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March 22, 2000
The Rediff Business Special/Nikhil Faleiro
Fight of the titans
Some call it World War III. Many describe it as the clash of the titans. Yet others call this the Final Countdown.
For the automobile manufacturers, India is the last virgin territory waiting to be conquered. And that does not mean only Indian manufacturers: Mahindra and Mahindra, Tata Engineering, Premier Automobiles, or Hindustan Motors.
Also fighting tooth-and-nail for a bigger pie of the sector are global automobile giants who have woken up to a market that wants only the best motoring toys to play with.
Ford, General Motors or GM, Toyota, Mercedes Benz, Honda, Mitsubishi, Peugeot, Daewoo, Hyundai and Fiat are all devising strategies and planning new product launches in India. These are the big daddies of the industry: automobile behemoths who, with a stroke of the pen, could change the entire face of the business, the shape of cars to come and the industry trends.
Admits Adil Jussawalla, editor Overdrive magazine (an automobile trade magazine), "You could say that in the red corner are the western companies and in the blue corner are the companies from the east. Each wanting to dominate the Indian market with its latest offerings.''
According to the Society of Indian Automobile Manufacturers or SIAM, the Indian automobile market has been growing at an annual rate of 50 per cent. Sales of automobiles have been growing at 50 per cent and automobile manufacturers are bending backwards to please buyers and to introduce the latest models into the country.
In January 2000, the Indian automobile market grew 61 per cent over the same period last year. Considering the way the market is growing, analysts expect another boom this year as well.
The long recession that the Indian car mart was reeling under is receding. This could lead to another phase of growth. Sleeker models, cut-throat pricing and value-additions would mark this phase.
Herein, however, lies a difference: unlike in the past when it was each company for itself, this time around the fight to corner a bigger market share of the Indian market can be distinctly divided into two groups. The manufacturers from the West -- Ford, Mercedes Benz, Fiat, General Motors -- and the boys from the East - Daewoo, Hyundai, Honda, Toyota and Mitsubishi.
As T Fujisaki, chief executive officer, Honda Siel India, puts it, "India is one of the growth models for us and we are expecting the mid-size segment to surpass all records as more consumers graduate from smaller cars to mid-sized ones. This desire for better vehicles is fuelling the boom.''
Indian consumers are now able to choose from as many as 120 models. Things have reached such a stage that some cars are already reaching the Indian mart before they make it to other markets.
Ford India started this trend last year by launching the Ford Ikon in Delhi before unveiling it in the US. Hyundai Accent, quick to grasp the importance of the Indian market, unveiled Hyundai Accent in India before other markets.
Admits P Balendran, associate vice-president of corporate affairs, General Motors India, "The fight now is to launch your latest product as fast as possible. If you don't, the other guy will grab that niche and reclaiming it from him would be a nightmare.''
These niche areas are witnessing the fight between the two blocks. The name of the game is to launch products before the rival does.
The industry at this moment is in the midst of an intense war. And it is not only to grab a bigger chunk of the market, but also to enter the memory shortlist of every household in the country.
When the Japanese giant Toyota decide to enter the market, it followed a trend distinct from the one espoused by its predecessors. Instead of launching a premium or small car, Toyota rolled out the Qualis, a multipurpose vehicle or MPV, which could be used in urban and rural areas.
The message was clear. Local leader in this segment, Tata Engineering and Locomotive Company or TELCO, suddenly found itself faced with a formidable rival challenging its supremacy.
Admits K K Swamy, deputy managing director of Toyota Kirloskar India Ltd, "The reason for launching the MPV was to blanket all segments. A premium car can be used mostly in urban areas. An MPV has the advantage of being used anywhere in the country.''
Priced between Rs 500,000 and Rs 800,000, the Qualis's launch was an indication that foreign manufacturers were no longer satisfied with just pussyfooting around.
Says Aniruddh Mathur, automobile analyst, "Earlier, you had one launch with a particular car. Then the company tested the market and if the results were favourable, it would go in for another launch or a variant. Now it's either a great marketing scheme or launch of a variety of models in one go to blanket the market.''
Be it blanketing the market or bending backwards to please customers, there is no denying the fact that global automobile manufacturers have got a huge fight on their hands.
