Column: Small is bountiful

Written by Yogima Seth | Updated: Nov 27 2009, 02:19am hrs
Stimulus or no stimulus, compact cars from India are selling like hot cakes in European markets and the trend is expected to continue over the next few years, courtesy low manufacturing costs in India and several new products, especially in the compact car category.

So much is the demand that total export of passenger cars from the country went up by 32.4% between April and October, at 2,48,277 units compared to 1,87,459 units in the corresponding seven months last year. In October, exports jumped by 16.8% at 38,189 units vis--vis 32,676 units in October last year, and 94.6% has been compact cars.

The segment, which comprises exports mainly of i10 and i20 from Hyundai, A-Star from Maruti Suzuki India, and small numbers of Tata Indica, Skoda Fabia, Honda Jazz, and Spark and U-VA from GM India, registered a growth of 16.8% last month at 36,114 units, compared to 28,014 units during the same month in 2008.

All this comes on the back of scrappage incentives that were given by various governments in the West to boost the sale of small cars in their respective countries.

The growth prospects are so bright that Nissan had entered into contract manufacturing with Maruti to source nearly 54,000 units of A-star from India and sell it in the overseas markets as Pixo under its own badge.

Going forward, players like GM India, Ford India and Toyota Kirloskar Motors are developing their bases in India for compact cars at a total investment of around Rs 6,000 crore. While Ford has already unveiled Figo that will hit the roads next year, GM India will shortly unveil its all new small car and the two big global players are betting big on India to cater to the rising demand of compact cars, both in the domestic market and overseas.

This is contrary to the 17.5% jump in domestic demand in the first seven months of the current financial year at 8,21,954 units, as compared to 6,99,790 units in the corresponding period last year due to higher base. However, sales in the domestic market surged by 33.8% in October at 1,32,615 units vis--vis 99,052 units in October last year mainly because of festivals and the wedding season in the northern part of India.