Small car engine ready, says Bajaj

Bajaj Auto Managing Director Rajiv Bajaj said the company has, in partnership with Renault-Nissan, developed India's most fuel efficient and least-polluting car engine. The engine has been developed for the small car the three companies are together planning to launch in the country in 2012. He also said the car would be priced below Rs 2,00,000.

The car is expected to compete against Tata Motors' Nano, which at an ex-showroom price of Rs 1,23,000 is billed as India's cheapest.

Bajaj said their car would give a mileage of 30 kilometre to a litre of fuel and emit less than 100 grams of carbon dioxide after a kilometre-long run. Currently, Nano, with a CO2 emission rate of 101 grams to a kilometre, is considered the least polluting car in India. It gives a mileage of 20 kilometres to a litre.

"The price of the car will be below Rs 2,00,000. We were very clear from the beginning, that we are not making the cheapest car in the country or a Rs 1-lakh car. We also do not want to cut back on features of the car. But, of course, we are leveraging the lower costs structure that we enjoy for making two-wheelers," Bajaj told Business Standard.

Renault-Nissan chief Carlos Ghosn has been talking of a car for over a year that would be priced at $2,500.

With the industry expecting Nano's price to go up, the proposed Bajaj-Renault-Nissan car could lead to a battle between the two giants in the entry-level market.

"This market will be very competitive, going forward, as more players come in," said Abdul Majid, auto analyst and partner in PriceWaterhouse Coopers. "Bajaj's entry into this category will make it tough for Nano to retain its numbers."

Elaborating on the strategy behind the proposed car, Bajaj said: "When we were working on the car, our main aim was to provide a product which will have low cost of running and maintenance, so that two-wheeler owners can upgrade. We have now been able to achieve development of an engine which will give us 30 kilometres to a litre, and together with the low CO2 emission, it would be a powerful city car for consumers." Bajaj said the car would be on the roads in another two to two-and-a-half years.

He said the objective behind the proposed car was to provide the consumer with a vehicle that would cost about Rs 5,000 a month to run and maintain.

"Today a mobike consumer spends about Rs 2,500 to Rs 3,000 to run and maintain a bike. It takes about Rs 8,000 to Rs 10,000 to run and maintain a Maruti small car. This consumer wants to upgrade, but he is not willing to spend so much money every month, but he could go half way. So, what we are looking for is a car which can be run, as well as maintained, for Rs 5,000 a month".

Bajaj said their small car project got delayed by over an year only because the company wanted to build a car which could offer best fuel efficiency.

"If we wanted to make just any car, we could have bought a company which makes them. But we wanted to do it differently." Over the past few years, this low-cost car segment has become very lucrative because the car penetration level is low in the country and there is an increasing number of two-wheelers owners who would like to upgrade to a car.  According to the Society of Indian Automobile Manufacturers, 9.3 million two-wheelers were sold in 2009-10.

"All vehicle manufacturers are seeing huge opportunity in this newly created Nano or ultra low cost segment," said Rakesh Batra, national leader (automotive practice) Ernst & Young. "As this segment is expected to attract two-wheeler users, there is a huge market potential waiting to be tapped."

Agrees P Balendran Vice President of General Motors. "The new segment will only expand the car market as it will see more and more consumers upgrading from the two wheeler segment. " General Motors India and Hyundai Motors India are also working on low-cost cars (smaller than their existing models).

Hyundai had earlier said it would look for a small car model at the $ 3,500 price band.

Experts said these cars are expected to be equally fuel efficient.

"The Bajaj car will face challenges not only from the Nano, but the to be launched 800 cc Hyundai car as well as a re-engineered product from Maruti Suzuki in India," said B V R Subbu, former president of Hyundai Motors India. Agreeing with this view, a senior executive of a leading automobile company said, "To expect that other players are not developing fuel efficient engines would be stupid. I am sure Hyundai 800 cc, which is expected to be priced at Rs 2.5 lakh to 2.8 lakh,  will have an engine which will match Bajaj's. I think all auto companies are working on engines which provide fuel efficiencies of over 20 kilometre already."