Mumbai: The global automobile market has been governed by a simple rule ever since General Motors Corp.’s legendary chairman Alfred P. Sloan made planned obsolescence central to his strategy in the 1930s: Old models get replaced by new models.
This time-honoured rule is being challenged in the Indian car and two-wheeler markets, as old and new models share market space in a form of uneasy co-existence. So, even as Maruti Suzuki India Ltd and Hero Honda Motors Ltd, market leaders in car and two-wheeler segments, respectively, roll out swankier products, they have not retired old workhorses such as the Maruti 800 car and the Splendor motorcycle.
Sharing space: A Maruti Suzuki showroom. The firm’s portfolio comprises 13 models with 40 variants. Ramesh Pathania / Mint
On the contrary, Maruti Suzuki’s portfolio currently comprises 13 car models with at least 40 variants, while Hero Honda has 10 models with 25 variants and plans to introduce nine additional new products in the current financial year ending March 2010.
Executives at both firms said given the variety of customer needs, it pays to allow multiple products to coexist. Other car makers such as Hyundai Motor India Ltd and Tata Motors Ltd, India’s second and third largest car makers by sales, have also followed a similar policy. While Hyundai Motor has kept its original offering, the Santro, in showrooms, Tata Motors continues to sell the Indica, a compact car, which at the time of its launch was touted as the first car to be designed and made in India.
Both cars have been offered in various variants over the 11 years since they were launched, even as the car makers have launched sedans and multi-purpose vehicles alongside.
Though a product’s life cycle depends on many factors such as a firm’s strategy, geography and consumer behaviour, it has shrunk to five-seven years from seven to 10 years a decade ago in developed markets of the world, said Pankaj Chadha, director, automotive practice, at consulting firm Ernst and Young.
However, even in developed markets, auto makers have retained models over decades with improved variants, such as Ford Motor Co.’s Mustang, Toyota Motor Co.’s Corolla, Volkswagen AG’s Beetle and General Motors’ Camaro.
In India, the 25-year-old Maruti 800 and the 9-year-old Alto are still selling alongside newer products such as the Swift, SX4, A-Star and Ritz. Similarly, Hero Honda’s Splendor coexists with the Hunk, Achiever and Glamour, all sleeker, more powerful motorcycles.
“Unlike the mature auto markets of the world, there is still a lot of gap between the steps of the product ladder in India that have to be filled in. Auto makers are trying to address this,” said R. Venkatraman, partner and vice-president at global consulting firm AT Kearney Ltd, adding that an important factor is that India is one of the world’s most price-sensitive markets.