Strategy to find space in the car market

The balloons, streamers, stars and flowers are all over. Workers ready cars for delivery there are number plates to screw in, wheels to polish and accessories to fit. Visitors glide in and out of cars. Located off the busy road that connects Faridabad with Delhi, the Hyundai showroom hopes to sell at least 600 cars in October. The period is auspicious for Hindus, with Diwali smack in the middle of the month. The Central government has handed out another lot of pay arrears that resulted from the award of the Sixth Pay Commission. Companies have given bonuses to employees. And people are keen to put their money to good use.
They are running full three shifts at their two plants. The momentum may continue after festival season as well.
Car makers reckon sales will grow at least ten per cent in 2009. For Hyundai, it is important that sales grow at a fast clip. Its production (600,000 cars per annum or 50,000 per month) is at present split equally between local sales and exports. Several countries in the West had announced “scrappage” incentives for buyers of fuel efficient cars. This gave a huge momentum to exporters like Hyundai. But now the incentives have begun to run out. Getting new export orders has become tough. Exports in 2009 may fall about 10,000 short of local sales, and the gap may double in 2010. It is therefore crucial for Hyundai to do well in India.
Hyundai sits on 23 per cent of the Indian car market. But the market place is turning crowded by the day. Leader Maruti Suzuki (market share: 52 per cent) has strengthened its small car portfolio with launches like the A-Star, Ritz and new Zen Estillo. Fiat has begun its new innings with the Linea and Punto. Ford has announced a new small car for India called the Figo. Nissan has set its sights on a 5 per cent market share. General Motors wants a 10 per cent slice of the pie.
Small cars account for over 75 per cent of the Indian market. The economic slowdown of the last one year has reinforced consumers’ preference for fuel-efficient and inexpensive small cars.
Almost a quarter of Hyundai’s repeat customers now own two small cars. In the past, the second purchase was invariably a mid-sized sedan.
And Hyundai knows this is where the future lies. The Korean chaebol has made India its hub for small cars in the world. Models like the Santro, i10 and i20 are not made anywhere else in the world. This ensures that the cars sold in India are of global standards. But it cuts the other way too. Often cars for the overseas market need to be fitted with expensive components and material; this drives up the price in India.
To consolidate its position, Hyundai launched the i10 in October 2007 and the i20 in December 2008. In September, it gave a facelift to its old warhorse, the Santro. The company has sold 11,000 to 12,000 i10s, about 7,000 Santros and between 4,200 and 5,000 i20s every month this year. The surprise here was the i20. They expected to sell not more than 700 every month. The car’s export volumes have been cut to feed the domestic market.
The Getz will be taken off the road soon. In the works is a new 800-cc, 3-cylinder car somewhere in a Hyundai laboratory in South Korea. The brief to the engineers, is to keep the price below $6,000 (approximately Rs 300,000). It will be smaller than the Santro in price as well as size. The car, which is yet to get a name, could take another two or three years before it launches.–