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The different tax structures for smaller and larger vehicles in the Indian market have resulted in the emergence of a unique category of compact sub-four-metre sedans and utility vehicles that are gaining favour among consumers.
Come mid-2013, half-a-dozen sub-four-metre vehicles will be on road in India in a first for any country globally.
While Maruti Suzuki (MSIL) and Mahindra & Mahindra (M&M) have already moved in with sub-four-metre products sedan DZire and compact SUV Quanto, respectively, earlier this year, up ahead are launches from Ford (EcoSport), M&M (sub-four-metre Verito) and Honda (Amaze).
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Deepesh Rathore, managing director, IHS Automotive India, said, "Excise duty on sub-four-metre vehicles at 12 per cent is half that levied on larger vehicles. Manufacturers can reduce the length of the vehicle and introduce products at aggressive prices. This has resulted in the creation of a category unique to India. The segment holds a lot of promise, and all car makers, be it Ford, Honda or Hyundai, are exploring opportunities."
Between April and October, 115,003 sub-four-metre vehicles were sold in the country.
In the entry-level sedan segment, growth has largely been driven by the introduction of the sub-four-metre DZire (Maruti Suzuki) in February.
The company has sold 87,359 units of the car between April and October, an increase of 74 per cent over the 50,384 units sold in the same period last year. The segment itself has grown 32 per cent to 122,613 units.
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"The growth in the entry-level sedan segment has been driven by the sub-four-metre products. With interior space remaining the same, it seems prices and enhanced features have a more important role to play than a slightly reduced boot space," said Shashank Srivastava, executive director (international market development), Maruti Suzuki.
The company registers 92 per cent of average monthly sales of 12,500 units of the DZire from the sub-four-metre variant, the rest comes from fleet operators' demand for the longer one.
While Tata Motors sold 23,185 units of the sub-four-metre Indigo CS and a mere 123 units of Indigo till October, M&M got 12,000 bookings for the sub-four-metre SUV Quanto since its launch in September.
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"The demand generated by the Quanto has necessitated that we increase production of the vehicle by 40 per cent. We will produce 3500 units of the Quanto from the unit in Nashik by January next year", said Pravin Shah, chief executive (automotive division), Mahindra & Mahindra (M&M).
To tap into the growth potential in the category, Mahindra has scheduled for launched a sub 4 metre version of the Verito in the last quarter of the current fiscal. Ford too will bring in the sub 4 metre EcoSport early 2013.
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"As a strategy, we try to develop products in compliance with the policies and the tax structures in a country while at the same time keeping in mind the market requirement. It makes for an attractive proposition to have more sub-4 metre vehicles in our portfolio. It made the case stronger to bring the EcoSport platform to India. Our engineers worked around the vehicle, tailored in consumer requirements to offer an attractive product," said Vinay Piparsania, executive director (marketing, sales and service), Ford India.