Let It Roll

• Over 40 new models are likely to be launched in 2007, most of them in the small and compact segment; but there will be enough choices in the mid-sized and the premium/luxury categories too
  
• 80% of car sales in India are in the small segment. Therefore, most carmakers are excited about its potential. Experts believe that the next year will belong to the low-cost, high-volume models
  
• Many first-time buyers are going for the Santro and other relatively expensive cars, instead of the Maruti 800. Toyota and Skoda feel the consumer will pay even more for great small cars.
  
• The growth rate in the auto sector has been 20% in the past three years. Many expect it to be 18-20% in 2007. Car majors think it may even be higher because of the new models that will hit the road.
  
• Changing consumer preference for more features may drive growth in the mid-sized category. Manufacturers are also gearing up to offer low-cost cars that can eat into the small class pie.
  
• The luxury segment that saw a contraction in 2006 may grow next year. On the anvil are Bentley, BMW, Porsche and Lambhorgini

In 2000, it launched Alto, with nearly the same price tag as the 800, whose demand is on a steady increase. This year, it came out with Zen Estilo, which is based on Suzuki's MR Wagon. This, say experts, was a great move as the Rs 3-4 lakh space had been quiet for some time. An early launch under the Zen platform, which has a good brand recall and a satisfied customer base, may put it ahead of competition which is preparing for new launches in this category in 2007. And it's gearing up for yet another small car model in 2008.

But what can truly change the scenario in both the small and the mid-sized segments is the entry of the French carmaker Renault, which has tied up with M&M, and plans to launch Logan in India. The Logan, an entry-level sedan, may be priced at about 5 lakh. If it's available at a lower price, as expected by some experts, it can eat into the small category as it'll also give the feel of owning a bigger car. If priced at Rs 5 lakh, it'll hit the other mid-sized models.

Either way, it'll trigger a price war as M&M, riding high on the global success of Scorpio, may prey upon anything else in either of the two categories. But other players are not going to give up easily. Even in the mid-sized subset, there'll be models galore. For example, GM launched AveoUV-A, a hatchback priced competitively in the Rs 4-5 lakh range, last week. Maruti is likely to replace the Baleno with a new model too.

Although Ford, which launched two new models, Fusion and Fiesta, in 2006, doesn't admit it, there are rumours that it may come out with Focus. Says a guarded Arvind Mathews,CEO, Ford India: "The current year was good for us. The next year will be one of consolidation. But we also need to have a portfolio (of models) to match competition."

Renault Logan : Six variants of the Logan, an entry-level mid-size car, will hit the market soon. Priced at about Rs 5 lakh, or even less, it is bound to rattle this segment.

After Honda's Civic created a stir in the upper end of the mid-sized segment, it'll unveil a new Accord model next year. And it launched the Honda crv this year itself in a bid to to pre-empt the launch of newer vehicles by rivals. Explains Honda's Sen, "The Indian customer is demanding feature-rich cars. We feel there is immense potential for everybody to exist and expand the market."

Such is the level of eagerness among car majors that they feel India can absorb more cars in the premium/luxury segment. Says Mathews: "In 2006, this segment was very small and may have had a little contraction as well. But new models may push demand." So get ready for cars costing over Rs 40 lakh—a Bentley Convertible GT, BMW 3 and 5 series and the X-5, and Mercedes C and M class cars. One might even see Porsche and Lamborghini on Indian highways next year.

Apart from specific trends in each segment, there are other developments that will take shape next year. The first is that, barring a few exceptions, most of the new launches in the compact and the mid-segments are hatchbacks and have similar looks and size. The second is the new trend among global automakers to tailormake models exclusively for the Indian market, against their earlier practice of merely introducing their global offerings. Says Dilip Chenoy, director general of Indian Automobile Manufacturers (SIAM): "Today there is a significant amount of engineering for cars meant for India. These reflect in the height and ground clearance, fuel efficiency and space in the new models and these are factors that influence car purchases in India."

