Why foreign manufacturers don't sell small cars in India

sbasak · 11th November 2005, 16:13

These are some very popular small cars in Europe.

I wonder why these manufacturers don't sell their small cars in India!

These cars are small and affordable. If sold in India, I'm sure they will sell in very large numbers.

Any thought?

Toyota - Aygo, Yaris
Honda - Jazz
Mercedes - A class
Ford - Ka
Nissan - Micra
Mitshubishi - Colt

ajmat · 11th November 2005, 16:21

Toyota - Aygo, Yaris - needs big volume to justify building in India - easier to market few high margin vehiles - small car margins are very thin.

Honda - Jazz - might happen as it uses City bits

Mercedes - A class - too expensive - Rs 15 lakhs plus - consumer wants a sedan at this price

Ford - Ka - only two doors

Nissan - Micra - Can't make it to Swift price as factory will not reach full depriciation yet, nor high localisation

Mitshubishi - Colt - ditto

Steeroid · 11th November 2005, 16:27

Some of these models are not affordable (A Class), some are not practical (Ka) and some others are already here as premium models (Jazz).

However, the real reason why small cars are less likely to come here is that its hard to beat Maruti's economic cost structure. Maruti pretty much had an official monopoly of the small car market (thanks to Licensing and Quotas) for a very long incubation period. This enabled the propogation of the 800 to such an extent that Maruti gained enough share of the market to keep pushing other more expensive models as well - the 800 would sustain the company, giving them more time to establish the more expensive models. See how long the Wagon R took to gain acceptance - any other manufacturer would've stopped manufacturing such a model but Maruti had the luxury of waiting for market acceptance. Same with the Baleno and to some extent the Alto.

Nobody else has been able to replicate this cost structure, and no one else will be able to do so since there are no more protection quotas. Besides, no other auto manufacturer had the support of the congress party...other than the Birlas who were more interested in selling junk and nibbling at the crumbs.

The only two manufacturers who have been able to come close are Hyundai and Tata. The latter because of its home-grown car that cost the fraction of the development expenses that would have been a limiting factor for foreign manufacturers and the former because it came to this country with a long-term strategy and therefore did all they could to develop a volume model like the Santro.

v12 · 11th November 2005, 16:52

Size wise these cars are small. Price - wise they are too big. The price at which these cars would fall in if they were imported here woyuld be too expensive. They would fall one segment above what they should be in.

Even if Mercedes gets in the A Class without airbags and all the gizmos, it still would be too expensive.

Jazz could be launched here. But wouldnt be less than 5 lakhs.

sandeepmdas · 11th November 2005, 17:01

Well said Steeroid.

My 2 cents:
One can find the answer of this Q (Why foreign manufacturers don't sell small cars in India ?) by finding the answer of another Q: How can we beat Maruti ?.

- Maruti has money-minting models in its lineup
- Maruti can cushion those NON-money-minting models till they start minting money.
- Maruti has deeeeep pockets.

Now, as far as other manfacturers are concerned, they (most probably) cannot have either money-spinners or cushions. Hence, the key lies in the deeeeep-pocket.

Either they can spend a lot of money and design/develop a global small car and launch that in India too. Fiat did this. But (needless to say) this is a risky affair, overall.

The second option is to design and develop the said global car IN India. A car can be designed and developed in India with inputs from their global RD facilities. Then launch the car globally. There will be a home as well as global market for this car - because of the inherent cost savings.

Atleast one company is doing this already (tyres, not cars).
http://in.rediff.com/money/2005/nov/11bweek.htm

The proposed tax cuts on cars below 1500cc is exactly intended in this way. By doing so the govt hopes that India will become a global manufacturing hub for small cars. Let us share this optimism.

sbasak · 11th November 2005, 17:05

Thanks for the replies.

I do agree with your points.

But Toyota, Honda and Mitshubishi are already doing good business in India.

Is it still so difficult for them to introduce Yaris, Jazz or Colt in India? These cars are good enough to give Maruti run for their money.

I feel people will definitely buy these cars in large numbers. So, they can recuperate their cost in quite short time.

It's a shame that high end cars like Mercedes S class or Porche are being sold in India but not the real good affordable foreign brands for common people.

