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The Rediff Business Special/ Veeresh Malik

Big wars imminent for small car market

For a decade-and-a-half now, Maruti has been racing against itself. On a racetrack called India. One of the largest markets in the world and one of the few showing an increase in the number of cars sold.

With about 84 per cent of the car market, they never had to sell cars; people had to buy them. Add to that the systematic decimation of the road-based public transport system, and you get an idea.

Nowhere else in the world has a single automobile manufacturer managed such singular domination. Look around you, in whatever part of the world you be, and compare this single figure of 84 per cent of a market with the figures in your country. The closest, I may stand gladly corrected, would probably have been Indonesia, where one brand had about 50 per cent of the market.

Which, however, is still not the complete picture. The Indian luxury car segment, comprising the Maruti Esteem, Daewoo Cielo, Ford Escort, Opel Astra, Honda City and Mitsubishi Lancer as well as the E-Class Mercedes Benz, is fairly well distributed, though even here the Maruti Esteem tends to dominate with almost 40 per cent market share.

It is the market share of the small car segment, defined as cars of engine capacity below 1000 cc, that Maruti holds for the year 1997-1998 (and previous years) at almost 100 per cent, with the only other competition being from the rather unfortunate Fiat Uno. Till now.

This segment is where the winter of 1998 is going to see action, in what has now been unofficially been denominated the 'small car wars'. Do remember that while cars are a universal subject, what people would call micro-mini suburban commuter two-seater cars elsewhere, are mainframe transport systems in India.

A category which accounts for about 250,000 units a year, and still growing. Notice all those people buying over a million scooters every year? They all aspire to buy a car. Who could resist such a market? Forget the country, look at it as a market, focus, remember?

Not Hyundai (Santro 1.0 aka Atos), Daewoo (Matiz), Fiat (Uno, Palio, Siena), Tata (Indica petrol and diesel), Opel (Corsa 1.0), Ford (Fiesta and/or Ka), Hindustan Motors (Ambassador with new dies from Taiwan, if you please). These are just the confirmed entrants, all within the next six months.

In a slightly longer time-frame, you also have Toyota, Mitsubishi, one of the French companies (Renault or Peugeot again?), China Motor Corporation of Taiwan, the Indonesian government with the Andhra Pradesh government. Then you may see Skoda trying to use some very favourable bi-lateral trade agreements with Czech and Slovakia that others may have forgotten, Mercedes may look at the 'A' Class, and -- surprise, surprise! -- is Volvo looking at small cars for Asia, too?

So what has Maruti done about this series of threats, literally from all corners of the world? If ground realities are to be believed, nothing so far!

It does seem as though their own internal as well as internecine battles, a bit like comparing matters to palace intrigues in days of yore, could well have got them lulled into believing that the country did, really, revolve around them! Firm believers in inertia, they do seem to believe that customers will continue to flock towards their showrooms, cheque-books in hand, with buzz-words like buyer loyalty and Japanese technology swaying them into continuing with the car, Maruti.

To give credit where it is due, Maruti does manage to run a factory at a 140 per cent of rated capacity, a figure probably unmatched anywhere else in the world. But this gives rise to two major problems:

1. Suspect quality control;

and 2. an employee compensation system based heavily on incentives.

On the other hand, the pricing of Maruti products has never been on the basis of anything but what the market would bear. Large profits, whether to the surrogate vendors or directly to Maruti, have always been assumed to be a birthright.

Marketing has been non-existent, after-sales service is usually supercilious and as for up-grading of technology, the best they can achieve is to change the shape of the head-lamps and tail-lamps. Still, they do turn out a fairly reliable car.

Hyundai seems to have entered the fray with cars which are apparently technologically advanced, and very aggressively priced. They have, however, not much of a track record in the neighbouring countries.

With deliveries slated to commence from Sunday, October 18, the Santro is the first real challenge in this segment. There are some doubts on its inherent stability due to the high-roof design which need to be seen in the context of India's single-lane highways and bad driving conditions, too.

Daewoo, on the other hand, has been enigmatically silent on the pricing of their Matiz. Built on the same platform as the Maruti-800 and even sharing the same engine configuration, power output has been tweaked up to a level that sounds very interesting but may be a bit difficult to sustain.

Daewoo has had a fairly mixed track record in India with their Cielo. Expected to announce their prices anytime between now and October 17, production has commenced, and initial test drive reports suggest that while the car performs well, the price will be a very crucial factor bearing in mind the perceived notions on 3-cylinder 800cc engines.

Running slightly behind everybody else is the Tata Indica. Short on information but tall on expectations, this is the car which will, possibly, decide the market trends, as prices are expected to be very, very, amazingly competitive.

Whether they are able to cobble together an after-sales set-up or not, remains to be seen. From all reports, this is going to be a totally new approach and the usual Telco habit of debugging on the ground account for the first customers, is being dispensed with, as we are informed.

Does India need so many brands in small cars? Can the market support it? What will happen to Maruti Udyog Limited? Is India ever going to be known as a producer of automobiles? Will our after-sales service ever be of a quality good enough to satisfy customers?

The answers to these, and other questions, keep changing and evolving. But the fact remains that we are woefully short on any sort of research and development activity, the automobile revolution in India seems to have bypassed the public transport segment, our fuel quality is not improving, and at the same time, currently, cars are over-priced.

This correspondent expects major changes to take place in the next few weeks, and the only firm piece of advice or opinion that can be proffered at this stage is: buying a new car in India is going to be like buying a new computer, they'll be cheaper, better and you'll have a wider choice next month. So, if you are in the market for a new car, small or big, and can hold off for a few months, please do so.

Or look at a good second-hand car! They've never been cheaper, either, than today!!

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