For Meerut?s Sunita Gupta, with an annual salary of Rs 2.8 lakhs, there?s a dream that finally looks like it will come true. Ever since Ratan Tata first announced the lakhtakia, she is eagerly awaiting her wheels. The debates, the politics, the technologies, the economics and ecologies of what gains and pains that might ensue once the Tata Nano hits the road ? are just that, talk. When bookings open, she will be among the first to be in line.
And so will be many others. Rarely has a car launch generated such interest. Will the Nano have the same impact that the iconic Maruti 800 had in the 1980?s? Will it revolutionise the way we drive? With just a week left for the launch of Nano, expectations run high across small town India.
Most two-wheeler and other four-wheeler manufacturers are wondering which segment of the industry would be cannibalised the most by the car that has taken the world by surprise ever since it was first unveiled at the auto expo in January last year.
Market matrix
Analysts feel it could be a long way before the actual impact of Nano is felt, primarily because of limited volumes in the first year of operation and the entirely new segment that the vehicle will create once it hits the Indian roads.
?Nano is set to create a new ultra low cost car segment, positioned between two-wheelers and the A1 or the mini car segment that currently only has Maruti 800. So there will not be much of an impact on the compact cars that include Alto, Wagon R, Santro, Spark and Indica, to name a few,? says Rakesh Batra, Partner and National Leader, Automotive Practice, Ernst & Young.
However, Abdul Majeed, Partner, PricewaterhouseCoopers feels that the world?s cheapest car could actually be able to pull quite a significant number of prospective two-wheeler buyers in the country.
?The automotive industry in India is skewed towards two-wheelers and if Nano is able to draw even 10% of this in next 18-20 months, it would be big enough to impact the segment,? he says. However those who are already driving a car will probably not downgrade to a Nano, even if they own an Alto or a Santro, he points out.
According to the Society of Indian Automobile Manufacturers (Siam), two-wheelers constituted 76.9% of the total automobiles sold in India at 61,52,804 units between April and January compared to 79,92,218 units of total vehicles sold in the country in the corresponding period of the last financial year. Agrees Batra, ?Women who are aspiring to own a two-wheeler and can afford an additional investment of Rs 40,000-50,000 will surely prefer a Nano than a scooter for safety and security reasons.?
This implies that the growth prospects for scooters, mainly the TVS Scooty and Hero Honda Pleasure, are bleak as the two constitute a good portion of total scooters sold in the country. Siam report shows that scooters formed 96,017 units or 16.5% of the total two-wheelers (5,81,742 units) sold in the country in January. Interestingly, their contribution to total two-wheeler sales has gone up by 2% from 14.5% in January last year to 16.5% now.
Yehi hai right choice
According to estimates, Nano will become a preferred option for people in the income bracket of Rs 1.5 lakh to Rs 3 lakh per annum and those residing in Tier II and Tier III towns. Since a huge part of the Indian population falls in this category, all major players are gearing up to launch similar products to cater to the growing demand of smaller, fuel-efficient vehicles, not just in India but globally.
The homegrown Bajaj Auto, the undisputed two-wheeler leader for several decades, has decided to foray into the segment with an ultra low cost car, which would be priced between $2,500 and $3,000, which the company is developing in association with Renault and Nissan and is expected to hit Indian roads in 2011.
Even global auto giants like Honda Motor, General Motors, Ford and Hyundai are working on new platform to develop smaller cars in India through their subsidiaries here. Though these cars might not compete with Nano in terms of pricing, but they would certainly be smaller than their existing smallest car in India. Thus helping companies to cater to the rising demand for smaller cars in their respective markets, ever since fuel prices sky-rocketed late last year.
Export wise
?With a surge in oil prices last year, many in developed countries have now started moving towards fuel efficient or small cars and this has led to a rise in demand for small cars,? says Vaishali Jajoo, Senior Auto Analyst, Angel Broking.
According to Jajoo, during turbulent times like these, even the cost of ownership matters the most. ?Since smaller cars, especially the ones made in India, are more affordable than the sedans and the sport utility vehicles, which had been ruling the roads in global markets before the financial meltdown, and high oil prices had set in, people there now prefer smaller cars,? she says.
As figures would testify, Maruti Suzuki India registered a jump of 89.9% in exports in February at 8,565 units against 4,511 units in the same month last year, Hyundai Motor India posted a growth of 18.3% in exports at 17,039 units last month vis-?-vis 14,401 units in February last year.
In fact, Hyundai has already exported 25,000 units of i20 in the last three months. This is 44.6% of the 56,039 units that the company exported in December, January and February. Even the A-Star, launched in India in November and the shipment of which to Europe started in January, has so far contributed 56.8% or around 10,000 units of the total 17,603 cars exported by Maruti in the last three months. These two models are specifically catering to Europe, signaling a growing demand for such vehicles overseas.