General Motor’s Spark better have a trick up its bonnet.

Most car makers are also thinking of making India their export hub. For instance, Maruti has tied up with Nissan for producing the latter's small car for exports to nearby countries and will make models to cater to a part of Suzuki's global exports. Others like Hyundai and Skoda may be looking at similar exports-related strategies.

Now, the carmakers are obsessed with the diesel bug. Leading this pack of diesel variants will be Maruti Swift, followed by Hyundai's Getz and Sonata. Sources contend that Hyundai may opt for a Santro diesel, although the company denies it. Others that may see diesel incarnations are Chevrolet Aveo and Ford Fiesta. Agrees SIAM's Chenoy: "The new diesel engines are not as noisy or polluting. Even in the US or Europe, the growth in diesel vehicles is higher."

But the billion dollar question is: can the market accommodate so many models, the new players and, most importantly, is there enough demand? Experts and carmakers dispel any doubts on these counts. Says Chenoy: "India always had room for competition but when the volumes were under 1 million annually, the push for global companies was not happening. Now that we are at a comfortable 1.3-1.4 million a year, with the cumulative figure having crossed the 10 million mark this year, they are getting serious. If the economy continues to grow at even 8 per cent, we expect the growth story to continue."

According to industry estimates, the sector, which has witnessed high growth rates for three consecutive years, is expected to carry on the good show in 2007 as well. It may record a growth rate of between 18-20 per cent with ease. Experts believe that the growth is being propelled by a large-scale movement of two-wheeler owners to four-wheelers and the availability of easy car finance. Even after the four upwards revisions this year, the interest rates for car loans are still cheap at 10-11 per cent, compared to the 2001-02 rates of 16-18 per cent.

BMW X5 : The big daddies will all make their debut next year. So get ready for Bentley Convertible GT, BMW 3 and 5 series and the X-5, and the Mercedes C and M class cars—all Rs 40 lakh-plus wheel deals.

A recent study by PricewaterhouseCoopers, 'Global Automotive Financial Review', states that India will be one of the leading growth centres for the auto sector in the coming few years. It adds that while the sector in several countries will see an increase in demand, the most prominent growth will be from theBRIC (Brazil, Russia, India and China) countries. These four are expected to account for 40 per cent of global production and 52 per cent of the capacity expansion.

No wonder, the carmakers are unusually optimistic. Says Honda's Sen: "The current fiscal is witnessing a growth of around 23 per cent in the domestic passenger car segment. We are confident the trend will continue in 2007 as well." Ford's Matthews agrees with him: "Whenever new models have come in, there has been a higher growth rate. So next year, we can expect the industry to grow faster."

Hyundai Verna: The recently-launched Verna will have stiff competition in its mid-size segment. GM launched Aveo UV-A. Ford is likely to launch its Focus soon. Maruti may replace the Baleno with a new model next year.

With such mindsets, it's not surprising that almost every car company is ramping up its capacity in India. While Maruti and Hyundai are in the process of setting up new plants, Honda has announced that it will double its annual capacity to 1,00,000 cars by end-2007. Skoda too has similar plans. Hyundai managers say that the company's new plant, which is scheduled to be ready by the last quarter of 2007, will push its capacity by another 1,50,000 units a year. Explains Chenoy, "The combined committed investment in the Indian automotive sector is a staggering Rs 60,000 crore over the next four years. If you add the proposed investments in the components segment, it will be much more." Recently, heavy industries minister Santosh Mohan Deb said the annual revenues from the auto sector may grow to $145 billion by the year 2016.

What's important, however, is that consumers are likely to be the biggest beneficiaries. Many more may be able to afford cars, and bid farewell to their two-wheelers. Others will be able to graduate to the more expensive models in the small segment. Some may have more choice in the mid-sized one. A few can now hope to possess their dream Bentley, BMW, or Porsche. The only snag: all of them will have to figure out a way to ride through the traffic jams in most cities.