From THE HINDU group of publications
Sunday, November 04, 2001


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Wheeling out luxury offerings

S. Muralidhar

IT is ironical that the passenger car industry is timing the launch of high-end luxury vehicles just when the economy seems to be on the verge of a slowdown. Three of the multinational manufacturers have already tested the waters with such internationally popular luxury cars as the Honda Accord, the Opel Vectra and the Hyundai Sonata.

But look at what has been lined up. The Ford Mondeo has just been unveiled, the Skoda Octavia is to be launched by mid-November, and the Toyota Camry -- popular family cars in the highly competitive American and European markets -- by the end of the year.

There are also rumours of some other car-makers -- both existing and prospective such as Daewoo and Nissan -- entering the luxury segment early next year. In fact, if its plans fructify, Nissan Motors of Japan, now under the Renault umbrella, would be the first to formally launch operations in the country through the import and sale of completely built units (CBUs).

The so-called luxury car segment (actually, the mid-size segment in the US and Europe, as far as the buyer profile goes), in terms of price, include cars in the Rs 12-20 lakh range. By the industry's estimation, the expected volumes in this segment are only about 10,000 units per annum. That translates to barely a couple of thousand cars per annum for each manufacturer. So why are so many manufacturers clamouring to enter this small segment of the industry?

The reason is the seemingly huge margins the companies get from these luxury cars. But, with such low volumes, it is hard to believe that the margins, however large, would justify the effort of bringing in these high-end models, particularly when most companies are manufacturing them locally.

The total sales recorded by Honda Siel Cars India (HSCI), which makes Honda Accord, and Hyundai Motor India Ltd (HMIL; Hyundai Sonata) reflect the difficult market situation for top-end luxury models. Honda has sold 850 Accords till date, since its launch in July; Hyundai also claims to have sold a similar number of Sonatas.

So, are the car makers just trying to showcase their technological prowess? Or, is it herd mentality? Or are they hoping that over the next few years, the Indian market will grow, and have more buyers graduating to the luxury segment. All this may happen, but the slowdown is not helping them.

The showcasing of `Palio': Meanwhile, October saw the entry of a new, serious contender in the volumes game. Fiat India's success with the Palio has enthused the company so much it now plans to increase the daily production of the car another 50 per cent from the present 100 cars. The response to the Palio, touted as the `make or break' car for Fiat India, has been overwhelming. The company has sold over 2,200 Palios since its launch in the last week of September. Company officials also claim bookings for over 5,000 Palios.

Versatile `Versa' hits the roads: The country's largest automobile company Maruti Udyog Ltd launched another potential market segment leader with the multi-purpose vehicle, Versa. The company, which rolled out the vehicle in the last week of October, has also cannily positioned it as one that will suit the requirements of, and appeal to, both the young and older generation. The celebrity endorsement for the Versa by the Bachchan father and son -- Amitabh and Abhishek -- is expected to `drive' home this point to the buyers.

Related links:
Pushing sales of Accord -- Honda to target City customers
Hyundai launches two variants of Sonata

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