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Stiff competition ahead between manufacturers

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The Indian auto market has been attracting new entrants of late, even as existing players look at new launches to spur sales, sharpening the competitive landscape for the year ahead.

The competition is likely to be quite intense in the car space, with the highest number of new entrants and launches in the small car (A2) segment, followed by motorcycle and commercial vehicle (CV) segments, according to auto analyst Joseph George of BNP Paribas.


The slew of attractively-priced small cars, especially from heavyweights like Toyota and Honda, will directly impact Maruti Suzuki’s A2 segment. Hyundai’s such launch, aimed at the rural market, is expected to hit the road by the end of 2011.

The motorcycle segment (77 per cent of two-wheeler sales) saw Mahindra and Mahindra (M&M) entering the space, without much impact as yet, but Hero’s split with Honda Motors (HMSI) will fuel competition, believe analysts. HMSI is expected to increase capacity by 40 per cent, while expanding distribution.

However, much of the competition will be driven by marketing blitz and product launches focussed on the mass market segments (entry and executive), say analysts. They don’t expect a major pricing deterioration, as Honda is not seen as a price player. The three listed auto companies will feel the impact as competition picks up over the next two years. Hero’s export ramp-up could take 18-24 months, even as the first mover, Bajaj Auto, took three to four years.

However, expect growth to slow due to last year’s high base. Analysts expect two-wheelers to grow at 12-15 per cent in 2011-12, while cars and CVs may see growth of 18 per cent and 15 per cent, respectively (Maruti could lag marginally).