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A Detailed Analysis of the Hatchbacks in the Indian Automobile Market (An Independent Study) August 2010

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An Independent Study - August 2010

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Page 1: The indian hatchback

A Detailed Analysis of the Hatchbacks in the Indian Automobile Market(An Independent Study)

August 2010

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8/7/2011 2THE INDIAN HATCHBACK

Participants

A Segment

B Segment

B+ Segment

The Way Forward

THE INDIAN HATCHBACK

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A hatchback is an automobile designed such that the boot is integrated with the cabin space.

8/7/2011 3THE INDIAN HATCHBACK

• Spark• Aveo U-VA• Beat

Chevrolet

• Grande Punto

Fiat

• Figo

Ford

• Jazz

Honda

• Santro• i10• i20

Hyundai

• 800• Alto• A-Star• WagonR• Zen Estilo• Ritz• Swift

Maruti Suzuki

• Micra

Nissan

• Fabia

Skoda

• Nano• Indica Vista

Tata

• Polo

Volkswagen

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The A-Segment covers entry level hatchbacks. These cars make for great city drives and are the first stepping stones for people graduating to cars. They usually feature sub 1 liter engines, are under 4m long and are priced between 1 to 3 lakh Rupees.

Competitors

The Maruti Suzuki Altosucceeded the Maruti 800 asthe king of hatches. The carcontinues to be a favoritewith buyers, as it continuesto clock the highest salesfigures across segments.

The Maruti 800 was the carthat brought 4 wheels toIndia. It retains a strongemotional relationship withthe customers and continuesto woe its faithful followers.

The Tata Nano, the cheapestcar in the world, hasdefinitely generated a lot ofinterest. Waiting periods raninto months as the publicqueued up for a piece of theNano pie.

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Despite featuring only three cars, the A Segment accounts for 25% of total hatchback sales.

Source: Press Releases

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Note: 1Ex-Showroom Price (Delhi) as on 7th August 2010

Value-for-money is the key to success in this price-sensitive segment. Fewer variants are offered with concerted efforts to keep base pricing as low as possible.

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The small engines and low weights allow these cars to be very efficient.

Source: Society of Indian Automobiles Manufacturers (SIAM)

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8/7/2011 THE INDIAN HATCHBACK 8

Source: Company Websites

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UpcomingLaunches

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• The entry level hatchback segment has been ruled by Maruti for decades now. Butthe Tata Nano has been able to rake in very good numbers as well. As customerconfidence grows in the Nano, one can expect better sales.

• Keeping the vehicle well priced, for the very price-sensitive entry level, is the key toinitial success.

• Keeping the ownership costs low, in the form of maintenance , spares cost, andefficiency is again of prime importance.

• Buyers in this segment would rather compromise on interior quality, ride comfort,and driving pleasure, than on the price, space and the VFM factor.

• Having a well-established service network helps alleviate maintenance worries,which are a carry forward from the 80s and 90s.

• Honda is developing an A segment offering• Bajaj and Renault-Nissan are developing a 1 lakh INR car to counter the Nano• Maruti might launch the Cervo in 2011• Hyundai plans to launch an 800 cc car in 2012

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The B-Segment covers above entry-level hatchbacks. These cars perform best during city drives and afford most creature comforts deemed necessary by today’s customer. They usually feature 1 to 1.2 liter engines and are priced between 3 to 5 lakh Rupees.

Competitors

The Spark, a rebadged Matiz,has created steady sales forthe last few years. The looksmake it a favorite withwomen and the maintenancepackages make for a valueoffering.

The Beat was launched byChevrolet with the hope thatit would change theirfortunes. While that hasn’thappened, the Beat hasdefinitely generated interestwith its unique design.

i10 has been a raging success, taking off from where the Santro left. It is the market benchmark for quality and practicality. It has really strengthened Hyundai’s position in India.

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Santro, the victor of thehatchback war of 1998, hasseen many successful years.Even though the car is simplyoutdated now, it continues tosell decent numbers.

The Indica Vista was a welcome change from the erstwhile Indica. With an effort to move away from the taxi image, Tata gave it a new name, new style and tried to give it a personal car touch.

The Wagon R has alwaysbeen hugely popular in India.With its new avatar, a newengine, new interiors… it justgot better. Being the charttopper for July is no surprise.

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A Star, or the Alto to the restof the world, was the car thatintroduced us to the K10engine which powers all Aand B segment cars forMaruti today. The pricey carhas not seen chart burningsales.

The second generation of the Zen Estilo saw it losing some of the character it was earlier criticized for. Although, it still does not rake in huge numbers, it is a respectable performer as far as sales are concerned.

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The B-Segment cars post sales of about 60,000 units every month! Launch of the new Wagon R propelled sales

Source: Press Releases

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Companies offer a large range of variants, from basic to luxury, to target a larger audience.

Note: 1Ex-Showroom Price (Delhi) as on 7th August 2010

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Most ‘B’ segment cars are tuned with a focus on efficiency.

