India Insight

India’s busy Auto Expo and the risk of an industry believing its own publicity

After fighting through the sea of camera-wielding car enthusiasts clutching their bags filled with corporate gifts to meet with Anand Mahindra, vice-chairman of the Mahindra group, it was difficult to argue with his rosy view of India’s car industry.

“Just look at all these people,” said Mahindra. “If these crowds translate into market appetite, it’s not much of a slowdown,” he added, shaking his head at the view from a glass-walled office high above the teeming masses at the India Auto Expo on Friday.

Mahindra has reason to be cheerful. Sales of cars by his group’s autos arm have remained strong this year. But he wasn’t the only executive shrugging off a slump in India’s car industry with glib comments about the sharp elbows of hundreds of thousands of excited punters that thronged the India Auto Expo this weekend.

The data is much less encouraging. Come April, the same executives could likely be digesting a year that saw sales volumes fall. Just a year previously, they were toasting 30 percent growth. But the Auto Show, held every two years in the capital, didn’t give the impression of an industry filled with ideas to tackle the slide.

SUVs, green technology vehicles and cutting-edge concept cars stole the headlines and drew in the crowds, aside from the free calendars and the chance to catch a glimpse of a Bollywood star or two.

It’s raining compact cars in India

Honda’s premium hatchback Jazz has just added to the flurry of four-wheelers crowding the ramp in the compact car segment.Indian market leader Maruti has been in the forefront here, following up its launch of the A-Star in 2008 with the Ritz (see photo) this year.This week, Fiat launched the Grande Punto, another compact car.This segment already has cars such as the hugely popular Swift, Swift D’Zire (all from the Maruti stable), the i10, i20 and Getz from Hyundai, Chevrolet’s Spark, etc.There are more in the pipeline with Skoda Auto’s new Fabia expected later this year and Volkswagen’s Polo in early 2010.And there is room for more.Auto expert Hormazd Sorabjee thinks this segment is fairly elastic and has the scope to absorb the supply.”Of course there will be a lot of competition…they will eat into each other’s share, but it will help to expand the market. And the competition is good.”Around 75-80 percent of the cars sold in India are in the compact segment – where the price varies from about 350,000 rupees to about 700,000 rupees (the super-premium compact).Within this elastic price range, the category has the cars to suit all budgets.Maruti dominates the segment because of the number of brands it has.It would be difficult for other players to dethrone it mainly because the company has got a clear head start over the others and it has identified itself as more of an “Indian” company compared to them.Few people think about its Japanese parentage. It also has the advantage of having a wider service network than the other relatively recent entrants.What do you think? Which car can end Maruti’s domination over the compact car segment in India?

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