Tata Nano Sedan (Nanoooo) and Maruti Eeco XL (Eeeeco) to be launched?

The Indian auto manufacturers are probably the smartest people in the world. They really do understand the pulse of the typical Indian customer whose main obsessions are those cars that give them the highest mileage per litre of petrol/diesel, has the highest resale value, the maximum space to stuff in the family members, neighbours and their dogs.

tata-nano-sedanOnce the above three main requirements are taken care of, they do not really care about the safety standards, ride quality and the driving dynamics of the vehicle. There are number of tricks that the Indian auto manufacturers use in order to fool the Indian customer who see only the peripheral issues rather than the real mechanical aspects of the vehicle.

The Indian auto sector tricks

The following are some of the tricks that the auto companies in India use to offer substandard vehicles at cheaper (not always) prices to the clueless customers,

1. Market outdated technologies

India is the dump ground for unsuccessful models, dated technologies and unsafe vehicles. This technique has been followed not only by Mahindras and Marutis but even Hondas and Toyotas. Remember the first versions of Honda City in India? And the Mahindra Renault Logan is still an ancient piece.

2. Reuse excess parts that doesn’t quite fit

When Ford India introduced the Ikon model in India, they in fact, reused the steering column as it is from their left-hand-drive cars in other developing countries. And the result was different orientation of the wiper and light control lever switches. When you look at cars made by Tata, you feel that they are doing mix and match logic to create new car models.

3. Patched up designs

Well, in order to make a sedan out of a hatchback, you just add a tail from another vehicle from your stable. Tata Indigos and Fiat Petras are created like that. The latest addition to this being the Swift Dezire that’s really a ’shikhandi’ vehicle in looks and needless to say with poor driving dynamics. India’s most successful vehicle, the Maruti 800, would never pass any safety tests in any other country but would work here because it used to be a government production! It seems, this particular vehicle, doesn’t even have a proper chassis.

Some of these vehicles actually look like match boxes or a loaf of bread (Mahindra Xylo, for example)

4. Under-featured vehicles

To market a car in India, you have to take out the plush upholstery, take out good plastics and put cheap recycled ones, remove airbags and good baking technologies, remove good alloys and finally put an underpowered engine from the models two-three years back. You have to then tune the engine to give 20km/l though vehicle wouldn’t really move. But wait, since the Indians are worried about the power of their A/Cs, the air conditioner should make you freeze within 15 seconds, else you fail in the market.

5. Re-brand it

In India, unsuccessful models can be renamed and re-branded easily as long as you add some two tone cheap design, some stickers or strips, a new front grille and different looking headlights. Though, nothing is changed with the engine, you can still re-tune it and call it a XYZ-series engine and market. You may be recalled how Ford Ikon, CLX had failed in India, but Ikon Flair was an instant success. And the good old Maruti Versa is selling now under the Eeco brand.

What’s in store?

maruti-eeco-eeeecoGoing by the above experiences, what we can expect from Tata soon is the sedan version of Tata Nano which would be nothing but the Tata Indigo’s boot attached to the Nano. And how can Maruti be far behind? Just like Tata, elongated and marketed the Indigo XL, now the Maruti Eeco’s newer, longer variant – the Eeeeco as shown in the picture – can be on the roads anytime now. And people will still buy them!

Long live our auto-companies!

Four business ideas in the auto space

In the last article I touched upon the changing face of the Indian automobile industry and the brisk pace at which it is growing. The entire automotive echo system has greatly benefited out of this sudden surge, in the past ten years or so, providing job opportunities to millions of people in India – thanks to the auto ancillary establishments, forging units, service centers, mechanic shops and agencies that provide related skills/services etc. However, there are still quite a few untapped market opportunities in this space, which does not necessarily provide jobs to people in bulk but are good business ideas to invest in. In this write up we will explore four such business opportunities (I should warn you that there is nothing innovative about them).

Multi-storied parking lots

Parking woes, along with strenuous traffic conditions, are common phenomena in all our metros and tier 1 cities. While the government and private-public partnerships need to work on the roads, nothing is preventing the venture capitalists or business men from starting a number of multistoried parking lots in key access locations in and around our big cities. Each of these parking lots ideally should accommodate 100 to 250 cars and should have automated machines at entry/exit that charge either hourly, daily or monthly parking fees from its customers. There can be services like round the clock security, parking full/free indicators, easy access via elevators or stairs etc that you can find in any modern parking lots in the western world. This is a very exciting business opportunity whereby the investments per such a building could be anywhere between 5 to 20 crores, depending on the city, locality and desired capacity etc.

Automated car wash centers

One of the worst things that could happen to your expensive, brand-new car is the scratches on the body – either owing to the packed traffic conditions or caused by the unskilled cleaner who is usually your gardener, house maid, security guard or chauffer. The latter issue can be addressed by introducing touchless automated car wash centers. This is an even better business opportunity compared to the first one as the number of expensive cars that are coming into the Indian market is growing day by day. The car wash centers automates the entire process of spraying water, applying shampoo, scrubbing the bottom/tyres, drying the car and applying wax in a sequence that takes hardly three to five minutes. It is high time we introduced such facilities in India. The initial investment per such units could be anywhere in the range of a crore or so but returns are guaranteed manyfold.

