The ‘mass car’ magnet

What happens when carmakers who are popular in other segments decide to enter the mass end of the market where they were not recognized so far? And they come in late too? Such as Toyota and Honda who, despite being present in India for years, are only now entering the mass market. In the last few months Nissan, Ford and Volkswagen jumped into the race. While the hatchback segment — comprising mini and compact segments — grew about 32 per cent for the April-September 2010 period (SIAM figures), experts believe more consumers are looking at upgrades.

"The Indian market is exceptionally overcrowded, though it is dominated by the small car segment which all manufacturers want a share of. The new entrants will have the additional challenge of competing with peers who operate with reasonably depreciated plants at higher volumes and therefore have greater pricing flexibility," said K Kumar, leader, manufacturing, Deloitte India.

Volkswagen India believes that first time customers who already have a positive exposure to the Volkswagen brand through staying abroad or with extensive knowledge of its brand strengths, will also opt for its products at the mass end.

Toyota's Etios is scheduled to drive in by December, followed by the hatchback. The entry-level sedan will be priced at around ₹5.25 lakh. Toyota Kirloskar Motors has worked to drive costs down by increased localisation of around 70 per cent. It recently strengthened dealership numbers to 100. With an over ₹3,000 crore investment at stake, it feels it is the right time and a perfect opportunity.

"The middle class is growing and there is a lot of demand for both A and B segment cars. For hatchbacks, 30 per cent are first-time buyers; for sedans, it's 25 per cent," said Sandeep Singh, deputy MD (marketing), Toyota Kirloskar Motors. "The competition is hot. Of the dozen players, at least three will do well." The company intends to sell 70,000 Etios — both variants — in 2011. By 2015, Toyota expects to have sold 3,00,000 Etios.

Honda Siel Cars India is looking at a 2011 launch for its small car. "Our model range is small. Early next year, we are looking at a small car under the ₹5 lakh price tag. The hatchback segment accounts for 80 per cent of car sales in India and there are a lot of launches happening in it. We have plans for it," said Jnaneswar Sen, the company's VP (marketing). The carmaker believes it's not late and it has a loyal consumer following for the Honda brand in India which will work for its small car as well.

Six months after it launched the Nissan Micra, Nissan Motor India is now set to roll out the diesel variant, starting December 10. Surprisingly, Nissan launched the Micra when it had only 15 operational dealerships. Currently, it has 20 dealerships and aims to take it to more than 100 by 2013. "In order to sustain in the competitive small car segment in India, it is imperative for us to have a robust chain of dealer network and we are pulling out all stops to build this in the shortest time possible," said a company spokesperson.

The mass car market is looking to get very active with new launches and variations, led by pricing. Established brands new to the mass market are banking on brand equity.