ET BureauMUMBAI: The instant popularity of Renault Kwid, a Tata Nano revival and the enduring success of the Maruti Suzuki Alto — all factors that have led to India’s entry-level car market nudging into positive territory after four years of consecutive decline. Improved sentiment, positive macroeconomic indicators and new launches have encouraged more Indians to pick up cars priced below Rs 5 lakh.
The mini-car segment posted 0.29 per cent growth in the April-October period. As for October itself, the Kwid has grabbed a 10 per cent segment share in the first month of its launch while the Alto was at 46 per cent and the Nano at 5 per cent.
With several new models being introduced in the next few months, the segment is set to broaden again, after having shrunk to 26 per cent of the overall market from its peak of 35 per cent in FY12. The segment is likely to see incremental volumes of 20,000 a month from all the launches, experts said.
The Kwid, which starts at Rs 2.57 lakh in New Delhi, has brought excitement to the segment, said Sumit Sawhney, managing director of Renault India. "We have got tremendous response from the market and we are seeing a lot of first-time car buyers coming to us," he said. "With retail inflation softening and lower interest rates, disposable incomes have gone up and that is driving demand."
"There was compression in the top and lower segments of the market over the past few years, that effect is reversing," said Sumit Sawhney of Renault India.
Renault has got 50,000 bookings and is expected to produce and sell more than 7,000-8,000 Kwids in the coming months, adding to segment volume.
Repositioning of Nano has helped revive sales with a fresh set of first-time buyers in cities such as Mumbai, Delhi and Bengaluru, said Mayank Pareek, president, passenger vehicles, Tata Motors. That reflects an upturn in the fortunes of Nano, which hit a trough after a hyperbolic launch in 2009. A decline in inflation and interest rates combined with lower fuel prices have buoyed sentiment as the cost of ownership has dropped, pushing many to take the plunge, said Devendra Pant, chief economist, India Ratings & Research.
"With real income increasing...consumers are having more purchasing power to buy goods," he said. "With banks likely to pass more benefit of (lower) interest rates to consumers, this would help sustain current consumption growth." A sizeable number of two-wheeler buyers are also likely to make the shift to cars with disposable incomes rising as companies launch new products.
Maruti Suzuki has already started working on the new Alto and more offerings from Renault-Nissan and Tata Motors are planned in the sub-Rs 5 lakh range. This turnaround is being seen after Maruti’s small-car numbers shrank 6.93 per cent on average in the past four years.
The mini-car segment, which contributes about 18 per cent of the global A-category market, is likely to swell to 25 per cent by the end of the decade.
India is likely to be the largest mini-car market in the world at around 1.5 million units, overtaking Japan, with all the new products lined up, said Gaurav Vangaal, senior analyst for forecasting at IHS Automotive.
'INDIA TO REMAIN SMALL-CAR MARKET'
In a recent interview to ET, Maruti Suzuki Chairman RC Bhargava said that unless India sees a major transformation in infrastructure like the one that took place in China about a decade ago, he doesn’t expect the Indian car market to turn premium. "India will remain a small-car market on the back of three reasons," he said. "One, there is a big mismatch between cars sold and parking space available." The other two factors are the focus on fuel efficiency and emissions.
In the coming two months, Tata Motors plans to start selling the Zica hatchback aimed at first-time car buyers while Datsun will roll out its Redi Go crossover.
Hyundai Motor India, which recently discontinued its Santro at the entry level, has seen its mini-car volume decline more than 40 per cent in the past seven months. Sales and marketing head Rakesh Srivastava said this had been a conscious decision by the company to restructure its portfolio and make i10 and i10 Grand, which are positioned above the mini-car segment, more accessible to entry-level buyers.
The i10 Grand posted record sales in October, up 14 per cent to 14,000 units, he pointed out.
ET VIEW
India, the Small Car Capital of the World?
Small can mean nimble and quick on crowded Indian roads. India has the potential to be the small car capital of world. Not merely for its assembly and production, but also for its design and conception. To achieve that goal, all stakeholders need to strive with purpose and vision. Auto-makers need to roll out a range of quality models in what is a price sensitive market. We also need finicky demanding customers to boost innovation on the shop floor and to better meet user needs and preferences. It should also be possible to leverage technology to customise small cars in various ways. As technologies like 3D printing mature, manufacturing will increasingly be about craftwork.
