Auto companies join race for Rs 1 lakh car

Hyundai also sees reason in Tatas' dream.

At the April 2003 Geneva Motor Show when Tata Sons chairman Ratan Tata first talked of his dream to roll out a car, which would retail for $2,000, he triggered widespread scepticism.

Sceptics said it was too low a price-tag. In the earlier years, Kinetic and Eicher had attempted it, and failed. In the 1980s, Badal, a three-wheeled fibreglass vehicles lost out to the more expensive Maruti 800. Dolphin too had come a cropper.

In the intervening years, the scepticism seems to have withered away, and been replaced by belief in the project. Putting their money where their belief is, a clutch of automotive companies has joined the fray to build India's cheapest entry-level car.

Delhi-based tractor maker Sonalika Group and Kolkata-based Global Automobiles have already announced their decision to take on the Tatas. Meanwhile, Korean car maker Hyundai Motors, the number two car manufacturer in India, is also looking at a car in the sub-compact segment.

The reason for the rush is simple - it is a huge-volume market. The industry estimates that by 2010, the Rs 1-1.5 lakh market would be the size of 5 lakh annually, which is half the existing car market. The Tatas have projected that they will have the capacity to make 1 million small cars by 2012.

Anang Dev Jena, head, TNS Automotive Research in Asia Pacific, said, "The people who are currently buying mobikes will move into this small car category. Our estimation is that in 2012-13, this segment could be one-third of the total market".

No doubt industry experts say that there is enough space in this below 1.5 lakh car segment for more than one player. A senior executive of Global Automobiles said, "India is a huge market and there is enough room for four or five players in this segment. We are planning to come out with our car in the end of 2007 in the sub-Rs 1 lakh category and expect to be the first one in this segment."

Sonalika top executives said that they will launch their car at a price of Rs 1.5 lakh sometime in late 2008.

Finding a market will not be difficult. Rahul Verma, head, Synovate Moto Research, said, "Though currently non-existent, it is expected to be a huge success when launched. It will be riding on the concept of 'value for money' offering - utility, comfort, luxury, transportability - of a car. Indian customers who are increasingly getting conscious on status and brands value, will make it a perfect substitute for their two wheeler."

However two-wheeler manufacturers are not to worried - they point out that while the price of the car is cheap, the fuel consumption and maintenance costs are nowhere comparable to two-wheelers. Pawan Munjal, managing director of Hero Honda, said, "It is altogether a different market segment and I don't think people will move out."