THE NEW LINE UP

What's B+? For our purposes, it's a car smaller than, say, the Ikon, but more expensive than the Santro or Zen.

MARUTI IGNIS Engine: Petrol: 1,298-cc (85 bhp) Expected launch: 2003 Expected price: Rs 4-5 lakh Maruti's model D has been waiting in the wings for a while. Launch plans not confirmed. Rugged SUV looks and fuel-efficient engines a big plus, but interiors short on space compared to rivals.

FORD FUSION Engines: Petrol: 1,597-cc (91 bhp) Diesel: 1,753-cc (90 bhp) Expected launch: Jan 2004 Expected price: Rs 5-6 lakh SUV looks on a mid-size car platform is what makes the Fusion unique. Expected with both petrol and diesel engines and a seven-seater option.

HYUNDAI GETZ Engines: Petrol: 1,086-cc (62 bhp), 1341-cc (82 bhp), 1,594-cc (105bhp) Diesel: 1,493-cc (80 bhp) Expected launch: June 2003 Expected price: Rs 4-5 lakh Essentially aimed at Europe, Getz's wide range of engines in India (both petrol and diesel) should make it a winner. Generous on internal space.

DAEWOO MATIZ Engines: 1,000-cc-1,200-cc (60-70 bhp) Expected launch: 2005 Expected price: Rs 3-4 lakh New Daewoo models likely to come into India with GM, but not badged as Daewoo. New generation Matiz-codenamed M200-could come in badged as Chevrolet. 3-way partnership of GM-Suzuki-Daewoo makes this a strong possibility.

HONDA FIT Engines: Petrol: 1,493-cc (106 bhp) Diesel: 1,343-cc (90 bhp), 1,493-cc (100 bhp) Expected launch: Dec 2003 Expected price: Rs 5-6 lakh This three-box version of the popular Jazz should come to India with over 70 per cent local content. Very cleverly designed interior.

Ask any Motown Hamlet, and he'll tell you that to B or not to B is not really the question any more. The foreign car majors have been around in India for as long as seven years and they've tried every trick in the book to sell their big cars, but things just don't seem to be working out. A staggering 80 per cent of the cars sold carries a price tag of Rs 4 lakh or less, and two companies alone-Hyundai and Suzuki, midgets compared to their Detroit rivals-account for almost seven of every 10 cars sold.

So the others have just two options: One, wait for the day when the smallest car sold would be, say, the Ford Ikon, but until then watch Hyundai and Suzuki eat their lunch or, two, rummage through their global portfolios and find a car that is small enough to fit the Indian consumer's pocket. Not surprisingly, it's the second option that is getting exercised. Over the next 14 months, some six cars, priced between Rs 4 lakh and Rs 6 lakh, are to debut in the market. These include the Hyundai Getz, Honda Fit, Suzuki Ignis, Ford Fusion, Toyota Vitz, and-don't laugh-the next generation Daewoo Matiz.

All these cars will be positioned in the new segment-called B+ in industry-speak-created by the entry of Fiat Palio. Like the Italian global car, the new line up will be smaller than mid-size cars like the Opel Corsa or Ford Ikon, but more expensive than the popular Santros and the Zens. Says Maurizio P. Bianchi, Chairman and Managing Director, Fiat India: "India is a price-conscious market and this segment offers the best value for money." Adds B.V.R Subbu, President, Hyundai Motor India: "There is bound to be a lot of action in B+, and it will grow."

Mass Appeal

That's precisely the point. Every one expects India to remain a small car market for a long time to come. In fact, a study conducted by Maruti Udyog indicates that in a growing market, it is the dominant segment that grows faster. Top executives at the market leader point to Mexico as an example. In 1998, they say, the total car market in Mexico was 6.40-lakh big, and small cars made up 48 per cent. Today, 8.40 lakh cars are sold in Mexico, and the share of small cars has jumped to 59 per cent. And the bet is that India will go the Mexican way. Says Jagdish Khattar, Managing Director, Maruti Udyog: "With a strong possibility of the economy improving, construction of better roads, cheaper car finance, and a clear government intent on lower excise duties, I see the car market growing at a healthy pace."

Khattar isn't the lone optimist. Executives in Honda Siel Cars expect the B segment to grow at 10 per cent annually over the next two to three years. According to the company's General Manager (Marketing), Ananda Mohan Gupta, 85 per cent of all cars bought over the next five years could be small cars, with the B segment making up for 65 per cent. Others like Rajiv Dube, General Manager (Commercial Passenger Cars), Tata Engineering, see the market growing to 1 million units a year (from 6 lakh today), provided taxes on cars are lowered. Today, nearly 55 per cent of the price of a car is made up of various taxes.

