Glitzy but with limited range

EVEN BY THE standards of the passenger car sector in India, recent developments are particularly frenetic. Visible as always has been the plethora of launches and relaunches involving new models and the refurbishing of old ones. This season has become especially noteworthy because of the introduction of the premium category D segment cars, carrying a price tag of Rs. 12 lakhs and over. Last week, Ford showcased the Mondeo and became the fourth auto major to enter a segment where even the most optimistic forecasts of combined annual sales do not exceed 15,000 each year. Earlier, Mercedes Benz with its C series and Hyundai with its Sonata and Honda Siel with its Accord had made their presence felt. Interestingly, Ford is using the CBU route to bring in the Mondeo. The other three, in contrast, are relying on the CKD and SKD routes which involve varying degrees of reassembling and customising of the imported kits. A car brought in through the CBU route attracts a higher duty, but in pricing or for that matter buying these luxury cars it is not clear whether the incidence of the extra tax will matter.

Launch events have been used by the car makers to generate substantial publicity and - few would disagree - hype. The D segment car's appeal is by definition restricted to a few but auto companies say they hope to significantly enhance the brand value of their existing products while launching premium versions. In that and many equally crucial areas, the auto industry is probably shooting in the dark. Incidentally, it is not the premium category alone that has seen new launches. Last month, Fiat inaugurated its B segment Palio and Maruti its multi- purpose vehicle Versa in the C segment hoping to give competition to the likes of Toyota Qualis.Have the Indian customers, long denied the freedom to buy a contemporary car, become inured both to the publicity glitz and the sales appeal? To the auto companies, the frequently-published data on car sales cannot give scope for all-round optimism. After recording a respectable volume growth to touch an annual car sales of 600,000 and more, car makers now say they have reached a plateau. To climb further, greater innovation and a better understanding of the car buyer is needed, traits not demonstrated uniformly by the majority of the manufacturers in the past. The premium cars now being introduced and those that can be more easily imported than ever before (thanks to the WTO-induced recent relaxation) are not going to count in the numbers game.

Also, the flip side to the abundance of customer choice is the increasing fragmentation of the car market. For auto makers, there are fewer opportunities to exploit economies of scale - a serious handicap when there is excess capacity globally and auto majors are forced to consolidate. As the case of GM, the world's number one car maker, shows, there are any number of ways developments abroad can impact on their Indian operations. GM, which makes mid-size cars in India, is expected to buy Daewoo, the ailing Korean company, but it is not certain whether the latter's Indian subsidiary, which already has a successful B category car - the Matiz - will be part of the deal. GM is also expected to bid for Maruti and already has a more than 20 per cent stake in its Japanese promoter, Suzuki. A truly global industry and one which has attracted significant foreign investment in India cannot escape the vicissitudes of both national and international happenings.

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