India's small car market booming

The race in on among the world’s car manufacturers to crack India’s booming small car market, with a number of them announcing production plans over the past few days.
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Renault-Nissan CEO Carlos Ghosn was in New Delhi last week to announce his company’s entry into the market by 2012.

“I don’t want Renault and Nissan to be makers of very pretty cars people dream about but can't afford. We need an entry price that's very competitive.”

Ghosn said that when fuel and running expenses were factored in, the cost of the car would be “lower than any car today made in India”.

That would suggest a starting price slightly above Tata’s Nano, currently the world’s cheapest car at 115,000 rupees (around AUD$2700).

Ghosn knows that the Indians will not just anything.


Renault has learnt the hard way as it has watched the dated-looking Logan it launched in 2007 battle to few more than 6000 sales a year.

132,615 passenger vehicles were sold in India in October – 34 per cent higher than in 2008 – as the industry races towards two million units per year.

And the trend is not about to slow.

Analysts are predicting the Indian market could explode to six million vehicles within a decade.


And while 750,000 two-wheelers were sold in October, the market for small, inexpensive passenger cars is increasing like no other.

Hyundai knows all about it. On the back of the success of its i10 and Santro, the Korean company announced on Tuesday that it will invest Rs. 8 billion (AUD$186 million) developing another small car for the Indian market.

Hyundai India’s newly appointed general manager, H.W. Park, kept most of the details secret but insisted that increasing small car sales was crucial for his brand.

“As we go forward we would need additional volumes in that space which constitutes 78 per cent of the overall passenger car market. The new small car will fit into that space.“Our Korean parent is now working on the new car. It will be smaller than Santro and priced lower than Santro. It will be totally cutting edge technology, well designed car for the Indian customer.”

Maruti-Suzuki has somewhat of a monopoly of this segment at the moment, with seven models – including the 800, Alto, WagonR, Estilo and Swift – and a 60 per cent market share.


Fiat will also join the party soon with a new small car on sale by 2011.

And plans are well advanced, as Fiat India President, Rajeev Kapoor, confirmed prototypes of the Turin-designed vehicle will be on Indian roads within a year.

“There are several steps between the drawing board [and] actual production-grade vehicles. The car will definitely be launched in 2011.”

Fiat Powertrain Technologies engineering manager, Roberto Dalmasso, said the car’s motor – believed to be between 0.7 and 1.0-litres – is already being tested and tuned for India’s driving conditions.

“We are adapting the engine to Indian specifications to ensure that it delivers optimum power and mileage,” he said.

Honda is another planning to hit the subcontinent earlier than expected and is currently fast-tracking development of its new codenamed-2CV for a possible 2011 launch.

Honda sells around 52,000 vehicles each year in India without a car in the small segment, but expects that to rise steadily with the release of the 2CV.

It will be powered by a 1.1-litre petrol engine and share the Jazz’s platform, however, it will be much smaller and aimed at other premium hatchbacks including the Hyundai i10, GM Aveo UV-A, Tata Indica and Ford Figo.


Few automotive markets in the world are experiencing a level of expansion similar to India.

Car manufacturers are now all very aware that making little cars in a nation with a big population will play a massive role in their futures.

by Tim Beissmann