Global automakers muscle in on India SUV market

 @http://www.twitter.com/entnewsnow on January 05 2012 11:04 AM
Hyundai
Hyundai Motor Chairman Chung Mong-koo attends the company's opening ceremony for the year in Seoul January 2, 2012. REUTERS

Bigger is better for global automakers aggressively targeting growth in India's underdeveloped SUV market as the country's much-vaunted small car market stalls.

Ford Motor Co, Hyundai Motor Co and domestic leader Maruti Suzuki Ltd all unveiled new SUV models for the Indian market as part of over a dozen new rugged, full-powered SUVs at the India Auto Expo.

India's once-booming small car market has slumped, dragging overall sales growth into the doldrums, as first-time buyers and customers requiring credit baulk at high interest rates and rising fuel and vehicle costs.

But sales of sport utility vehicles (SUVs), off-road capable cars and multi-purpose vehicles (MPVs), rare on India's roads just a decade ago, are bucking the trend, as car owners look to upgrade their driving experience.

SUVs, MPVs are lifestyle products, and providing lifestyle products, choices, is exactly what India is moving towards, said Arvind Saxena, director of sales and marketing at Hyundai's India unit, on Thursday.

Someone whose parents drove a hatchback, and who started his career in a saloon will naturally be interested in a SUV... providing SUV establishes the customer-for-life concept.

Driven by rising incomes, an aspirational middle-class, and the expansion of major automaker dealership networks beyond India's biggest cities to areas where rugged vehicles are more useful, big cars are in demand.

SUV sales rose 11 percent in the eight months between April and November last year from a year earlier, while overall passenger car sales fell 4 percent, according to data from the Society of Indian Automobile Manufacturers (SIAM).

Mahindra & Mahindra Ltd, the traditional leader in multi-utility vehicles, launched its South Korean Ssangyong brand in India on Thursday, unveiling four new SUVs of which two could be on sale in the country by the end of 2012.

French carmaker Renault SA and German luxury brand Audi AG also launched new SUV models for India at the Expo, as talk of rugged, aggressive and wild and urban vehicles dominated day one of the seven-day event.

LOCAL EDGE?

Carmakers in Europe and the United Statdes like SUVs for their high margins, but in India's price-sensitive market, companies may struggle to make similar profits. High import taxes will also be a factor for models manufactured overseas.

As the SUV market continues to expand, that could encourage more carmakers to move production or assembly to India.

Ford said on Wednesday it would spend $142 million on its plant in the southern Indian city of Chennai to begin manufacture of a new global SUV planned first for the domestic market, and subsequently to be built for export.

Local manufacturing, lower-cost sourcing allows us to provide SUVs competitively in the price-sensitive market. That's why we're confident in the market here, said Pravin Shah, chief executive of international operations for Mahindra.

Mahindra said its new Ssangyong SUVs would be assembled in India, avoiding high tariffs. Jaguar Land Rover, owned by Tata Motors, already assembles some of its luxury SUV models at its Indian plants.

Carmakers also see SUV models improving customer perception of their entire vehicle range, and even complementing their small-car offerings in increasingly brand-conscious India.

Entering the SUV space increases brand image, it makes you a more respected and stronger player here in India, said H.W. Park, chief executive officer of Hyundai India, which launched a concept MPV.

Maruti, whose 800, Alto and Swift models are some of India's most recognisable small cars, has been hit particularly hard this year due to the slump in the segment. A new SUV concept car and the Ertiga, its first-ever MPV, is set to debut at the Expo.

As more and more players muscle in, the market is going to get crowded.

For sure, everyone is coming to this segment, competition is fierce, said Park. But we are ready for a fight.

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