Developing a small car for the Indian market at a reasonable price was what Mr Rattan Tata chairman of the TATA group wanted to achieve when he started with the car project. The Telco part of the TATA group of industries started with manufacturing trucks in collaboration with Mercedes Benz. Later on the company started manufacturing light commercial vehicles. Product range expanded when the company decided to get into the utility vehicles and finally into passenger cars.
The Indian car industry was closed to competition even in early eighties. There were only three companies that were allowed to produce cars in India. The changes started when government with Susuki Motors produced new generation cars in the country. Till that time the old companies were producing models that were outdated elsewhere in the world. The companies never wanted to improve since whatever they could produce were easily sold.
With the liberalization of the Indian economy, entry restrictions into the Indian market were gradually removed. The first set of companies that came into the Indian market did offer variety and international standards. But most of them were beyond the reach of majority of Indians. The 800 cc Maruti car from Maruti Susuki was the only choice. The 1400 cc Indica with its base price of Rs 2.95 lakhs was supposed to compete with the Maruti 800 with a price tag of Rs 2.10 lakhs. Struggle for market share has become intense, with Maruti announcing a price cut of almost Rs 25,000, bringing the price of a no-frill Maruti 800 to Rs 1.85 lakhs.
The launch of Indica is likely to reshape the car market - diesel is now a small-car option. For those who drive more than a minimum distance every month, the saving on fuel would more than justify the additional financing cost of Rs 1 lakh that a diesel car calls for over the cheapest petrol option. The saving in fuel costs is due to the artificial price difference between petrol and diesel in India. Diesel cars makes more sense to Telco which has no background in petrol engines.
Declining sales and tough competition in the small car market has forced Maruti Udyog Ltd (MUL) to announced steep cuts in the prices of its 800 cc car, the Zen and the Omni van. Maruti 800 with leaf spring suspension and bias tyre is being priced at Rs. 1.85 lakhs (lower than the current price by almost Rs. 25,000), a new Maruti 800-EX with coil spring suspension and radial tyres at Rs. 2.09 lakhs and the Maruti-DX (deluxe version), now with radial tyres also, at a price of Rs. 2.46 lakhs, a decline of over Rs. 11,000. All these prices are ex- showroom, ex-Delhi. MUL has also cut the prices of the Omni van, pricing the eight-seater Omni-E at Rs. 1.8 lakhs, lower by Rs. 17,000 and the Omni five-seater will sport a new price of Rs 1.98 lakhs, lower by about Rs. 7,000.
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