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Indian auto market – a war zone of small cars

Last Updated: Wednesday, January 6, 2010 - 12:11

Stanly Johny

New Delhi: The 10th Auto Expo, started here on Tuesday, set the stage for a prolonged war between global auto giants such as Toyota, Volkswagen and Honda in India, one of the fastest growing auto markets in the world.

The buzz word of the latest Expo, being held in every other year in the national capital, is “Small”. The first day of the show saw three global auto conglomerates unveiling their brand new small cars, hoping to penetrate into India’s most popular auto segment.

Toyota Kirloskar Motors, a joint venture between Japan’s Toyota and India’s Kirloskar, showcased its compact car “Etios”, while Volkswagen, Europe’s largest car maker, unveiled its small car model “Polo”. Honda Siel Cars India also joined the race by unveiling its small car concept, which will enter the market sometime in 2011.

For auto makers, hit badly by the global recession that plunged their sales in many advanced markets in the last two years, India offers plenty of opportunities to boost sales and revenues. India is one of the four key markets for the small car segment. Brazil, Japan and Thailand are the other markets where the demand for compact cars is still booming.
In India, small cars constitute over 78 percent of the total car sales. Indian auto sales are set to grow about 16 percent this year to 1.4 million vehicles, after posting double-digit growth through most of 2009.

Unveiling the five-seater Etios, which is expected to be priced between Rs.4-5 lakh, Toyota said it would start selling the car first in India later this year, posing a tough competition to market leaders such as Maruti Suzuki and Hyundai Motor. According to market analysts, Etios will directly compete with Maruti’s “Swift”, Honda’s “Jazz” and Skoda’s “Fabia”.

"India will play a pivotal role in Toyota`s global expansion plans and the time has come for us to strategically accelerate our growth here," Toyota vice-chairman Kazuo Okamoto said after unveiling the car at the Expo.

Toyota, the world’s largest auto maker, is a small player in India, where compact cars rule the market. In the first 11 months of 2009, Toyota had a market share of just 2.3 percent, with sales of 48,000 vehicles.
With the launch of Etios, the company plans to increase its market share in India. It plans to sell 70,000 units of Etios a year in India, Hiroshi Nakagawa, managing director of Toyota Kirloskar, said. The small car will be produced in Toyota’s upcoming Bangalore plant where the company has already invested Rs 3,200 crore.

In what could intensify the race for higher market share, Volkswagen plans to launch Polo in Indian market in March. The 1.2 litre engine-powered car, price for which is expected to fall between Rs.4.5-6 lakh, will play a key role in making the German auto giant a “mass market player” in India, one of its board members said in New Delhi. The company has also said it is working on introducing a cheaper model, which could further beef up competition.

Honda is developing a five-seater car especially for India and the other emerging markets. The car is expected to be priced at around Rs 5 lakh, the cheapest in Honda’s line-up, according to sources.

A day before the Expo began, US car giant General Motors on Monday launched its new compact car “Beat” in Indian market, signalling a massive change in the offing in the country’s small car segment. The Beat comes from GM’s Cheverlet stable with an aggressive price tag of Rs 3.34 lakh and is expected to reenergise the US firm’s performance in Asia’s third largest economy.

Another US firm Ford is also expected to launch its small car “Figo” in India. But the car was not showcased in the Expo. According to company sources, the car will be priced between Rs 4-5 lakh.

First Published: Wednesday, January 6, 2010 - 12:11

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