[TusharK]

According to a media report, Hyundai is shifting its focus from entry-level models to more profitable segments.



Hyundai is moving away from small cars like the Santro, which was discontinued last month, due to factors like falling demand, increased costs and revised safety norms.

In 2018, Hyundai discontinued the Eon, and with the Santro gone, the carmaker currently has just two hatchbacks on offer - the Grand i10 Nios and the i20.

Earlier, Maruti Suzuki has also indicated that it would not hesitate to discontinue its small cars if they become unviable due to rising costs. The statement came in the wake of the government’s decision to make 6 airbags mandatory in all cars, which is expected to increase the prices of cars.

According to RC Bhargava, Chairman, Maruti Suzuki, the company doesn’t make any significant profits on small cars. Rising costs would therefore make them unviable and the company would be forced to discontinue these models.

Source: ET Auto

Link to Team-BHP News

[The Alchemist]

Maruti made a similar statement a few weeks ago and now Hyundai follows suit. This is bad news for the customers, especially first-time car buyers. These 2 manufacturers are the most popular ones in entry-level hatchbacks. Many other companies tried and exited the segment already.

The primary reason for this I feel is the unscientific regulations introduced by our governments, such as the mandatory 6 airbags requirement. I'm a big advocate of safety features and crash test ratings. But it is all about having the choice and transparency around the crashworthiness of the product one buys.

A zero star rated car without any airbags is much safer than a 2 wheeler any day. Many families depend on 2-wheelers for family commutes and entry-level hatchbacks are aspirational for them. Our tax structure and unscientific interventions by the government are delaying that purchase, forcing them to remain unsafe for a longer period! Let's not even talk about the safety aspect of auto rickshaws which is another most popular commute option. We can not start mandating airbags in them now, can we?

If the government is really keen on road safety, they should start by fixing roads on time, putting clear markers when road work is in progress, enforcing road traffic rules etc. Ideally, we should promote entry segment cars by introducing lower GST slabs, GST rebates, or by reducing road tax IMO.

[DhinaStark94]

Originally Posted by The Alchemist

Maruti made a similar statement a few weeks ago and now Hyundai follows suit. This is bad news for the customers, especially first-time car buyers. These 2 manufacturers are the most popular ones in entry-level hatchbacks. Many other companies tried and exited the segment already.

Hi Alchemist,
I was just about type the same autorickshaw and government buses not getting any safety and you beat me to it. I also would like to bring attention to the recent crash results of kia carens and maruti espresso. Both are 3 star rated and one was 0 star before. So why does a car with 2 airbags and a car with 6 get same ratings without taking into consideration the weight the segment they’re in. Also if espresso had 6 airbags will those additional 4 airbags fetch it an extra 1 star!? Just saying my piece!

Just imagine how many middle class families that would be affected. The bulk of sales comes from cars under 10L for Maruti and for half of rural india Maruti is the go to brand in this price range. These cars are already priced high so much so that the used car market has gone insane!. 6 airbags on a swift!? Alto? !. The solution is not that simple. IF so GNCAP would not have named " Safer Cars for India" it would have been "6 Airbags for India" .

Hope someone talk some sense to the government that addition of 6 airbags to every car will not make them 5 star rated. It will only put more unsafe vehicles in the road.

[lordrayden]

Originally Posted by The Alchemist

Maruti made a similar statement a few weeks ago and now Hyundai follows suit.

I feel this is not Hyundai joining in with Maruti in protest of the 6 airbag rule.

For Hyundai, this has been a long time coming. The sales of their new Santro never really took off and kept declining over the years. There was not even a facelift planned let alone a replacement. Hyundai had realized long ago that they will not be able to make a small car to compete with Maruti on price while still maintaing its 'Hyundai'ness. Plus they have realized that the SUV market gives them manifold the margin that small cars give them.

So instead of spending X amount of resources (time, materials, etc) to make 2-3 small cars and getting a total margin of say Rs 20000, they decided to spend the same X amount of resources to make 1 mid-size SUV and get a margin of say Rs 30000.

It is however sad to see all the choice evaporate from the small hatchback space, whatever be the reason.

[RaghuVis]

TATA says Thank you!

The news has been hyped up as if they are selling vast volumes of Santro! It is one of the biggest flops for Hyundai in recent times. Regarding concentrating on profitable cars, they already have been doing this for some time. Grand i10 is not cheap at all and with fat profit margins, they are not going to think about discontinuing it no matter how much everyone wants to twist the news or create unnecessary rumors.

[AKB]

I smell a cartel here, two largest passenger automobile manufactures speaking about business not being viable in largest car segment of the market. Doesn't make sense.

Let's take into consideration the increase in the price of these entry level cars in last 2 years by both players, it has been astronomical. Demand has shown elasticity and they are continuing to do good numbers. It is basic business planning that entry level models make lower profit (as % of revenue) but add the most in absolute profit owing to their volumes

Compare that to cost of 6 airbags (which is about Rs. 10,000 according to estimates). It is not so high that India heads of both players start making these statement unless they want to influence policy.

Also, we spoke about Auto and Bikes - two wrongs don't make a right is all I will say.

