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BUSINESS: NEW CARS
Premium Drive
Defying the current slowdown in demand, about a
dozen new luxury cars are ready to roll on the Indian roads in the coming
months
By Malini Goyal
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DAEWOO NIBURA
(1,600CC) Rs 9-10 lakh. Likely launch October.
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DAEWOO
MAGNUS (2,000CC) Rs 13-15 lakh. Likely launch October.
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HONDA
ACCORD (2,300CC)
Rs 15 lakh. Likely launch July.
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SUZUKI
GRAND VITARA (2,500CC) Rs 15 lakh. Likely launch this year.
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HYUNDAI SONATA
(1,997CC) Rs 14-16 lakh. Likely launch July.
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SKODA OCTAVIA (1,900CC)
Rs 10-12 lakh. Likely launch September.
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MERCEDES SLK Rs 40-49 lakh. Likely
launch this year. Many variants expected.
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MERCEDES CLK Rs 30-48 lakh. Likely
launch this year. Many variants expected.
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MERCEDES M-CLASS Rs 40 lakh. Likely
launch this year. Many variants expected.
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MITSUBISHI PAJERO Rs 22 lakh. Likely
launch September. Many variants expected.
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Owners of the Ikons,
the Accents, the Citys, the Esteems and the Lancers should get ready for
a big dent on the status symbols. A bevy of new cars are making a beeline
for Indian roads. July will see the launch of two cars-the Honda Accord,
the top selling model in the US for years, and the Hyundai Sonata. Both
will be priced at Rs 14-15 lakh. They will be followed by a slew of launches
covering every shape and size of the car market-saloons, coupes, SUVs
(sports utility vehicles) and convertibles. Even Mercedes-Benz, the car
with the highest aspirational value, is set to offer a panoply of premium
vehicles.
The sudden spurt in car launches, at a time
when the Indian car industry is struggling to come out of its worst-ever
slowdown, defies conventional wisdom. In 2000-1, car sales in India slipped
by 7.5 per cent-the number of cars sold shrank from 5.9 lakh in 1999-2000
to a little more than 5 lakh in 2000-1. It is hardly the kind of market
ready for the launch of 11 new models. That too, all of them priced at
Rs 10 lakh plus. What's behind this apparent irrational exuberance?
Carmakers see it as elementary mathematics.
Till now, the Indian car market has almost entirely focused on a price
range of less than Rs 10 lakh. Barring Mercedes' S-Class, E-Class and
C-Class models-priced at Rs 62 lakh, Rs 32 lakh and Rs 20 lakh respectively-all
other cars available are in the Rs 2-10 lakh range. There is no car in
the Rs 10-20 lakh price bracket. That's the market the carmakers are eyeing.
Comments A.M. Gupta, general manager (Marketing), Honda Motors India:
"The spate of launches has nothing to do with the current recession
because the new cars are coming into a segment that hasn't been explored
so far."
The sales pattern of the past few years holds
out some promise for prospective entrants. Since 1998 the Indian car market
has been adding new tiers at the upper end. Till then, the largest and
fastest growing segment was the least expensive segment A (Rs 2-2.5 lakh)
dominated by the Maruti 800 and Omni. With the arrival of foreign cars
in 1998, the action shifted to a slightly higher priced segment B (Rs
3-4 lakh) with models like the Santro, Matiz, Uno and Zen.
By 1999, segment B had outstripped segment A
in growth rate, logging an eye-popping growth of 128 per cent against
segment A's 17 per cent. The segment C (Rs 5-10 lakh) came alive with
the launch of bigger cars like the Ikon, Accent, City and Lancer and posted
a 63.6 per cent growth rate in 2000. Industry watchers believe that the
time is now ripe for a new tier, segment D priced at Rs 10-20 lakh. "It's
a normal process of upgradation and maturing of the market. It has happened
worldwide, and it will happen in India," observes B.V.R. Subbu, director
(Sales and Marketing), Hyundai India Motors. In absolute terms the new
market will be small-Honda hopes to sell no more than 2,500 Accords in
a year compared to 4.5 lakh Accords it sold in the US last year-but it
will be an entirely new segment with profit margins higher than in the
lower segments.
Some carmakers are also enthused by the abolition
of import restrictions from April 1, 2001. Completely built units (CBUS)
of cars can now be imported and sold in India. However, the hike in customs
duty has made some companies re-think their plans. Fearing a flood of
foreign-made cars once the import restrictions are lifted, this year's
Union budget had raised import duty on CBUS from 35 to 60 per cent. With
that the effective duty on import of passenger cars shot up from 85 per
cent to 120 per cent. General Motors and Ford have stalled their plans
of launching the Vectra and the Mondeo. Admits P. Balendran, vice-president
(Corporate Affairs), General Motors, India: "Contrary to our earlier
expectations, the duty hike will push up the final prices of the cars
substantially." Add to that the cost of homologation, a mandatory
approval required for imported models. Conducted by Ahmednagar-based Vehicle
Research Development Establishment, the test costs between Rs 10-20 lakh
and takes up to two months.
Not surprisingly, the company that is unfazed
by the duty hike is DaimlerChrysler, owner of Mercedes-Benz. Given the
super premium image of its brand it doesn't have to. The company plans
to introduce three new models-SLK, CLK and M-Class. The unexpectedly successful
launch of its C-Class in April this year has provided a further boost.
The model has already received confirmed orders of close to 100 units.
Explains Juergen Ziegler, CEO, Mercedes-Benz India: "Even with higher
duties, some models will remain attractive. Besides, India has defined
a roadmap for reduction in customs from 60 per cent to 20 per cent over
three years. That has boosted the confidence of the automobile industry."
The surprise entry in the race is Daewoo India.
It's ready to roll out not one but three models this year. While Lanos
is likely to replace Cielo, which is being phased out, the other two models
are expected to shore up the fortunes of the company mired in speculation
about its future. The industry insiders suspect that Daewoo may be getting
too ambitious, but the company is sure of its plans. Asserts Y.C. Kim,
CEO, Daewoo Motors, India: "The three new models will cover the complete
spectrum in the mid-size car segment and offer a new car in the luxury
segment." If that sounds daring, Kim isn't the only one indulging
in it.
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