Small cars promise big business in India

Encouraged by India’s fast-growing small-car market – it already accounts for 75% of the 1.5 million auto market in that country – a slew of global auto makers have announced plans to make and launch small cars in the South Asian country.

So far Japan’s Suzuki, Korean Hyundai and India’s Tata Motors have dominated the hatchback segment of the small-car market

with their Maruti 800, Santro, Wagon-R, Indica and Swift.

However, the market is going to be really crowded now.
In the past year and a half, General Motors, Fiat, Honda, Nissan and Hyundai have announced Indian investments to the tune of US$1.5 billion. Volkswagen, Mitsubishi, Toyota and BMW are also looking to move in by setting up manufacturing units.

The top seven or eight auto makers are estimated to invest $4 billion, with most of the small cars – those with engine displacement up to 1.3 liters – likely to hit the Indian roads within the next three years.

Tata Motors’ much-anticipated Rs100,000 ($2,460) people’s car, cheaper than some two-wheelers, is likely to open up the competition further when it is launched next year.

Suzuki, which has half of India’s car market sewn up, is making 800,000 cars a year and ramping up to build 1 million a year in two years.

The entry of one of China’s biggest auto makers, Chery Automobile Co, could alter the market further. The company said this week that India is very much on its market horizon.

Car companies are looking at young high-income earners as well as two-wheel riders looking to upgrade to four. According to experts, a quarter of new-car purchasers move up from scooters.

Much as with mobile telephones that have enjoyed phenomenal growth in the country, experts say there is a big untapped car market as well.

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