At least 20 models and variants are expected to be introduced in 2008, giving car buyers in the world’s second fastest growing market some hundred options—ranging from the Rs1 lakh Tata Nano to the Rs5 crore Maybach from the Daimler stable—a far cry from the two models that dominated the Indian roads just over two decades ago.
With the small-car market cornering a majority of the buyers, that segment will see fierce competition as Hyundai Motor India Ltd and General Motors India Ltd try to eat into the market share of Maruti Suzuki India Ltd, which makes half the cars sold in India.
The surge in new models brings with it a big challenge for car makers—attracting and retaining customers, many of whom now expect features such as airconditioning and power steering as standard.
Greater choice: The Maybach, priced at Rs5 crore, is among the many options open to the Indian consumer.
Even after a decade of fairly aggressive competition among top car makers such as Maruti and Hyundai, the companies charge hefty fees for some of the add-ons. These range from safety features, such as airbags and anti-brake systems, to stereos and leather upholstery, which are generally not available in the base model. But, that may be about to change.
“Customers are becoming more demanding with most of them wanting features similar to their global counterparts, but at the same pricing,” says Rajat Dhawan, partner at McKinsey & Co., who consults on the automotive industry.
Companies are offering multiple variants and often introducing special edition vehicles to bring customers to showrooms. Maruti, for instance, has five vehicles with multiple variants in the small- to compact-car range, which accounts for 75 of every 100 cars sold in India.
Still, analysts caution that while offering a range of vehicles is necessary to improve market share, it is not sufficient on its own. In a marketplace, which is getting increasingly cluttered and overloaded with information, firms are trying hard to differentiate themselves from competition by promoting after-sales services, such as warranties and the use of new media such as the Internet. “Having a diverse portfolio is a key competitive strategy to gain market share,” says Manish Mathur, principal at AT Kearney & Co., a consulting firm. Still, “companies will have to offer more reliability to customers as they place more weightage on trust.”
General Motors, for instance, has increased its warranty period to three years and 100,000km, from two years and 45,000km a few years ago. It has also launched a campaign called “Chevrolet Promise” where it promises to refund the maintenance cost of a vehicle to the consumer if it exceeds a certain limit. “Customers are happier with a warranty than other accessories,” says Ankush Arora, who heads marketing and sales at GM India.
The demand for cars continued to grow, albeit at a slower pace, with interest rates at a five-year high. Car purchases in India pottered along at 13% during April-January 2007-08. With companies pumping in Rs30,000 crore to build new factories, sales are forecast to touch 2.2 million units a year by 2010, and with 65% of India’s population under the age of 35, firms are looking at newer ways to catch customers. Some firms are using the Internet, which is popular with the younger generation, to get in touch with customers—GM’s Internet campaign for the Spark being a prime example.
Tata Motors Ltd, which made headlines by showcasing the world cheapest car, Tata Nano, is offering test drives on its website, even as it prepares for a launch later this year.
Hyundai, for instance, has introduced a service called “Always Around”, where its representatives visit custom in amusement parks, malls, etc., offer free car check-ups and take them for servicing if needed. “It’s as simple as checking and cleaning his (the customer’s) car,” says Arvind Saxena, senior vice-president at Hyundai. “This will give him confidence to refer us to friends.”