India

India Autos: Toyota, Honda Challenge Suzuki


By Vipin V. Nair

(Bloomberg) — Toyota Motor Corp. (T), Honda Motor Co. (HMC), and other carmakers will unveil at least six vehicles this week in India challenging Suzuki Motor Corp. (7269:JP), which controls half of the country's market.

"There will be more choices and some of Suzuki's market share will be eaten up," said Puneet Gupta, a New Delhi-based analyst at consultant CSM Worldwide Inc. Maruti, the Indian unit of Hamamatsu, Japan-based Suzuki, may lose up to 5 percentage points in the next two years, he said.

The carmakers will unveil the models at the Delhi auto show starting tomorrow to attract India's 50 million middle-class consumers. Ford Motor Co. (F), General Motors Co. and Volkswagen AG (VOW:GR) are all building plants and introducing new cars in India, the world's second-fastest growing major economy, while demand slumps in the U.S. and Europe.

That's encouraging buyers like Koravangattu Vinayraj to consider new models after a decade of owning two Maruti Suzuki India Ltd. minicars.

"I've always wanted to buy a global car brand," said the 36-year-old rubber industry executive in the southern Indian state of Kerala. "In the past, there weren't many options available for small cars."

Surging sales in India and China — set to dislodge the U.S. as the world's biggest automobile market when 2009 numbers are tallied later this month — contrast with factory closures and job losses in the U.S. and Europe. Suzuki will maintain its market share by introducing cars and expanding its sales network, said Hideki Taguchi, a company spokesman.

Detroit Show "We are aware that India now isn't in a situation where we can be the sole winner," Taguchi said. "But this doesn't mean that we will give up." India is Suzuki's biggest market, accounting for about 42 percent of its global sales.

Maruti shares, which tripled last year, fell 0.6 percent to 1,551.45 rupees at the close of trading in Mumbai today. Suzuki gained 0.9 percent to 2,301 yen in Tokyo.

India is one of the few markets that continues to grow amid the global recession, said Jnaneswar Sen, vice president of Honda India. Industrywide car sales may double to 3 million units annually by 2015, according to the government.

Some 1.8 million visitors are expected at the biennial Auto Expo 2010 starting in Delhi tomorrow, said the Society of Indian Automobile Manufacturers. Honda will hold a world-premiere of a compact vehicle at the show, choosing India for the concept vehicle ahead of the North American International Auto Show in Detroit later this month. GM today unveiled its Beat small car.

'Can't Ignore' "The Indian auto industry has become internationally very important," said Pawan Goenka, the automaker group's president. "No one can ignore this market."

For Suzuki, the influx of competition is similar to what the carmaker faced is 1998, when Hyundai Motor Co., Daewoo Motor Co. and Tata Motors Ltd. all unveiled hatchbacks. Maruti's market share plunged to below 50 percent from 87 percent within four years.

"Competition is getting fiercer as Toyota and other carmakers are entering India in a big way," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments Ltd. in Tokyo. He declined to say if the company owns Suzuki shares.

Suzuki now holds a 52 percent share in a market in which per capita incomes have doubled in the past decade. It has seven hatchbacks and a dealer network that rivals will take years to match, said Ashvin Chotai, London-based managing director of Intelligence Automotive Asia Ltd.

"The fall won't be as dramatic as in the past," Chotai said. "As long as Maruti's own volumes grow, what is the problem?"

Toyota's Plan Suzuki Chairman Osamu Suzuki said in December 2007 the automaker would maintain its 50 percent share of India's car market "forever." At the Delhi show, Maruti will exhibit its Eeco van and premiere its first compact multipurpose vehicle.

Competing for attention at a nearby stall will be Toyota's low-cost car, which will help the company become a "major player" in India, said Sandeep Singh, deputy managing director of Toyota's India unit.

Hyundai will show its electric i10 hatchback. India will remain a "big small-car market" for the next five years, said Arvind Saxena, senior vice president of Hyundai India.

"India is a gem that many companies want to tap now," said Deepesh Rathore, an analyst at IHS Global Insight Inc. "They ignored it in the past and that allowed Suzuki to run away with the market. They have learned from that mistake."

That's heartening news for customers like Vinayraj, who is waiting for the new models from Toyota and Honda.

"I am keen to drive something other than a Maruti, which is everywhere around," he said. "I need a change."

To contact the reporter on this story: Vipin V. Nair in Mumbai at Vnair12@bloomberg.net.

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