Source: Society of Indian Automobiles Manufacturers (SIAM)

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Source: Company Websites

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UpcomingLaunches

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• Dominated by Maruti, with 4 offerings in the segment including the recentlylaunched Alto K10, the B segment is a lucrative market to tap. This segment has seenquite a bit of activity recently.

• The keys to success remain the same as with the A segment, with fuel efficiency andreliability taking the crown.

• Customers look for a few creature comforts as well, and good interiors coupled witha stylish design can pull in the younger buyer.

• Mostly these cars find use in the city, hence ease of driving and good efficiency are abig advantage.

• The general absence of diesels in this segment can be one of the ways to enter themarket. The bottleneck remains the cost of development and deployment for smallcapacity diesels.

• Fiat India’s small car• Hyundai i10 and Santro diesels• Volkswagen UP

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The B+ Segment covers the entire range of premium hatchbacks. These cars are just at home on the highway as they are in the city. Most new hatchbacks are launched in this segment. They usually feature engines above 1.2 liter and are priced between 4 to 7 lakh Rupees. Undoubtedly, with the Indian buyer getting richer, the B+ segment is where all the action is.

Competitors

The Ritz was launched in May2009 as a conservativealternative to the hugelypopular Swift. The car hasbeen well-received despitethe oddball rear as it provesto be a practical choice.

The Swift has been a rage inIndia ever since its launch. Apowerful yet fuel-efficient carthat meets everyone’srequirements; the Swiftmakes up for almost half thecars sold in this segment.

i20, Hyundai’s offering in the B+ Segment, has introduced the Indian middle class to quality. With interiors shaming cars two segments above, the cosmopolitan Indian is ready to pay the premium.

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Chevrolet’s initial attempt tocapture the market, in theform of the Aveo U-VA,pretty much failed. The carwas never bang-for-buck,despite its roomy interiorsand well-sorted ride.

The Grande Punto rescuedFiat in Europe. It hasn’t beenable to do the same in Indiayet. The beautiful car doeswell on most counts, butFiat’s old reputation is analbatross around its neck.

Figo, Ford’s latest offering, has certainly created a blast in the market. The car is viewed as value-for-money and has been clocking more numbers than the rest of the Ford lineup combined.

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The Polo had been the most ‘looked forward to’ launch this year, and it didn’t disappoint. Offering the hatch buyers a shot at owning a ‘real’ German car; Polo saw heavy bookings, but few deliveries.

Skoda’s Fabia was never anumbers player in themarket. Marred byunfortunate glitches and aninflated price tag, thisdeserving car never reallytook off.

Honda’s Jazz is another car that has seen very poor sales owing to its irrational pricing. With most SUVs coming cheaper, the ‘space’ sales point never really struck a chord with the public.

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The B+ Segment is attracting all companies, with almost all fighting for a piece of the premium hatchback pie.

Source: Press Releases

Figo moved to the 2nd place within a month of its launch.

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B+ segment car prices often compete with entry level sedans’.

Note: 1Ex-Showroom Price (Delhi) as on 7th August 2010

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Diesel hatches are favorites for people looking for economical long-distance city rides.

Note: 1Ex-Showroom Price (Delhi) as on 7th August 2010

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Hyundai’s ‘Kappa’ engine leads the pack in fuel efficiency.

Source: Society of Indian Automobiles Manufacturers (SIAM)

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The premium diesels offer stunning fuel efficiency coupled with the low cost of fuel.

Source: Society of Indian Automobiles Manufacturers (SIAM)

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Source: Company Websites

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Source: Company Websites

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UpcomingLaunches

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• Toyota Etios• Volkswagen Golf• A revamped Swift with a new engine and exteriors• A revamped Chevrolet Aveo U-VA with a diesel variant

• The B+ segment is where all the action is. Maruti again maintains a strong hold with itsdual offerings: Swift and Ritz.

• The customer here is usually buying his second car, specifically for the city, or is anexperienced buyer.

• Important factors can range from exclusivity, premium image to practicality and reliability.• With a wide range of customer audience, positioning of the vehicle vis-a-vis the right

customer bucket is essential for success.• This diversity is illustrated by the success of Ritz, Swift and Figo which play on the VFM

factor.• On the same level, premium offerings like the Polo and i20 are tapping into the market

share as well.• Pricing is a factor that must not be ignored as has been clearly illustrated by the Jazz’s

inability to rake in numbers.

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•Currently hatchbacks account for over 70% of all passenger cars sold and the segment isgrowing at rate above 30% annually.

•A Segment Competitive pricing and providing the basic necessities are of key important. New launches should focus on keeping costs low, without compromising on – fuel

efficiency, space and safety.•B Segment New launches can look to differentiate themselves on features, practicality and

comfortable ownership, apart from maintaining competitive price points.

•B+ Segment Higher than expected sales speak for the acceptability of the premium hatch. New launches must come across as viable alternatives to sedans and should offer:Suitability for city driving along with the advantages of sedan-like space.More customers are looking for safety features.

Focus should be on either premium or practicality.Good quality and performance at a reasonable high price is accepted by a niche

but ever-growing customer base.Value-for-money and practicality will continue to be of prime importance to the

majority of Indian buyers.