The compact kingdom

PARVATHA VARDHINI C | Updated on July 31, 2014


The Nano may not have been a great success, but when Ratan Tata introduced this $2,500 car to the world, it came to be known that India was one of the largest markets in the world for tiny cars. Indian ‘compact cars’ — defined quaintly as cars which are sub-4000 mm length — constituted about 70 per cent of the 12 lakh cars sold in the country in 2008-2009, when the Tata Nano was launched.

Today, more than five years later, salaries have grown, the numbers of super-rich have multiplied, and big cars have a bigger presence. Yet, the dominance of the compact car in the Indian market has only risen.

The segment has been further differentiated into Micro, Mini and Compact, and at least a dozen new cars such as the Eon, Figo, Beat, Brio, Amaze, Micra, Go, Polo, Pulse, Liva and Celerio have been added, so much so that 77 per cent of the roughly 1.8 million cars sold in India in 2013-14 are today, again, small cars.

With the segment attracting such huge interest, global carmakers have been posing stiff competition to Maruti Suzuki, traditionally the biggest player in this segment. The company’s market share has steadily dwindled from 45 per cent in 2008-09 to 36-38 per cent now.

Global trends

This predominance of compact cars in the Indian market is quite at odds with global trends. In the developed markets of US and Europe, compact cars make up no more than a tenth of annual sales. Why, even the definition of a ‘small car’ in India is at a fraction of the global definition.

While Tata set his sights on pricing his Nano at $2500, China’s cheapest entry-level car, recently flagged off by Nissan was priced at 39,900 yuan ($6400). Popular compact models in Europe like the Dacia cost upwards of $10,000.

Compact cars have held the interest of Indians due to several reasons. For one, with most car buyers financing the purchase through loans, these cars are more affordable.

Prices of such cars are kept low with concessional excise duties. Fuel economy, easy manoeuvrability and the requirement of less parking space also push first-time buyers towards small cars.

Affordability seems to be a big issue too. Despite its population, India’s car market with a sales volume of 1.78 million cars in 2013-14 is tiny by global standards.

China sells as many vehicles in a single month and Europe, with only 60 per cent of India’s population, sells 12 million cars a year.

Published on July 31, 2014

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