India races for the world's
cheapest car By Siddharth
Srivastava
NEW DELHI - The telecom
revolution in India has made cheap mobile
telephones accessible to even the country's
poorest, and now India's underclass is likely to
be able to go from two wheels to four when the
cheapest entry-level autos hit the roads in the
near future.
The race for the world's
cheapest four-wheel vehicle was recently ignited
by Tata Motors' plans to launch a Rs100,000
(US$2,470) car in 2008. In comparison, China's
bargain auto, the Chery QQ,
retails for about 20,000 yuan
($2,600).
Partners Renault/Nissan and
Mahindra are also eyeing a sub-$3,000 model, while
Toyota Motor Corp, Honda Motor Co, Fiat, and
Volkswagen AG also plan economy cars to compete in
the Indian, Chinese and Russian markets. India's
market for cars is predicted to double to 2
million by 2010, with passenger-car sales growing
by 18.5% last month.
Motorbike maker Bajaj
Auto Ltd is reportedly looking at a slightly
higher-end compact car, while reports suggest that
Ford India may enter the segment that accounts for
75% of sales in the country.
Last week,
SkodaIndia, a fully owned subsidiary of Volkswagen
Group's SkodaAuto of the Czech Republic, announced
plans to launch the Skoda Fabia, its first small
car in the Indian market, where a "small car" is
defined as one with an engine displacement of 1.3
liters or less.
Encouraged by the good
response to its recently launched Chevrolet Spark,
General Motors India recently said it has set a
target to capture 15-20% of the domestic
compact-auto market by 2010, one that is currently
dominated by Maruti and Korea's Hyundai.
The current buzz, however, is over Tata's
four-door, 600cc rear-engine model suitable for
both gasoline and diesel. This "people's car" has
drawn obvious comparisons to Germany's Volkswagen
Beetle and Britain's Mini.
This is opposed
to the 800cc Maruti, base-priced at Rs225,000, and
the high-selling 1,000cc hatchbacks made by
Hyundai's Santro, Maruti's Swift and Tata Indica,
all of which begin at about Rs350,000.
Tata's venture partner Fiat will engineer
the new mini-car and analysts expect an initial
output of 100,000-250,000 units. Tata Motors
chairman Ratan Tata has estimated that the Indian
market for the car could be as high 1 million
units and expand to the rest of Asia as well as
Africa.
Auto makers Maruti, Bajaj, Honda
and Renault-Mahindra have taken notice. "We will
be part of this competition. We are investigating
... how we can make a $3,000 car,'' Nissan-Renault
chief executive officer Carlos Ghosn said
recently. "If we build a car like this, it will be
done in India because the suppliers are there, the
plants will be there, and the environment in India
would be very favorable to a frugal product
definition."
This week, Honda announced
its intention to enter the Indian small-car market
after the huge success of its mid-size Honda City
and bigger Accord and Civic.
The company
is planning to launch a premium small car by 2009
and hopes to compete with the $3,000 price range.
Honda Motor Co chairman Satoshi Aoki, in
India to firm up Honda's second plant in
Rajasthan, said: "We are studying the Fit and City
models for the cheap small-car segment. But we
have to make sure that a cheap small car will have
Honda characteristics. However, our mini-vehicles
are priced at $9,000, and making a car with
one-third of that price would be a challenge."
Observers say that Renault-Nissan, Italian
auto maker Fiat, Tata and Maruti are likely to
emerge as the three largest global low-cost
vehicle manufacturers.
According to
PricewaterhouseCoopers, India will become the
single largest test ground for all versions of
these low-cost vehicles. They predict that by
2010, more than 100 million world households will
be able to afford a $2,000-$3,000 car.
It
is expected that a quarter of these buyers will be
from the more than 7 million two-wheeler users in
India.
Currently India is the world's
12th-largest consumer market. By 2025, it is
should be the fifth-largest and larger than
Germany, according to a recent McKinsey survey.
While urban and semi-urban areas are the
big markets, there is uncertainty whether the car
could do well in rural areas where poor road
conditions make bicycles and scooters the main
mode of transport.
Some car makers,
including Honda and Toyota, have raised questions
about quality, safety and reliability of such a
low-cost car. However, some analysts say that
given the high accident and fatality rates of
two-wheeler riders, especially in urban areas, the
economy car is a better option.
But India
also holds the dubious distinction of the highest
number of road accidents in the world. According
to official figures, last year the road death toll
stood at more than 60,000. The carnage is due to a
deadly cocktail of fast vehicles and slow-moving
bullock carts, cyclists and people on the
highways, while inadequate emergency medical
services exacerbate the situation. India's large
road networks pass through villages and towns,
often without safeguards such as overpasses and
service lanes.
The Gurgaon-Delhi
expressway is almost complete but has also turned
into a killer route, with many crushed while
trying to cross the busy road. This weekend the
former chief minister of Delhi, Sahib Singh Verma,
was killed on a highway near Delhi when a truck
crashed into his vehicle. The truck driver was
trying to avoid a cyclist.
Yet the market
for more powerful high-end luxury cars is
expanding because of rising incomes and a surfeit
of new Indian millionaires and billionaires.
Rolls-Royce, Porsche, Lamborghini, Aston
Martin, Ferrari and Maserati, Jaguar,
Mercedes-Benz, Maybach and BMW are beating sales
targets. The size of the luxury-car market in
India is estimated to be more than 5,000 a year
and growing at 30% annually.
Siddharth Srivastava is a New
Delhi-based journalist.
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2007 Asia Times Online Ltd. All rights reserved.
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