PASSENGER CAR SEGMENTS – INDIA

A 3-million huge industry cannot be devoid of some classical segmentization. India’s passenger car industry is broken down into multiple segments. This is done for ease of understanding and improved competition among manufacturers to get bigger pies of particular segments.

While there are multiple ways of segmenting this industry like based on price and engine size but the most prevalent and the official method is based on dimension. i.e. the length of the vehicle under consideration.

A1 Segment - Mini – Up to 3400mm (M800, Nano)
A2 Segment - Compact – 3401 to 4000mm (Alto, wagon r, Zen,i10,A-star,Swift,i20,palio,indica etc)
A3 Segment – Midsize – 4001 to 4500mm (Manza, City, Sx4, Dzire, Logan, Accent, Fiesta, Verna etc)
A4 Segment - Executive – 4501 to 4700mm (Corolla, civic, C class, Cruze, Optra, Octavia etc)
A5 Segment - Premium – 4701 to 5000mm (Camry, E class, Accord, Sonata, Laura, Superb etc)
A6 Segment – Luxury – Above 5000mm (Mercedes S class, 5 series etc)
B1 Segment - Van – Omni, Versa, Magic etc
B2 Segment - MUV/MPV – Innova, Tavera, Sumo etc
SUV Segment - CRV, Vitara etc

While its easy for SIAM to segment the vehicles as per dimensions but for consumers, it becomes a tad difficult. This is primarily because of the widely varying / spread out prices of the vehicles.  A 2 segment, as per the above criterion, will range between 3 lakhs to 7 lakhs. And A 3 will be between 4.5 to 9 lakhs. Such wide variation in prices has distorted the image of segments in the minds of consumers. 

Hence, for simplicity purposes, a different segmentation has cropped up. The details are as follows:-

A Segment – Approximately below 3.5 lakhs - Alto, Eon, Nano, Spark, 800
B 1 Segment – Hatchback largely below 6 lakhs – Wagon R, Indica, Beat, Santro, A Star, Micra, Estilo
B 2 Segment – Hatchback majorly below 7.5 lakhs – Swift, I 10, I 20, Ritz, Figo, Polo, Liva, Vista, Jazz, Punto, Brio, Fabia, Pulse, Aveo UVA
C 1 Segment – Sedan below 8 lakhs – Dzire, Indigo, Etios, Sunny, Fiesta Classic, Verito, Accent, Ambassador, Aveo

C 2 Segment – Sedan below 9.5 lakhs – Linea, Manza, Verna, Rapid, Vento, City, SX 4, Verna New, Optra
D 1 Segment - Premium Sedan below 15 lakhs – Corolla, Civic, Cruze, Laura, Jetta, Fluence
D 2 Segment – Luxury Sedan below 25 lakhs– Superb, Passat, Accord, Camry, Sonata, Teana, Kizashi
B1 Segment - Van – Omni, Versa, Magic etc
B2 Segment - MUV/MPV – Innova, Tavera, Sumo etc
SUV Segment - CRV, Vitara etc

Now, lets see how the volumes stack up segment wise.

If we consider the 1^st Quarter of 2012-13, then total vehicle sales has been around 6.32 lakh units.

The hatchback segments has totaled to 56% of the entire passenger car sales in India. This comes to 355857 units. This clearly shows the popularity of smaller cars in the Indian market. Alto continues to be the top selling brand with 17422 in July. It is followed by Swift (11421) and Wagon R (9582) – all Maruti brands. This is an indication of how well the Maruti team has understood the Indian market. i 10, I 20, Nano, Beat, Figo, Santro & Polo are some of the high selling models in these segments and these models continue to clock more than 3000 units monthly. Nano has been a disappointment so far with huge expectations but it is showing some kind of resilience off late. Lets see how Tata Motors team takes this special car ahead!

 

As a segment, the Utility segment is showing the maximum growth. In fact, this segment has outclassed the other popular segments of A, B 1 & B 2.  With 128110 units under its hood in the 1^st quarter, the segment is definitely making some good progress.  Maruti’s Ertiga, Mahindra’s XUV 500 & Bolero has been instrumental in pushing the volumes of this segment. Innova and Omni too are raking in good numbers. What has been disappointing is the performance from the Tata Motors stable. Venture, Safari and Sumo have been showing steady decline in the numbers per se but definitely possess huge potential to challenge the other models.

Among the sedans, Maruti Dzire continues to lead the pack. With 11413 numbers in July, it is way ahead of its next model Verna (5300). The iconic models of City, Linea, SX4 have been showing consistent degrowth and seriously calls for some introspection by their respective manufacturers. Vento & Rapid also showed some slack but given the aggression of VW and Nissan, it wont be long before they start to pull in good numbers. Tata’s Indigo and Manza were on a slightly negative terrain all these months but somehow the trend has been reversed in July. 6816 for these 2 models augurs well for the company and lets hope the reversed trend continues. Frankly speaking, these 2 models are real value for money and pose serious threat to Maruti’s Dzire.

Novelty factor or Brand Pull ruling Indian Car Market?

Toyota Etios launch saw an overwhelming booking response from India. So did Maruti Swift (2011), Volkswagen Vento, Tata Indica Vista (2011). Does this phenomenon hint at something big!

Yes, its the brand pull and novelty factor. These vehicles are good but so are scores of others that are their in the market and that also in the same segment. Why aren't people going for those? Gone are the days when a brand will run successfully for more than a decade and still hold its novelty factor. These days, a model / brand becomes old / jaded only after 6 months - 1 year of successful running. This is a disturbing trend indeed. Companies will then look to recover the costs in shorter period, thus hitting the price accelerator a bit hard. Old car market will revive though and contribute a lot more to the annual car sales market. Its not a fancy world as you can comfortably find 2010 models in the used car domain now in the 3rd quarter of 2011. Its good for people who need a vehicle but cannot afford a brand new vehicle. According to industry estimates, the used car market, which is currently around 18 lakh units a year, is expected to clock anywhere between 20% and 25% growth in the next five years, vrooming beyond the 40-lakh mark by 2015. Of this, the organized sector is likely to clock a 35-40% growth. This exposes one thing for the auto manufacturers - bring new models into the market as fast as possible. Else they will stay behind.

Its a situation like this that challenges the brand pull of a company. Maruti Suzuki, by virtue of a string of successful products in the past, still manages to maintain that pull in the market. New 2011 Swift, even though its not hugely different from the previous one, managed to garner some much-needed support from public. Whereas Mahindra Verito made huge waves in the market but the final response was pretty lacklustre. Technical reliability and service support are two main things that go towards building a brand. Foreign companies coming into India have high brand pull but thats entirely based on the technical reliability. Once their service support also gears up, perhaps these companies will then be a force to reckon with. Till that time, the Indian companies have opportunity to strengthen their service network and technical reliability.

So i have a feeling that the Indian Car Industry will see a new models / variant every month going forward. And the Indian companies will look to expand their network base to strengthen their foothold in this country.