The industry's recent history seems to corroborate the argument for small cars. According to David Friedman, Managing Director, Ford India, the average spend on cars has moved up by 25 per cent over the last four to five years. And the definition of-and consumer expectation from-a small car is changing too. Not long ago, the Maruti 800 epitomised the entry-level small car. When the Zen came, a lot of buyers graduated directly to it. This trend intensified with the coming of Santro. Ergo, since 1998, the share of B-cars has been growing-from 27 per cent to 57 per cent in January-August 2002. According to BT estimates, based on ncaer's automotive demand projections, that share could well soar to 70 per cent in 2005-06.

That's a forecast car marketers don't want to ignore. Honda Siel, for instance, has begun work on a small car, Fit, which is the Asian version of a popular model in Japan called Jazz. Fit, also to be launched in Thailand, will have 70 per cent local content, and the vendors have been told that the car has to roll out by September 2003. According to another vendor, Honda also plans to launch a 660-cc car sometime in 2004-5. Apparently, Honda currently does not have this platform and, therefore, is developing the engine. Honda wouldn't confirm any of it. Says Honda's Gupta: "Honda has no immediate plans of introducing a small car. We have established ourselves in the C segment, and wish to become the No. 1 player in the premium segment."

Similarly, Toyota Kirloskar refused to comment, but some of its vendors say that the company is working on three independent projects at the moment: the 1496-cc petrol and 1794-cc diesel Corolla, a small car Vitz, and the Euro III variant of Qualis. Work on Vitz, BT learns, is at a fairly preliminary stage. Interestingly, General Motors too is expected to foray into small cars with a new generation Daewoo Matiz, currently under development. The new car is likely to come under a new marque for India-possibly Chevrolet. gm India, however, isn't revealing anything. "As of today, we have no plans to enter the small car market," says a company spokesperson. "However, we are open to business opportunities and have our alliance partnerships in place for the purpose."

Besides these, Volkswagen-it launched its resurrected Czech brand, Skoda, in India in November 2001-is contemplating setting up a manufacturing base in India. According to a Skoda official in Delhi, VW executives have made as many as five visits to India in the recent past. "They are closely studying the Indian market and would take a decision on investing in India shortly," says the Skoda executive. The Rajasthan government is believed to have offered VW land, but the company is weighing other options. VW offerings in India could include the Polo and the Passat.

Jagdish Khattar: MD, Maruti Udyog

"With a strong possibility of the economy improving, construction of better roads, and cheaper car finance, the car market should grow"

Think Global, Make Local

For most of these players, another model should make their local operations that much more viable. Most of them set up manufacturing facilities expecting higher volumes. Therefore, few need to spend any substantial amount of money on new models. Small investment, then, should help them make money even if volumes are small. Says Friedman: "Most of our investment is in place and introducing a new model should cost us anything between Rs 10 crore and Rs 50 crore, depending on the model and its volumes."

A bigger product portfolio helps in another important way. It gives suppliers much-needed volumes, allowing them to make components cheaper, and thus setting the stage for greater localisation of components. And almost nobody in the industry today thinks that car-makers can get by importing kits. That's simply because, apart from the logistics of it, the rupee keeps depreciating every year, either making the kits costlier or squeezing margins.

David Friedman, CEO, Ford India

"Our investments are in place and introducing a new model should cost us Rs 10-50 crore"

In the recent past, it's the Fiat Palio that may have helped the industry make up its mind. The car was launched in September 2001 only after the supply for three-fourths of its components had been tied up locally. Today, the Palio boasts of 85 per cent local content. Says Fiat's Bianchi: "We could have launched the Palio earlier, but it made sense to wait for greater localisation and launch it at a lower price point."

That will likely be the preferred strategy of the others too. In fact, Friedman declares that any new car from Ford in India will be manufactured locally. For example, vendors for Ford Fusion-whose launch Friedman refused to confirm or decline, saying that "we can't talk about the specifics of our future models"-have already been alerted, although, according to one vendor, Ford is yet to begin work on the engine of this car.

Yet, it's a no-brainer that in a market like India, car-makers will need to figure out ways to make money by selling smaller volumes of many different models. Some of them will crash out of the race, but the others will stay on the winning course. In any case, one man is already winning the automotive grand-prix: the consumer.