They are small, compact and lovely...ok, ok, not all are that bewitching. Whatever be their bewildering shapes, an avalanche of small cars is driving into the Indian market. While there was always a crowd in the small car market—those with up to 1.2 litre engine capacity and priced between Rs 2 lakh and Rs 5 lakh—this year we’ll see at least 10 more offerings. In a few months, Honda, Toyota, GM, Ford, Nissan and Volkswagen will join the race in India.
All told, there will be around 75 models and versions to choose from in 2010. More choice is good for consumers, but it could also end up being confusing. Many consumers of small cars complain of being in “suspended animation” when it comes to choosing a new car. But automakers bet they will eventually make up their minds: in fiscal 2010, India added 1.8 million cars on its roads, 73 per cent of which were small cars. Some expect that annual figure to double over the next five years.
There is one more reason. The Indian government gives several incentives to foreign companies investing in India. Coupled with low production costs and cheap skilled labour, India becomes the best option for companies to manufacture, sell locally and export sizeable numbers to other countries.
But competition in the already crowded market will be intense, pushing some to the brink. Yezdi Nagporewalla of KPMG India says, “It is no longer a situation where you have a running model now that will hold good next year.” Companies have already started sugar-coating their offers by throwing in goodies to attract buyers. Hi-tech features, hitherto available only in luxury cars, will now be seen in compact models. Says Michael Boneham, president and MD, Ford India: “Now the small cars are more advanced and have the technological goodies that came with bigger cars.”
Analysts also expect companies to use price as a differentiater. Says Hormazd Sorabjee, editor, Autocar India: “The price war is inevitable and GM has already started it. GM’s Beat has come with a shock price.” They may be blinded by the light skidding off the new models, but it’s not for (mostly) star-struck customers to complain.
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Prices are ex-showroom for entry level petrol versions in Delhi; Source: Company Websites; *Expected price
