Carmakers in India are stepping on the gas when it comes to increasing their mass-market penetration, both through their products and dealerships. Almost all of them, including Mercedes Benz, are looking beyond tiers 1 and 2 cities and working quickly to penetrate tiers 3 and 4 cities and towns. 'Mass' is the mantra and hatchbacks seem to be the magic vehicles, literally, to get to them.
A number of carmakers entered India with their sedan offerings, calculating that the hatchback domination would soon give way to a sedan preference. That did not happen — the hatchback market is around 61% of the total car market in India currently. It has been like this for the last four years and according to industry projections, it will continue to dominate at the same level for the next five years.
Small wonder that all car makers are talking hatchbacks now. "The passenger car industry has grown, with the contribution of hatchbacks growing with the same consistency. Carmakers who entered India with sedans are now looking at the hatchback segments for growth," said Shashank Srivastava, chief general manager - marketing, Maruti Suzuki.
The entire drive is to get into small town India which holds out the promise of growth. While General Motors, Volkswagen, Honda, Toyota and Ford are focusing their attention on smaller and newer cities and towns, players with established bigger networks including Maruti Suzuki, Hyundai Motors and Tata Motors are preparing for deeper, mass-market penetration. Even luxury carmakers are spreading their reach beyond the bigger cities.
"We started in India with bigger cars. 80% of our sales were in big cities and 60% of our dealers took care of that. But now, with our sedan and hatchback offerings, we need to go to smaller cities. By 2013, we aim to have an equal mix of small-to-big cities in our Toyota dealerships," said Sandeep Singh, deputy MD, Toyota Kirloskar Motors.
Toyota is currently identifying dealers. Soon, it will debut in places such as Tumkur, Satara, Madurai, Bhatinda and other such towns. Currently, Toyota has 163 dealers in tiers 1 and 2 cities.
Maruti Suzuki and Tata Motors also have ambitious plans. "We have strengthened our portfolio in hatchbacks, in which the A2 segment has grown fastest, contributing 18% in 2010 to our sales from 8% in 2007. We are already penetrating deeper into much smaller locations with our network as we discover more places that have good economic potential," said Srivastava.Between April and August this year, the company added 55 new dealerships and over 45 new cities to its network. It is present in 700 cities and has over 980 dealerships. About 42% of its sales come from the A2 segment.
In the last few years, Maruti-Suzuki's communication strategy has sharpened for its diversified hatchback portfolio. It has positioned Wagon-R as the family car while the A-Star is for the youth. In smaller towns, it takes part in local melas for activation purposes.
Tata Motors, which has 620 passenger car showrooms, is in the process of opening 300 more in towns with less than five lakh population. These will exclusively sell Tata Nanos. A few such places where these dealerships will debut include Gangavathi (Karnataka), and Kotma (Madhya Pradesh).
Hyundai is known to be putting together plans to launch a new small car which will be its first offering at around Rs 2.5 lakh. Sources inform that Hyundai is also putting together a blueprint to establish its dealer presence in smaller cities and towns.
Meanwhile, Honda's recent massive discounts for its premium hatchback, Jazz, is known to have worked, with the Jazz being in short supply after the price cut. Honda is now looking at launching its smaller hatchback, Brio.
"With the Brio launch, the mass-market opportunity and its viability increase for us. Honda dealerships will debut in even greater numbers in tier 3 cities, including Asansol, Gorakhpur and others, since they make very good business sense. By the end of the current financial year, we will be in 90 cities (from 78 now) of which the bulk already comes from tier 3 towns," said Jnaneswar Sen, senior VP (sales & marketing), Honda Siel India.
Ford is really pleased with Figo's performance. "For us, Figo has been a gamechanger and its value-for-money positioning has given us success beyond our expectations. We have an opportunity to further penetrate the market, keeping in mind the seven more launches we are planning. A further ramp up in dealerships and services is on the cards. There is a clear focus on tier 3 and 4 towns and we'll enter 20 of them soon," said Nigel Wark, executive director - marketing, sales and service, Ford India.
Ford has 190 dealerships at present and aims to open many more with particular emphasis on the eastern market where it sees good opportunities. Driving Figo's popularity further has been the Ford Figo Bharat Yatra Roadshow, a 100-day journey through 1,000 cities to engage customers in various fun activities with Figo.
Even luxury carmakers are looking exploring the potential of smaller cities. Audi recently opened a dealership in Ludhiana and is preparing to drive into Surat, Indore and Coimbatore.
Mercedes Benz is known to be looking at launching a luxury hatchback by 2012-end. "We are looking at further lowering the entry price for the Mercedes-Benz cars. The new, smaller cities are on our radar. The luxury market is maturing in India and we are serious about reaching out to customers in newer places. It's no longer about affordability, but how much consumers can pay per month. 70% of our cars are financed," said Debashis Mitra, director sales and marketing, Mercedes-Benz India. Right now, the entry level car for Mercedes-Benz is the C-class.