Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Battle hots up in small car, mid-car segments - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Sep 8, 1999

    Battle hots up in small car, mid-car segments

    According to news reports, small car majors TELCO and Daewoo Motors have firmed up plans to hike their production levels considerably. As if on cue, mid-car majors Honda and Ford have outlined large-scale investment plans to battle it out in the sluggish mid-car segment.

    First the small car segment. TELCO plans to go for a second shift to increase production of the Indica. By FY2000, it expects to achieve production level of 60,000 units (single shift), by when it will have cleared its order backlog. Daewoo has also outlined plans to step up production by introducing double shifts. Currently, the company manufactures 3,500 units a month. While TELCO's move to hike production levels is in response to increasing domestic demand, Daewoo's move has been influenced by rise in domestic as well export demand.

    Daewoo plans to come with a new model of the Matiz aimed at the higher segment. TELCO also plans to introduce a variant of the Indica.

    Passenger Car market share as on July 1999

    There is a heated battle in the small car segment for market share. Competitors are slugging it out on price as well as quality. While Maruti has been caught napping on both these counts, companies like TELCO (Indica), Hyundai (Santro) and Daewoo have been quick to seize the opportunities that have come their way.

    Not wanting to be left behind, auto majors in the mid-car segment, too, have firmed up investment plans, to underline their commitment to India.

    Ford India is banking heavily on its Ikon model to improve its cash-flow position, which has been negative since the company's inception. The company has already invested US$ 800 m (Rs 34 bn) in its Indian operations, which include a new plant to produce the Ikon. The latter is slated for a commercial launch in November. Ford India, plans to price the Ikon at Rs 500,000-570,000, which is just below the premium segment, which includes Ford's existing Escort model, Mitsubishi Lancer, Opel Astra and Honda City.

    Honda Siel has also outlined ambitious plans in the mid-car segment. It targets sale of 11,000 units in FY2000, as against 9,631 units in FY99. It has sold only 3,814 cars in the first five months of FY2000, and 11,000 cars looks like a tall order at the moment. The company expects to break even at 16,000 cars.

    Honda plans to invest Rs 8.5 bn in its Indian operations over the next five years. In a move to improve the viability of its operations, it plans to import cars not manufactured in India. The new-look Honda City will be launched in the country in a year's time.

    Although competition is a good thing for the mid-car segment, demand is conspicuous by its absence. Manufacturers will have to look at offering their products in the niche, sub-premium segment (below Rs 550,000), as the premium segment seems saturated, with too many players offering too many models.

    Currently, the mid-car segment has too many companies competing for what is a very small, fragmented market. With companies like Ford, Fiat, Honda, Toyota, scaling up investment plans, there could well be a shakeout in this segment, with some companies being forced to scale down operations or withdraw completely.



    Equitymaster requests your view! Post a comment on "Battle hots up in small car, mid-car segments". Click here!


    More Views on News

    Tata Motors Ltd: Another Disappointing Quarter, Management fails to Perform! (Quarterly Results Update - Detailed)

    Aug 14, 2017

    Tata Motors Ltd disappoints again for both India and JLR business. Management commentary indicates a slow year ahead.

    Maruti Suzuki Ltd: Bumpy First Quarter. GST dents Margins! (Quarterly Results Update - Detailed)

    Aug 2, 2017

    GST realted cost impacts Margins, Management expects good year ahead.

    Hero Motocorp Ltd: Riding on the Scooters Growth, Maintains Margins! (Quarterly Results Update - Detailed)

    Aug 1, 2017

    Good Recovery in the Scooters market, expects pick up in exports too.

    Bajaj Auto Limited: Recovery in Exports but Domestic Disappoints! (Quarterly Results Update - Detailed)

    Aug 1, 2017

    New Export Markets picking up, Management expects good recovery in domestic Three wheeler market.

    Bajaj Auto Limited: Finishes the Year with Headwinds. Poised for a Recovery Ahead? (Quarterly Results Update - Detailed)

    Jul 6, 2017

    Ends the year on a Flat note. Expects good recovery in the exports market.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 16, 2017 (Close)