IIPM set to beat economic slowdown
Yeah... this too is about the US financial metldown and its after effects; but there’s more to the Indian consumer’s yearning for compacts than just less money in their back pockets...
After years of oohing and aahing over luxurious sedans, high-nosed SUVs and adrenalin-pumping sports machines, compacts are once again the flavour of the season. If the hype around the imminent launch of Tata’s Nano is anything to go by, there is more at stake here than meets the eye. Even as naysayers were talking about the demise of the Indian small car market, the year 2009 began with the launch of Hyundai’s premium compact i20 and estimates suggest that of the 50 car launches this year, a majority would be in the compact category. Some 563,398 (SIAM) compacts were sold during April-Nov. 2008 alone and every car maker wanting a bigger slice of the Indian market has a plan for the compact segment. Toyota Kirloskar is setting up vast networks throughout the country in line with launching a Yaris derived compact in India in response to archrival Honda Siel’s plans with the Jazz. Both Honda and Toyota are investing massive capital for the same. Last year, with its new plant, South Korean car maker Hyundai also romped up production from the erstwhile 300,000 units to a whopping 600,000 units for its small car designs. When asked about the company’s plans for compacts last year, Heung Soo Lheem, CEO, Hyundai Motor India told 4Ps B&M, “As soon as our new plant comes up, we will bring in a sibling to the Santro.” He followed up his promise with the new i10 and there could be several new compacts in the offing. General Motors India–despite its plight globally–is also basking in the success of its Spark compact in India. Not to be left behind, premium player Skoda has unleashed the Fabia–positioned as a high end mid segment product.
However, according to Indian small car parameters, a car is justifiable as a small car only if it is within proscribed length limits. But the new generation launches will hardly meet these specifications, given that they are substantially larger. Most car makers have to be content with B+ positioning for their products–a segment that’s out side the purchasing purlieu of most buyers upgrading from a two-wheeler. But market dynamics are gradually changing. A mere look at compact sales figures show that the ‘A’ segment is on a gradual decline, while there’s a steady shift toward large compacts. It all began with the Suzuki Swift (in the B+ segment), which intoxicated the nation with its looks and competitive pricing, just as its sibling did in 1982 (in the A segment). Now, first time buyers are becoming more carefree about cost differentials and are rather driven by brag value. A look at the fast rising sales charts is enough to motivate car makers to bring in substantially larger, new generation compacts (almost like a saloon), proving government rules obsolete. After the launch of the Fiat Palio, Indians got a taste of large roomy perceived small cars that were affordable, comfortable and surprisingly easy to drive in congested cities.
Sure, the financial meltdown and liquidity crunch are the key persuaders for consumers opting for compacts instead of copious four-wheelers; but as the market stabilizes, chimeras like the Mercedes-Benz A-class and that lovely Volkswagen Golf GTi (premium compacts) are just as capable of giving a new flavour to the power of small.
Karan Mehrishi
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Source : IIPM Editorial, 2009
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