With almost 50 new models and variants expected to hit the Indian market over the next year or so, auto makers are betting heavily on the Indian car market emerging among the fastest growing in the world. By Rex Mathew

Having expanded at a brisk clip in recent years to touch an annual output of 1 million units, the Indian car industry is all set for its busiest ever period of new launches. It is estimated that nearly 50 new models or variants of existing models would be launched over the next year or so, taking the total number of models and variants available to nearly 250, a far cry from the days when consumers had to choose from just two or three models.

As more foreign car manufacturers enter the country, India is poised to retain its position as one of the fastest growing markets in the world. Annual production is forecast to touch 2 million units by 2010 and the country is fast becoming a production hub for small cars.

The country now produces more compact cars than the whole of Europe. If the current growth rate in compact cars is maintained, India would beat Brazil to become the second-largest manufacturer of small cars behind Japan over the next few years.

Apart from the fast growing domestic market, the maturing domestic auto ancillary industry is another factor, which is encouraging global auto companies to look at India. Most global auto companies are now looking at India as a major source of low-cost but high quality components. The government has also done its bit by reducing excise duty on small cars to expand the domestic base.

Entry level and beyond
Tata Motors is all set to redefine the entry-level market with what has been dubbed 'Rs1-lakh car'. Expected to be launched by 2008, the car promises to be a 'disruptive product' incorporating technology and materials. Company officials have already stated that the final price of the car would be above Rs1 lakh though it would be substantially cheaper than the current low-priced warrior, the Maruti 800. Such a product would very likely encourage two-wheeler users to buying a car.

In response, Maruti is most certain to lower the prices of its 800 model even further. In fact, the company is keeping the two-decade old model alive only to have a vehicle to meet the challenge from the Tata small car. If the Tata car – in the quest to drive down costs - does not meet the basic quality and comfort standards expected from a car, all the hype surrounding it will vanish easily.

Tata Motors may face some competition even in the Rs1-lakh space. Kolkata-based Global Motors is planning an even cheaper car, in association with some Chinese companies. Bajaj Auto is also learnt to be interested in a low-cost car, though it is not clear if the company is taking the project further.

Till the Tata small car is launched, Maruti's Alto can safely expect to remain the highest-selling model in the country. Tata Motors has made a very aggressive move by introducing a low-powered version of the petrol Indica at a Rs25,000 discount to the earlier version, thereby reducing the price gap with the Maruti's Alto. Maruti has responded by offering special cash discounts on the Alto and the 800 models.

The real compact segment
Much of the action in the near future is expected in the upper compact car segment, also called the B-segment. Maruti, which had a major hit in this segment with the Swift, would launch the all new Zen – which is sold in Japan as the MR Wagon – by early next year. The car would be priced slightly lower than the Wagon R, which has received a favourable response after its recent facelift. Maruti is also expected to launch a diesel version of the Swift – powered by a common rail diesel engine developed by Fiat and licensed to Suzuki.

Korean favourite in India, Hyundai also has plans to soon launch an updated Santro as well as a diesel version of premium hatchback Getz, to retain its share in the B segment. Though there is some speculation about a diesel-powered Santro, the company has refrained from announcing it.

Tata Motors is working on the next generation Indica, which would be launched by 2008. The company is expected to position the new version against the Swift and Getz while the older version would continue to be offered to lower-end customers. The next generation Indica would feature common rail diesel engines sourced from Fiat, same as the one to be offered by Maruti on its diesel Swift.

GM has started work on its new plant in Maharashtra, which would roll out the Chevrolet Spark, an upgraded Daewoo Matiz, in the B segment. Ford has already announced that it is not interested in the compact segment as it is too crowded.

Fiat plans to bring out the Grande Punto, which is a major hit in Europe, by the middle of next year. The model would be positioned at the high end of the compact segment and the company has just received government permission to bring in an additional Rs2,000 crore in investments. An upgraded Palio, expected in early 2007 and would be positioned against the Swift and Getz, will precede the Grande Punto. Fiat would continue to expand its marketing and production alliance with Tata Motors.

Volkswagen, Europe's largest carmaker, has just announced its plans for India. The company is setting up a plant at an investment of $530 million, which would roll out the premium hatchback model Polo – one of the most successful models in this segment globally. French auto giant Renault may also look at the compact segment, once the JV with Mahindra completes the manufacturing plant.

Honda may launch a premium hatchback, most likely the Jazz, by next year to mark its entry into the compact car segment. Toyota has reportedly deferred its plan to launch either the Yaris hatchback or the small car Echo till 2010.

Another new entrant in this segment is Hyderabad-based MLR Motors, promoted by auto ancillary group Lokesh Machines. The company is planning an investment of Rs1,300 crore in a manufacturing plant to bring out a diesel powered hatchback.

MLR has acquired the technology from a European company, rumoured to be the Uno platform from Fiat, and has appointed B V R Subbu, former marketing head of Hyundai India, to manage the venture.

Expanding mid-segment
The mid-size sedan or C segment would also see many launches, both in the entry level as well the higher end. The most significant of the launches would be the Logan from Mahindra – Renault, expected early next year. The car, which would be available in both petrol and diesel, is a winner in Europe as it offers excellent value. The Mahindra – Renault JV would complete its first plant shortly and is in the process of upgrading Mahindra dealers and appointing new ones.

Maruti is testing a new sedan, which would replace the Baleno and a sedan version of the Swift to replace the ageing Esteem. Tata Motors is expected to launch both the Indigo sedan and Marina station wagon by 2009, on the next generation Indica platform with common rail diesel engines.

Hyundai is expected to launch a new updated version of the Elantra in the upper segment, with a diesel engine option as well. The company may gradually phase out the Accent and focus on the recently launched Verna.

GM would launch a diesel version of its popular sedan Aveo and a CNG version of upper end sedan Optra. Ford would launch another version of its diesel Fiesta with a more powerful engine. There is some speculation about possible launch of the Focus sedan by Ford, towards the end of 2007.

Skoda is expected to launch its much-awaited model Fabia. Though the model is also offered as a hatchback in Europe, in India it would be introduced as a sedan and possibly as an estate as well. Fiat is expected to replace its Petra sedan with Linea, a sedan based on the Grande Punto platform.

Premium sedans to wow
The premium sedan segment, or D segment, would also see some action. Honda has a big winner in the entry-level premium sedan segment with the whole new Civic, but Toyota would launch the upgraded Corolla by next year. The new Corolla is expected to be launched in the US and Japan shortly and reportedly has much better styling and technology than the current version.

Hyundai would launch a diesel version of the Sonata to make the model more attractive. The Sonata Embera has received a very poor response in the upper segment, which is dominated by Honda Accord. The latest generation Toyota Camry has excited many buyers, but is pricier than the Accord.

While Skoda is doing well with its Octavia, Laura and Superb models, parent company Volkswagen would launch its Passat premium sedan by next year. Volkswagen would use Skoda's Aurangabad facility till its own manufacturing facility near Pune is completed sometime in 2008.

At the very upper end of the car market, Mercedes Benz would have some competition from BMW and Audi. BMW is setting up a plant to assemble its 3, 5 and 7 series cars by next year. Audi, another Volkswagen affiliate, has launched its premium sedans in the country recently.

Audi may look at local manufacture in the future, either with Skoda or Volkswagen. Despite low volumes the luxury segment offers high margins making Mercedes Benz one of the few profitable foreign auto companies in the country.