Compact car segment to jump by 13% in FY10-11

The compact car industry in India is expected to register a high sales growth of 11-13 percent, in fiscal year 2010-11, though profit margins will come under pressure, as per a research study done by CRISIL.

As per this research report, the increasing competition and new launches in the segment, are the main factors behind this growth, Where at one hand it will result in a 6-7 per cent drop in the sales of individual models, on the other hand the decline in sales per model will increase the cost pressure on manufacturers due to declining economies of scale.

Major car makers of the world planning aggressively to grab a significant market share in the compact car segment in India. Recently many new cars have been launched in this segment, including Chevrolet Beat, Ford Figo and Volkswagen Polo. The segment is already very congested with around 25 different cars including Maruti Swift, Maruti Ritz, Maruti A-Star, Hyundai i10, Hyundai i20, Skoda Fabia, Fiat Punto and Honda Jazz.

According to Manoj Mohta, head of CRISIL Research, to preserve margins and benefit from scale efficiency, manufacturers need to increase sales per model in the compact car segment rather than focus on overall sales by introducing more models.

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