SIAM may reset car segments

The long-awaited reclassification of passenger cars may well be around the corner. Going by top automobile industry sources, many carmakers are now pushing for a change.

Currently, the Society of Indian Automobile Manufacturers (SIAM) classifies cars on the basis of length only. However, these carmakers want the classification to also take into account the engine displacement and horsepower (hp).

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Requesting anonymity, the CEO of a large car company told DNA Money, "The segmentation today is outdated; it needs to change. We have been holding negotiations with many members of SIAM and there is a general consensus on effecting changes by including parameters such as engine displacement and hp. If segmentation changes, market shares are also bound to change."

But, why should market share positions get affected by merely reclassifying vehicles?

The CEO pointed out that though Maruti Suzuki is by far the largest car maker in India, its portfolio of cars priced above Rs 3 lakh "does not have a single brand that is a market leader." While this claim could not be verified (Maruti shares only the combined sales of its hatchbacks on a monthly basis, not the brand-wise breakup), the company remains the clear market leader in the compact car segment by virtue of combined sales numbers. Maruti sells the M800 besides the Omni, Alto, WagonR, Zen Estilo and Swift hatchbacks.

As on date, SIAM classifies cars up to 3.4 metre as A1 where only M800 qualifies (the Tata Nano would also fall in this bracket soon). All the remaining hatchbacks, which are up to 4 metre long, come under the A2 segment — Fiat's Palio, Ford's Fusion, GM's Spark and UVA, Hyundai's Santro, Getz and i10, the Maruti brands and Tata Indica.

Besides correcting any market share skews, such a reclassification will also take care of another problem. Currently, cars priced at Rs 2-4 lakh, Rs 3-6 lakh and even Rs 7 lakh are all clubbed together in the A2 segment.

"Any reclassification should make a clear distinction between cars whose price points are so varied. How can a Maruti Swift or Hyundai Getz compete with, say, a Maruti Alto or a Hyundai Santro?" asked the CEO of another carmaker.

He gave a typical example. Last week, General Motors slashed the price of its small car 'Spark' to Rs 2.66 lakh, bringing it in the same bracket as some variants of the Indica Xeta and the base version of Hyundai Santro.

But, are these three brands comparable in specs and even the engine displacements?

According to GM's P Balendran, the company is offering value for money at this pricing and hopes to see monthly Spark sales spurt to over 4,000 units from an average 1,800-2,000 units till now.

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But Rajiv Dubey, president - passenger cars at Tata Motors, said the Indica versions in the Rs 2.6-3 lakh price bracket have an altogether different appeal. "In size and specs, the Indica has always been a 'B' segment car at 'A' segment pricing even the below-Rs 3 lakh variants sell well for us."

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A Hyundai India spokesperson said the Rs 2-3 lakh price bracket "is the magic price band because it attracts first time buyers." He, however, admitted that the non-AC Santro does not account for even 10% of overall Santro sales.