After dizzy growth for three years, reality hit home in 1997. There were plenty of cars, but not enough people to buy them--despite incredible deals, peaking with the slashing of the Cielo's price last week. A slew of cars from budget to big-ticket will hit the roads in weeks, which means better options on offer than ever before.

By Sudeep Chakravarti and Shankar Aiyar with Robin Abreu

Slow was boring. If you wanted a car in the mid '80s you either bought an Ambassador, or a Fiat. Usually cash down or bust. No frills, take it or leave it. Around 30,000 would sell every year, because you couldn't sell more, because you couldn't make more. Then you had the Maruti mania. It was still take it or leave it -- how far could you go with three basic models in a country India's size? -- though numbers jumped to a lakh.

It's a lot faster now, and not only because there are cars around that don't shake and rattle when the speedometer hits 50.
Today, you have too many in an infinitely freer market that has grown more than 10 times in the past 10 years, almost touching four lakh in the year ended last March. Things have moved so quickly that Tata's Sumo, launched two years ago, sold one lakh faster than the Maruti 800, India's best-selling car.

Fast, but not fast enough for top international names such as Mercedes, Ford and General Motors, Fiat, Peugeot and Daewoo. They have had to collectively absorb hundreds of crores of rupees in losses in the past two years, the effect of a once-promising market that after a few years of keeping pace at about 15 per cent a year -- more than twice the speed of the economy -- is now matching it with a more sedate 6 to 7 per cent. It's still growth, but the bigger car makers like Maruti and TELCO which make less expensive, hardy cars with strong networks have accounted for most of it.

The glamour segment of the so-called mid-size cars, which includes Daewoo's Cielo, Opel's Astra, and Mahindra-Ford's Escort, have scaled back production, are offering frills, and blitzing the market with advertising that offer low-cost, easy-interest payment deals in a desperate bid to win customers who simply don't seem to be there anymore.

Last week, Daewoo went to the unprecedented extent of slashing the showroom price of its basic Cielo model to Rs 4.9 lakh -- a cut of Rs 1.3 lakh, the largest ever in the car market, and arguably the most sensational drop in Indian consumer goods history. Earlier, the company had offered 200 cars for 18-month test drives, no problem if you wanted to return it after that. "Many people say we are crazy to do these things," says managing director S.G. Awasthi, who has seen the Cielo's sales plummet from over 13,000 during April-November 1996 to less than 3,000 during the same period last year. "But we are here for the long term. We have to review our entry strategies, and do everything we can to create demand, offer better products, pricing and services."

The ultimate outlook, for Daewoo and every other player: offer better terms, value for money, better dealer and service networks, easy finance, and go get that customer before someone else does. It's trickling down to the dealers as well. B.L. Pashi, who is a dealer for TELCO cars and trucks and Maruti in Delhi, has absolutely no hesitation in stating his case in a charged market. "Today, if there was a chief minister waiting outside, and a customer, I'd prefer the latter because I get my bread and butter from him. We would like to have firm bonding with our customer."

This is happening even as India gets ready to face another onslaught of cars, as the last thing a company with long-term outlook wants to do in a nascent market is stay away -- either altogether, or in some segments. They range from a new model of the Mercedes to more crowding in the middle segment with Mitsubishi's Lancer and Honda's City. And to arguably the four most eagerly awaited low-end models to be displayed at the Auto Expo '98 in Delhi this week, a direct challenge to Maruti's 800 model which accounts for more than half of all car sales for that company: the "Indica" from TELCO, Daewoo's D'Arts, the Atos from Hyundai, and a car for Rs 1.25 lakh, as yet unnamed, from Kinetic Engineering. Cheap enough to entice a motorcycle or scooter owner in a city to buy.

The major sizzler is expected to be TELCO's ultra hush-hush car, popularly nicknamed Indica, designed, as Chairman Ratan Tata announced at a meeting some time ago, to be a car "with the Zen's size, the Ambassador's internal dimensions, the price of a Maruti 800 and the running cost of a diesel (car)." While that will cover the low-end, small-car segment, TELCO has already unveiled the Safari, a deluxe utility vehicle to be priced at around Rs 7.5 lakh, to take on Opel's Astra and Ford's Escort on price and car-like comfort. A collaboration with Benz already assembles the E-series Mercedes, and will introduce a new model.

The other expected hot draws at the automobile show: the powerful Honda City, billed for the Rs 7 lakh range and a launch this year, and Mitsubishi's sleek Lancer, a more expensive but plush version for the middle market. The low-end dazzler, Daewoo's D'Arts, which insider intelligence has pegged to be priced below Rs 3 lakh, is trying to nudge prospective Maruti 800 buyers with competitive power and price and the Zen users with comfort and control that come cheaper. This is exactly the slot that another Korean auto giant, Hyundai, wants to fill with a modified version of the Atos, a 999cc car that is presently being road-tested in southern India.

As these cars jostle for space, it will be the ultimate buyer's market -- more choice, better service -- less than a year down the road. "By the end of this year, you can expect an all-out product and price war in practically every segment," says Shripad Bhatt, assistant director with the Association of Indian Automobile Manufacturers (AIAM). And if car makers don't get aggressive, that's that. "It's going to be a crowded party and there will be no place to hide," says Anand Mahindra, managing director of Mahindra & Mahindra, which has held on to its profits with some well-regarded utility vehicles like the Armada. "Anybody who believes there is a segment free from competition is fooling themselves."

This realisation is hitting home. Even Maruti, which accounts for over 80 per cent of the market, is "alive to the situation," says managing director R.S.S.L.N. Bhaskarudu. The company, he says, plans to introduce new models developed at partner Suzuki's plants in Japan. Maruti is holding road shows for its customers, which includes the Maruti Onroad Service, introduced in Chennai, Mumbai and Delhi, through which the company provides Esteem owners with a replacement vehicle while their cars are being serviced.

Everybody is throwing in some sops to net a buyer. Purchasing a Ford Escort could win an all-expense-paid trip to the US. If you can't buy a Mercedes Benz then you can rent it under a scheme that brings an E-220 on lease for Rs 37,290 a month, with car phone, liveried chauffeur and a bar. Some financiers are offering sweeteners like loans for other purchases at zero interest, as Countrywide Finance is now doing for the Opel Astra -- an extra Rs 50,000 loan thrown in apart from the car loan. "A unique offer that lets you buy just what you always wanted," chimes an advertisement, "that 29 inch colour tv, that snazzy music system, that multimedia PC."

The bottomline is that everybody will be trying to address a market. A scrap has already broken out. Not because there isn't enough potential, but much like many ventures in the big-ticket consumer goods arena, there simply haven't been as many buyers as people thought there would be. The time-tested shift -- get the two-wheeler chap to buy an economy car; snag the economy car owner who has money but little choice with a bigger set of wheels; get the wealthy one who lives on imports with easily available, easily serviced local variants -- hasn't gone too far. The ride on India's liberalisation boom started to slow last year along with a slowdown in the economy. "How long can a limited, nascent market take so many models?" asks Kevin D'Silva, an auto analyst with securities firm First Global. "It's not even as if Maruti, as solid as it is, is absolutely safe."

More

Write to us | Subscriptions

© Living Media India Ltd