The Hindu Business Line : The wheels are turning

A slew of new cars is set to zoom on to Indian roads next year. As finance schemes make it easier for consumers to buy bigger cars, most of the launches are in the mid-size segment.

WITH a bevy of hot new wheels set to scorch the roads next year, the going is only getting to get better for the Indian consumer. According to estimates, at least 20 new models are due for launch in 2006, most of them significantly in the mid-size or premium mid-size sedan segment, perhaps reflecting the growing number of owners who are `upgrading' to bigger vehicles and also the rising income levels.

"Consumers are upgrading to bigger cars. In fact, the average duration of ownership of a vehicle has come down to about 3.5-4 years from about 8-10 years earlier. This figure is likely to stabilise at about 2-3 years.

"The reason lies in the increasingly easier options within finance schemes which allow consumers to go in for bigger vehicles," says Anang Dev Jena, Head, Synovate Motoresearch.

Market watchers say the lone entry into the compact car segment next year may be Chevrolet Aveo from General Motors. The Aveo is set to come in two variants — a premium hatchback and a notchback — with the mid-size Aveo expected to eventually replace the Opel Corsa in India. The Aveo hatch would be pitted against the growing sales of Getz and Swift, and its three-box version would compete with the Honda City and its ilk.

General Motors is also gearing up to introduce a sporty hatchback version of the Chevy Optra, styled by Italian design house Giugiaro, on Indian roads.

The slated launches for 2006 not only include newer models but also the latest variants of current models.

Volume giants Maruti and Hyundai Motor India's launch line-up for the next year includes a premium mid-size car and diesel variants of their compact cars.

Hyundai plans to roll out the Verna next year, which will be positioned between the Accent and the Elantra, a new generation model of the Accent (sometime in the second half of 2006) as well as a diesel variant of the Santro.

Maruti's array includes a diesel variant of the Swift and a premium mid-size car priced in the Rs 9 lakh -10 lakh range. The launch is expected to mark a shift in the car-maker's image — that of a mass manufacturer of cars. The company's new model would take on the likes of the Skoda Octavia, the Toyota Corolla and the Hyundai Elantra.

There is more to come in the premium mid-size category, with Honda set to launch its popular car, Civic, in the first half of 2006. The company has expanded capacity at its plant to meet the demand.

"We are aiming to launch the Civic as early as possible and are working on it. We are also studying the possibility of rolling out a small car for the Indian market; however, this is still in a very early stage," Honda Siel Cars India (HSCI) President and CEO Masahiro Takedagawa says.

The company, which has invested close to Rs 150 crore in ramping up capacity to 50,000 units per annum from 30,000 units, plans to double the output to 1 lakh units by 2010 at an investment of Rs 700 crore.

Mitsubishi too plans to roll out a new version of the Lancer — the Lancer Cedia — in early 2006, and may even launch a new sports utility vehicle from its global portfolio. "Consumers are increasingly opting for a good brand, reputation, better styling and features. They are able to do that as income levels are increasing and financing options for mid-size cars become much simpler.

In addition, studies have shown that mid-size cars are providing the same mileage as a premium hatchback ... thereby a potential car buyer would inevitably opt for the bigger mid-size sedan. In fact while in 2002, 82 per cent of the people surveyed said that they were willing to spend over Rs 4 lakh on a car, this figure is about 89 per cent at present," says Pradeep Saxena, Senior Vice-President, TNS India Automotive.

In fact, the mid-size sedan segment is poised to be the biggest volume driver in the domestic market, growing at a higher rate than the passenger car category. Incidentally, most of the new launches are in the higher end mid-size cars, which are fuelling growth in this segment. In turn, the entry-level mid-size segment is getting hit, with the premium hatchback segment (consisting of the Hyundai Getz and the Maruti Swift) coming to life, points out a market analyst.

Meanwhile, Volkswagen group company Skoda is planning to roll out the Fabia and two variants of the Octavia on a larger platform next year. The Fabia is Skoda's largest selling model globally. "This is part of our commitment to bring in new technology to India every 2-3 months," says Imran Hassen, Managing Director, {Scaron}koda Auto India. The automaker earlier this month rolled out the high-end Laura.

Ford may also roll out the Focus, which will be positioned above the recent launch, Fiesta. Adding to this list will be high-end models from the stables of Daimler Chrysler, BMW, Audi and Porsche, among others.

The reason behind the flurry of activity perhaps lies in the numbers. The domestic car market has grown at a double-digit figure over the past few years, though market watchers are quick to point out that the current fiscal may be an aberration.

In fact, US-based consultancy Keystone, a subsidiary of LaSalle Consulting Associates, has forecast that India will become the world's third largest automobile market by 2030, just behind China and the US. An ageing population and increasing costs of ownership will see the auto market shrinking in Japan, Korea and Europe, while increasing per capita income will fuel the growth in India and China, it says.

Therefore it would be difficult for any automaker to give India a miss.

Needless to say, automobile majors such as Volkswagen and BMW have announced their intention to set up base in India, while Renault has tied up with Mahindra & Mahindra to roll out its vehicles in 2007.

In addition, almost all automobile companies present in India have announced massive investments in the country with Hyundai and Suzuki taking the lead.

Further, analysts point out that as Indian car buyers mature they will be looking for consistent excitement in the market. The success of the Swift, launched in 2005 in the premium compact segment, is a case in point. In fact, Maruti recently had to increase production of the Swift by 30 per cent to bring down waiting time. The company, which had been producing 5,000 Swifts per month, stepped up the number to 6,500 from November.

Meanwhile, there is more for the Indian consumer to be happy about next year. Small cars just might get cheaper with the government considering a two-tier excise structure for automobile manufacturers.

Analysts say that while cars may get cheaper with the excise duty likely to be reduced from 24 per cent to 16 per cent, small cars could get cheaper with excise duty reduced to 8 per cent. These changes are likely to be part of the auto policy which the Government is working on and are likely to be announced in the forthcoming Union Budget.

Earlier this year, Finance Minister P. Chidambaram announced that the tax regime for small cars would be reviewed to encourage production.

"Once this happens, the small car will be big! In fact, the premium hatchback segment is expected to become the largest segment in the next 2-3 years," says Synovate's Jena.

Needless to say, several automobile majors are working on strategies to introduce a small car in India. This may include the Honda Jazz, the Toyota Passo and the Chevrolet Spark. These cars, however, are only likely to roll out in India in 2007.

Options galore for the Indian consumer to ride away in into the sunset!

Imaging: K. Balakrishnan

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