Indian passenger vehicle industry is showing a slow growth rate below 6%, all time low in last four years. In spite of double digit growth in rural market, the urban market like Delhi NCR, Mumbai witnessed flat sales with negative sales growth in FY2018-19. A very recent article, “Small is beautiful. Again” by Malini Goyal published in the Economic Times (Dec9-15, 2018) has beautifully analysed the passenger car market. A sharp contrast in car demand is observed in the rural and urban market. It’s a structural shift in consumer demand with visible divide in the rural urban market. In rural market, any young aspirant, reaching the income threshold level, after getting a job or having a stable business willing to own a car. In urban market like metros, car is no longer a status symbol, at least not the entry level car. Rather it works in other way. For upwardly mobile consumers of young age, buying trendy, high end bike with good presence on the road is much more attractive and aspirational option rather than buying a small car. Other reasons causing a declining sales growth in urban automobile market is traffic congestion, scarcity of parking places, cheaper and more convenient share ride options like Ola and Uber. Especially for the first times buyers in cities, buying a car is like adding an expensive inflexible asset which depreciates fast. Along with the cultural shift among buyers, government new policy on safety norms, rising interest rates, fluctuating income uncertainties, and pollution concerns make the passenger car market very complex.During last year Diwali, Dusehrra or Christmas time, the car makers did not receive the expected sales which normally are higher because of festive bonanza. To capture the new demand in Tier II cities, small towns and rural India , Hyundai Motor has launched Santro with all new features in five variants –Santro Dlite, Santro Era, Santro Magna, Santro Sportz, and Santro Asta. Its pre-booking started from first day of Navratri- 10th October, 2018.
Re-Launch of Santro
Smaller towns, Tier II cities and rural areas are the new target market for the car makers to introduce entry level cars. Overall economic development, poor public transport facility, low penetration of cars in rural areas and absence of share rides are primary reasons for the double digit growth in automobile market in rural and semi urban markets. Cars are highly aspirational products in rural areas and a major share of entry level car market comes from this segment. Since rural market is growing faster than urban market, car makers are redesigning and rethinking their strategies to capture this market. A number of automakers are coming up with small cars, mini-compacts, micro-SUVs- Hyundai -Santro new version, Maruti Wagon R (2019 model), Celerio, Alto K10 (codenamed Y1K), Alto 800 (YE3), Renault’s KWID, Tata’s Tiago and Nissan’s Datsun Redigo are some of them. Many automakers like Hyundai Motors and M&M are positioning few of their brands in REVV and Zoom cars- flexible car mobility section. Hyundai is re-launching Santro with all new features, classy engine with minimal vibration, contemporary hatchback style targeting specially the first time car buyer segment in rural and semi urban market. It has come with the option of five speed automatic gearbox, first time for global Hyundai. Santro maintained its tall boy design as well as all previous attributes liked by the customers. The new Santro is introduced in early October, 2018 with ex-showroom (Delhi market) price of Rs. 3.90 to Rs 5.61 Lakhs with a hope to increase Hyundai’s market share to 17-17.5% from existing 16%.
Phasing out of Santro
At the launch of Santro, Mr. Puneet Anand, Group Head, Marketing of Hyundai Motor Ltd (HML) stated that this is the right time to bring Santro back for Indian market, as this segment is growing and this year HML is celebrating its 20 years stay in India. Introduced in 1998, Santro became an iconic car, ruled in Indian market for two decades. Its tall boy image was so popular that Maruti came with similar version Wagon R. In 2014 December, HML discontinued popular Santro for several reasons- its sales was declining and HML wanted to create its other brands like EON, Grand i10 and Creta. Hyundai did not want the cannibalism.
Santro relaunched with all features
Hyundai motor invested $100 million and three years to come up with a contemporary hatch back, with stylish features to strengthen its position in the first time buyer market. Santro, already having a strong emotional connect with Indian buyers positioned itself between EON mini and Grand i10 and expecting to be sold between 7000 and 10000 per month. It has come with a fresh look sync to attract buyers across all ages, though all previous attributes loved in the original Santro are unchanged. Y.K. Koo, MD & CEO of HMIL said that the brand name Santro was retained again, after a market survey of 5 lakh people, where nearly 67% asked for retaining the name. Within 22 days of relaunching, Santro received over 28,800 bookings and more that 1,29,500 enquiries. Current market trend is showing that buyers of entry level cars are not only looking for price of the car but all latest features which was very unlikely few years back. Buyers of entry level cars whether from rural or urban areas, expect top-end fully loaded variants even for small cars. To tap the market Santro planned to spend 15% of the total advertisement budget on digital marketing. TV, hoardings and print are the other media where the company focussed to communicate. For rural buyers HML, specially planned for mobile vans with videos featuring Shah Rukh Khan endorsing the brand.Easy financing options are added by most of the car makers to convince rural buyers.
Today’s customers are smart, they don’t look for only price, but for value. According to Koo, MD & CEO of HMIL New Santro is launched with six key features- style, tall boy design, comfort, premium cabin experience, state of the art technology and finally safety features, for which Hyundai is famous all time. HMIL has set a target of 1 lakh in domestic market and 25,000 for export in the first year. Company is predicting almost half of its sales from tier II and tier III towns. Immense competition from different players, increasing popularity of shared mobility, cultural shift of buyers, economic uncertainties, new Government policy to upgrade from Euro IV to Euro VI emission norms, and finally the projected popularity of electric vehicle already made the Indian road very bumpy. Let see how Santro will perform in future!
Malini Goyal, “Small is Beautiful. Again”, The Economic Times- Magazine Cover Story, December 9-15, 2018
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