Indian car market no longer all about compacts

NEW DELHI—With millions of Indian car buyers trading up from compact vehicles, Japanese automakers are vying for a strategic position in the country’s growing market for minivans.

Compact cars still overwhelmingly dominate India’s market with nearly 70 percent of sales. Utility vehicles including minivans and SUVs account for just over 10 percent of the sector.

However, that picture is changing rapidly, with sales of compact cars increasing by only 1.3 percent year on year in fiscal 2011 while sales of utility vehicles jumped 16.5 percent.

Maruti Suzuki India Ltd., a subsidiary of Suzuki Motor Corp. that accounts for nearly 40 percent of India's passenger car market, released the new Ertiga minivan here on April 12.

"Many urban families in India are now looking for a vehicle that offers more space and flexibility than a sedan, without being bulky, bland and expensive like a utility vehicle," said Shinzo Nakanishi, Maruti Suzuki's managing director and CEO. "The Ertiga is designed for these customers."

While the Ertiga is only 4.2 meters long, it has three rows of seats and can accommodate seven passengers. Prices begin at only 589,000 rupees ($11,400, or 920,000 yen).

Suzuki, which until now has concentrated on hatchbacks and other compact models in India, plans to market the model in Indonesia and elsewhere in the future.

In the past, Indian consumers have been highly price sensitive and compact cars have benefited from government tax incentives.

However, as incomes increase, the potential for utility vehicles in a country where it is not uncommon to see seven or eight family members packed into a compact car is believed to be considerable.

Utility vehicles also bring greater profit margins, so the sector is likely to become crowded quickly.

Toyota Motor Corp. has stolen a lead in the minivan market with its Innova model but now faces serious challenges. In addition to Suzuki, Nissan Motor Co. is planning to release new models this summer and General Motors Co. is aiming to join the market by the end of the year, while Indian manufacturers are also said to be preparing their own minivans.