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Rediff.com  » Business » Finally, some good news for small car buyers!

Finally, some good news for small car buyers!

June 18, 2018 17:03 IST

The models from Hyundai and Maruti, which might go on sale in October 2018 and February 2019, respectively, are set to revive a segment that had lost sheen to the compact SUV segment, lately

 

With Maruti bringing the new generation Alto and Hyundai introducing a completely new entry-level model, buyers in India’s small car market, who have had little to choose from in the absence of new launches since five years, would now be spoilt for choice.

 

“We would be launching a contemporary car that will address the entry-level of the car market,” said Rakesh Srivastava, director - sales and marketing at Hyundai Motor India.

The all-new model would also derive its strength from high quality and high aspiration levels akin to the Creta in the SUV segment and Elite i20 in the compact car segment, he said.

The new model, which is likely to be badged as the Santro, would eventually replace the ageing Eon and is expected to be bigger and wider than its rivals.

Amid shifting buyer preferences and lack of choice, the segment, which once accounted for a lion’s share in the domestic passenger vehicle market, has been ceding ground to pricier and bigger models.

The models from Hyundai and Maruti, which might go on sale in October 2018 and February 2019, respectively, are set to revive a segment that had lost sheen to the compact SUV segment, lately.

Driven by the two new models, IHS Markit, a sales forecast and a market research firm expected sales of entry level cars to jump from 370,000 units in CY17 to 570,000 in 2022.

Passenger vehicle sales in India advanced 27 per cent to 3.3 million in 2017-18 from 2.6 million in 2011-12.

But hatchback (includes entry-level cars and premium small cars) sales dipped to 1352,000 from 1358,000 in the same period, according to IHS.

The drop has largely been led by muted sales of micro and mini models such as Alto, Wagon R, Tata Nano and Renault Kwid.

Rakesh Batra, partner and national leader, automotive sector at E&Y said that while the sales mix in the market has been changing in favour of compact SUVs, “the fundamental of the entry-level segment remains strong,” pointing out that first time buyers still account for 40-45 per cent of the car market.

The new generation models therefore would definitely help in reviving the segment.

However, a flurry of new regulations on emission, safety and fuel efficiency expected over the next few years would push up the price points, he added.

In the absence of new models that have service and reach matching with Maruti and Hyundai, first-time buyers opted for used cars, fuelling sales of the second-hand car market.

While the Alto has been through several iterations - from minor to major ones and continues to be a top seller with average monthly sales of over 20,000 units 18 years after its launch, Hyundai pulled the plug on the Santro in December 2014.

Local arms of other global carmakers including Volkswagen, Honda Cars, Toyota Kirloskar, and Ford India have unsuccessfully tried to break into the entry-level car market.

None of the entry models launched in the current decade have been able to replicate the volumes of the market leader. Renault Kwid - launched in September 2014 - seemed like a formidable rival to the Alto. However, after a year of strong run, volumes fizzled out.

The Kwid sales are now down to 5,000 units a month from over 9,000 units in 2016.

Tata Motors’ Tiago has been outselling the Kwid, emerging as the second-largest selling model.

Besides other factors, lack of adequate sales and service network led to the undoing of the Kwid, which could have capitalised on its competitive pricing and styling, said Avik Chattopadhyay, co-founder at brand consulting firm Expereal.

“When you launch a model in the range of Rs 260,000 to Rs 270,000, you are expecting mass market buying your products,” he said adding that even in larger cities, Renault did not augment its network adequately.

“It’s a classic mistake of the European carmakers - focus on sales and not service,” he said.

Image used for representation purpose only.

Photograph: Babu/Reuters

Shally Seth Mohile in Mumbai
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