The small-car parade

Time was when the executives of the American car companies in India would talk about the increasing size of India’s middle class, its growing aspiration levels and purchasing power, its concern about safety and comfort, and having been exposed to global brands, the middle class too would like to own such brands.

The pitch was that this class of consumers would more readily go in for a three-box car, or an entry level mid-size sedan, rather than a hatchback. They would say that they were basing their opinion on extensive market research that had been conducted and also on similar experiences in other countries, most notably China.

Based on this premise, manufacturers such General Motors and Ford India, and the Japanese companies such as Toyota and Honda concentrated on larger cars or utility vehicles. Ford came in with the Ikon, an entry-level mid-size sedan; General Motors had the Opel Astra, a costlier sedan; Toyota with the Qualis, a multi-purpose vehicle that had been discontinued in other markets; Honda with the City, a sedan that held sway over that segment for a long time till challengers came along.

During all this, the country’s largest car manufacturer Maruti Udyog Ltd, which subsequently became Maruti Suzuki India Ltd, trudged along with the Maruti 800, Zen and other such small cars. Of course, Maruti too dallied with the sedan segment, with the Baleno and an estate version of the Baleno, both of which did not exactly excite the buyers.

First to sense opportunity

Hyundai Motor India, which originally planned to enter India with the mid-size sedan Accent, was perhaps the first of the foreign manufacturers to read the market right. And, instead of the Accent, it launched the Santro, a hatchback as its first model in India — known as Atos or Atoz in other markets.

After several iterations, Hyundai still continues to sell the Santro, more than a decade after it first hit the Indian roads. In the meantime, Maruti went from strength to strength, launching a range of small cars at different price points and introducing sedans and compact multi-purpose vehicles, challenging the competitors on their turf. It still commands nearly a half of the million-plus passenger vehicle market.

Nano’s entry, policy push

Tata Motors, which transformed itself from a largely truck and bus manufacturer into one that makes cars and utility vehicles also, entered the car segment with a hatchback. And, then made the world sit up and take note of it by introducing the Nano, touted as the Rs 1-lakh car.

Even as Maruti, Hyundai and Tata Motors formed the top three in the passenger vehicle segment, an inevitable transformation was happening with the others. Having realised that they were not making much headway in the country, companies such as Ford, General Motors, Toyota and Honda too got into the small car space. Of course, there was a bit of policy push too in that. Small cars — less than four metres in length and engine displacement below 1.2 litres for petrol and 1.5 litres for diesel — were charged a lower excise duty.

Export hub

And, before you knew it all, the manufacturers were drawing up plans for cars to meet these specifications. Some even chopped a bit of their existing three-box cars to ensure that they were within the small-car limits and would get the lower excise duty benefit. Hyundai even made it clear that its Indian arm would be the export hub for small cars, with both the i10 and the i20 doing good numbers. Nissan sourced cars from Maruti, badged them as its own and sold them in Europe. Now, almost all the major manufacturers of small cars are exporting from India, even to developed markets such as Europe. India as a hub of small car manufacture had truly arrived.

In the middle of all these developments, the chief of Renault-Nissan Carlos Ghosn, after scouting around in the country impressed by its frugal engineering — providing more for less — tied up with Bajaj Auto, a predominantly two-wheeler manufacturer, for a small car.

His aim was to come up with a car that will be better than the Nano on specifications, look and feel and yet be priced not much higher than the Nano. That this did not take off as Renault-Nissan would have liked is a different issue altogether.

The paradox of the Indian car industry is that while hatchbacks still account for nearly 70 per cent of the market, the utility vehicles and luxury car segments are the ones that are growing the fastest, albeit on a much smaller base.

>ramakrishnan.n@thehindu.co.in

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