New Delhi: The noise at the recent Auto Expo may have been all about big sports utility vehicles, but small cars, too, are crafting their own makeover, spurred by new regulations and rising consumer expectations.

The concept of a cheap, no-frills car at the price point of a Nano or even a Maruti 800 (now discontinued) may be on the verge of going into oblivion, changing the landscape of the country’s 3-million-a-year car market over the coming years. Rising aspirations among buyers will drive the trend.

For instance, Tata Motors Ltd, the maker of the Nano, which was touted as the 1 lakh car, plans to re-engineer the car in order to meet future regulations pertaining to emissions, fuel efficiency and safety. The fourth-generation model may get a new engine, a stronger body and enhanced safety features.

Others like the local arms of Nissan Motor Co, which has had limited success with the low-cost brand Datsun, is working on augmenting the existing line-up with more expensive new-generation small cars.

By all accounts, the Maruti 800 price band (less than 3 lakh) is no longer feasible.

“With the safety and emission norms becoming stiffer, it is difficult to launch a product in that price segment," said Toshihiro Suzuki, president and chief operating officer at Suzuki Motor Corp., on 3 February when asked if Maruti Suzuki India Ltd will consider introducing a replacement for the Maruti 800.

Suzuki also spoke of the need to exceed buyers’ expectations, forge collaborations with component suppliers amid heightened competition and be mindful of the changing regulatory requirements of the market.

At the 13th Auto Expo, where the buzz around utility vehicles—big as well as compact—was louder than that around small cars, Girish Wagh, senior vice-president of new product planning at Tata Motors, spoke in a similar vein.

“With all the safety and other requirements, it won’t be possible to launch a small car at the price point of a Nano," said Wagh, the man behind the ultra-low-cost car.

If anything, Wagh said, the Nano’s price may go up due to the high costs involved in meeting new regulatory requirements and buyers’ expectations.

“There’s nothing called a no-frills car with even the buyer of low-cost car like a Nano looking for features which are seen only in high-end cars," he said.

This, in turn, poses the challenge of introducing cost-effective technologies, while still making the final product aspirational. The future Nano, positioned as a smart city car, would come with a new engine that can meet new emission norms, a stronger body and safety features, said Wagh, who declined to share specific details.

The Indian car market is preparing to meet a bunch of new regulations to be enforced over the next five years. In 2020, India, one of the world’s fastest growing auto markets, will leapfrog to Bharat Stage VI emission norms from the current Bharat Stage IV, skipping an intermediate stage, two years ahead of target. This will require auto companies to invest a cumulative 40,000 crore to 60,000 crore, Mint reported on 6 January.

As part of the Bharat New Vehicle Safety Assessment Programme, the Indian equivalent of European New Car Assessment Programme, car makers will also have to meet advanced crash test norms, including frontal crash and side impact tests.

Cars sold in India will have star ratings based on their safety. The norms are likely to come into effect from 2017 in phases—for new and existing cars. Auto makers are also gearing up for the new fuel-efficiency norms, which take into account corporate average fuel efficiency of the manufacturer instead of individual models. The first phase will kick off in 2017.

India’s small car market has always been a bit of a puzzle for global car makers. Tales of success—like that of the Renault Kwid, which seems to have cracked the market at least for now—are rare.

The local arm of Nissan tried to challenge the stronghold of market leader Maruti Suzuki India and Hyundai Motor India Ltd with its Datsun brand. But nearly two years after the launch of the Datsun Go and Go Plus, the sales are hardly encouraging.

In the first nine months of fiscal 2015-16, Nissan Motor India Pvt Ltd sold 12,008 cars (including the Datsun and Micra models) against 17,207 units a year ago, according to the Society of Indian Automobile Manufacturers. This is less than what Maruti sells in just four days.

Nissan is not giving up the fight just yet and plans to introduce yet another offering in the sub- 5 lakh segment called the Datsun Redi GO—a cross between a hatchback and an SUV—in a few months, said Vincent Cobee, head of Datsun, in an interview on 3 February.

“It takes time to create a brand. This is the battle we have to fight street by street and village by village," said Cobee. “What I find intriguing about the Indian market is a permanent tension between a traditional mindset and a very new and ambitious attitude—where this tension lands is extremely complex to predict."

However, he remains optimistic of the sub- 5 lakh market. “Half of the Indian market will be in the sub- 5 lakh segment," said Cobee.

Small car makers are also aware of the changing profile of the average Indian car buyer; consumer aspirations are growing. There is now a higher preference for variants that are packed with safety features and creature comforts, said Puneet Gupta, associate director at sales forecasting and market research firm, IHS Automotive.

He cites the examples of some attractively priced, recently launched models such as the Mahindra KUV1OO ( 4.42 lakh to 6.76 lakh) and Renault Kwid ( 2.60 lakh to 3.64 lakh).

The KUV1OO currently has a waiting list of two months. In both cases, the higher and mid-trim versions are driving 70% of sales. This shows that besides the coming regulations, “the buyers are also pushing up the price points, indicating an upward structural shift in the market", said Gupta.

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