Q & A

‘We see a future for small cars in developed markets’

It is a coming of age for the small car. Just as India and the world focus on ultra-cheap cars, the original small car seems to be acquiring a big status globally as more and more people choose to drive small. Importantly, the trend is catching up in Europe and the US. Uwe Achterholt, global head of automotive practice for consultancy major KPMG, speaks with Pankaj Doval:

Is the small car phenomenon restricted only to emerging markets like India or is it spreading to the developed markets?
Probably yes, though the definition of small may be different in different markets. In the US, it is happening more due to concerns on fuel price, but it is environment and sustainability issues in markets in Europe, China and India that is fuelling small car growth.
What is the reason for this trend in developed markets?
The next generation is not so emotional about cars like, maybe, we were. Things like brand, luxuries were important for us but the new generation thinks different. They do not think much about them and see the car more of a commodity to take you from point A to point B comfortably. Therefore, we see a future for small cars in developed markets as well. For example, in Germany people above 40, like me, are brand oriented. But it is more of those in their twenties and thirties who are thinking otherwise — where should i invest my money, for a more fancy car or for a flat. A lot of these guys prefer to invest in other areas than just a car.
So, would you say that premium cars’ sales are under threat?
No, we will always have the premium segment, but there will be a growing low-cost car segment. The premium cars will not disappear. But overall, the trend will be guided by ‘what do i really need instead of what can i afford’. That’s a major change. People are not willing to accept a less safe car, but some are willing to miss fancy features like electrical seats, seat heating or navigation system. So there is room to save money, which can also be probably achieved with less fancy design as a huge portion of production cost for a car goes on design.
There has been talk of a slowdown in the global auto industry. How do you see the health of the industry?
Initially there was a lot of optimism, at least till the fourth quarter of last year. This was even in the US. But after the subprime crisis, there is a total turnaround in the last three months and there is now pessimism. US and other mature markets are not performing well and we see an actual downturn coming. The BRIC markets (Brazil, Russia, India and China) will be the ones to see growth, though it may again be less than they could do.

ADVT : TIMES OF INDIA
DATE : 18/06/2008