Struggling India Carmakers Look to Show for Slump Reversal

Indian carmakers have seen better days. Auto sales in the country are headed for their first drop in 12 years as the economy grows at a pace that’s close to a decade-low.

So market leader Maruti Suzuki India Ltd. (MSIL) to Tata Motors Ltd. (TTMT), grieving over the sudden death of Managing Director Karl Slym, are counting on the biennial New Delhi Auto Expo this week to become a turning point as they seek to revive demand with their latest vehicle models.

It won’t be easy. Asia’s third-largest auto market is shrinking at time when Indian inflation is higher than anywhere in Asia, undermining the economy, loans are expensive and government help is nowhere in sight as political bickering escalates before the general elections due in May.

“The only way to turn things around is if people are excited by the new models and concepts at the Auto Expo, which is why the show is crucial,” said Deepesh Rathore, director at Emerging Markets Automotive Advisors in New Delhi. “Slym’s untimely death will be a sad overhang.”

The economic slump has prompted consumers in India, already the world’s biggest market for hatchbacks, to stop flirting with gas-guzzlers and return to small cars. Hatchbacks accounted for 55 percent of the 1.8 million passenger vehicles sold in the country during the first nine months of the Indian fiscal year, which ends on March 31.

Photographer: Sanjit Das/Bloomberg

Sales assistants attend to customers inside a Maruti Suzuki India Ltd. dealership in New Delhi, India. Close

Sales assistants attend to customers inside a Maruti Suzuki India Ltd. dealership in New Delhi, India.

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Photographer: Sanjit Das/Bloomberg

Sales assistants attend to customers inside a Maruti Suzuki India Ltd. dealership in New Delhi, India.

That’s why small cars, along with compact SUVs -- the focus of the last auto show -- are likely to dominate the show floor this year.

Tata Spotlight

Tata, maker of the flop that’s been the $2,300 Nano, will be in the spotlight. The Mumbai-based company, whose sales in India have fallen more than at any other carmaker, today unveiled a hatchback, Bolt, and a compact sedan, Zest. The company will be paying tribute to Slym, who had been heading the company -- except for the profit-driving Jaguar Land Rover unit -- before he fell to his death at the Shangri-La hotel in Bangkok just over a week ago.

Slym “personally oversaw our buildup toward new launches at Auto Expo 2014 and we are going ahead with all we had planned with him,” Tata said in e-mailed comments. “This is the start of a pipeline of new launches that you will see every year,” Ranjit Yadav, the president of the passenger vehicle business at Tata, said at a news conference in New Delhi today.

Shares of Tata fell 3.8 percent to 336.40 rupees in Mumbai trading, the lowest close since Oct. 1. The stock was the biggest loser on the 10-company S&P BSE Auto Index.

Costly Loans

Maruti, majority-owned by Japan’s Suzuki Motor Corp., plans to introduce the Celerio hatchback, a yet-to-be named concept SUV and a sedan. While the New Delhi-based company widened its lead in India this fiscal year, domestic sales shrank 6.3 percent in January, the second drop in three months.

Reserve Bank of India Governor Raghuram Rajan has raised the benchmark interest rate thrice -- the latest 0.25 percentage point increase last month -- since taking charge of the central bank in September to protect the rupee from external shocks and tame inflation. With about two-thirds of the cars delivered in India being sold on loans, higher borrowing costs can delay purchase decisions.

“I don’t think a 25 basis point hike or cut will make that much of a difference,” Sugato Sen, the deputy director general of the Society of Indian Automobile Manufacturers, said in a telephone interview. “What will have a difference will be 1 percentage point change. That can impact sentiment.”

Datsun Concept

Among foreign automakers, Ford Motor Co. presented a new compact concept vehicle and Nissan Motor Co.’s low-cost Datsun brand will display a prototype of a hatchback that will compete against Maruti’s best-selling Alto minicar. Nissan will also unveil production versions of the Go hatchback and Go+ minivan, whose deliveries will begin this year.

“Success in India is critical for Ford’s global success” as the country is set to become the world’s third-largest market by 2020, Nigel Harris, the president of the automaker’s India unit said today. “The Ford Ecosport and the Ford Figo have generated thousands of new customers for Ford in India.”

Honda Motor Co., which has climbed to the third spot among carmakers in India from as low as No. 8 in 2011 on the back of its entry into diesel models, will show a new version of its Jazz hatchback, a crossover concept called Honda Vision XS1 and the Mobilio minivan. The Jazz and the minivan will go on sale in the South Asian country in the year ending March 2015, though Honda isn’t sure if India’s slump will be over by then.

“A lot of new models are being showcased by everybody with the hope that this will create excitement and spur customers to want to own a car,” Jnaneswar Sen, Honda’s India sales chief, said in a telephone interview. “Whether this will boost demand or not, I don’t really know.”

Nano Twist

Back at Tata, the motor show may offer a chance for the company to recover some ground after sales of its passenger vehicles in India slumped 37 percent in the first nine months of the fiscal year. Last month, it introduced the Twist variant of the Nano, equipped with features such as power steering to upgrade its image and win back urban buyers.

The company will do so without Slym, who joined Tata in 2012 after a 17-year career at General Motors Co. and would have celebrated his 52nd birthday on Feb. 9. Thai police said last week that preliminary evidence indicated Slym, who was in Bangkok on business, jumped to his death after a quarrel with his wife.

“Since the Nano, Tata hasn’t had any new models at the show,” Rathore said. “This year’s show in a way will be a tribute to Mr. Slym, as whatever the company displays will be part of the changes he brought at the company.”

To contact the reporter on this story: Siddharth Philip in Mumbai at sphilip3@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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