The Indian car market is highly price driven. Price based attributes like the initial price of a car, cost of spare parts and fuel economy play the crucial part in the purchase decision. Thus the most popular cars in the country are also the cheapest. Where is the entry-level part of the car market heading? Deepesh Rathore and Tilak Swarup review the issues at the heart of that question.
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The best selling car in the country until very recently was the Maruti 800 (based on the early 1980s Suzuki Alto) and it is no accident that it was also the cheapest car available. But the current best seller is the more modern Maruti Alto, the second cheapest car in the country. Car sales in the country touched the one million mark in FY 2005. However, herein lies the ‘anomaly’. Two-wheeler sales in the country were nearing the seven million mark in FY 2005. The reason, again is, price. Indian industrialists are working on getting some of the motorcyclists to upgrade to cars and narrow the two-wheeler/four-wheeler price differential.
Unexplored price gap between motorcycle and cars
The most popular motorcycles in India retail in the price band of INR 40,000 – 55,000 (€ 720 – 1000) while the cheapest car costs around INR 200,000 (€ 3,650). There is hardly any product between the cheapest car and the most popular two-wheelers – a gap that has been noticed by all, but attended to, by none of the manufacturers till now. What the Indian customers have been buying till now in this price segment have been used cars – often as much as five-years old.
The problem is that it is difficult to price a car under the Maruti 800 (M800) as things stand. The M800 is a basic car with a seating for four, with a size significantly smaller than the Fiat Panda and rides on a platform that is now more than 20 years old and the base model comes sans air-conditioning. There is not much lower, and cheaper, that you can go with conventional cars.
Quadricycle – the dream solution?
However, Quadricycles as a means of personal transport hold some promise for the Indian customers. Quadricycles are small, offer adequate weather protection, uncomplicated and are cheap to own and operate, exactly the virtues that the Indian customer is looking for. This would represent a totally new segment of personal transport in the country. Quadricycles, also designated as microcars, are a typical European concept of a small, motorised four-wheeler designed for intra-city travel and companies like Microcar, Aixam, Chatenet and Ligier make a living out of them.
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By GlobalDataSome Indian companies – namely TVS and Piaggio – are ready to introduce Quadricycles in the market. Some others like Bajaj Auto (the two wheeler manufacturer has set a four year time frame for a Quadricycle style vehicle) and Tata Motors (Tata Motors’ much awaited Rs 100,000 (€ 1,825) car is likely to turn out much closer to a Quadricycle than a car) are working on new projects.
However, the Indian Quadricycles may turn out to be very different in concept than the European cousin. While the European Quadricycles are more aimed at the leisure and intra-city travel market, the Indian Quadricycles will be aimed at the basic transportation market. In Europe, there are regulations for different categories of Quadricycles with the weight and power being the differentiating criteria. Consequently, depending on the norms, a “Quad” can be driven with or without a license. In India, the regulations for Quadricycles are yet to take shape.
Indian Quadricycles – a lack of concept clarity
Quadricycles as a medium of transport are quite alien to India. This was precisely the reason that Quadricycle norms were not yet frozen in India. However, with the recent interest being shown by TVS and Piaggio to introduce quads, the Indian automotive industry and the apex body SIAM are handling the matter with some urgency.
A typical Quadricycle, as the TVS group sees it, can be sold in the market in the proximity of INR 120,000 – 150,000 (€ 2,180 – 2,730) making it up to 40-percent cheaper than the ubiquitous Maruti 800, the cheapest car in India by a fair margin. The Maruti 800 has seen a decline in sales in recent months as Maruti provided a greater push to the Alto, but still accounts for a large chunk of Maruti profits.
Thus a Quadricycle may end up enjoying a huge cost advantage over traditional cars. A four-wheeled product, even as basic a design as the Quadricycle at INR 150,000 is bound to take away customers from the Maruti 800 and even the base models of some B-segment cars like the Maruti Alto, Hyundai Santro Xing (Atos Prime in Europe) and the Tata Indica.
