Small is beautiful for car majors

It is back to basics for global automakers in India. After seeing low numbers and at times bumpy rides with their mid-size sedans, several automakers are rushing in their premium small and combo cars (read hatchbacks) to revitalise their sales.

Year 2005 will not just be a testing year for their offerings unleashed but will also be decisive to their balance sheets, for most are writing off or wiping out their accumulated losses.

Also, this will mean the new launches will be the primary drivers of the sales of these firms. General Motors Chevy Spark (earlier the Daewoo Matiz), Fiat's Panda, Skoda's Fabia, Ford's Fusion and Hyundai's Getz appear to be definitive launches, with Getz almost on the roads now.

Others evalauting their options include Honda and Toyota, according to reports. The move though is not surprising as the compact segment accounted for 58 per cent of the 1.8 lakh cars sold in the first quarter of 2004-2005. "With the pie going to the likes of Maruti, Hyundai and Tata Motors, it is but natural to pitch our cars and take a slice of that market," an automaker based in the South said.

A leading auto analyst said, after nearly a decade in India, companies are still staring at numbers of around 10,000 to 25,000 annually.

It is a fraction of what they had claimed they would achieve when they drove into the country. It all boils down to the right models and pricing, he added, warning that even now compact cars above Rs 5 lakh will be shunted out of the market.

Industry players said, as the clinical trials of the lined-up models had indicated, customers though open to the sophisticated powerful hatchback models were still price conscious.

As a result, companies like Skoda and Ford which had picked higher priced models are looking to create categories. Ford, for instance could launch Fusion as a three box sedan and Skoda will introduce the Fabia as a Combo, between a conventional hatchback and an estate, they said.

Analysts add, the positive response elicited by Corsa Sail did show that the compact models extended beyond the Indica, Santro, Zen and Alto. In fact, the launch of Sail along with General Motor's new offerings Optra and Tavera assisted GM increase its Q1 market share to 2.4 per cent from 1.7 per cent.

Another reason attributed by analysts is that only a presence in the volume-driven compact segment will shore up the bottomlines of companies coming out of the woods.

They reason that auto majors like Maruti, Hyundai and Tata who have sworn by mini cars control nearly 75 per cent of the Indian car market now.