RX135 · 11th November 2005, 17:14

Most Japanese companies have good small cars and they can be introduced in the market. Cost structure of Maruti can be matched if these companies have long term vision for indian market. A Yaris or Micra can fit in B+ segment, provided these companies push it consistently at low margins. Companies like Toyota have deepest pocket on global scene and no reason why they can't do it. However, question is whether they are willing to do it. Suzuki could focus on Indian market since they hardly have big presence in other markets (barring Japan). I am not sure Honda or Toyota want to do it. They seem to be happy enjoying premier status in Indian market.

jkdas · 11th November 2005, 18:48

the same happened in the case of Fabia, Skodas little sis. They couldnt price it below 7lac!

sajo · 11th November 2005, 19:20

IMHO, building a small car, and taking their products to the masses requires a big commitment on part of the manufacturer. And apart from Hyundai and Tata, and to some extent Maruti, no one is ready to commit themselves to India fully. Hence they are now known as makers of good, affordable cars for the average Indian.
Honda and Toyota are not going the hard way to gain people's acceptance, ie, start from the lower end of the market. Heck, they dont even make their current offerings entirely in India ( they make good use of the free trade agreement with Thailand). The Indian market is not worth much to them, and they think their brand cachet is enough for them to continue enjoying their current status in India. And it will continue to be so for some time to come.

Rudra Sen · 11th November 2005, 22:26

Quote:

Originally Posted by sajo

and they think their brand cachet is enough for them to continue enjoying their current status in India. And it will continue to be so for some time to come.

I agree. My friend picked up CRV (top of the line) in Nairobi for 7.5 lacs. Grand Vitara costs around 10 lacs+ in the same market.

Mpower · 11th November 2005, 22:56

Aygo, Yaris - Aygo is shared with Peugeot and that might prevent them from bringing it to India. Yaris will be coming in one form or the
other very soon. TKML keeps talking about a small car and they are firming up plans.
Honda - Jazz Nothing but a City with the boot sliced off and a smaller piston for the engine. Do you want to pay 6L for that.
Mercedes - A class Why? This car makes sense only to Europeans.
Ford - Ka Is based on Mark4 Fiesta which exists in India as the Ikon/Flair. Looks small but its not.
Nissan - Micra Once Mahindra-Renault plant comes on board in Nasik, Nissan might decide to build this for India. Although it looks small, its pretty big and cheeky styling may not appeal to mature customers. They may have to do a Fiestaization on it.

Mitshubishi - Colt Mitsu is too broke to invest in India. Hindustan motors neither has the deep pockets nor the motivation to fight with Hyundai and Maruti.

devarshi84 · 12th November 2005, 00:30

Quote:

Originally Posted by sbasak

These are some very popular small cars in Europe.

I wonder why these manufacturers don't sell their small cars in India!

These cars are small and affordable. If sold in India, I'm sure they will sell in very large numbers.

Any thought?

Toyota - Aygo, Yaris
Honda - Jazz
Mercedes - A class
Ford - Ka
Nissan - Micra
Mitshubishi - Colt

Toyota and honda are the biggest thiefs and worry to much for their brandname to bring in small cars because they wont get big margins as they do in the sedan market. they play collectively and hence dont expect any sedans from them even in the future.

mercedes A class will be too expensive for the Indian market and hence doesnt make a succesful car in India. Though the Indian duty and tax structure is to be blamed partly for this.

ford Ka is a good concept but is doubtful whether it may click or not. Ford is currently in a situation where it cannot take risks. hence dont expect it to come anytime soon.

NIssan has just entered India and may sell A small car in India if scales and costs allow them.

mitsubishi colt is a very successful model in Europe but its not available in N.america. And HM-mitsubishi's placement of the brand dont allow them to bring in a hatchback in India. their strategy is stupid and they should bring such great car in India.

but if fiat comes in with TJD then it would be hard for the competition unless fiat doesnt improve its dealer performance and quality.

amit · 12th November 2005, 08:29

One of Europe's most popular small cars is being sold in India but look what happened to it. Opel Corsa. The car was too "costly" and too low on "fuel efficiency" to appeal to the Indians. Having said that, I feel both Fiat and Opel brought in B+ segment hatches too ahead of their time. Anyway, while we are talking about hot selling small hatches in Europe, why are we ignoring the kings of all small European hatches - VW Golf & Fiat Punto. Question is no matter how good, would the average Indian buy the Golf for 7.5-8 lakhs?

Steeroid · 12th November 2005, 11:21

Quote:

Originally Posted by amit

One of Europe's most popular small cars is being sold in India but look what happened to it. Opel Corsa. The car was too "costly" and too low on "fuel efficiency" to appeal to the Indians

Corsa was made for 'developing' markets like India, Brazil, South Africa, etc...same as Fiat's world car platform.

Both these 'world' cars havent done well in India...either we're too underdeveloped or we're really developed and not 'developing'. Take your pick.

filcord · 12th November 2005, 15:03

Why are cars priced so high in India?
My relative bought a Toyota Corolla in the US for abt 18000/- USD, that makes it Rs 810,000/- And the car has many more goodies than the model sold here.
For a small car to sell here, it has to be realistically priced, like Hyundai has been doing with the Santro.
Then again, volumes have to aimed at right from the start, that means big investment, exporting from India, etc. , the same formula Hyundai has brought in.

