India's crowded car market will have new global players focused on SUVs

For the first time in about a decade, car buyers will see new name-plates entering the Indian market. Starting June, three global automobile brands — MG Motor, KIA Motors, and Citroen — will begin rolling out more than a dozen models over the next three years as they seek to grab a share in India’s 3-million plus passenger vehicle market. 

The three players will stay clear of the entry segment and, instead, be gunning for the mass premium segment with sports utility vehicles (SUVs) as the centrepiece of their India strategy, thanks to the rapid change in buyer preference and the upcoming legislation on emission, safety and fuel efficiency. 

In a reflection of the buyer preference for pricier vehicles, the average price point of passenger vehicles in India has inched up to $10,000 now from $6,000 five years ago, according to IHS Automotive, a sales forecast and market research firm.

Among the slew of planned launches, the MG Hector will be first off the blocks. Estimated to be priced between Rs 17 lakh and Rs 20 lakh, the premium SUV will compete with the Hyundai Tucson, Jeep Compass, Mahindra XUV500, and Tata Harrier, among others, and is likely to go on sale from June. 

A fully electric vehicle, expected in the last quarter of the current calendar year, will be the next. It will be followed by the launch of one new model in the SUV segment every year over the next five years, said P Balendran, executive director, MG Motor India. MG has appointed 45 dealers, which will have a network of 110 outlets, he added. 

“Though the market has slowed down, SUVs continue to remain a growing segment. Our product is likely to stand out in terms of product attributes and services,” said Balendran. 

India’s utility vehicle market grew at a compounded annual growth rate of 11 per cent between FY13 and FY18, faster than the 3 per cent growth seen by passenger cars, according to the Society of Indian Automobile Manufacturer (Siam). 

Kia Motors India, too, has its eyes set on the fast expanding SUV market and has an aggressive model roll-out plan — one new model every six to nine months, said Manohar Bhat, head of marketing and sales at Kia India. It will start with an SUV offering, codenamed the SP2, in the latter part of the year. The model, expected to be priced in the range of Rs 10-16 lakh, will rival the Hyundai Creta and Honda HR-V, among others.

Bhat is confident that Kia’s distinct identity and design language will give it a differentiated positioning against the sister (Hyundai) and other rival brands in India. “Our cars have the power of disrupting the market with their eye-catching designs, best-in-class features and premium quality,” said Bhat. “We will surely surprise the customers with our wide product offerings in some of the most growing segments.”

Kavan Mukhtyar, partner, automotive, PwC, says the decision to play in the pricier segment is governed by the financial viability it offers. “Most of the new models are targeting the mid to higher segment of the market. That’s where one can make money unlike small cars, where one needs a strong reach and large volumes to remain financially viable,” he said. 

Kia Motors SP2i SUV

Bhat declined to comment on the number of outlets the Korean firm will have by the time its products are ready to go on sale. “Kia’s network will be spread pan-India, including tier-3 and tier-4 cities,” said Bhat, adding that in places where the possibility of having a service centre is bleak, it already has its mobile workshop.

PSA Group’s Citroen, which will be the last of the three to enter the Indian market, also will be banking on SUVs for its India entry. It is set to make an announcement on the India-bound model at a press meet in Chennai on April 3. The French carmaker, which has a joint venture with the CK Birla Group, will launch its first model by end of 2021 and introduce one model every year for the next five years, an executive of the company told Business Standard in an earlier interaction. 

Experts believe the newer entrants are unlikely to pose an immediate threat to the existing players given the former’s smaller scale and the priority to build the brand over volume. But companies like Maruti, Hyundai and Mahindra & Mahindra will have competition for their premium offerings and cannot afford to ignore the newer rivals. “Brand and product fatigue has become very common in the Indian market. The incumbents, therefore, will have to run harder to stay the course,” said Puneet Gupta, associate director at IHS Markit.  

• Morris Garage: MG Hector (SUV) by June 2019 | Rs 17-20 lakh (Estimated price) | One new model every year from 2020
• Kia Motors India: SP2i (SUV) by 2nd half of 2019 | Rs 10-16 lakh | One new model every six to nine months
• Citroen: First unnamed model (SUV) by end of 2021 (one new model every year)