GM, Ford take aim at heart of India car market

Detroit automakers have learned that in India, smaller is better.

General Motors Co. and Ford Motor Co. are on track to achieve record sales in India this year by offering smaller, more affordable vehicles. This marks an enlightened change in strategy.

When Detroit's Big Three first approached India in the 1990s and early 2000s, the plan was to remain above the fray of the lowest price segment and offer larger, somewhat pricier cars.

Detroit's logic was that buyers of India's best-selling Maruti Suzuki 800, a car that retailed for just $6,000, would in time trade up to larger, more expensive vehicles.

But more than a decade later, Indian car buyers have remained stubbornly loyal to cheap and cheerful products. Most of the cars on offer from Maruti Suzuki, Tata and Hyundai feature prices at or under $8,000. Together, India's "Big Three" account for a whopping 72 percent of sales.

In response, Ford has just launched the Figo, a subcompact hatch designed in Europe with a sticker price starting at $7,900. Ford sales in India are on track to double to about 60,000 cars this year.

GM is invading India's small car segment with its Chevrolet Spark minicar and its successor, the Beat. These two models will account for 60 percent of the 105,000 cars GM plans to sell in India this year.

GM formed a joint venture in Hong Kong last year with its Chinese partner, Shanghai Automotive Industry Corp., in part to ensure a pipeline of low-cost, small vehicles for India.

Demand for passenger vehicles in India is growing at a clip of 20 percent this year and total sales are expected to surpass 2 million units. By 2015, the market will expand to 3 million units per year.

GM and Ford are right to launch a direct attack on the heart of the market. Indian consumers will trade up to larger sedans eventually. But, for now, offering inexpensive cars is necessary to compete in a meaningful way.