities. Raw materials are processed and refined to meet the specifications required for
battery production.

Cell Component (Electrodes) Manufacturing: Manufacturers produce electrode materials

(anode and cathode) by applying coatings onto metal foils. These coated foils are then
processed into rolls or sheets to be used in the assembly of battery cells.

Cell Assembly: Battery cells are assembled by stacking layers of electrodes and separators,
then winding or folding them into cylindrical, prismatic, or pouch formats. Electrolytes are
added, and the cells are sealed to prevent leakage.

Recycling: At the end of their lifecycle, lithium-ion batteries undergo recycling to recover
valuable materials such as lithium, cobalt, nickel, and graphite. Recycling processes involve
disassembly, shredding, and separation of materials to extract reusable components for
manufacturing new batteries.

5.4 GOVERNMENT REGULATION FRAMEWORK FOR ELECTRIC VEHICLES:

Some of the global regulations are rolled out by SAE, AIS by CMVR, and UNECE
Regulations R100 R101 R85 for electric vehicles.
AIS Standards are for electric vehicles in India, Some of the regulations are AIS038, 039,
040, 041, 048, and 049.

● AIS038: Requirement for construction and functional safety

● AIS039: Measurement of electrical energy consumption (Wh/km).
● AIS040: Method of measuring the range.
● AIS041: Measurement of net power and maximum 30 min power.
● AIS049: CMVR type approval for EV.
● AIS048: Safety requirements for traction batteries.
5.5 MARKET TRENDS

1. Government Initiatives and Policies:

The FAME II scheme, launched in 2019 with a budget of ₹10,000 crore, aimed to promote
the adoption of electric vehicles in India by providing incentives for buyers and
manufacturers. (Source: Ministry of Heavy Industries and Public Enterprises, Government
of India). Various states such as Delhi, Maharashtra, and Gujarat offered additional
incentives
for EV buyers, including subsidies ranging from ₹5,000 to ₹1.5 lakh and exemptions on
road tax and registration fees. (Source: Various state government announcements and
policies)

2. Increasing Adoption of Two-Wheelers and Three-Wheelers:

According to the Society of Indian Automobile Manufacturers (SIAM), electric
two-wheeler sales in India grew by over 30% in FY 2020-21 compared to the previous year.
(Source: SIAM). Electric three-wheelers also witnessed significant growth, with sales
increasing by approximately 20% during the same period. (Source: SIAM)

3. Rise in Electric Four-Wheelers:

In FY 2020-21, electric passenger vehicle sales in India reached approximately 4,000 units,
marking a substantial increase compared to previous years. (Source: Society of Indian
Automobile Manufacturers - SIAM) Several electric car models were launched by both
domestic and international manufacturers, including Tata Nexon EV, MG ZS EV, and
Hyundai Kona Electric, contributing to the growth of the segment.

4. Focus on Charging Infrastructure:

As of January 2022, India had over 1,800 public EV charging stations, with plans to deploy
an additional 6,000 charging stations across the country under the FAME II scheme.
(Source: Ministry of Heavy Industries and Public Enterprises, Government of
India)Public-private partnerships and investments were made to expand the EV charging
network, with companies like Tata Power, Reliance, and EESL leading the initiatives.

5. Partnerships and Investments:

Various partnerships were announced in the EV sector, including Tata Motors' collaboration
with Tata Power to deploy charging infrastructure and Mahindra's partnership with LG
Chem for battery cell manufacturing. (Source: Company announcements and press releases)
Investments in EV manufacturing and battery production facilities were made by companies
like Ola Electric, which announced a $2 billion investment in setting up the world's largest
two-wheeler factory in Tamil Nadu. (Source: Company announcements)
6. Battery Swapping and Leasing Models:
Companies like SUN Mobility and Lithium Power introduced battery-swapping solutions
for electric two-wheelers and three-wheelers, aiming to address concerns related to battery
costs and charging infrastructure. (Source: Company announcements and press releases)

7. Rising Environmental Awareness:

According to surveys conducted by various research organisations, including Ipsos and
Nielsen, there was a growing awareness among Indian consumers regarding environmental
issues and a willingness to switch to cleaner transportation options like electric vehicles.
(Source: Ipsos, Nielsen)

8. Technological Advancements:
Advances in battery technology led to improvements in energy density and charging speed.
For instance, companies like Exide Industries announced investments in lithium-ion battery
manufacturing facilities in India. Electric vehicle manufacturers introduced features like
connected car technology, smartphone integration, and advanced safety systems to enhance
the appeal of their products. (Source: Company announcements and product specifications)

5.6 COST OF MANUFACTURING:

Considering the average market price of an EV for the Indian market is ₹15,00,000 and its
manufacturing cost stands at 50% of the selling price, the cost of manufacturing an EV is
₹7,50,000 its cost break-up is:
● Battery Pack (30-40% of total cost):
Assuming 35% of the total manufacturing cost: ₹2.625 lakhs
● Electric Motor (15-20% of total cost):
Assuming 17.5% of the total manufacturing cost: ₹1.3125 lakhs
● Power Electronics (inverter, charger) (10-15% of total cost):
Assuming 12.5% of the total manufacturing cost: ₹0.9375 lakhs
● Other Components (chassis, body, interior, etc.) (Remaining 20-25% of total cost):
Assuming 22.5% of the total manufacturing cost: ₹1.6875 lakhs

5.7 COMPANIES TO FORGE STRATEGIC ALLIANCES WITH:

(Kindly refer to the document attached for company financials.)

