Auto firms like M&M, Tata Motors, Maruti, Hyundai, Renault and Nissan to spend … – Times of India

Posted: Monday, June 09, 2014
MUMBAI: Automobile makers in India have lined up more than Rs 10,000 crore of investment to develop new passenger vehicles and soup up existing ones despite a slowdown in sales, as they strive to meet changing customer demands in a market where products become outdated fast, according to industry executives.

Companies such as Mahindra & Mahindra, Tata Motors, Maruti Suzuki as well as the local units of Hyundai Motor, Renault and Nissan Motor are working on all-new platforms to bring out new products.

Twenty-two all-new models and as many facelifts along with 12 new model-year updates and seven new power-train options have been lined up for the Indian customer in 2014 — the most elaborate product action plan by auto makers in recent years. And, this is happening just after the passenger vehicle market recorded its worst sales decline since 1976.

Companies have deferred capacity expansion, and thousands have lost job with assembly lines running at their lowest utilisation levels, but auto makers aren’t cutting down on product development. No longer can a product continue to have a good run for a decade, said Pawan Goenka, executive director and president of Automotive & Farm Equipment business at Mahindra.

Nowadays, new products do well for two-three years at best. The margin for error, he says, is very small. “Success rate has become lower because there are too many products getting launched and every product launched is a better value for money. Customers have been opting for better-value new products to older products. That is what is making industry competitive,” he said. “The Indian market is not a place for the weak hearted anymore.”

Auto firms like M&M, Tata Motors, Maruti, Hyundai, Renault and Nissan to spend Rs 10,000 crore on new models, faceliftsAccording to industry experts, fiscal 2014 saw 35 product launches, including major facelifts, but only eight of them, or less than a quarter, can be considered as successful. Car sales fell for the second straight year in fiscal 2014, which ended in March.

If not for the all-new models like the Honda Amaze, Ford EcoSport and the Hyundai Grand i10, total passenger vehicle sales would have declined 15-16 per cent in the last fiscal year, instead of the actual 6-7 per cent drop.

Customer preference is changing fast, and vehicles that were fast selling until recently have seen demand eroding. That is putting pressure on manufacturers to be more innovative to satiate demand, especially of young buyers.

Models which are relatively new like Ertiga, Elantra, Evalia, Quanto, Rapid, Safari Storme, Santa Fe, XUV 500 and Verito have seen sales falling between 3 per cent and 71 per cent in the past year.

This trend indicates that it is very difficult to maintain sales momentum beyond 15-18 months, without a facelift or a refresh or some upgrades.

Waiting periods are a passe and discounts are common on models that are 6-12 months old. How to sustain the momentum is the biggest dilemma for all manufacturers, said Mayank Pareek, senior executive officer at the country’s largest car maker, Maruti Suzuki. Times are gone when one manufacturer sold a product for 20-30 years, he said. Product lifecycles are shrinking and companies have to refresh products very frequently.

“More than 50 per cent of the Indian population was born after 1991. The thing that I am unique is the ‘feeling’ today’s generation wants to have. They say I want to be different, so I want new products. Generations change now every five years, so we are planning right up to 2025,” he said. “Even before the car is launched, we plan for anniversary editions and limited editions to satiate the desire of young buyers.”

Maruti Suzuki has been launching a new model, facelift or a refreshed one every three to six months. The idea is to keep the interest level of the customer alive in the brand, said a product planning executive at a leading multinational company.

According to him, sales generation is largely happening through new models. The product lifecycle today has almost halved to four-five years from seven-eight years.

Major facelifts, which used to happen every four-five years, now happens every two-three years. There are new concepts of minor facelifts, new model-year models, limited edition and anniversary editions emerged to excite the buyer. The trend of falling product lifecycle in India is similar to global markets, said Puneet Gupta, associate director at consultancy firm IHS Automotive. But the pace at which it is happening in India is faster now.

According to Gupta, product lifecycles can vary from segment to segment. The lifecycles are lot longer for a small-car buyer vis-a-vis a luxury-car buyer. “Propensity to change cars increases significantly as one moves from an entry-level car to a luxury car,” he added.

To cater quickly to the fast-changing needs of the local market, several MNCs like the Renault-Nissan alliance, Hyundai and General Motors have significant research and development bases in India. With the low success rate of new launches, the biggest challenge for auto makers today is return on investment.

Therefore, with changing technology, car makers like Volkswagen, Renault-Nissan and Tata Motors are moving towards modular platforms, which enhance commonising of parts, yet delivering different models at lower costs.


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