The future is with the small car
India might be a rapidly growing economy too, but it's the small car that's going to dominate our roads, generate volumes and strengthen manufacturers' bottomlines in future. Consider a few market realities: firstly, many more people are buying cars now than even a year ago and this number is growing exponentially. Overall, the Indian market for small cars – has grown 17% annually.
Secondly, with rising disposable incomes, Indians are graduating from bare-bones mini-cars to premium hatchbacks that offer a lot more in terms of space, comfort and aspirational value. This has been illustrated by the tremendous response to Chevrolet Spark since its launch few months ago.
Wednesday, November 7, 2007
Is there a market for new small cars?
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| Karl Slym President & MD, GM India |
Which means that barring metros like Delhi and Mumbai, most other parts of the country are being driven by a need for a true value proposition – and the small car, which offers mobility and at the same time, costs little to buy or run, fits the bill perfectly.
This doesn't mean the big metros are off the radar. On the contrary, we see the growth of the 'second car phenomenon' in most cities, which means the need for the small car, is only being fuelled further. Let's look at the figures – in 2005, the small car market in India absorbed about 6.5 lakh cars. In 2006, sales rose to 7.8 lakh units. The estimates for 2007 is 9.12 lakh units.
So, is there growth in the future? Definitely. For 2010, estimates are 15.82 lakh small cars will be sold. And, this is going to be helped by the entry of a whole new category of small car in 2009 or thereabouts, which will retail at less than Rs 1.5 lakh.
Lastly, the average Indian is well clued-in to the trends abroad, and is quality and trend-conscious. Small cars might be the order of the day in the near future, but it's the latest offerings with the highest of credibility and value quotient that will succeed in the India of tomorrow
Two-wheeler owners potential buyers
Indian automotive market is currently dominated by two-wheelers, which account for almost over 75% of the Indian automotive industry. The two-wheeler production is currently roughly over eight million. The passenger vehicle penetration in India is amongst the lowest in the world (7:1000 compared to roughly about 500:1000 in the developed countries). This clearly demonstrates the potential for small passenger cars in India.
With rising per capita income, changing demographic distribution and the greater participation of rural India in the economic growth will also significantly benefit the passenger vehicle sales growth in future. The passenger car market is expected to grow from 1.7 million at present to three million by 2014-15.
Currently, the small car comprises over 70% of the overall passenger car segment in India and this trend is expected to continue. Small cars would be the vehicle of choice for those migrating from two-wheelers to a four-wheeler as well many first time buyers of passenger cars, given that such vehicles are affordable and costs less to run and maintain.
In addition, considering that all the metros and class B and C cities are getting overcrowded, customers prefer the smaller cars for overall driving comfort within cities. A new segment of cars costing less than $3,000 being developed by some original equipment makers will also help rapid migration from two-wheelers to four-wheelers.
In addition to the robust domestic demand for smaller cars, there is a growing demand for smaller car both in developing and developed economies. Some recent studies indicate that the global demand for small cars is expected to grow by 30% to 27 million vehicles by 2013. Much of the growth mostly will come from the developing markets.
Looking at the growth trend for the smaller car segment, the major global car makers — who has earlier ruled out inclusion small vehicles in their portfolio of product two decades ago on account of low profit — are now seriously looking at and entering into the smaller car segment. Considering the opportunities, there is a market for small car in India. Not just that, India can become a hub of small cars for the global automotive market.
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