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Old 24th March 2010, 10:40   #1
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Default The 2 Lakh A- Segment Gold Rush

There has been some serious heat in the A- segment of the auto sector, with several firms announcing their intention to launch products to compete with the likes of the Tata Nano and Maruti 800. Auto majors are not only looking at India as a market for these cars, but emerging BRICs (Brazil, Russia, India, China) , Indonesia, Iran and Nigeria as well.

Calos Ghosn, for one, is determined to bombard the market with multiple small cars and various price points. He has been fairly overt about taking Tata and Maruti Suzuki head on with the help of multiple alliances.

Some highlights:

1. Nissan - Ashok Leyland

Nissan is in talks with Ashok Leyland to develop a global small car costing under Rs 2.5 lakh. The two are in an alliance for light commercial vehicles and the small car could be an extension from one of the platforms.

The Hindu Business Line : Nissan to build Rs 2.5-lakh car with Ashok Leyland

2. Maruti Suzuki (speculation)

The launch of the 'Cervo' as Maruti's next gen low cost product has been doing the rounds in blogs, but there has been no confirmed news from any large media house. Im sure that maruti will be preparing for a successor to the 800/alto though


3. Hyundai

Hyundai Motors is lining up a new release for India that is likely to be priced not much higher than that of Marutiís cheapest variant, the Maruti 800. The vehicle, which will be launched in the second half of 2011.

Hyundai to take on Maruti 800 next year


4. Renault Nissan - Bajaj

The Renault-Nissan combine is already working on an ultra low-cost car project with Bajaj Auto where the base version would be under Rs 2-lakh and will take on the Tata Nano. The CEO Carlos Chosn referred to the staus of this alliance, saying "it is moving along. We are negotiating the contract". However, there have been varying reports about the ability of the partnership to engineer the car. Nissan's executive vice-president Collin Dodge was quoted as saying "The physics of it is very difficult. We have not yet found a solution as there are lot of engineering solutions required"

The Hindu : Business News : Ghosn defends multiple alliances
The Hindu Business Line : Carlos Ghosn says small car will be priced lower than Nano
Nissan's Nano rival 'on track' - Autocar.co.uk
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Old 24th March 2010, 11:54   #2
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I do agree with you entirely. Maruti will also do a Rs 2.5lakh car in partnership with VW and lets not forget the VW Up! that will fill the gap under the Polo.

Renault-Bajaj ULC will be probably shared with Nissan too and the same goes for Nissan-Ashok Leyland deal.
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Old 24th March 2010, 18:15   #3
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Till only some time back, manufacturers (other than Maruti, Hyundai & Tata) were finding it impossible to price their new hatchbacks below 5 lakh rupees. The Indian hatch market is incredibly price-sensitive. In the recent past, Chevrolet with the Beat & Ford with the Figo are the only ones who have successfully cracked the code, and priced their fresh products sensibly. Either makes for a VFM purchase.

Honestly, I have my doubts on new brands flooding the A segment. Firstly, its an uphill task to have the cost structure in place. The reason Maruti can sell the 800 for so cheap is that the model has been in production for 25+ years (depreciated machinery et al). And Tata pulled off the Nano only after exploiting every rule (and then some more) in the "Basic Automobile 101" book. The top-loaded Nano, which really isn't premium equipped and has only the basics, retails for 2.2 lakh rupees in Bombay. Even then, the Nano's pricing is not sustainable and Tata is expected to increase them marginally.

Then, there's the question of profitability and whether its enough to keep a manufacturer interested. Even if someone does pull it off, the margins will be wafer-thin! If anyone manages to have an A-segmenter in the near future, it will be a player who is already well-established in India. Outside of the "Big 3", I'd say only Bajaj (in its collaboration with Nissan) has a shot.
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Old 24th March 2010, 22:44   #4
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About 12 years ago, Eicher and Kinetic came up with prototypes of their 1 Lakh rupee car that were properly road tested by Auto India Magazine. Both of them stated that they need relaxation in tax structure for such smaller cars to make it practical for them to sell it at 1 Lakh.

Considering the cost appreciation they might cost about 1.5 - 1.8 lakh today.

My doubt is that they didn't even have the guts to challenge the Maruti 800 then. Tata Changed the face of it.

What GTO has mentioned about other car makers' inability to launch a good sub 5 lakh car was exactly my thought for several years. But now they want to launch a sub 2 Lakh car. Though that is laughable, we all know that Tata Nano has shown them the way. But the key is their commitment that Tata's have shown tremendously well not just for the Nano but also for the Indica.

I'd say: if Nissan really wants to make a small car at 3000 USD, let them first price the Logan meaningfully. A cost cutting car can't cost so much.

BTW, Suzuki Cervo's news was covered in the TOI & ET. Even in a Telugu Daily - Saakshi with photo. All the news articles mentioned that the Cervo will replace the M800 and will have a new ~ 600cc engine.
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Old 25th March 2010, 00:14   #5
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Quote:
Originally Posted by MotoKris View Post
I'd say: if Nissan really wants to make a small car at 3000 USD, let them first price the Logan meaningfully. A cost cutting car can't cost so much.
You meant Renault here,

I Agree to GTO. It would rather be Imperative for Car Manufacturers to have a more realistic range of 3-4 L rather than just run behind the Nano success and try replicating it,

It really does not matter if you can launch a new car for under 2 L and cannot sustain it for longer duration, Ratan Tata, on the launch of Nano, himself agreed that 1L price is not sustainable in the then current market situation and becuase of the Inflation, it already reached a level of 1.4L at the time of Nano Launch, although it was only a Ex-Showroom price and not OTR.

