Cool carmaker

Mumbai: No matter that car models of General Motors India (GMI), the Indian subsidiary of the US-based General Motors Corporation, are not doing as well as they should in the Indian market. No matter that the company does not have a small car in its portfolio from which volume sales can be hoped for in the future. But GMI remains coolly optimistic about its strategy of depending almost completely on its portfolio of C and D segment cars apart from wholly imported car models such as the Opel Vectra and the Chevrolet Forrester.

Recently the company has committed to increasing investments in India to Rs 1,600 crore till the year 2005 from Rs 844 crore till now. GMI says it sees India becoming one of the world’s 10 largest car markets in the next five years.

This might speak volumes about the deep pockets of its parent company, and its determination to stick it out in India for the long haul, especially since GMI has not exactly had a smooth ride in the last two years.

While nearly all C segment cars struggle against smaller hatchbacks, which comprise 85 per cent of the Indian market, GMI Opel models (Corsa and Astra) haven’t done too well against other mid-size cars like the Honda City, Ford Ikon and the Hyundai Accent either.

GMI sold 8,458 units in the mid-size segment last year with the Opel Corsa accounting for 85 per cent of the sales. In the same segment, the Ford Ikon sold 14,970 units and the Honda City sold 11,842 units.

Dealers say GMI has lost out to other C segment cars because of its lack of marketing strategy. The Ford India and the Honda City they say are promoted intensively and are well positioned while the Corsa and the Astra lack proper positioning.

End of struggle?
Whatever be the reason, GMI’s struggle against small cars at least could soon be over as it prepares to take the fight into the enemy camp with the launch of a Corsa hatchback priced at least Rs 1 lakh less than the Corsa Sedan. Not only this, reliable sources also indicate that GMI could soon launch the Daewoo line-up of cars in India.

Says GMI vice-president (corporate affairs) P Balendran: “The company is planning the launch of a number of new car models and the Corsa hatchback is one of them. Apart from the Corsa hatchback the company is planning a number of new models that are due later this year or early next year as they would require expansion of capacity at GMIL’s Halol plant to 25,000-50,000 per annum on a double-shift basis.”

At the moment GMI is present in the mid-size segment with the Opel brands (Corsa and Astra) and in the premium segment with the Vectra. The luxury car segment in India at best can be described as a niche segment. Cars in this segment face a struggle against smaller, less expensive and more fuel-efficient cars like the Santro and the Indica, which dominate India’s 580,000-a-year car market with an 82-per cent market share.

GMI’s intention to launch the Corsa hatchback version is an attempt to enter the popular market in order to boost overall Corsa volumes, now selling around 400-450 (including the Swing) units a month. Market sources indicate that it would be a price-fighter model (priced almost Rs 1 lakh cheaper than its competitors’).

Some market analysts, however, feel that the launch of the Corsa hatchback will affect the sales of the Corsa Sedan and especially so if the hatchback is cheaper. GMI is also said to be planning the launch of the entire Daewoo vehicle portfolio in India, including the hugely popular Matiz.

What is in the offing?
Reliable sources say GM is currently working on a project on a Daewoo car that would be introduced in India as a completely knocked down kit. The company is initially looking at the small- and medium-sized car market in India with the Daewoo product.

Sources say the first Daewoo car is expected to hit Indian roads by the end of 2003. “The company is alongside studying the feasibility of introducing the entire Daewoo vehicle line-up in India in the future.” The company may be looking at the small car Matiz and the mid-sized Lacetti (a derivative of the Daewoo Nubira) as initial launches.

GMI, since its inception, has focused only on the mid-size segment and a majority of new launches in the future are also focused on the luxury car category. New cars in the pipeline to be brought in as completely built-up unit (CBU) imports next year include the brand Signum, built on the Vectra platform, and the Zafira, a mid-size sedan. Automobile analysts expect the Signum to be positioned between the price-range of Toyota’s Camry (Rs 18.5 lakh) and the Mercedes-C (Rs 24 lakh).

The utility vehicle Panther, most probably to be sold under the Chevrolet badge, is likely to be manufactured in India with engines being assembled at Hindustan Motors’ plants. Company sources say over the next two years CBU models would account for around 10 per cent of GMI’s revenue.

The officials say the D segment, which notched sales of about 6,000 units in 2002, should grow to over 10,000 units in 2003 and maintain a growth rate of 10-12 per cent thereafter. GMI’s reasoning is based on the fact that though the initial volumes in the D segment might be low but with import duties gradually headed downwards the D segment will see exponential growth in the next few years.

Carmakers importing models through the CBU route till recently had to pay an import duty of 120 per cent, which is expected to be reduced. Budget 2003 has left the 60-per cent customs duty on cars brought in through the import route untouched. But with an 8-per cent reduction in domestic excise duty, the countervailing duty on imported cars is expected to come down, leading to an overall reduction in duties.

The name is Chevrolet
Recently GMI announced that all new car launches would be under the brand name of Chevrolet, one of General Motors’ most venerable brands. Auto analysts characterise it as an effort to capitalise on the Chevrolet brand name. The recently launched multi-utility vehicle (MUV), Subaru Forrester, has the badge of the Chevrolet Forester and new launches, including MUV Panther and the Daewoo cars, will be under the Chevrolet brand.

Notably, none of these cars come under the Chevrolet brand in global markets. GMI’s strategy is to target the Opel brand at the premium end of the market, while the Chevrolet will be the mainstream umbrella brand which the company feels has enough recall and brand equity to bring in the required volumes.

Senior company officials say while most of the Chevrolet branded products would be locally manufactured in India, a few of them would also be imported and sold as CBU units. And, please remember, India’s premium segment is only about 18 months old and is estimated at about 6,000 units a year with all models priced at over Rs 11 lakh.

Notably Ford India, Honda Siel or even Hyundai Motor has committed to any significant new investments or announced new vehicle launches in India in the recent past. Honda is said to considering the launch of its small car Fit and the mid-sized sedan Civic though no concrete plans have been announced yet.

The final points to ponder. GM has been in India since 1996. It has just about 1.6 per cent share of the domestic car market, although it has an 8-per cent share of the mid-size segment.