The Rs1 lakh car, to be unveiled by Tata Motors Ltd next year, may find its competition coming from used cars, as a raft of newer models tempt consumers to switch vehicles more frequently, flooding the market with cheaper pre-owned ones.
That’s even though the Tata car will be the cheapest in the country at that price.
“Demand for Tata Motors’ Rs1 lakh car will depend on its capacity and features, which are still not known,’’ said Avinash Gorakshakar, head of research at Mumbai brokerage Emkay Share and stockbrokers. “The used-car market can keep a leash on demand for the Rs1 lakh car as the consumers may have a certified used car with better features at roughly the same price.”
In India, features such as airconditioners, fog lamps, airbags and demisters are considered as additional and not standard, and each feature can cost more.
This can even include simple additions such as a power steering, which makes manoeuvring easy, an add-on in the cheaper cars.
The price of the Tatas’ Rs1 lakh car would be almost half that of the cheapest car in the market today—the Maruti 800, available for just under Rs2 lakh.
And a three-year-old, used and certified car which carries a six-month warranty would cost around Rs1.2 lakh. Older cars of this model are available at even cheaper rates. This means that the Tatas will have to work hard to keep costs down in an economy where inflation is at a two-year record.
In 2006, around 12 lakh new cars were sold in India. The number of used cars sold that year is estimated to be similar.
As many as 50 new models of passenger vehicles, including tweaked versions of existing cars, will be introduced in this year. That’s set to increase, with investments worth Rs35,000 crore coming onstream by 2010, pushing more car makers into the country’s already-crowded car market. As many as 13 companies produce cars locally and almost every brand can be imported at a cost.
“The demand for used cars is increasing and we are finding difficulty in sourcing them while selling is not a problem,” said Ravi Bhatia, general manager, at Maruti’s True Value, which sells used cars.
Rival Automartindia, promoted by Mahindra & Mahindra, currently sells 1,200 cars a month from its 97 stores in 56 towns. The company is planning to expand to 150 stores in 75 cities by 2009 and hopes to up sales to 4,000 cars a month by 2010.
“We see huge opportunity for growth in the coming years. In the next three-four years we are aiming to increase our sales by three to four times,” said, Arun Sinha, chief operating officer, Automartindia.
Some say a car costing Rs1 lakh will be targeted at users of two-wheelers who want to upgrade to four wheels. A motorbike can cost anywhere between Rs 30,000 to Rs1 lakh.
“There is always a market for new cars,” said Sumit Bali, chief operating officer, Kotak Mahindra Prime Ltd. “The Tata car would most likely target the large number of motorbike users to help them upgrade.”
A Tata Motors spokesperson declined to comment on any issue related to the Rs1 lakh car.