Foreign automakers have struggled to establish a foothold in the price-sensitive Indian market.
Companies such as General Motors had introduced a wave of new products to expand India's still-modest car market - and loosen local carmaker Maruti Udyog's stranglehold on the region.
But sales have been shaky, and Maruti still dominates the country. Now, GM and other automakers are beginning to introduce more modestly priced vehicles. General Motors India was to launch the Opel Corsa in India this month - a major addition to its lineup.
In November, Staff Correspondent Sadananda Mukherjee spoke to Richard Swando, president of GM India, about the company's plans for the region.
Swando, 50, joined General Motors in 1992 as director of China program development, after working at Chrysler and Ford for 19 years. He was appointed managing director of GM India in 1997.
Edited excerpts from the interview follow:
Now that you are going to launch the Opel Corsa this month, what are your plans for the Opel Astra?
We plan to continue with the Opel Astra. We will launch an improved version just prior to the Corsa, and I think it will bring out some excitement at the auto show.
We know that the Astra has a lot of competitors. We have to have a fresh look. We have to have better features; we have to have a new, powerful engine. It is going to stay new. Or else, we can't survive competition from the Honda City and the Mitsubishi Lancer.
For the six-month period ending last October, you sold 1,560 Opel Astras. That's down from 6,228 in the same period two years earlier. How do you account for the drop?
The Opel Astra is carving its share in the market at 12 to 15 percent. The mid-size market has shrunk, but our market share is increasing each month.
We are No. 3 in the upper end of the mid-segment, behind the Honda City and the Mitsubishi Lancer. Both were launched last year. Both enjoyed the first full year of production this year, and each is enjoying 30 percent market share. That segment is driven by novelty and what is new and what is fresh.
Are you afraid that your market estimates for the Opel Corsa may be inaccurate?
When I arrived here, there was a three-month waiting list for cars. Now, we have overcapacity. We have about 1 million units' capacity chasing about 400,000 customers.
When the economy started a recovery, you had a range of new fresh products at the small end. You had many exciting products like the Hyundai Santro, the Tata Indica, the Daewoo Matiz and even a fresh-looking (Maruti) Zen. All were in an aggressive price range. Maruti also enjoyed some sales rise. GM entered the market knowing that fully well.
What prompted you to launch the Corsa now, when you could have done that two or three years earlier?
We launched the Opel Astra when the economy had a downturn. So GM said: Be cautious, make sure the product is right; make sure the product is Indianized and can survive in the Indian market. Don't rush to market when the economy is in a downturn, but when the economy starts recovering.
What percentage of the Corsa's parts are locally produced?
About 35 to 38 percent to start with. It will steadily increase to almost 50 percent at the end of the first year.
What about fuel efficiency?
Our test vehicles are averaging 13 to 14 kilometers per liter. That's very good for test vehicles.
How many versions do you plan to launch?
Only petrol versions to start with, because the market research shows it (petrol) has a better chance. We also have a diesel model that we are thinking of introducing. We are watching the diesel market, since the government is looking at diesel pricing.
We have a diesel Astra that is selling well, but suddenly purchasers are asking lots of questions. We are a bit cautious about bringing in the diesel Corsa.
The Corsa's success depends on realistic pricing.
We know pricing is most important, and we have to compete with the Fiat Siena, the Ford Ikon and the Hyundai Accent. We will be competitive with those models.
What section of the population are you targeting for the Corsa?
Our main target is the loyal Opel customer who would like to go for a second car. We also are positioning the car as the top 'city' car.
What is the current size of the Corsa segment?
45,000 to 50,000 units.
What share of the market are you aiming at?
We are aiming at 12 to 15 percent.
What has been GM's investment in the car project?
We invested $149 million.
Car sales in the current year will exceed 600,000 units, with the small segment showing massive growth. Do you have plans to introduce a small car?
The Corsa is perhaps one of the smallest cars in the GM family, but it is not small by Indian standards. We are studying a car smaller than that. We know if we have to be successful in India, we have to have a small car. I can tell you for sure that it is receiving serious attention.
Do you plan to produce a small car for India with Suzuki's help?
At the Tokyo Motor Show, we introduced the YGM. It's the first such product with Suzuki's collaboration. Whether we should bring it to India has not been decided.
If the Indian government decides to sell its stake in Maruti Udyog, would you bid for that?
While he was in India, (GM President Rick) Wagoner said we are interested in discussing the matter with the government. But they (officials) have not yet been approached.
Wagoner said GM has a long-term commitment in India. When are you going to make profits?
We were able to achieve a small operating profit in 1997-98. That was at a volume of 10,000 units a year. If we achieve 12 to 15 percent of market share and sell over 10,000 units next year, we may register a profit.
Almost all of the global auto players have rushed to India. Will all survive?
All the players are in the middle segment. But at the end, there must be consolidation. Only the strongest players will survive.
We don't have to seek consolidation, but we are always open to discussion. We are in no rush to make any alliances.
What do you think about the future of the Indian automobile industry?
We see a return of strong single-digit percentage growth, and in some segments, even two-digit percentage growth. We are very bullish about India and we need to be a major player.