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Guess what? US has appetite for Indian cars

Wednesday, 5 August 2009 - 3:22am IST | Place: Mumbai | Agency: DNA
Around 11% of new car buyers in the US would consider buying a car from India, without knowing of specific brands or vehicle makes.

Around 11% of new car buyers in the US would consider buying a car from India, without knowing of specific brands or vehicle makes, and 15% would consider buying from China, claims a research report.

“As Hyundai and Kia have been on the American scene for decades now, it’s surprising that consideration for Chinese and Indian brands, sight unseen, would be about as strong as it is for the Korean brands,” said George Peterson, president of automotive research firm AutoPacific, which conducted the survey.

The report comes ahead of Mahindra and Mahindra’s (M&M) foray into the American market next year with its Scorpio pick-up truck and the launch of Tata Nano in the US in three years.

Interestingly, those considering Chinese and Indian brands are more likely to currently own Japanese and Korean brands, indicating these brands may have the most competition from new entries, rather than domestic brands such as Chrysler, Ford and GM.

The study also shows that those considering a car from China and India rate reliability and durability very high, but are not as interested in the dynamics of a vehicle such as handling, braking and acceleration.

The study adds positively to market research done by M&M. However, the current breakup of the US light trucks market could dampen its spirit somewhat.

“The US light truck market, which is the second-biggest after Thailand, is dominated by the American auto giants,” said an analyst with a leading research firm, requesting not to be named. According to him, a little above 4 lakh units were sold in the market in June. Chrysler, Ford and GM together cornered a 60% marketshare, selling 2,40,000 units, Japanese automakers Honda, Kia, Nissan and Toyota sold 1,47,000 units. Even Japanese players have not performed well in this market, he said.

So, it’s going to be a tough deal for M&M to generate large volumes. “They will be able to generate volumes of about 50,000 units a year in three years’ time, but stretching it beyond this would be very difficult,” the analyst said.

However, Pawan Goenka, president (automotive), M&M is positive about the US market. “We have done our research and found that there is enough customer base for our products in order to achieve volumes. There is a huge market there for pick-up trucks and sports utility vehicles. We will be offering our products, pick-up truck for now and an upgraded version of Scorpio, some time later in a diesel variant,” he said.

The American market is primarily petrol driven, said Goenka, though there is a slow migration towards diesel that could become prominent in 5 years. “While we have the opportunity of being a strong diesel player, we also have the risk as the diesel population is still very small in the US,” he conceded.

As for passenger cars, the US is not an ideal market for small car manufacturers from India, due largely because long-distance commutes are common there.

Ratan Tata, of course, has expressed his keenness to see the Nano in the American market. “The Nano variant will be introduced for the American market and will be available in many fuel options. Nano is a unique car with high fuel efficiency apt for the American market,” a spokesperson said.

However, industry experts are not too sure about the utility of Nano as it is not suitable for long distance travel. They feel it will be more of a niche product than a mainstream one.

On its part, Maruti Suzuki, India’s largest car maker has no plan to focus on the American market. “American market is not a small car or diesel market, which is our strong area. Through Suzuki we sell our SX4 and Vitara there, but the numbers are very small,” said a company spokesperson. Suzuki itself does not have a product portfolio that suits the needs of the American customer. The company sells only 1,300 units of cars (Suzuki- SX4, Aerio, Verona and Reno) a month and 1,12,000 units of trucks (Vitara, Equator and XL7) a year.

Korean car maker Hyundai, which has been marketing vehicles in the US since 1980s, also does not plan to introduce any of its small cars in the US.

Further queering the pitch for Indian auto majors is the return of the US biggies GM and Chrysler from the brink. “These companies have become leaner and gotten rid of their loss-making brands. Now that they are back in the scene, the competition will intensify as the American giants had lost some market share to Korean and Japanese car makers,” said an analyst, requesting anonymity.




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