And that seems to have stirred up a hornet’s nest.
This factor has not gone down well with manufacturers whose product sales will be directly affected. That is why Quadricycles are facing tough resistance in India. Recent meetings between SIAM members have failed to reach a consensus. There are two clear groups of manufacturers – the first group with Maruti and other established carmakers is against Quadricycles while the other group with Bajaj Auto, TVS and Tata Motors is pro-Quadricycles. While the groups have been meeting, no decision has yet been reached much to the comfort of the anti-Quadricycle group.
On the question of regulatory norms, companies are not in favour of following European rules blindly. The European Quadricycle has achieved much of its success because of favourable norms. The large European Quads (quadricycle lourds) have a GVW of 600kgs with a 20-bhp engine powering it. These do not have to pass any crash tests and are strictly meant for intra-city usage. In fact they are not at all allowed on autoroutes. They are slightly cheaper as compared to small cars with prices starting from GBP 5000. Compared to this, the Fiat Panda sells at around GBP 6,500. Rivals like the CityRover are not much farther off. Compared to these cars, the Quadricycle at GBP 5,000 does not seem to be a good buy, but when one considers that they are more lifestyle and convenience vehicles and a good buy for those without a driving license, the basic Quadricycle concept starts making sense.
European Quadricycles use innovative and often expensive material to achieve the desired lightweight and are high on style. Models like the Chatenet Media, the Microcar Bingo and the Aixam Mac possess contemporary looks, while others like the Microcar MC1 Dynamic and the Matra M 72 are futuristic. However, quality is a concern as most of these Quadricycles are not able to deliver regular passenger car like quality.
Indian companies are against using exotic materials to achieve weight savings as this will result in an increase in price. Using regular materials will result in an increase in weight which is why TVS has demanded that the Quadricycle GVW be fixed at 800kgs, considering that the Quadricycles will seat four or carry equivalent goods. The Maruti 800 at 840kg GVW is quite comparable.
Both TVS Motors and Piaggio are developing their Quadricycles from a three-wheeler base and argue that the emission gross vehicle weight and safety norms should be as applicable for three-wheelers. A favourable emission norm structure will allow TVS and Piaggio to use twin cylinder diesel engines from one of the typical diesel engine manufacturers like Kubota or Lombardini.
However, rivals Maruti and Hyundai demand passenger car norms for the quads since they are four-wheeled. The European Quadricycles are not subject to any norms. It was also proposed that in the first phase the Quadricycle would conform to emission and safety regulations applicable to three-wheelers and post-roll-out move to those applicable to cars in the second phase.
TVS on its part argues that since the Quadricycle’s engine power is restrained at 15kW and top-speed at 72.5kph, there is little chance that the Quadricycle will compete with Maruti’s 800. Interestingly, both TVS and Piaggio are looking to develop cargo quads first and then look at passenger models. It is expected that Indian Quadricycles will be fairly low-tech with an eye on keeping maintenance costs down.
However an easy solution to the issue does not seem likely right now. Both Maruti and Hyundai have a lot at stake in this issue. A major share of Maruti’s profits comes from the ubiquitous 800, the car that will be affected the most by the entry of passenger carrying Quadricycles at a price lower than the 800’s. Hyundai meanwhile does not have any product in its international portfolio below the Santro Xing and thus would like to delay the arrival of Quads for as long as possible.
However, one cannot undermine the importance of a vehicle concept like the Quadricycle for the Indian market. The Quad will fill a huge gap between two-wheelers and cars. More than taking customers away from existing cars, a Quadricycle is expected to only cannibalise two-wheeler sales in the country. Thus, it is likely that the customers of Bajaj and TVS Quadricycles will be mostly their own two-wheeler customers but a Quad will always deliver better profits.
Deepesh Rathore / Tilak Swarup
