The hatchback car market in India looks all set for a fresh round of cut - throat competition.
Below is a clipping from last week's TIMES zigwheels. www.zigwheels.com
Ford India has launched the Ford Figo at a super competitive price of Rs. 3.49 lakhs (approx USD 7755, at 1USD = INR 45) for the base model.
The Indian government is also rolling back excise duty benefits on the sale of small cars and the Reserve Bank of India is also hinting at a tighter monetary policy going forward.
The Indian hatchback market is dominated by Maruti Suzuki & Hyundai Motors.
Maruti Suzuki is the dominant player and is the manufacturer of the legendary Maruti 800, the Suzuki Wagon R ( since relaunched as the Suzuki Ritz) and the Suzuki A star ( formerly the Suzuki Alto).
Hyundai India also makes the popular Hyundai Santro and the Hyundai i 10.
Tata Motors makes the Tata Indica & the Tata Nano!
Volkswagen, Ford, Fiat and GM are new entrants in the hatchback space.
In the past Fiat and GM have tried to enter this space, and were not very successful.
The hatchback segment is getting rather crowded in my opinion.
While this is great news for the customer, it means that the car makers will face margin pressures going forward.
Car makers will also have to compete with a growing second hand car market and second hand cars that are refurbished by the car companies themselves.
Consequently, investors in auto companies like Maruti Suzuki need to take note of the changing dynamics of the low margin high volume hatchback car market.
Investors in auto ancillary companies will also have to deal with shrinking profit margins. Raw material prices (steel, glass, rubber etc) are rising and car companies will look to cut costs to boost their own profitability.
A price war is great for the customer, but drastically reduces the profitability of the car makers.