Once the mega hit, the mini car drives into the sunset - The Financial Express

Once the mega hit, the mini car drives into the sunset

What explains Honda being lower than Hyundai in terms of sales even though it entered the market earlier? Possibly the car it chose to enter the market with.

By: | Updated: March 21, 2016 11:49 AM

renault kwid review

Renault launched its entry-level model Kwid at an introductory price starting at Rs 2.57 lakh (ex-showroom Delhi). (Car Dekho)

1997: Honda Motor of Japan entered the Indian market, not with any of its small car but with a sedan, City.

1998: Hyundai Motor of South Korea entered the Indian market with 1-litre engine small car, Santro.

2015: Both Honda and Hyundai are present in the country with a range of cars but Hyundai has the second largest market share while Honda stands at number four.

What explains Honda being lower than Hyundai in terms of sales even though it entered the market earlier? Possibly the car it chose to enter the market with. Hyundai entered a year later with the hatchback Santro and stormed the market, almost challenging the hitherto undisputed No. 1 position of Maruti Suzuki. What is little known is that Hyundai had first toyed with the idea of first launching its sedan, the Accent, but changed its mind because the market was mainly small cars then. Honda decided against a small car because it said it would not be able to compete with Maruti's vast dealer network, something essential to being successful if the product is a small car.

Barring Hyundai, all other overseas carmakers entered India with bigger cars and much later brought smaller variants. The latest was Renault, which on September 24 launched its entry-level model Kwid at an introductory price starting at Rs 2.57 lakh (ex-showroom Delhi).

Gr7

But this is where the script changes. The Kwid launch notwithstanding, the era of small, mini cars with an engine capacity of 800 cc or below seems to be over for Indian consumers. Wider choice and bank financing seems to have made consumers move to compact hatchbacks or sedans. The era of the mini car, which put the majority of Indians on roads with the iconic 800 from Maruti — the only car that did not have a name but was known by its engine capacity — is over. In January 2014, Maruti completely phased out the 800. The Alto, which was born in 2000 and was supposed to replace it, continues to sell but was last spruced up in 2012. To tap the mini car segment Hyundai launched Eon in 2011 but sales have been lacklustre. Tata Motors' Nano was never close to setting the market on fire. General Motors also entered the market with its 1-litre engine Spark in 2007 but phased it out early this year.

Statistically, the micro and mini segment constituted 21% of the total passenger car segment in 2014-15. This stood at 30% in 2010-11. In the same period, the share of compact cars has risen to 41% from 33%. Sales of mini and micro cars remained flat during the April-August of the current fiscal.

“We expect the micro and mini segments together to continue to underperform owing to weaker demand from rural areas, significant launches in the compact segment,” said Ajay Srinivasan, director, Crisil Research.

“The mini car segment is easily impacted by high inflation and low savings growth. A lot of customers in the segment have moved to the used car segment for owning a superior product. In future this segment will be outgrown by hatchback and premium hatchbacks,” said Kumar Kandaswamy, partner, Deloitte and Haskins.

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