11th November 2005, 16:13	#1
sbasak BHPian Join Date: Nov 2005 Location: CCU-LTN Posts: 608 Thanked: 14 Times	Why foreign manufacturers don't sell small cars in India These are some very popular small cars in Europe. I wonder why these manufacturers don't sell their small cars in India! These cars are small and affordable. If sold in India, I'm sure they will sell in very large numbers. Any thought? Toyota - Aygo, Yaris Honda - Jazz Mercedes - A class Ford - Ka Nissan - Micra Mitshubishi - Colt
	() Thanks

11th November 2005, 16:21	#2
ajmat Team-BHP Support Join Date: Feb 2004 Location: Bangalore Posts: 14,863 Thanked: 27,973 Times View My Garage	Toyota - Aygo, Yaris - needs big volume to justify building in India - easier to market few high margin vehiles - small car margins are very thin. Honda - Jazz - might happen as it uses City bits Mercedes - A class - too expensive - Rs 15 lakhs plus - consumer wants a sedan at this price Ford - Ka - only two doors Nissan - Micra - Can't make it to Swift price as factory will not reach full depriciation yet, nor high localisation Mitshubishi - Colt - ditto
	() Thanks

11th November 2005, 16:27	#3
Steeroid Senior - BHPian Join Date: Mar 2005 Location: N.A Posts: 7,046 Thanked: 2,751 Times	Some of these models are not affordable (A Class), some are not practical (Ka) and some others are already here as premium models (Jazz). However, the real reason why small cars are less likely to come here is that its hard to beat Maruti's economic cost structure. Maruti pretty much had an official monopoly of the small car market (thanks to Licensing and Quotas) for a very long incubation period. This enabled the propogation of the 800 to such an extent that Maruti gained enough share of the market to keep pushing other more expensive models as well - the 800 would sustain the company, giving them more time to establish the more expensive models. See how long the Wagon R took to gain acceptance - any other manufacturer would've stopped manufacturing such a model but Maruti had the luxury of waiting for market acceptance. Same with the Baleno and to some extent the Alto. Nobody else has been able to replicate this cost structure, and no one else will be able to do so since there are no more protection quotas. Besides, no other auto manufacturer had the support of the congress party...other than the Birlas who were more interested in selling junk and nibbling at the crumbs. The only two manufacturers who have been able to come close are Hyundai and Tata. The latter because of its home-grown car that cost the fraction of the development expenses that would have been a limiting factor for foreign manufacturers and the former because it came to this country with a long-term strategy and therefore did all they could to develop a volume model like the Santro. Last edited by Steeroid : 11th November 2005 at 16:29.
	() Thanks

11th November 2005, 16:52	#4
v12 Distinguished - BHPian Join Date: Feb 2004 Location: Mumbai Posts: 6,739 Thanked: 7,213 Times View My Garage	Size wise these cars are small. Price - wise they are too big. The price at which these cars would fall in if they were imported here woyuld be too expensive. They would fall one segment above what they should be in. Even if Mercedes gets in the A Class without airbags and all the gizmos, it still would be too expensive. Jazz could be launched here. But wouldnt be less than 5 lakhs.
	() Thanks

11th November 2005, 17:01	#5
sandeepmdas Senior - BHPian Join Date: Feb 2005 Location: Varkala Posts: 1,538 Thanked: 2,491 Times	Well said Steeroid. My 2 cents: One can find the answer of this Q (Why foreign manufacturers don't sell small cars in India ?) by finding the answer of another Q: How can we beat Maruti ?. - Maruti has money-minting models in its lineup - Maruti can cushion those NON-money-minting models till they start minting money. - Maruti has deeeeep pockets. Now, as far as other manfacturers are concerned, they (most probably) cannot have either money-spinners or cushions. Hence, the key lies in the deeeeep-pocket. Either they can spend a lot of money and design/develop a global small car and launch that in India too. Fiat did this. But (needless to say) this is a risky affair, overall. The second option is to design and develop the said global car IN India. A car can be designed and developed in India with inputs from their global RD facilities. Then launch the car globally. There will be a home as well as global market for this car - because of the inherent cost savings. Atleast one company is doing this already (tyres, not cars). http://in.rediff.com/money/2005/nov/11bweek.htm The proposed tax cuts on cars below 1500cc is exactly intended in this way. By doing so the govt hopes that India will become a global manufacturing hub for small cars. Let us share this optimism. Last edited by sandeepmdas : 11th November 2005 at 17:05.
	() Thanks

