India is a land of automotive portent. Last year, Tata Motors bought glamour icons Jaguar and Land Rover. Now, in a coup de grace allowing it to span the extreme high and low ends of the market, the company has delivered the Nano, which, priced at Rs123,000 (US$2,400), is the world’s cheapest car.
On 9 April, the day that Indians lined up to fill out applications for the first batch of Nanos, due for shipment on 1 July, the Bank of India was softening loan terms to encourage buyers. India is a nation where car sales are financed and credit has been tight.In February, to reverse a sales decline that began last October, the Government announced cheaper financing, and that same month sales of light vehicles jumped 24 per cent.
“Growth in February was due to banks providing more credit and lowering interest rates for vehicle buyers,” says Ammar Master, senior market analyst for India and Korea, JD Power & Associates. “This is why Tata Motors, Maruti-Suzuki and Hyundai have tied up with banks for vehicle financing.”
India has one of the lowest car ownership rates in the developing world. Ownership is 9.5 per 1,000, according to TNS India. Most new car buyers are making the shift to four wheels, from two- or three-wheelers. Automobiles account for only 16 per cent of vehicle sales, with the dominant means of transport being the motorcycle, which last year accounted for 75 per cent of market volume.
The official outlook is upbeat. While other car markets sink into oblivion, Society of Indian Automobile Manufacturers’ director- general Dilip Chenoy predicts growth of three to five per cent for passenger vehicles in India for fiscal year 2009-10.
“Small cars will continue to be the leading sub-segment,” says Chenoy, “and new growth will come from the small towns and newer cities.”
Mid-sized and luxury cars accounted for just one per cent of the 256,303 passenger vehicles sold in January and February, according to JD Power and Associates. SUVs and minivans tallied sales of 39,244 units, or 15 per cent, while minis and subcompacts represented the remaining 82 per cent of sales with 128,386 and 89,960 units, respectively.
For decades, Maruti-Suzuki has produced India’s best-selling minis and subcompacts, and therefore leads the market ahead of Hyundai, Tata and Mahindra.
“Until a few years ago, hatchbacks were entry level cars and sedans implied ‘having arrived’ in life,” says Nikhil Rawal, senior VP, IMRB International. “But today with premium hatchbacks like Swift and Fabia, young upwardly mobile consumers consider the loaded hatchbacks as a good buy for crowded Indian city roads, where parking is a big problem.”
One might anticipate a reshaping of consumer expectations given how low the cost of the Tata Nano is. Rawal certainly expects the launch to have some impact. “It’s too early to say whether the Nano has changed perceptions of what a car should cost,” he says. “But what it will change is consumer expectations of what features they can get at a particular price.”
Freebies are a sign of heightened competition, and the trend is not limited to entry-level cars. This spring Mercedes-Benz, BMW and Audi have been offering interest-free loans on select models to move inventory. Likewise, AdEx India, which measures media use but does not compute adspend, reported a shift in car advertising from print (down 13 per cent) to TV (up 20 per cent) last year, signalling an increase in budgets.
That is borne out by Basabdatta Chowdhuri, CEO of Madison Media Plus, who estimates the rise in auto adspend from 2007 to 2008 at 50 to 60 per cent. She adds: “The momentum doesn’t seem to have been lost in the first quarter of 2009, in spite of the economic downturn.”
Chowdhuri says TV is growing as a marketing medium as it is increasingly seen as delivering broad reach, and car firms are increasingly looking for growth outside the urban centres. “The more mass the car brand, the more likely it is to have a heavy presence on TV.”
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On 9 April, the day that Indians lined up to fill out applications for the first batch of Nanos, due for shipment on 1 July, the Bank of India was softening loan terms to encourage buyers. India is a nation where car sales are financed and credit has been tight.In February, to reverse a sales decline that began last October, the Government announced cheaper financing, and that same month sales of light vehicles jumped 24 per cent.
“Growth in February was due to banks providing more credit and lowering interest rates for vehicle buyers,” says Ammar Master, senior market analyst for India and Korea, JD Power & Associates. “This is why Tata Motors, Maruti-Suzuki and Hyundai have tied up with banks for vehicle financing.”
India has one of the lowest car ownership rates in the developing world. Ownership is 9.5 per 1,000, according to TNS India. Most new car buyers are making the shift to four wheels, from two- or three-wheelers. Automobiles account for only 16 per cent of vehicle sales, with the dominant means of transport being the motorcycle, which last year accounted for 75 per cent of market volume.
The official outlook is upbeat. While other car markets sink into oblivion, Society of Indian Automobile Manufacturers’ director- general Dilip Chenoy predicts growth of three to five per cent for passenger vehicles in India for fiscal year 2009-10.
“Small cars will continue to be the leading sub-segment,” says Chenoy, “and new growth will come from the small towns and newer cities.”
Mid-sized and luxury cars accounted for just one per cent of the 256,303 passenger vehicles sold in January and February, according to JD Power and Associates. SUVs and minivans tallied sales of 39,244 units, or 15 per cent, while minis and subcompacts represented the remaining 82 per cent of sales with 128,386 and 89,960 units, respectively.
For decades, Maruti-Suzuki has produced India’s best-selling minis and subcompacts, and therefore leads the market ahead of Hyundai, Tata and Mahindra.
“Until a few years ago, hatchbacks were entry level cars and sedans implied ‘having arrived’ in life,” says Nikhil Rawal, senior VP, IMRB International. “But today with premium hatchbacks like Swift and Fabia, young upwardly mobile consumers consider the loaded hatchbacks as a good buy for crowded Indian city roads, where parking is a big problem.”
One might anticipate a reshaping of consumer expectations given how low the cost of the Tata Nano is. Rawal certainly expects the launch to have some impact. “It’s too early to say whether the Nano has changed perceptions of what a car should cost,” he says. “But what it will change is consumer expectations of what features they can get at a particular price.”
Freebies are a sign of heightened competition, and the trend is not limited to entry-level cars. This spring Mercedes-Benz, BMW and Audi have been offering interest-free loans on select models to move inventory. Likewise, AdEx India, which measures media use but does not compute adspend, reported a shift in car advertising from print (down 13 per cent) to TV (up 20 per cent) last year, signalling an increase in budgets.
That is borne out by Basabdatta Chowdhuri, CEO of Madison Media Plus, who estimates the rise in auto adspend from 2007 to 2008 at 50 to 60 per cent. She adds: “The momentum doesn’t seem to have been lost in the first quarter of 2009, in spite of the economic downturn.”
Chowdhuri says TV is growing as a marketing medium as it is increasingly seen as delivering broad reach, and car firms are increasingly looking for growth outside the urban centres. “The more mass the car brand, the more likely it is to have a heavy presence on TV.”
Got a view?
Email [email protected]
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