Nano effect: April to see car firms vie to woo customers

Written by Shweta Bhanot | Yogima Seth | Mumbai, New Delhi | Updated: Mar 25 2009, 05:37am hrs
Come April and the Indian automobile industry may see companies vying hard for potential customers which could again lead to a price war, this time owing to the small wonder Tata Motors Nano.

With bookings for the Nano scheduled for April 9-25 (possibly the only booking period for the year, considering the company is strapped on the supply side), experts and analysts feel that it is the time other players in the small car segment will want to focus on offers (discounts and incentives) to keep sales afloat, at least in the near future. Further, the dealers will look at on the spot offers to attract customers. According to industry experts, once the Nano hits the roads, the new as well as used car market for small cars will take a dip, both terms of prices and sales.

Since all bookings will happen in the month of April, all car manufacturers might look at bigger schemes and discounts during this period to draw potential customers into their fold, said an analyst, adding that discounts could range Rs 20,000-30,000 on certain cars, over and above existing offers.

Ratan N Tata, chairman, Tata Motors, had, on a similar question regarding the expected price war in the market due to Nano, said on Monday, There will be some reaction from the other small car manufacturers. Industry watchers also feel that companies like Hyundai may look at bringing cheaper variants of existing models; the company may reduce the engine size of Santro from 1,000 cc to 800 cc to make it more affordable.

Abdul Majeed, auto analyst and partner, PricewaterhouseCoopers (PwC), said that the price war will not only be confined to four-wheelers, but will also extend to two-wheelers. The Nano episode will make original equipment manufacturers (OEMs) jump in on board, either with similar products or lower prices on existing vehicles to stay competitive, he said. The fact that a sizeable number of potential two-wheeler buyers, close to 40-50% in case of B and C-class towns, may shift to Nano in the long run will result in a change in strategy of all manufacturers, he added.

However, the Nanos capacity constraints, product report and after sales service will also play a role in determining the impact of the car on the auto industry.

The Nano will definitely eat away the entry-level market, but the actual impact will be felt once it is on the road and driven around in the city, said, Mohit Dubey, chief executive officer, Carwale.

He, however, said that prices and sales of used cars may dip around 25%. For instance, a 2007 Maruti 800 model may cost around Rs 1.2 lakh and a 2006 model of Hyundai Santro may cost around Rs 2.2 lakh in the used car market.

A Mumbai-based Hyundai dealer said, The long waiting period for Nano is the biggest drawback the Tatas have; that gives us an upper hand.

He said that the most affected will be Maruti 800 and Maruti Alto and not Hyundai cars, which are in a completely different segment.