The Best Deal On Wheels?

THE styling's terrific. The curves, creases, simple planes, soft flowing shape will make this car stand confidently alongside any contemporary hatchback on a European street," exulted an industrial designer who saw the Indica displayed at a Telco AGM.

Several years and numerous rumours later, Telco's small wonder is finally here; Indica will be unveiled even as this issue hits the stand. Says a Telco spokesman: "In the second week of December, we'll start the launch programme for India's first indigenously developed small car." Known for its trucks and commercial vehicles, the country's oldest automotive company's setting a lot of store by the Indica.

The Tata Small Car has been largely conceptualised, designed and engineered at the company's Engineering Research Centre (ERC) at the Pune plant. The height of the floor and seat has been designed to ensure effortless entry and exit. Interior space is claimed to be better than any other car in this class. Body structure has been designed to meet stringent safety regulations of domestic and European markets. Indica will be offered in two versions—Standard and Luxury—with diesel and petrol options.

Undoubtedly, it's the most awaited car of the decade. Says an executive of Concorde Motors, a 50:50 car dealership venture between Tatas and Jardine Matheson: "We've been getting a whole lot of queries on the price and availability of Indica." Price is one factor the company's still keeping a secret. In an interview to

Forbes Global in June, chairman Ratan Tata had priced the then-unnamed five-seater around US $5,000 (approx Rs 2 lakh) including a 40 per cent sales tax, just right for the middle-class Indian's budget. However, Mumbai dealers estimate it'll be closer to Rs 3 lakh. "In Mumbai, the petrol version may retail at around Rs 2,87,000 while diesel would be closer still to Rs 3 lakh," says a city dealer.

If customers are excited about the pricing, competitors are worried. Says an official from a leading car manufacturer: "If the Indica is priced at Rs 2.5 lakh or lower, we'd have to rethink our pricing strategy. We can't price our cars below cost." Not only Daewoo and Hyundai, which have just launched their small cars, market leader Maruti will also have to get its act together. Says a top Hyundai executive: "If Indica is whatever Telco has promised it to be (see table), then it could be a real winner."

And yet, not everyone is enthused about Telco's new venture. According to investment firm Morgan Stanley Dean Witter, the company's foray into the small car segment will not add shareholder's value. In its September research report, it says the car market will be hit by intense competition over the next five years: "Unless demand picks up significantly, supply will exceed demand, turning India's car market from a seller's to a buyer's market. Returns in the medium term are likely to be sub-optimal and a shake-out can be expected eventually."

There're quality doubts too. "Historically, there have been teething troubles with Telco's new products. Most recently, a small batch of Safaris encountered gear slippage problems. Technically it may not be difficult to set this right, but the adverse impact on image could've a disproportionate effect on sales," said Morgan Stanley. Adds Hormazd Sorabjee, editor, Auto India: "Tatas have never been able to launch a defect-free car. The car might look sexy, but how it performs on the roads is anybody's guess."

Says an automobile dealer in Mumbai: "Until now, Telco has had the luxury of rectifying defects after the launch of the vehicle. The personal car market may not be so forgiving." Says the Morgan Stanley report: "We reckon that risk on the initial quality front is higher for Telco than for Hyundai and Daewoo."

Telco's sales target has been halved to 10,000 Indicas till March 1999; it aims to sell 50,000 units in the first year of launch. The revised target has anticipated a slowdown in demand after an initial spurt when the car is launched. Telco management estimates the car project to break even at annual unit sales of 60,000. However, analysts feel that figure should be at least 90,000. Experts are also sceptical of a diesel engine's performance in a small car. Diesel engines have high vibrations; in a small car, these would be even more pronounced. Reports the June Forbes Global story, "...Diesels are cheap to maintain but also generate noise and vibrations, which will rattle passengers' teeth in such a small car. Questions also exist about the road quality of the Tata cars."

TELCO officials refused to let Outlook test-drive Indica to see how it handles city roads. But they're confident Indica would come out with flying colours in the marketplace. In a Telco AGM, Ratan Tata had proudly announced: "We'll have a car with the Zen's size, the Ford Escort's internal dimensions, the price of a Maruti 800, and with the running cost of a diesel."

Telco has restructured its marketing strategy for Indica. The small car will bear a different logo, other than the ubiquitious T emblem. Within the next three years, Telco plans to have a 115-dealer-strong network. It has already chalked dealerships in 34 cities. Also joining the Telco dealership team is Concorde, the Tata-Jardine Matheson joint venture. Concorde has been handed seven dealerships and the first three in Delhi, Hyderabad and Bangalore are already operational. The company has also tied up with Tata Finance and ANZ Grindlays to finance Indica purchases.

There's no doubt the curiosity factor will sell a few thousand Indicas. But roadworthiness is what would actually determine winners. Even if Telco sells 30,000 to 40,000 diesel Indicas initially, that would give the company breathing space. Out -look's recommendation: wait and see the performance of the car on the roads for a few months before plunging to buy.