1) SwiftCharge Systems:

Introduction: With its headquarters located in Silicon Valley, SwiftCharge Solutions

is a company that specialises in creating incredibly quick electric car charging
stations that are seamlessly integrated into the current infrastructure thanks to their
cutting-edge battery management technologies.
 Competitive Advantage: SwiftCharge installed some new charging stations at
Golden Quadrilateral and other national highways specifically near restaurants
which helped the company gain public attention as it provided convenience to the
customers as they could use the service increasing the market share in the industry at
an accelerating rate.

Market Share: Despite being a newbie, SwiftCharge has grown its market share fast
by signing agreements with significant automakers and local governments in
important North American cities.

Limitations: The newly constructed charging stations come with a compatibility

limitation, featuring a ratio of 80-20. This means that 20% of electric vehicles
currently on the market may face compatibility issues with the charging
infrastructure.

2) ZenithEV:

Introduction: ZenithEV, specialises in producing next-generation lithium-ion

battery packs with enhanced energy density and thermal management capabilities for
electric vehicles.

Competitive Advantage: ZenithEV's advanced battery comprises a rare combination

of lithium-ion metal supplied only to ZenithEV, the only company to have the power
source of batteries.

Market Share: As a key player in the Chinese EV battery market, ZenithEV supplies
battery packs to a few of the largest electric vehicle manufacturers in the country,
capturing a small share of its massive domestic market.

Limitations: ZenithEV's batteries are low in cost compared to the manufacturing

cost of Fletcher but ZenithEV recently faced a threat of their battery malfunctioning
and bursting into flames which led to a tarnished brand image and thus affected the
goodwill of ZenithEV.

3) NimbleEV Technologies:

Introduction: NimbleEV Technologies, based in Sweden, specialises in lightweight

and high-performance electric drivetrains for sports cars and luxury vehicles.
 Competitive Advantage: NimbleEV's advanced drivetrain technology offers superior
acceleration, handling, and range, attracting enthusiasts and luxury car
manufacturers seeking to electrify their lineup.

Market Share: While still a niche player, NimbleEV has garnered attention from
upscale automotive brands, securing partnerships and collaborations to integrate its
drivetrains into premium EV models.

Limitations: For sports car models, the charging speed is significantly slower due to
their high-speed requirements. This slower pace can result in delays in charging,
impacting the overall efficiency of the charging process.

4) SparkCycle Innovations:

Introduction: Based in Japan, SparkCycle Innovations specialises in crafting

compact and foldable electric bicycles designed for urban commuters and
recreational riders.

Competitive Advantage: SparkCycle's electric bicycles boast lightweight frames,

extended battery life, and convenient folding mechanisms, providing unmatched
portability and versatility in bustling urban environments.

Market Share: With a robust presence across Asia and Europe, SparkCycle has
established itself as a frontrunner in the expanding electric bicycle market, capturing
the attention of environmentally conscious consumers and urban residents.

Limitations: The company is facing challenges in diversifying its product portfolio

to cater to a broader range of consumer needs and preferences. Relying solely on a
niche market segment could limit SparkMycles’' growth opportunities and leave the
company vulnerable to changes in market dynamics or shifts in consumer demand.
Also, the company has very few service stations spread across the country.
PROBLEM STATEMENT:

Fletcher Engines Ltd. is confronted with multifaceted challenges requiring immediate

attention and strategic planning. Firstly, the company must address the fallout from a
significant PR crisis stemming from fraudulent diesel emissions practices, necessitating the
rebuilding of stakeholder trust, restoration of its public image, and management of legal
implications with transparency and accountability. Simultaneously, the company is at a
pivotal juncture where it needs to choose the most suitable target with which it would
engage strategically by merging, acquiring, or forming a joint venture out of the four
identified prospective companies as part of its strategic shift toward the electric vehicle
(EV) sector. This entails conducting a comprehensive analysis of both companies to
determine which aligns best with Fletcher Engines' objectives, capabilities, and market
positioning.

Additionally, considering the timing of the transition to the EV sector is also imperative,
given the evolving market conditions, regulatory considerations, and competitive strategies.
You are tasked with proposing viable solutions for Fletcher Engines Ltd. to navigate its
strategic and operational problems, keeping in mind that the future success of Fletcher
Engines hinges on these strategic decisions.
SUBMISSION GUIDELINES

● Participants are required to submit their solutions in a PowerPoint Presentation

containing a maximum of 10 slides, the first slide being the introductory slide, and
the last slide being references supporting research (if any).
● Any supporting document, if any, is to be sent as an attachment in the submission
email. [Acceptable format: Excel Spreadsheet, PDF Document.]
● The slide deck should be mailed to [email protected] by
8:00 AM, Tuesday, 2nd April 2024. The subject of the mail should be “Team <Team
Name> | Cases Over Coffee: Chapter 2 - Finals”.
● Only 1 submission per team is permitted, and this submission is to be mailed by any
1 team member.
● Participants will be evaluated on the accuracy and depth of analysis based on the
information provided in the submission, presentation skills, and overall outlay.
● Failure to submit the solution within the given time frame will lead to automatic
disqualification.
● The information given is final and no further information will be provided.
● AI-generated solutions will result in immediate disqualification from the event.
● Decisions made by the Executive Board of Xavier’s Consulting Club will be final in
case of any disputes.
● Participants are also required to carry a copy of their case solutions on a PEN
DRIVE on the day of the finals (2.04.2024). They will be given 10 minutes to
present the same.