Now, Hero Honda seems to have found a different riposte -- moving down the price brackets to widen the gap.
While the Rs 1 lakh car is expected to hit the market next year, the world's biggest two-wheeler maker is planning to build a motorcycle that will sell for Rs 12,500-15,000 and create an all-new class of buyers.
At present, the cheapest motorcycles in India cost between Rs 30,000 and Rs 35,000.
"We are evaluating the entire scenario and a possible $300-350 vehicle is on our radar. It is in the broad spectrum of our work. Although there is nothing on the drawing board yet, we are seriously looking at it," said Pawan Kant Munjal, the managing director of Hero Honda, on the sidelines of the launch of two variants of its largest selling bike, Splendor, priced at Rs 40,990 and Rs 41,990 (ex-showroom Delhi).
Hero Honda is being egged on by the government's "unannounced concessions" in its 10-year vision statement, the Automotive Mission Plan, which envisages the development of low-cost vehicles.
Says the plan: "Domestically, the focus should be on developing and selling appropriate products for the large population of the country. The products could include cost-effective small carriers, strong rugged vehicles for the rural market and $300-350 motorcycles."
The government's move to lower the excise duty on small cars to 16 per cent from 24 per cent has already borne fruit, with India gradually becoming a hub of small car manufacture.
Automobile experts don't rule out a similar evolution of the two-wheeler market. Rahul Verma, the head of Synovate Motor Research, said, "Low-cost manufacturing is Indian companies's forte, though issues of maintenance and the lifespan of the product determine success."