“Mobility in the Base of the Pyramid”.
Design & Engineering: Datta P. (Team leader), Peters V. (Technical Leader), Mejia J.R. (Strategic design & Business leader), Kuday M. (Financial Manager), Ouwehand P. (Technical Development), Fransman J. (Technical Development), Patil S. (Technical Development), and Sable S. (Technical Development).
Support team: Vastbinder B. & Blom E. (DCE Delft Centre for Entrepreneurship)
Project date & place: 2008 – 2009 The Netherlands & India.
In large cities across Asia, a million Auto-rickshaws serve as one of the most important means of transportation every day. At the same time, these Auto-rickshaws cause considerable air pollution and a large amount of CO2 emission (Enviu 2008). The Auto-rickshaw drivers are part of the economic poorer groups of society and earn on average $3 to $4 a day.
The idea is that in five years a large number of Auto-rickshaw drivers will have made the change-over. The project goals are therefore:
- To reduce the CO2 emission of Auto-Rickshaws by 40% to 60%,
- To improve the economic situation, and with that the social position, of the Auto-rickshaw drivers and their families by lower fuel costs and more efficient motors, and
- To improve the air quality in large Asian cities
The TUDelft TukTuk-team MAQiNA is convinced that the given targets are feasible by designing a simple, low cost, conversion kit. Besides the technical improvements, a business model is developed to implement the technical solution in India. The key factor in a successful upgrade kit is to find the balance between costs and fuel reduction. The team defined “sustainability” and an “integral design approach” as its basic framework in order to achieve the goals mentioned before.
A quantitative analysis was carried out for the team analyzing different aspects thanks to an extensive context analysis; that includes an economical background, GDP growth, GDP composition, inflation, unemployment, foreign investment, and stakeholders analysis.
In order to have some feedback about the characteristics and preferences of customers and potential clients of the project the team designed, arranged and developed four different activities to find qualitative information and receive ideas from people with experience in the context considering the difficulty to have direct contact with “real” market.
The first activity was a “creative session” with the team members trying to find different and new approaches, ideas and concepts, this activity was designed to generate a large number of ideas for the solution of this specific problem. The group came up the “modular approach” and other elements incorporated in the marketing strategy.
During a month and a half a survey was conducted using a questionnaire to ask about the product, its features, attributes and its potential impact in the Indian market; including price, promotion strategy and places to sell it. The team conducted a “Focus Group” with seven participants; all of them are native from India. The special guest was the Dr. Murthy D. Halemane (Assistant professor of Management and Innovation from RSM Erasmus University). This focus group was part of Maqina´s qualitative research in which the group of participants was asked about their attitude towards the idea, concept, product, price, packaging, advertisement, and the ideal channel to sell it. Questions were asked in an interactive group setting where participants were free to talk with other group members. The main topic during this activity was to corroborate if the key values of the product (features), price, place and promotional aspects really fits with the market conditions, preferences and behaviors. The differences between the rickshaw drivers and these participants were taken into consideration when the team was concluding the marketing mix strategy and was incorporated during the analysis phase.
The team used a tool called “personas” in order to describe three different customers (drivers), their living conditions, salaries, marital status, preferences, behaviors and of course their interest and opinion about the product and its characteristics.
Results (system & strategy)
Following this analysis “the team wants to create a reliable product, easy to use and easy to maintain which is available to all income groups”.
Dividing the problem in three different subsystems (exhaust, DI+ICE and total kit) the team can thinks about the problem and the business in a systematic way connecting the technical dimension and the strategic aspect at the same time.
Making their existing auto-rickshaws clean through the use of an affordable upgrade system will mean not only 40% CO2 reduction and improved air quality, but also significant savings in fuel costs for the drivers. Maqina estimates that their income can increase up to 35% through savings on fuel costs. The team also sees the possibility of offering the collective CO2 reduction of the rickshaw drivers on the formal or informal carbon compensation market. With the Ecospidy kit the drivers of auto-rickshaw will increase its revenue by 35% and at the same time reduces the CO2 emission by 40%.
The system includes two main products which contribute to the efficiency of the rickshaw. The first of the two, the exhaust system provides the rickshaw drive with a 10%-15% increase in efficiency. The second system is the mechanical direct injection kit. This system is mechanical over electronic. The reason behind this is the durability and maintenance factor.
A key attribute to the exhaust system is that it is easy and quick to install as a “replacement part”. The driver needs only between 15 and 20 minutes with a basic kit of standard tools (a screwdriver and other complementary elements) to install it. The handling does not require much expertise or high level of skills and there is little room for error. The exhaust is a simple accessory and does not modify anything in the engine. Any engine modification has to be recertified in India. This homologation takes a minimum of one year.
The exhaust effectively increases the pickup and speed of the rickshaw and at the same time keeps the fuel consumption low. When these attributes are weighed against the purchase price, it is an ideal product that can easily be bought.
The exhaust system and mechanical injection is instantly implementable and fits into the current production facilities within India. No extra investment is needed to start producing the exhaust. The cheapest method of production is still in search with Indian partners.
Bajaj has introduced the DI technology on the two-stroke auto rickshaws. This was introduced together with Orbital Systems, who hold the patent for direct injection with a spark. However, inside information reveals that the discussion on banning 2-stroke is playing important role vs full production. However, in other vehicles it has proved to be successful and the interest for it is quite high, but the price is sometimes the overpowering factor.
The price of the upgrade kit is one of the most important factors in the road to success. As mentioned in Product, the drivers are unwilling to pay a price of more than 50 euros for an upgrade. 50 euros is the utmost amount they are willing to give out. As far as loans are concerned, they are not at all interested to borrow money to invest it into their rickshaw. They just want to make profit with their already bought rickshaw and not keep busy with working to pay off the loan for investing in the rickshaw.
Keeping these factors in mind, the best fitting strategy is following a combination of limit pricing along with penetration pricing.
Drivers have indicated that they do not spend more than in between 1000 and 5000 rupees on monthly maintenance. It is most of the time on the side of 1000. Only when major revisions are made, does the cost hardly touch the 3000 rupees.
Therefore the costs of the exhaust will be somewhere in between the 1000 to 2000 rupees. This is still reasonably affordable for the driver, as the general maintenance package comes along with the exhaust. In total their efficiency will increase 25-30% with only max 2000 rupees.
When the consumers realize that the benefits are indeed there, the demand is expected to increase proportionally. The price can be increased to a certain percentage till the consumers stay interested.
Competitors might harm the actual efficiency aspect of the exhaust, for that reason, as mentioned in promotion, the exhaust will be certified. Only the certified exhausts can guarantee an optimal efficiency.
Another case studies:
Javier Ricardo Mejia Sarmiento