Lastly, would challenge that these two manufacturer withdraw their sub 6L cars, they will struggle to make sense of their business model with sub-par plant utilization. Also, Tata and Mahindra will love them for this.

[prajwalmr62]

Originally Posted by RaghuVis

TATA says Thank you!

Tata has said ta-ta to this A-segment long back. Its cheapest hatchback is Tiago, which is equivalent of grand i10 of Hyundai or Celerio of MS. So all of them are still pretty much in same race.

Base models of B-segment starts at 6L+ now. A-segment had a play between 2L to 6L, which has been reduced to 5-6L. It doesn't make sense to offer A segment cars anymore since buyers can easily buy a next segment car with probably similar features.

---

I'm not putting the blame on safety features, but on inflation. When prices are through the roof, government should first see how to reduce it. With the current prices + the new additions a new Alto could cost 7L in 2024. We will loose many many first car buyers because of this. Government can improve road safety by handling trucks menace on highways, speed controls etc without directly affecting car buyers.

[autocratic1107]

Wish they also seriously shift their focus towards safety

[abhkop]

The entry-level car prices will skyrocket with all the new safety and emission regulations. People looking for entry level cars will rely on the used cars which are again with zero or only two airbags and with older engines. The real purpose of the regulations will be defeated if the prices are not under controlled.The taxation on small cars needs to be looked into.

[gopalnt]

There was a news article today stating that government has brought in norms for tires too and there are some standards to be followed from next April. So that means tyre manufactures are going to find another opportunity to increase the prices beyond what it takes to bring those standards.

When the government is bringing in crash test norms and each car's lowest variant is going to be rated (and advertised), they should leave it to the people to decide whether they want to buy a car with 2, 4 or 6 airbags. It is not going to be viable for companies to have an Alto or Santro with 6 airbags, the cost would be too prohibitive for the buyers. May be it could have an indirect impact that companies would make structurally safe cars. But on the other side, for people who upgrade from a 2-wheeler to a 4-wheeler, being inside a car shell can give a false sense of security, there are high chances that they may think they are absolutely safe just because they have some space with other vehicles around. This kind of assumption is what is going to have accidents, may be the government is trying to mitigate that to an extent.

Having said that, the prices of cars are insanely increased by the companies without any changes to the underlying body structure. A Maruti Celerio Lxi costs around 5.3 Lakhs on-road in Chennai. To have 6 air-bags in this car means that Maruti have to redesign the structure and add the airbags to it. This would definitely take the price of the same car to around 7 or 7.5 Lakhs OTR. And our people will say that the same car with same features has now price increased by more than 1 lakh! How many people are going to buy the argument that the price increase is because of safety features? Example is Beleno which now has 6 airbags but its CVT got replaced by AMT.

By next year, the starting prices of a lowest-segment, lowest-variant car could be around 8L OTR. With the government standardizing safety features of cars, the differences in variants will only be in features and I hope the price range between the lowest variant and highest variant of a car is not going to be too much.

Lastly, why can't the government order school buses to have curtain and rear airbags?

[Contrapunto]

It is becoming increasingly difficult to make safe and feature-rich small cars which can be delivered at a price point the consumers expect - not in India's high cost structure. Incidentally, this is the norm in mature international markets as well - where small is NOT equal to cheap.

I do hope that this new trend results in longer lasting cars, as you see abroad, where a 10 year old, reasonably well maintained Ford Escape would ride without any squeak or squeal.

[charanreddy]

I think the government is going about this the wrong way. Carrot is needed vs a stick. Reduce the GST by different categories to incentivize adoption.

Say 10 percentage points less GST for cars equipped with 6 airbags of length is less than 3.7 M , price upto 7lakhs and engine less than 1.2 L for petrol.

Say 7 percentage points less GST for cars < 4M , price upto 10 lakhs and existing engine restrictions which have 6 airbags.

5 percentage points less for cars with 6 airbags and price upto 20 lakhs .

one can easily model loss of revenue to the govt. which hopefully govt can recover by increased volume. This needs to be compared to a simulation vs reduced volume with mandating 6 airbags without change in GST pricing.

[shankar.balan]

Yes most certainly small is not equal to cheap.
If one wants all the features and bells and whistles then one has to pay the price.

Our market isnt mature yet in many ways. This is why bling and gizmos are apparently more important than safety features to the average consumer.

Consumer demand-led change is not therefore necessarily going to result in safer cars, because of the point mentioned above.

Hence in one way, this kind of draconian legislation and govt policy diktat is probably the only way to enforce safety norms in this market.

But there are massive inconsistencies. All this legislation only applies to passenger cars and the like.

How about enforcing lane discipline for everyone everywhere?
How about stopping those ill designed goods carrier mini trucks which have zero rear ward visibility?
And those tractor trailers carrying a full load of agricultural or construction workers?
Or those two wheelers with riders without helmets?
And the ubiquitous Auto rickshaws?
Or even bullock carts coming along on the wrong side on our roads and highways?

And the list goes on..

Originally Posted by Contrapunto

price point the consumers expect - not in India's high cost structure.

this is the norm in mature international markets as well - where small is NOT equal to cheap.

I do hope that this new trend results in longer lasting cars, as you see abroad.