Not everyone’s on to small cars

NEW DELHI: Everyone else may be scrambling to join the $3,000 car bandwagon, but the original small car company, Suzuki Motors, appears content to wait and watch from the sidelines.

Not only Suzuki, most big names from Japan, including Honda and Toyota, also appear reluctant to enter the “cheap” car fray.

Even South Korean major Hyundai Motor does not want to enter the low-cost car category just yet.It seems Ratan Tata will only find company in Carlos Ghosn, the Renault-Nissan boss, for launching a car that comes at such a low price.

Sample this: Honda Motors’ cheapest car anywhere in the world is a 660 cc one in the home market, priced at roughly thrice the cost of a Rs 1 lakh car, at $9,000. Compatriot Toyota is selling its new small car, Aigyo, in Japan for around $10,000. So, for these companies to think of making a vehicle for less than one-third the existing cost dynamics does sound slightly improbable.

Even Suzuki, the pioneer in the small car mart and a clear leader in India - which is an acknowledged small-car superpower - is not looking at an entry into the low-cost car category.

Says Maruti Udyog managing director Jagdish Khattar, “Our Japanese engineers have said they cannot develop a car at this cost.

Anyway, the car that will come at this price would have a different customer profile and would be a completely different product from existing small cars here in terms of engine, speed limits etc. Even the 660 cc car that we sell in Japan uses a Turbo engine.”

Analysts point out that the low-cost car can be viable only in the Indian market today, since exports from here to other markets could run into trouble over emission norms, safety features etc of the low-cost vehicle.

“Many markets, especially in Europe and the US, take features such as ABS and air bags as standard. I wonder if the Rs 1 lakh car can accommodate these, given its severe price constraint,” said a senior official of a leading Japanese automaker in India.

According to Jnaneswar Sen, senior GM (marketing), Honda Siel Cars India, “Customers have certain expectations from Honda in terms of refinement, quality, characteristics and styling. As of now, we feel that all of this cannot be achieved in the $3,000 price band.”

An analyst points out that a viable product at this price level is possible only when there is a very high level of localisation and no plans to use this car for exports.

But the low-cost car pioneer Ratan Tata begs to differ. He still maintains that the car would be launched in early 2008, as Tata Motors has completed its styling and designing and tested the prototypes within the plant.

And Ghosn seems to echo his sentiment, asserting that Nissan-Renault is looking at a small car priced below the Logan at around $3,000 and would be developing such a product with M&M in India.

"On product development, when we want to bring small and cheap cars to India we would like to use local development and engineering skills because India is great at developing those products," Ghosn said recently while addressing a Nissan result conference in Tokyo.

Not only Tata and Ghosn, global consulting firm PricewaterhouseCoopers also pinpoints to the 'India Advantage' in this regard. In a detailed analysis of what PwC calls the low-cost car phenomenon, it said that by 2014, every other low-cost vehicle would be assembled in the Asia Pacific, with India and China accounting for 34% and 11% of global output.