Small Car Market in India

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Small car market in India is increasing by leaps and bounds. The indigenous market for small cars now occupies a substantial share of around 70% of the annual car production in India of about one million. The main players in the car market like Tata Motors and Maruti Udyog are fiercely competitive and more or less all the automobile companies in India that have forayed into the production of small cars are trying to out-do each other in terms of design, innovation, pricing, and technology, in order to gain control of the small car market in India.

The biggest players in the Indian small car market are engaging in a healthy competition, which has intensified since the Indian government decided to boost the small car sector. In this regard, a reduction in the excise duties has been thought of. Even the engine capacities are expected to be raised to 1500cc. The new small cars in India cars may even be fueled by gasoline and diesel in the future. With all these facilities, it has been estimated that the indigenous car market is going to move beyond the 3.5 million mark very soon.

Suzuki, which is now heading the Indian small car market has plans to invest an additional US$ 650 million for research and development work in its Manesar Plant. This Plant will also be used for manufacturing diesel cars. Suzuki has decided to enter into a joint-venture with Nissan to launch a new mini car model in India.

Even Hyundai Motors is on a similar investment spree for research work with a venture of US$ 700 million in India. The two cars from the Hyundai stable - Santro and Getz are already in the market and have been doing exceptionally well in the past few years. It is expected that more and more foreign companies are likely to join the healthy race in the Indian small car market.

One of the biggest players in China's car market, Volkswagen, has decided to invest in the Indian small car market. It is supposed to invest a total amount of US$ 540 million and manufacture nearly 100,000 mini cars on an annual basis.

Reason for growth in the small car segment in India

The increase in the demand for small cars can be attributed to the aspirational lifestyle of people which makes them strive for a car early on in life. The overall age for owning a car has also decreased in recent years. Further, with the growing affluence of the rural sector, owning a car, at least a small car, is a foregone conclusion in modern India. However, since small cars are more affordable and utilitarian, the demand for them has shot through the roof. This rising demand for small cars is attracting companies like General Motors which has increased its yearly production in India to 140,000 vehicles.

The Maruti 800 which is the most preferred car among the Indian middle classes can now be bought at a lower cost. Tata Motors has decided to launch a mini-car in 2008, which will cost as less as US$ 2,200. Tata Motors is also going through a process of decision-making, to launch a variety of mini-cars in association with Fiat. Honda has also decided to increase its manufacturing capacity in India to 100,000 very soon. Therefore, the leaders in the market for small cars in India can be seen to engage in a price war to make more cars available to the majority of Indian citizens.

The small car market in India is witnessing the maximum activity and is all set for more exciting times ahead, with more players from India and abroad joining the race

Last Updated on 4/24/2015