The mini-car segment posted 0.29 per cent growth in the April-October period. As for October itself, the Kwid has grabbed a 10 per cent segment share in the first month of its launch while the Alto was at 46 per cent and the Nano at 5 per cent.
With several new models being introduced in the next few months, the segment is set to broaden again, after having shrunk to 26 per cent of the overall market from its peak of 35 per cent in FY12. The segment is likely to see incremental volumes of 20,000 a month from all the launches, experts said.
The Kwid, which starts at Rs 2.57 lakh in New Delhi, has brought excitement to the segment, said Sumit Sawhney, managing director of Renault India. "We have got tremendous response from the market and we are seeing a lot of first-time car buyers coming to us," he said. "With retail inflation softening and lower interest rates, disposable incomes have gone up and that is driving demand."
"There was compression in the top and lower segments of the market over the past few years, that effect is reversing," said Sumit Sawhney of Renault India.
Renault has got 50,000 bookings and is expected to produce and sell more than 7,000-8,000 Kwids in the coming months, adding to segment volume.
Repositioning of Nano has helped revive sales with a fresh set of first-time buyers in cities such as Mumbai, Delhi and Bengaluru, said Mayank Pareek, president, passenger vehicles, Tata Motors. That reflects an upturn in the fortunes of Nano, which hit a trough after a hyperbolic launch in 2009. A decline in inflation and interest rates combined with lower fuel prices have buoyed sentiment as the cost of ownership has dropped, pushing many to take the plunge, said Devendra Pant, chief economist, India Ratings & Research.
"With real income increasing...consumers are having more purchasing power to buy goods," he said. "With banks likely to pass more benefit of (lower) interest rates to consumers, this would help sustain current consumption growth." A sizeable number of two-wheeler buyers are also likely to make the shift to cars with disposable incomes rising as companies launch new products.
Maruti Suzuki has already started working on the new Alto and more offerings from Renault-Nissan and Tata Motors are planned in the sub-Rs 5 lakh range. This turnaround is being seen after Maruti’s small-car numbers shrank 6.93 per cent on average in the past four years.
The mini-car segment, which contributes about 18 per cent of the global A-category market, is likely to swell to 25 per cent by the end of the decade.
India is likely to be the largest mini-car market in the world at around 1.5 million units, overtaking Japan, with all the new products lined up, said Gaurav Vangaal, senior analyst for forecasting at IHS Automotive.
'INDIA TO REMAIN SMALL-CAR MARKET'
In a recent interview to ET, Maruti Suzuki Chairman RC Bhargava said that unless India sees a major transformation in infrastructure like the one that took place in China about a decade ago, he doesn’t expect the Indian car market to turn premium. "India will remain a small-car market on the back of three reasons," he said. "One, there is a big mismatch between cars sold and parking space available." The other two factors are the focus on fuel efficiency and emissions.
In the coming two months, Tata Motors plans to start selling the Zica hatchback aimed at first-time car buyers while Datsun will roll out its Redi Go crossover.
Hyundai Motor India, which recently discontinued its Santro at the entry level, has seen its mini-car volume decline more than 40 per cent in the past seven months. Sales and marketing head Rakesh Srivastava said this had been a conscious decision by the company to restructure its portfolio and make i10 and i10 Grand, which are positioned above the mini-car segment, more accessible to entry-level buyers.
The i10 Grand posted record sales in October, up 14 per cent to 14,000 units, he pointed out.
ET VIEW
India, the Small Car Capital of the World?
Small can mean nimble and quick on crowded Indian roads. India has the potential to be the small car capital of world. Not merely for its assembly and production, but also for its design and conception. To achieve that goal, all stakeholders need to strive with purpose and vision. Auto-makers need to roll out a range of quality models in what is a price sensitive market. We also need finicky demanding customers to boost innovation on the shop floor and to better meet user needs and preferences. It should also be possible to leverage technology to customise small cars in various ways. As technologies like 3D printing mature, manufacturing will increasingly be about craftwork.
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