Automobiles - Auto Expo: Two wheelers, SUVs steal the show; sector update ::Edelweiss,

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We attended the Auto Expo, the largest automotive show in India, held in Delhi from January 5-6. Our key observations were: (1) lack of new launches in cars as has been the case in the past two editions; (2) car makers are targeting new segment compact SUV where Maruti has taken the lead; and (3) competitive intensity is set to increase in the two-wheeler space.

Cars: Lacked excitement

Nano was the star in 2008 whilst various new small cars from global car makers, eying entry into the Indian small car space, were exhibited in the 2010 edition of the Auto Expo. The current edition (eleventh) saw the debut of only Renault Pulse. The receding competitive intensity augurs well for Maruti Suzuki (MSIL).

Compact SUV: The new frontier

Through compact SUV, car makers are targeting compact car owners looking to upgrade to sedans. Thus, focus is on interior space, styling and mileage. MSIL has taken the lead with Ertiga, a seven seater 1.4 litre petrol and 1.3 litre diesel urban SUV. Renault unveiled 1.5 litre diesel engine powered SUV Duster. Also, Ford and MSIL showcased their concepts for future SUV products. Mahindra & Mahindra (M&M) is also working on Xylocompact. In our view, this should create a new segment and not cannibalize existing SUV sales given the different value proposition in terms of power and pricing.

Two wheelers: Competition set to heat up

Honda unveiled its new mass market offering Dream Yuga. It comes with 110cc engine and is likely to be priced at around INR46,000 (ex-showroom Delhi). It should compete with Hero Motocorp’s 100 cc bike Passion Pro which is similarly priced. The scooters segment is likely to see the maximum launches with Suzuki, Yamaha, Honda, Hero and Vespa showcasing their new offerings. 

Commercial vehicles: Bajaj and Daimler steal the show

Bajaj RE60 generated maximum interest in the commercial vehicles space where the company is looking to upgrade existing three-wheeler owners by relying on higher mileage and government support. Daimler also unveiled its products which it intends to launch in Q2FY13.

To conclude: Auto expo indicates that competitive intensity is increasing across product categories, which is good for consumers, though, not necessarily for investors. Two wheelers are likely to see maximum launches whilst cars the least. Hence, pricing discipline hitherto observed in two wheelers may come under pressure. The passenger vehicle market is likely to expand with the new compact SUV segment.