Interestingly, sensing a huge potential for these cars in domestic as well as global markets, Tata Motors has announced a diesel version of Nano for India, which will soon follow the petrol version, as well as Tata Nano Europa for select international markets.
Unveiled recently at the 79th Geneva Motor Show, the Tata Nano Europa is expected to be priced at $6,316 and would be launched towards the end of this year. The car is expected to be powered by a three-cylinder sporty all-aluminium multi-point fuel injection (MPFI) engine matched with a five-speed automatic transmission and electric power steering.
No matter how robust is the demand for the Nano, auto analysts feel that it will be a volume game for Tatas? and the company will break even only in next five-six years, considering that they are operating at a profit margin of 7-8% and have spent close to Rs 2,000 crore on the project.
Since the outlook for the 2009 continues to be gloomy for markets such as Europe, the US and Japan, which make the bulk of the global automotive industry, it is to be seen as to how fast will global auto manufacturers catch up with ?Made in India? Nano.
Wheel spin
Bajaj
Bajaj Auto has entered into a joint venture with Renault and Nissan to foray into the passenger car segment. The company had unveiled a prototype of a small car, which is being developed under the code name ULC (ultra low cost) car project, before the Auto Expo last year. The car is being designed at the Renault Design Centre in India and would be rolled out in 2011. The joint venture partners have zeroed in Chakan to set up the small car plant that will have an initial production capacity of four lakh units per annum. In June 2008, Bajaj-Renault-Nissan had announced a joint venture for the ULC project, with Bajaj holding a 50% stake and Renault and Nissan holding 25% each, to produce and market small cars in the country.
Hyundai
Sensing a huge potential for Hyundai?s ?Made in India? small cars, the company is working on a smaller car than its smallest existing car that is Santro. However, it will not be anywhere priced similar to Tata Nano. ?Right now, we are not looking at competing with Nano in pricing and would take at least three years,? Chung Mong-Koo, Chairman and CEO, Hyundai Motor had said last year. The company has already started work on the new car at its R&D centre in Korea and plans to roll-out the vehicle from its recently inaugurated second plant in Chennai. The plant that has been set up at an investment of $1-billion would double the company?s production capacity to 6,00,000 units per annum.
General Motors
The world?s largest car maker, General Motors, is mulling to produce a compact car with an engine of less than one litre. The company is conceptualising a car in the 800-900cc segment that it plans to produce in India and launch by the end of next year or early 2010. ?We intend to introduce a second mini into the market,? D Nick Reilly, President, Asia-Pacific for GM, had said earlier. ?When we say new cars (for India), that?s referring to a second mini and potentially another vehicle in a completely different segment,? he had said without divulging further details. It is believed that GM?s top brass in the Asia-Pacific region is already working on putting together the concept of the car that will likely be developed at GM Daewoo in South Korea.
Ford
Ford India will soon debut in the small car segment in the country. The company is already working on the design aspects of the car at its R&D facility in Australia and expects to roll out the car by 2010. ?Ford is entering the small car segment for the first time and we know it has to be aggressively priced. We studied the market and know it is large and growing,? Michael Boneham, President and Managing Director, Ford India had said some time back and added that the Ford?s small car will directly compete with products from Maruti Suzuki India and Hyundai Motor India in the compact car segment. The company has invested $500 million to expand its production capacity as it plans to export small cars from India to countries in Asia-Pacific and Africa.
Honda Siel
It will be a top-end compact car but would put Honda Siel Cars India in the list of compact car manufacturers in the country. The company is all set to roll-out Jazz in India in June from its Greater Noida facility. This would be followed by another small car on a completely new platform that will roll-out from the company?s upcoming plant in Rajasthan. The company has invested Rs 1,000 crore and plans to take it up to Rs 2,200 crore over next few years to scale the production capacity from the initial 60,000 units to two lakh units. The company had some time back said that it is putting work on its second plant on hold for few months till the domestic demand picks up.
NUMBER GAME
Domestic Sales
Passenger vehicles registered growth with 0.28% in April – February 2009 over last year.
Passenger cars grew by 1.35% during this period.
The sales in February 2009 for passenger vehicles grew at 15.02% over February 2008.
Three-wheelers sales registered a decline of (-) 5.51% in April 2008 – February 2009.
In February, three-wheelers sales grew by 5.06% over same month last year
Two-wheelers registered marginal growth of 2.50% during April 2008 – February 2009. Mopeds and scooters grew by 3.86% and 9.51%. Motorcycles also grew marginally at 0.98%. Electric two- wheelers segment grew by 45.24%. Two-wheelers sales grew at a growth rate of 16.23% in February 2009 over same month last year.
Exports
April 2008 – February 2009 saw automobile exports registering a growth of 26.51% with all segments except Commercial vehicles, registering positive growth.
Passenger vehicles and two-wheelers segment grew by 56.30 and 25.55% respectively. Three-wheelers exports grew by 7.43%
Source: SIAM