Consider the elitist Mercedes Benz, which launched a 'new-for-old' scheme in a bid to wean away buyers from other manufacturers. The price for the new E-class Mercedes, after you trade-in your old car, is merely Rs 1.3 million Rs 1.5 million. And the Merc strategy to expand quickly includes bringing in Chrysler products such as the Neon, the Jeep, the mini-van Voyager and the best-selling MPV Cherokee.
As Jurgen Ziegler, MD and CEO Mercedes Benz India Limited or MBIL, said, "The Indian consumer is very discerning. So we have to show him the best and the latest, and we have to get it here before the rest.''
Similarly, GM has realised that it has a cash cow in the Opel Astra 1.6-litre models. Cashing in on the demand for low-priced, high-performance cars, GM recently launched the Opel Astra 2-litre model. For the lower end of the market, it unveiled the Corsa. Priced at Rs 5,35,000, Corsa has become an instant success and the company hopes to sell 10,000 units this year.
Spurred by the success of this recently launched vehicle, GM is planning to introduce the cheaper version of the Corsa -- the two door convertible called the Cabrio.
"It's a fun vehicle for the urban users. With the consumer becoming more demanding, we have no option but to meet such niche demands,'' says Richard Swando.
Not to be outdone, Ford India Ltd has launched the Ikon Rally Sport with a price-tag of Rs 5,92,000. Available in two exclusive colours, Ford Racing Blue and Silvertone, and powered by a 1600-cc Rocam engine, the Rally Sport can accelerate from 0 to 100 km in 11.5 seconds.
Phil Spender, managing director, Ford India, during the launch of Ikon Rally Sport said, "You want to be known as the best, and then you be the best.'' That, however, is not all that the company is planning. It is also contemplating making customised cars.
The Japanese and the Koreans are not taking things lying down either. Having come to the conclusion that it is better to bring the best before the rest, they too have awakened to the reality that the western automobile manufacturers are quietly stealing a march over them by bringing in the best.
This is why Hindustan Motors is entering into a strategic alliance with Mitsubishi Motors Corporation to market the world-famous Pajero in the country.
With the western manufacturers bringing in their MPVs into the country, the Japanese have also decided to take the fight to former. With Mitsubishi's Pajero set to enter the mart and Toyota's Qualis already carving out a niche for itself, automobile analysts anticipate a price war.
Says Mathur, "With so many models available and the desire to grab a bigger chunk of the market, automobile companies will go any lengths. The varied launches are an indication that the auto giants now respect the Indian consumer. Gone are the days when Indians were only interested in family-oriented vehicles. Today, niche and speciality vehicles are the order of the day. And this is triggering off the war. The consumer now stands to benefit tremendously.''
Daewoo, which earned a name as a low-end automobile company, is now realising the need to plug all segments and has finally decided to bring its 1500-cc luxury car Nubria by the year-end. It is also planning to introduce an exchange offer for its cars so that it can develop the used-car market here. S G Awasthi, managing director, Daewoo India, puts it succinctly, "If you do not get the best, you cannot beat the rest."
Meanwhile, Mitsubishi is gearing up to counter the western automobile invasion. It plans to launch two new upgraded versions of its premium mid-segment offering, Mitsubishi Lancer. The Japanese auto major is all set to launch a sportier version of the Lancer SFX, targeted at younger customers. For the older generation a super-luxury version of the Lancer SLX is in the offing.
R Santhanam, executive vice-president, Hindustan Motors or HM, says "The latest offerings have to be niche products or you are nothing.'' And this realisation has also hit Hyundai and Daewoo, who made a mark with their price-cutting tactics but lost out to more sophisticated models.
Hyundai has drawn up plans to bring in Sportage, an MPV comparable to the Pajero, the Cherokee and the Safari. While that will take care of one area of the industry, which all companies seem to be aiming at, the other area is the 'omni' option. Here the company plans to roll out the Starex, which has the attributes of both a MPV and a light commercial vehicle.
Says B V Sabhu, marketing manager, Hyundai India, "You can never be too careful and Indian preferences have shown that many Indian customers favour a vehicle that can double up as a personal vehicle and can also be put to commercial use.
While the Indian automobile manufacturers are still struggling to upgrade their existing models and introduce new ones to take on these new challenges, the Japanese, Korean and US automobile majors have all ready drawn up elaborate strategies to emerge victorious in this big fight.
As Mathur rightly puts it, "It is not about reaching the post or leaving the starting line first. In fact, it is all about staying on the track in a variety of ways."
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