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S. Muralidhar

Maruti... In the vanguard

THE sheer pace of growth, the wide spectrum of new technologies, and the number of new car manufacturers that have made India-specific products have made the car industry unique.

And now, with the expertise that multinational car manufacturers such as Hyundai, GM, Ford and Honda, have gained in the small car dominated Indian market, the country could well become the world's manufacturing and export hub for this class of cars. Further, as manufacturing, instead of `screw-driver' technology, was promoted in the years after liberalisation of the industry, the backward linkages into the manufacturing of auto components have enabled many Indian vendors to realise their global ambitions.

Players proliferate: The most visible aspect is the number of new manufacturers and the spread of new products available in each sub-segment.

Importantly, apart from the once ubiquitous Ambassador from Hindustan Motors, we now have top-selling models and home-grown brands such as the Tata Indica and Mahindra Scorpio. The stellar performance of these products has also, in equal measure, contributed to the expansion of the market. These `desi' companies are now attempting to leave their footprints in markets abroad.

From sales of less than a lakh vehicles about a decade ago to an estimated sales of 7.2 lakh cars and utility vehicles this fiscal, the industry has made a long haul. And these numbers have not just come from small cars, but from the whole range of cars in the mid-size, premium mid-size and super-luxury car segments.

It is a reflection of the attractiveness of the Indian car industry that in addition to the presence of some of the biggest names in small car technology such as Suzuki, Hyundai and Fiat, many of the high- profile luxury brands such as Mercedes Benz, Bentley, BMW and now Maybach and Audi are steering into India.

Diversity and choice: The renaissance, so to say, in the automobile industry happened with the throwing open of the sector to overseas manufacturers through the wholly-owned subsidiary route. The credit for expanding the car industry and discovering the market for small cars must go to Maruti Udyog (MUL), which launched its Maruti 800 almost 20 years ago. With the entry of multinational car manufacturers, particularly in the premium small car and mid-size sub-segments, the industry has acquired greater diversity and choice. It also enabled the building up of a strong manufacturing base, which companies are now able to leverage for developing new products.

Small car to dominate: Interestingly, the still ubiquitous Maruti 800, the small car that revolutionised personal four-wheeled transportation in India, continues to be MUL's best-seller. And yet, it is being debated if it will be able to face the future. The segment will see more entrants and a lot more technological inputs in future. As a result, the small car segment will also continue to witness an expansion in terms of price spreads and in terms of varied trim-level positioning.

Expansion in mid-size cars: There is the possibility of a similar market expansion in the mid-size car segment. Near rock-bottom interest rates for car financing and competitive market forces have ensured that the affordability factor for mid-size cars has dramatically increased.

For the first time, since the opening up of the car industry, sales of mid-size passenger cars have crossed the one lakh mark this fiscal and are set to close the year at an all time high.

Contemporary features: The combined attractiveness of the small car and mid-size segments of the Indian car industry and the integration of Indian emission standards with globally accepted emission norms are also leading to the infusion of new technologies. The initial spate of cars, especially in the small car segment, made radial tyres, air-conditioning, power steering and side-impact protection standard features today.

The car industry is foreseeing the possibility of emission and safety related features such as anti-lock braking systems, common rail injection, airbags and tiptronic transmission becoming standard fitment in most mid-size cars, and even some premium small cars, of the future. The new, highly aware Indian car buyer is also likely to drive demand for new technologies.

Strength in parts: The entry of new technology and the increased focus on costs during the last few years amongst the existing manufacturers, who have developed a strong vendor base in India, has ensured that the component manufacturers have also had to retool their production capacities to match global quality standards.

A number of multinational component manufacturers such as Delphi, Visteon and Johnson Controls did set up base in India, but the need for global quality standards amongst the local vendors (then Tier II and Tier III suppliers) has enabled a number of Indian companies to become Tier I suppliers. Some of them such as Bharat Forge and Sundram Fasteners are also aspiring to become global players through acquisitions abroad.

Benefical fragmentation: With the entry of new manufacturers, the market is likely to become even more fragmented. The car industry is, however, likely to benefit from this in the form of greater depth, diversity and increased market discovery. After all, not many of us knew that there was such a large latent demand for small cars, until manufacturers such as Hyundai, Fiat and Daewoo came to India in the late 1990s.

And, as car sales near the magical one-million mark, for all those wondering where the roads are to accommodate the explosion in car sales, you may take solace in the fact that the US too faced a similar scenario, a few decades ago.

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