Recent Car Launches have clearly shown that Market is mature enough for a hatchback upto 6L and 3-4L starting price is a sustainable figure no matter if you are looking for mass volumes or just smaller sales target to gain an entry into the Great Indian Small Car Bazaar,

Try replicating Maruti/Ford/VW rather than Honda while gaining entry to the India Small Car market which has a huge potential.
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Old 25th March 2010, 02:50   #6
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IMHO, the Nano is not selling because of its pricing, but more for the curiosity and novelty factors. Of course, after 800 is wiped out, there is going to be a void that Nano can fill. We have enough hatches in 2 ~ 5 lakhs, thanks mainly to Maruti. What may help is a two seater hatch priced under 1 lakhs on-road that can seat two adults (and two kids) - buy a bike at 50k and a car at 1L - the EMI factor will make the car purchase easier.

Last edited by ph03n!x : 25th March 2010 at 02:51.
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Old 25th March 2010, 19:28   #7
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Phoenix, the 800 doesn't have a strong position anymore and thus, there won't be a noticeable void created by its absence either. Maruti has very successfully positioned the Alto to take over from the 800; in fact, the Alto sells 10X as many 800s each month! Believe it or not, the iconic 800 is now Maruti's worst selling hatch.
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Old 25th March 2010, 20:42   #8
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Quote:
Originally Posted by GTO View Post
Phoenix, the 800 doesn't have a strong position anymore and thus, there won't be a noticeable void created by its absence either. Maruti has very successfully positioned the Alto to take over from the 800; in fact, the Alto sells 10X as many 800s each month! Believe it or not, the iconic 800 is now Maruti's worst selling hatch.
With the news of ALTO coming out with a one litre engine in JUne,the dales might go through the roof! provided they price it sensibly
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Old 25th March 2010, 21:44   #9
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Quote:
Originally Posted by GTO View Post
Phoenix, the 800 doesn't have a strong position anymore and thus, there won't be a noticeable void created by its absence either. Maruti has very successfully positioned the Alto to take over from the 800; in fact, the Alto sells 10X as many 800s each month! Believe it or not, the iconic 800 is now Maruti's worst selling hatch.
Though the sales of 800 have dropped drastically over past few months and car is going to be phase out within a couple of weeks when BS4 norms kick in, but it won't be completely fair to call it "worst" selling hatchback.

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Old 27th March 2010, 20:07   #10
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Quote:
Originally Posted by dodge_v1per View Post
Though the sales of 800 have dropped drastically over past few months and car is going to be phase out within a couple of weeks when BS4 norms kick in, but it won't be completely fair to call it "worst" selling hatchback.

Dodge, the 800 now sells only about 2,000 odd cars a month (averaged). All other Maruti hatchbacks sell more. Surprising isn't it? The cheapest Maruti, and yet the worst selling.
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Old 28th March 2010, 01:28   #11
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Quote:
Originally Posted by GTO View Post
Dodge, the 800 now sells only about 2,000 odd cars a month (averaged). All other Maruti hatchbacks sell more. Surprising isn't it? The cheapest Maruti, and yet the worst selling.
GTO, while i agree with you, there is also some truth to the fact that Maruti is purposely killing the sale of the 800.

I would imagine that the dyes for the 800 are so worn out that they cant be used for too long anymore. I even read somewhere that the F8D engine could have been engineered for BSIV but Maruti chose not to go ahead with it any longer.

In any case, Im sure that the next generation Alto/800 replacement is already at some stage of development - in case it is not the Suzuki Cervo.
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Old 28th March 2010, 04:57   #12
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Yup, agree the 800's hay days are long gone - but it is still the cheapest hatch (excluding nano). While the Alto is filling in 800's shoes very very well, my thought is that the 800 can be moved a notch or two lower on the pricing scale - bang on nano's park

For those who are on a tight budget, it is still 800 or nano - and nano's wait-time is unbelievable right now! Once nano's production becomes main stream (max 2 - 3 weeks of waiting period) it remains to be seen where the sales # gets settled at, and how much of a price hike nano is going to undergo by then. Currently it is not actual bike-buyers who are buying the nano - it's mostly being bought as a 2nd or a 3rd car, primarily for the novelty factor. When production numbers get on track, and actual bike-buyers turn nano-buyers it remains to be seen how many would pick the nano over the 800 (if it is available at a price point closer to nano).

The 800 on the other hand has a few benefits over nano - time tested, appeals to the "car shape" expectations of a lot of Indians, has a proper back seat and a boot, and yeah, its a Maruti! The depreciation on the machinery would have been nil for a while now, and spare prices can be kept lowest. Maruti can sell it at whatever price Tata fixes for the nano (or less) - may be a 2 pot in the 800 will still be fine?!

The only car that can rival the nano in terms of pricing and VFM is the 800. And sadly enough, MSIL is killing it instead of doing what they have been doing historically

Last edited by ph03n!x : 28th March 2010 at 04:59.
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