Santro’s sunset may see rise of EV variants of Hyundai

Way back in late 90s, several foreign car manufacturers entered the Indian market. Most continue to struggle till today and are finally calling it quits. However, South Korean car manufacturer, Hyundai, became a roaring success. The reason was its first product, the entry-level, 1-litre engine hatchback, Santro.

Hyundai’s original choice was not to launch Santro as its first car but the mid-sized sedan, Accent. However, there was a strategic rethink and the company chose to first build volumes and then move up the product chain. Rest, as they say is history.

Today, the product which defined the company’s success in the Indian market, is being phased for the second time because of very low monthly volumes – around 1,500 units.

BVR Subbu, former president of Hyundai Motor India, who was the strategist behind first launching Santro instead of Accent, has an interesting take on the phasing out of the car at this point of time.

“Am sure this decision to phase out Santro is to retool its platform to produce electric vehicles instead. Santro sells low volumes and makes less money. EVs are emerging products and by retooling its platform, Hyundai would be able to make a splash in the EV market at a much lesser investment than any other manufacturer,” Subbu said.

“I am sure, Hyundai would retool the platform to produce its Ioniq 5 EV and Kia Motor’s Kia EV6. These two would give it a leadership position in the EV space very fast,” he added.

Subbu’s assessment seems right. Hyundai’s strategy of phasing out a product when its time is over by a product whose time has come, may yield it rich dividends just like Maruti did with its first car 800 by replacing it with Alto.

Maruti 800, which was launched in mid-80s and redefined motorisation in India, was phased out completely in 2014. At that time it had sold 2.8 million units. Alto, a similar but more contemporary and stylised car which was launched in 2000, had clocked in 4 million units by 2020.

“Alto can appropriately be termed a worthy successor of the successful Maruti 800”, says RC Bhargava, chairman, Maruti Suzuki India.

Santro was launched in 1998 and had sold a total of 1.3 million units before it was phased out in 2014. A new Santro was launched by Hyundai in August 2018 but failed to click in its second coming. Here again, there’s a parallel with Maruti which phased out its once popular Zen, replaced it with Estilo, which failed and was subsequently phased out.

Auto sector analysts are not surprised at the news of Santro being phased out as the market for cars has totally changed. “The average car-buying age is coming down, and younger buyers, in general, prefer good driving dynamics, customisation and a lot of technology features on the dashboard over traditional features such as good fuel efficiency,” Som Kapoor, partner, automotive sector, EY India, said.

“Margins are low, and you need to sell in high volumes to recover investment costs. I doubt any carmaker will develop an all-new entry-level hatchback in the near future,” Gaurav Vangaal, associate director, light vehicle forecasting, S&P Global Mobility, said.

The perspective of marketers and brand experts on the phase out of Santro is also quite similar. “Santro when it was first launched was an upgrade over the prevailing entry-level Maruti 800. So, two-wheeler owners looking to buy a car for the first time would opt for the Santro as it offered more space, style, comfort and low maintenance/running cost at an affordable price-point, according to Samit Sinha, managing partner, Alchemist Brand Consulting.

“It was a revolutionary launch, a massive upgrade over the Maruti 800, without a corresponding huge delta in the pricing,” Sinha said. “When it was relaunched in 2018, the company made the classic mistake of assuming the market was the same when it had left,” he added.

According to Sinha, the marketing world has seen several brands failing to innovate in time, and phase out gradually. When they relaunch, trying to ape market trends, it could be too late.

“Classic examples include Nokia and Blackberry. They have tried to relaunch, but they both know they missed the touchscreen smartphone bus and the Android bus,” Sinha said.

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