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Small cars, big buzz

The buzz around new brands and brand extensions in the small car market seems to have made an impact on the bruised and battered car market. Small cars are leading the charge towards higher sales, reports Sumant Banerji.

autos Updated: Aug 23, 2009 21:12 IST
Sumant Banerji

The buzz around new brands and brand extensions in the small car market seems to have made an impact on the bruised and battered car market. Small cars are leading the charge towards higher sales.

Spurred by a gamut of launches, from the wonder car Tata Nano to the path-breaking Honda Jazz and Hyundai i20, small cars have scripted the revival story from the depths of a slowdown in the last six months.

While it may not be possible to say that Nano has directly either triggered greater interest in the small car segment or started a new sub-compact segment, the fact is that the number of brands in the small car market that play either on lower price or a slew of rich features, are doing everything they can to make their presence felt.

Just look at the number of brands in the fray. From Indian players like Tata to Bajaj, which has announced its intention to launch a small car, to India-strong Maruti Suzuki, to a number of international car makers like General Motors, Ford, Hyundai, Volkswagen and Toyota, the interest in the small car market in India is noticeable.

Volkswagen, Toyota and Ford, which have so far been relatively dormant due to the lack of a small car, are readying their products within the next six months. “We have been in India for a long time now but our market share has been low because we are not part of the voluminous segment,” says Michael Boneham, managing director, Ford India. “With our small car, we are targeting the segment that brings the chunk of the numbers in the market.”

The small car phenomenon is not unique to India. “Globally, there is a shift towards small cars as they not only cost less, but also are more fuel efficient. India, which is anyway a big small car market, is no different,” says Dilip Chenoy, director-general, Society of Indian Automobile Manufacturers.

Lower income countries, including India, make up approximately 53 per cent of the global population, but account for only 13 per cent of car sales. Low-cost to ultra low-cost cars are expected to drive market penetration in such countries.

Mayank Pareek, executive officer (marketing and sales), Maruti Suzuki, says, “Small cars are peppier, easy to drive, economical to maintain and use and also cost less. There are many positives attached with it and that is why in India, where per capita penetration of cars is low, small cars are such a hit.”

Industry observers point out that while the Nano hasn’t exactly seen a slew of competitive launches being announced, it has opened up awareness that India can be an attractive manufacturing hub for making compact cars. Plus, it has undoubtedly set a new benchmark in low-cost cars.

While the small car segment has beckoned to Indian consumers with more choices, the tried and tested brands have continued to do well, such as Maruti Suzuki’s small cars and Santro. Maruti Suzuki’s Pareek says, “In times of uncertainty, there is a trend towards tried and trusted brands that offer a good value-for-money package.” Brand assurance is also a driving factor.

Not all car manufacturers believe that good value for money needs to mean ‘cheap’, however. A number of small brands — Skoda Fabia, Hyundai i20 and Honda Jazz, for example — come for over Rs 6 lakh and offer goodies such as airbags and anti-lock braking systems as a standard.

While Nano’s numeric contribution to the small car success story is a mere 2,475 units sold in July, it is expected to play a major role going forward and expand the customer base further. Due to its production and supply constraints, the car attracted a very high booking amount but analysts feel once the Sanand factory in Gujarat is operational, the car will be able to reach out to the masses better.