Cheap cars: the end of the family scooter?

Wednesday 13 February 2008

A four-member family huddled up on a scooter is an everyday sight on India’s congested streets but the onset of the small-car boom is set to change this. (Report: N.Vij)

An Indian family on wheels:  the father in the driving seat, mother sitting side-saddle, holding a baby, and another child standing in front.
 
But this common sight on the Indian streets is about to change. The onset of the small-car boom in India is set to make a revolutionary change in the way millions travel across the country and it could mean the end of the family scooter.
 
In fact it was the four-member family on a scooter that inspired India’s Tata Group Chairman Ratan Tata to launch ‘Nano’ - the world’s cheapest for Rs. 100,000 ($2,500).
 
"It led me to wonder whether one could conceive of a safe, affordable, all-weather form of transport for such a family," Tata told reporters at the car launch on Jan.10 in New Delhi, India.
 
Anil Mehta, a 38-year-old bank clerk in New Delhi, carts his two teenage boys to school on his motorbike, on his way to work.
 
“With kids growing up it’s difficult to bundle up the entire family on a motorbike on roads congested with traffic, especially during peak hours,” says Anil Mehta, a 38-year-old bank clerk from New Delhi. “Two-wheelers cost close to Rs.80, 000 ($2,000) I rather spend a little more money on one of these new small cars to ensure my family’s safety.”
 
Rising incomes and easy access to financial loans make it easier for lower and middle class families to invest in cars.
 
“People who couldn’t afford to buy a four-wheeler will now be tempted to invest in a small-car,” says Rahul Surjiani, auto analyst with the Centre for Monitoring the Indian Economy in Mumbai. “Instead of spending $1000 dollars on an expensive  two-wheeler, they would rather save a little more money to buy a car and move up the social and economic ladder.”
 
 
Two wheels to four
 
The cheap new cars are giving leading scooter and motorbike manufacturers a run for their money.
 
Days before Tata’s new car launch, India’s second-largest motorbike and three-wheel automaker Bajaj Auto unveiled plans to launch ‘LITE’, its version of a compact car, within the next four years.
 
Bajaj’s two-wheeler sales have fallen by 20% since 2006. Analysts say the bike-maker’s latest strategy will help it maintain a large majority of its clients who are slowly shifting towards cheaper and smaller cars.
 
“Car companies investing in the small-car segment are a threat to two-wheel manufacturers like Bajaj,” says Surjiani. “People prefer investing in a small cheap car which costs close to 20% more than a two-wheeler.”
 
The automaker wants to bring out a $2,500, highly fuel-efficient small car in a possible alliance with carmaker Nissan Motor and Renault.
 
In case of a deal, Bajaj would depend on Renault for expertise on large-scale car manufacturing and in return the French company would benefit from the Indian bike-maker’s strong distribution and large-scale production facilities in India.
 
“Bajaj understands the needs of the Indian market” says Ashish Sinha Roy, Vice President Renault India. “Their manufacturing and channel management skills along with their years of experience in the two-three wheeler segment is a big advantage.” 
 
Auto Analysts are however skeptical of Bajaj’s foray into the four-wheeler market.
 
“No one can challenge Bajaj’s technical expertise but perceiving the company as a car maker and making it work in terms of volume seems difficult,” says Surjiani. “We have to wait and watch how people react to Bajaj as a car brand; when we hear Bajaj, we automatically think of scooters and three-wheelers.”
 
But according to a Renault spokesperson in Paris, France, “Bajaj could come up with something innovative and new in their first car venture.”
Other leading players such as Ford Motor Company also plan to expand operations in India and invest $500 million to begin production of new small cars within the next two years.
Analysts predict carmakers’ revenue to quadruple by 2016 to around $145 billion in the country. “By 2025, it’s estimated that India will boast around 580 million drivers – vastly more than the total population of the 27-nation European Union”, says Douglas Herbert, FRANCE 24’s Business analyst.
 
And Anil Mehta and his boys could soon be one of them.