For the first time in the past two decades — amid a flurry of new players, slew of launches and zooming sales — India’s Motown is thinking seriously about bottom-of-the-pyramid cars.
Maruti Suzuki, India’s largest car company, is launching a sub Rs 2.5 lakh car in the next 18 months. This is the first time Maruti is looking at launching an entry-level car since the debut of Maruti 800 in the 1980s.
Hyundai Motors, India’s second-largest car company, too is developing a car called H800 that will debut on Indian roads soon. This is the first time the Korean auto major is looking at setting a new floor price for its cars. Currently, Hyundai’s entry-level car is Santro available at a little over Rs 3 lakh. “The opportunity is enormous. This is the largest segment in India’s car industry today and in times to come,” says Arvind Saxena, director, sales & marketing, Hyundai Motors India.
This optimism is partly inspired by India’s macroeconomic growth story. India’s gross domestic product (GDP) is expected to quadruple from $1.7 trillion (2010-11) to $5.6 trillion (2019-20). During this period, India’s working population will go up by 20% to comprise 55% of the total population — which will mean more income earners and fewer dependants in Indian households.
And this growth will not be so much about the rich getting richer as much as about poorer Indians graduating to the middle class, says Mayank Pareek, executive director (marketing), Maruti Suzuki. It is expected that the number of households in the income category Rs 2.8-7 lakh will grow from about 2 crore in 2010 to 5.5 crore in 2015. “The thumb rule is that a household is ready to buy a car when its annual income is equal to the cost of the car,” says Jagdish Khattar, former managing director of Maruti Suzuki and founder of Carnation Auto, an auto solutions firm. This means in the next 5-10 years, a large number of Indian households will cross the income threshold when cars will become affordable to them.