Hot Wheels On The Horizon

Hyundai Motors’ marketing director B.V.R. Subbu can sell himself almost as well as he sells his cars. And the 50,000 Santros he has sold in 343 days bear testimony to his skills as a car salesman. Subbu is equally gung-ho on Hyundai’s new offering, the 1.5-litre Accent, being launched on October 14. "In the year 2000, we should be selling 1,000 Accent cars a month," he says as he shows off the car at Hyundai’s factory at Irrungattukottai, 32 km from Chennai.

Barely 50 km away at Ford’s plant at Marimalainagar, vice-president marketing John Fink exudes the same enthusiasm about the 1.6-litre Ford Ikon. Scheduled launch: mid-November, while deliveries commence in the fourth week of that month. "We expect to sell 21,000 cars in the year 2000. That should give us a 30-35 per cent marketshare of the low-end mid-sized car market (currently defined as Rs 4.8 lakh-Rs 6.5 lakh)."

Cut to General Motors’ marketing office in Delhi. Vice-president marketing Rajeev Chaba is busy preparing for the launch of the 1.4-litre Opel Corsa in mid-December. Deliveries will begin by January. "The lower end of the mid-sized car market (Esteem, Cielo and Siena), currently worth about 30,000 cars a year, will nearly double to 55,000 cars a year thanks to the entry of these new cars. The Corsa should acquire a 15 per cent stake in that market," he says. That works out to a tad over 8,000 Corsa cars a year.
But even as these three manufacturers sharpen their swords to take on one another, is there an element of misplaced enthusiasm on their part? After all, luxury car sales declined by 18 per cent in ’98, and a further 8 per cent downward slide is expected this year. Even in the Esteem-Cielo-Siena category, sales haven’t exactly been shooting through the roof. This, when the Zen-Matiz-Santro segment has more than doubled this year. For that matter, sales of the ubiquitous Maruti 800 have also shown an upward trend. But maybe not. After all, pack leader Maruti Esteem is of ’94 vintage, and the Cielo too was launched in ’95. The only new offering has been Fiat Siena—launched in May ’99—which has been a relative success, despite the constraints of brand and dealer network. These three car marketers are, therefore, entering a market which has suffered a drought of new models. Which could mean a fair amount of latent demand. "The entry of new cars in this segment is bound to spur growth. If the economy picks up, the growth could be huge," says Subbu.
But even then, with the entry of three new cars in one go, it’s bound to be a bloody scrimmage. Auto analysts agree that in terms of the products offered by the three companies, there are few differences. Each car offers the very best of technology available in the world in its product category. The Ikon, for instance, has been specially developed for the Indian market, and it’s the first time that the world launch of a Ford car is being done in India. In fact, the keys of the first Ikon will be handed over by Ford Motor Company’s president Jacques Nasser, who will be making a special trip to India for the purpose. Hyundai’s Accent also is one of the company’s latest offerings worldwide.

The key differentiation that will ensure the success of each of these cars, therefore, is how they are marketed, priced and positioned. And the companies are pulling out all stops in this regard. Especially Ford. The company’s spin doctors began generating hype way back in April, when they introduced the concept of the car to the media. Then, it announced the Ikon name in May, followed by a low-intensity but regular ad campaign, which was running until recently. Then, in September, it unveiled the car at its dealerships, and roadshows are expected to continue till mid-October when it announces the pricing. That’s a full seven-month build-up!

Let’s look at pricing. The benchmark for this segment is the Maruti Esteem, priced at Rs 4.88 lakh for the LX in Delhi, and Rs 5.55 lakh for the VX model. "We believe that our product is a notch above the Esteem, so the pricing will be a notch below that of a luxury car. That should make it between Rs 5.5 and Rs 7 lakh," says V. Sivaramakrishnan, Ford’s general manager, marketing and product planning. He could very well have been speaking for his other two competitors as well, as they share the same beliefs about their respective products. The three will, therefore, be hard pressed to create a price differential between their products.

But the price trend is going to be set by the Hyundai Accent, for it will be the first to announce prices this week. "Thanks to the success of the Santro, customers look at us with a greater degree of comfort than the other companies. Therefore, we believe the price can reflect the product and the brand equity we’ve built," says Subbu. Ditto for General Motors, which also believes the customer will pay that extra bit for the Opel brand. Whether these two companies exercise this luxury is another issue, but this is a luxury Ford cannot afford. After all, the Escort hasn’t exactly done the Ford name a world of good. That’s why the success of the Ikon is far more important to Ford than is Accent’s success to Hyundai or the Corsa’s success to General Motors. Besides, the Ikon is looking at greater volumes than the other two. Therefore, expect the Ikon from the Ford stable to be more aggressively priced than the other two.

What the Accent loses by announcing prices first and allowing competitors to react and set prices accordingly, it expects to gain by garnering initial orders. From the launch date of October 14, to Diwali on November 7, Hyundai expects to deliver 250 cars, since none of the other entrants would be available by then. And when the wedding season begins on November 15, Hyundai’s dealers will be targeting all banquet halls in their area, promising to deliver the Accent as a wedding gift on the wedding day itself. "This will ensure that we have enough sales even in the month of December," says Subbu. But his two competitors don’t believe that Hyundai has all that much of an advantage. Says GM’s Chaba: "The buyer for the premium car is in no hurry. If there is a three-month window between launches, a customer will wait and evaluate all the cars before he makes his purchase."

Then comes the positioning. The target for all three is roughly the same; mid-level executives, and those young at heart. Therefore, the ads go, "The Power to Excite"—Hyundai Accent; "The Josh Machine"—Ford Ikon. The Ikon, though is expected to be a sportier car, offering greater power and is expected to appeal to a slightly younger audience. The Accent is a more benign, family car. "On a broader level, all three are targeting a customer base of 200,000-250,000 a year. This includes those who have bought luxury cars three years ago, and see great value in these new cars, and those who purchased their Esteems, Cielos, Zens and air-conditioned Maruti 800s at the same time," says Chaba. With such a tightly-defined target set, all three firms are heavily focused on direct marketing. Each of them is sending direct mailers to customers who fall in this segment, inviting them to come and test-drive the car. "We are looking at a focused campaign, which relates to the customer and has an extremely low spillover," says Chaba.

And a lot of direct marketing is done at the dealer level. That’s where Ford and General Motors might score. After all, their dealers should be very hungry for success, having stuck with their companies through more thin than thick over the last three years. Says Ashok Sachdev of Harpreet Ford, its dealer in Delhi: "I am confident of selling 300 Ikons a month." Which is what an average Santro dealer does in Delhi. Plus, anticipating and to generate higher volumes, Ford is also expanding its dealer network from 26 to 44, which will cover 36 towns across India.

In addition, all three companies expect to generate a fair amount of sale from existing customers. "Sixty per cent of all car sales come from the ownership experience of previous customers," says Subbu. Ask any Opel, Santro, or Escort owner, and he’ll tell you how he’s being pampered. That, of course, is to get him to buy another car from the same stable.

Even as customers look forward to these new offerings, it’s not just the fate of these three new cars which hangs in the balance. Folks at Maruti are sure to be jittery about the future of their vintage Esteem. What do they have up their sleeves?