11th November 2005, 17:05	#6
sbasak BHPian Join Date: Nov 2005 Location: CCU-LTN Posts: 608 Thanked: 14 Times	Thanks for the replies. I do agree with your points. But Toyota, Honda and Mitshubishi are already doing good business in India. Is it still so difficult for them to introduce Yaris, Jazz or Colt in India? These cars are good enough to give Maruti run for their money. I feel people will definitely buy these cars in large numbers. So, they can recuperate their cost in quite short time. It's a shame that high end cars like Mercedes S class or Porche are being sold in India but not the real good affordable foreign brands for common people.
	() Thanks

11th November 2005, 17:14	#7
RX135 Senior - BHPian Join Date: Dec 2004 Location: pune Posts: 2,106 Thanked: 75 Times	Most Japanese companies have good small cars and they can be introduced in the market. Cost structure of Maruti can be matched if these companies have long term vision for indian market. A Yaris or Micra can fit in B+ segment, provided these companies push it consistently at low margins. Companies like Toyota have deepest pocket on global scene and no reason why they can't do it. However, question is whether they are willing to do it. Suzuki could focus on Indian market since they hardly have big presence in other markets (barring Japan). I am not sure Honda or Toyota want to do it. They seem to be happy enjoying premier status in Indian market.
	() Thanks

11th November 2005, 18:48	#8
jkdas Senior - BHPian Join Date: Sep 2005 Location: Thiruvananthapu Posts: 9,687 Thanked: 1,492 Times View My Garage	the same happened in the case of Fabia, Skodas little sis. They couldnt price it below 7lac! Last edited by jkdas : 11th November 2005 at 18:50. Reason: missed a word
	() Thanks

11th November 2005, 19:20	#9
sajo Senior - BHPian Join Date: Apr 2005 Location: Pune Posts: 2,625 Thanked: 1,153 Times	IMHO, building a small car, and taking their products to the masses requires a big commitment on part of the manufacturer. And apart from Hyundai and Tata, and to some extent Maruti, no one is ready to commit themselves to India fully. Hence they are now known as makers of good, affordable cars for the average Indian. Honda and Toyota are not going the hard way to gain people's acceptance, ie, start from the lower end of the market. Heck, they dont even make their current offerings entirely in India ( they make good use of the free trade agreement with Thailand). The Indian market is not worth much to them, and they think their brand cachet is enough for them to continue enjoying their current status in India. And it will continue to be so for some time to come.
	() Thanks

11th November 2005, 22:56	#11
Mpower Senior - BHPian Join Date: Mar 2005 Location: Bangalore Posts: 10,409 Thanked: 1,730 Times View My Garage	Aygo, Yaris - Aygo is shared with Peugeot and that might prevent them from bringing it to India. Yaris will be coming in one form or the other very soon. TKML keeps talking about a small car and they are firming up plans. Honda - Jazz Nothing but a City with the boot sliced off and a smaller piston for the engine. Do you want to pay 6L for that. Mercedes - A class Why? This car makes sense only to Europeans. Ford - Ka Is based on Mark4 Fiesta which exists in India as the Ikon/Flair. Looks small but its not. Nissan - Micra Once Mahindra-Renault plant comes on board in Nasik, Nissan might decide to build this for India. Although it looks small, its pretty big and cheeky styling may not appeal to mature customers. They may have to do a Fiestaization on it. Mitshubishi - Colt Mitsu is too broke to invest in India. Hindustan motors neither has the deep pockets nor the motivation to fight with Hyundai and Maruti.
	() Thanks

12th November 2005, 08:29	#13
amit Senior - BHPian Join Date: Feb 2004 Location: Mumbai Posts: 3,717 Thanked: 449 Times	One of Europe's most popular small cars is being sold in India but look what happened to it. Opel Corsa. The car was too "costly" and too low on "fuel efficiency" to appeal to the Indians. Having said that, I feel both Fiat and Opel brought in B+ segment hatches too ahead of their time. Anyway, while we are talking about hot selling small hatches in Europe, why are we ignoring the kings of all small European hatches - VW Golf & Fiat Punto. Question is no matter how good, would the average Indian buy the Golf for 7.5-8 lakhs?
	() Thanks

12th November 2005, 15:03	#15
filcord BHPian Join Date: Mar 2005 Location: goa Posts: 996 Thanked: 67 Times	Why are cars priced so high in India? My relative bought a Toyota Corolla in the US for abt 18000/- USD, that makes it Rs 810,000/- And the car has many more goodies than the model sold here. For a small car to sell here, it has to be realistically priced, like Hyundai has been doing with the Santro. Then again, volumes have to aimed at right from the start, that means big investment, exporting from India, etc. , the same formula Hyundai has brought in.
	() Thanks