U TURN

For many carmakers in India, small is no longer beautiful

Quartz india
Quartz india

From Maruti’s best-selling Alto to Tata Motor’s failed Nano, the small car was once the darling of Indian automobile companies.

At the turn of the decade—with India emerging as the second fastest growing car market in the world—analysts predicted (pdf) that the subcontinent would lead the small car market growth globally. Expectedly, foreign carmakers arrived to cash in.

Then, on the back of a sputtering economy, car sales slowed down in India—and the situation persisted.

Now, a clutch of foreign carmakers in India—including Volkswagen, Fiat and Toyota—is paring back their plans for small car launches, a new report suggests.

Here’s the breakdown:

Volkswagen: Europe’s largest carmaker hasn’t had it easy in India. Stiff competition from domestic and East Asian manufacturers, like Hyundai, has led VW to revise its plans of gaining 20% share of the country’s car market by 2018. Now, it hopes to corner only about 7-8%, the company’s India head Mahesh Kodumudi said last week.

Volkswagen has also stalled plans to launch two small cars—the Volkswagen Up! and the Skoda Citigo—in India, according to a report by Emerging Markets Automotive Advisors (EMMAAA), an auto industry consultancy.

Earlier this year, Kodumudi admitted that Volkswagen has failed to replicate its European cost structure in the subcontinent. “India is one of the most challenging markets in the VW (Volkswagen) world,” he told the Mint newspaper. This chart shows exactly what’s happened.

Volkswagen-2009-Today
(India Auto Report)

Fiat: The Italian automotive firm has been in India for a long time, and in many forms. The most recent was a distribution arrangement with Tata Motors that ended in March last year.

Numbers have improved since, but the small car specialist, the EMMAAA report points out, isn’t planning on introducing any new small cars in India.

Although, the company did announce last month that it intends on launching 12 models in India over the next five years, there remain concerns about volume growth.

Fiat-2009-Today
(India Auto Report)

Fiat Chrysler, as the carmaker is known since its acquisition of the Chrysler group earlier this year, will also bring it’s vaunted Jeep brand to India by 2015.

The mid-sized Cherokee and the Wrangler SUV will be first Jeep models on offer, Reuters reported. But even these will hardly help the carmaker drive volume, primarily because of their substantial price tags.

Toyota: There was a time when Toyota could do no wrong in India. Its cars—particularly the Qualis and Innova—were being driven out of showrooms in numbers; and its after-sales service was commended.

But with newer models, similar success has remained elusive, and now the company is planning to delay launches by about two years, an official said earlier in February.

Toyota-2009-Today
(India Auto Report)

And, like Fiat, the Japanese compact car specialist has decided to stay away from the small car market, instead focusing on larger vehicles, EMMAAA reported. The Liva, a hatchback, will remain the smallest Toyota on sale in the country.

“That is quite surprising considering the company is the market leader in the Japanese small car market and has the formidable Daihatsu brand specializing in small cars,” it added.

For some, evidently, small has ceased to be beautiful.

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