Traffic Radio channel

While our popular FM radio stations are updating listeners on the traffic conditions in respective cities, it is about time we had dedicated traffic radio stations. This has to be a public-private partnership in Indian conditions as getting relevant information from the traffic personnel on duty may be the only reliable input for providing such a service. This kind of a traffic radio station can be set up at a very minimal cost (say less than 15 lakhs or so) and the revenue model is driven by commercials. The recurring expense may include funding the government a little bit in the wake of the additional services that the traffic police department has to provide to the radio station. But this venture will definitely make more money than many of our popular FM stations as there is not much content production cost involved.

Mobile basic breakdown service

There are several breakdown services already provided by the service stations and big body shops. However, there are still opportunities for the small and medium scale entrepreneurs to enter this space. We are talking about providing very basic breakdown services like tyre repair/change, minor accident repair, replacing battery or uses, basic engine failures, etc. Depending on the number and type of service vehicles one would want to start with, this business can be set up at a cost of 1 to 10 lakhs. At 10 lakhs one can have five or six used Maruti Omnis on errand serving a whole city from various locations. The returns on investment would depend on the type and reliability of the service provided.

Do you have any other business idea related to the auto-industry?

India changing gears

The automobile market in India has been witnessing very rapid changes for the past four or five years. Until the late nineties, for any multinational car-maker, India has been the dump ground for obsolete engine technologies, dated designs, models with design flaws or those vehicles that didn’t comply to safety or emission standards. This notion seems to be changing so fast with new an new car models being introduced in India without too much delay after their international launch in the international markets.

One of the main reasons for this change is the economic reforms that were initiated by a few wise men since the past two decades or so. India is one of the fastest growing and stable developing economies in the world today that is also investment friendly for foreign investors. The outlook of the Indian market has also been changed with industries like Information Technology, IT enabled services and Biotech making India more globally accepted. More international brands – not just in cars – are readily available for the Indian buyer now in India and they have the purchasing power as well. Twenty years back we had exactly three outdated options to choose from when it came to buying a new car. Chevrolets and Hondas appeared only in the ‘high-speed’ car chase scenes of Hindi movies then. Now we have close to twenty or so different manufactures to choose from and they produce more than hundred models.

International travel opportunities and vast information that is available on the Internet, the awareness on safety, technological and design standards also went up. I remember the times – probably 12 years back – when India’s leading car manufacturer then (and even now) in their commercials proudly announcing the introduction of seat belts in their cars as a major luxury and safety feature. Earlier the MNCs used to introduce a new technology or car model 4-5 years after it was launched in the market. Now they know that the educated Indian customer is equally (or even more) demanding than their international customers. Also with more and more car makes available, the car manufacturers are also under pressure to upgrade their models and offer the best for the customers.

One Indian company that has led the changes from the front is Tata Motors. Tatas were not put down by the failures of their initial big car models but they brought in more innovation and collaboration to steal the B-segment market share from Marutis and Hyundais. Without these efforts (along with that of MNCs) I am sure that Maruti would never have changed their models. Hindustan Motors is the only ‘live fossil’ with the kind support from the government and its service sectors. I wish the spoilt brains and unmotivated workforce of HM gets a break as well soon – High time they put some research into their works and come up with a new generation ambassador that offers not only power and safety for Indian roads but features, usability, good looks and drivability. Ambassador still belongs to the generation that believed that buying a car is once-in-a-lifetime thing and that asset has to be maintained and preserved by generations to come.

A recent research study shows that the A-segment growth rates is slowly coming down not just in urban areas but across all types of markets. The growth rate is
very high in the B+ and C segment markets. This may be attributed to the above mentioned aspects and is supported by the stress from the government on infrastructure development and the commitment to improve the national highways and new national road networks.

The new car market is very well complimented by the growing used car market in India. With the average ownership period falling drastically every year the used car market offers alternative buying opportunity. The auto boom also resulted in the emergence of related industries such as auto ancillaries and related job opportunities.

Indian two-wheeler market is catching up with the changing trends as well. The need for power and style is more than it was ever before. Twenty years back, with the exception of the Rajdoot Yamaha 350, one could not have imagined powerful and faster bikes in the Indian market. The changes were initiated by the introduction of lighter, mileage aware and durable Japanese bikes in the mid 80’s. Then slowly they started adding power – though still only 10cc added at a time 🙂 – and newer technologies. The 2000s are about power and style. The manufacturers are concentrating too much on styling as the target users are mostly youngsters. Obviously elderly Indian finds it difficult to pick a motorbike for himself and he is pushed to the scooter using community.

Overall, the outlook is good for the consumers as well as the manufacturers. I wish the government gets a little more proactive in getting the road infrastructure – other than highways – issues addressed. Once the infrastructure is in place, rest of the developments (not just the auto industry) will fall into places.