Global carmakers see small sedans as next hot market in India

NEW DELHI/BEIJING Tue Feb 4, 2014 6:32pm IST

Kumar Galhotra, Vice-President, Engineering, Ford Motor Co, stands next to a Ford Figo global compact concept car at a press preview in New Delhi February 3, 2014. REUTERS/Adnan Abidi

Kumar Galhotra, Vice-President, Engineering, Ford Motor Co, stands next to a Ford Figo global compact concept car at a press preview in New Delhi February 3, 2014.

Credit: Reuters/Adnan Abidi

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NEW DELHI/BEIJING (Reuters) - Carmakers including Ford Motor Co (F.N) and Hyundai Motor Co (005380.KS) will showcase compact sedans at India's largest auto show this week, targeting what they think could be the next hot market in a country long dominated by ultra-cheap hatchbacks.

Global carmakers are still banking on emerging economies including India, the world's sixth biggest auto market by volume, to drive long-term growth despite a recent slowing in demand. Industry-wide sales in India are headed for a second straight annual decline in the fiscal year that ends in March.

Hyundai, the biggest foreign carmaker in India, will next month roll out its Xcent compact sedan, which is under four metres and thus taxed less heavily than longer cars in India, executives said at the car's global unveiling on Tuesday.

The car will be on display at this week's auto show in the outskirts of New Delhi, which opens to the public on Friday.

Ford will display a compact sedan show car, the "Figo concept," which hints at its own future entry into the segment in India. The existing Figo is its hatchback.

Ford did not specify if it would soon sell a production model of the car in India or anywhere else.

"We are not confirming it, only as a concept ... but it isn't too great a leap to believe it will happen and in India," a Ford official with knowledge of the matter told Reuters.

The enthusiasm for small sedans stems in part from Honda Motors Company's (7267.T) success with its entry-level Amaze, launched last April, which starts at 520,500 rupees and has helped it nearly double market share in India to 4.7 percent by December.

The Amaze's price tag compares with Honda's larger sedan, the City, which begins at 742,000 rupees.

"The customer feels he has got a very good deal because he has got a car with a boot and not just a small hatchback," said Deepesh Rathore, director of Emerging Markets Automotive Advisors, who expects compact sedan sales to more than double within five years.

Maruti Suzuki saw sales of its (MRTI.NS) Dzire compact sedan jumped 25 percent in April-December, even as the passenger vehicle market fell 6 percent during the period, data from the Society of Indian Automobile Manufacturers showed.

Tata Motors (TAMO.NS), India's largest automaker, will also launch a small sedan in the second half of the year.

Honda is banking on the Amaze and other small vehicles in emerging markets such as India to help it boost overall annual global sales to six million cars by the year to March 2017, up from 4.5 million cars it plans to sell this year.

The Tokyo-based automaker expects much of the incremental growth to come from India and Indonesia, despite their near-term economic challenges.

Honda expects industry-wide demand for cars in emerging markets in 2014 to remain sluggish, with sales falling 15 percent in Thailand and 3 percent in India. In Indonesia, it expects no growth.

Honda has bullish expectations for its own sales, buoyed by popular small cars like the Amaze, Executive Vice President Tetsuo Iwamura told reporters Friday. In India, Honda aims to boost sales by nearly 50 percent this year and to nearly double sales in Indonesia.

(Editing by Tony Munroe and Mark Potter)

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