French automobile major Renault SA (EPA:RNO) recently launched the Duster sports-utility vehicle (SUV) in India, at a price, that many analysts think will put it in direct competition with local players, Mahindra & Mahindra Limited (NSE:M&M) and Tata Motors Limited (ADR) (NYSE:TTM) (NSE:TATAMOTORS). The Duster was launched at a starting price of 719,000 Indian rupees ($13,260) for the base gasoline model, and 799,000 Indian rupees ($14,348) for the base diesel model, in an attempt to break the stranglehold of market leader Mahindra & Mahindra Limited (NSE:M&M)’s Scorpio and Tata Motors Limited (NYSE:TTM) (NSE:TATAMOTORS)‘ Safari. Sports-utility vehicles are gaining rapid popularity in India because of the growing affluence of the vast middle class, and Renault SA (EPA:RNO) thinks the Duster has the potential to make deeper inroads in the world’s fastest growing automobile market after China, where annual car sales are expected to touch three million units by 2015. Marc Nassif, Managing Director of Renault SA (EPA:RNO) India, expects the country to be among the top three automobile markets in the world by 2020, and said the company is planning to invest around 45 billion Indian rupees ($812 million) by February 2015 to meet this huge surge in demand.
And not to miss out on the bus, other major global automakers are also getting ready with new launches in India. Ford Motor Company (NYSE:F)’s first compact sports-utility vehicle, EcoSport, is expected to be launched in India during the first half of 2013.General Motors Company (NYSE:GM), the world’s largest-selling car maker last year, will introduce the premium hatchback Sail, in September, which would be followed by an entry-level sedan. While, Europe’s No. 1 carmaker, Volkswagen AG (ETR:VOW) (FRA:VOW)’s highly anticipated small car, UP, is expected to hit Indian roads in a year.
But despite their highly ambitious plans, most of these foreign car makers have seen their recent sales dwindle amid the general economic slowdown in India. Spiraling fuel prices and high interest costs have forced customers to defer their purchases. Ford Motor Company (NYSE:F)‘s Indian unit saw sales decline 11 percent to 6,257 vehicles in June. The local unit of General Motors Company (NYSE:GM), last month recorded an 11 percent fall in sales to 7,364 units. Weak demand prompted Tata Motors Limited (ADR) (NYSE:TTM) (NSE:TATAMOTORS) and General Motors Company (NYSE:GM) to halt production at some factories to reduce stock-piling. However, leading industry body, Society of Indian Automobile Manufacturers, doesn’t expect the current slowdown to last too long, and has forecast a sales growth of 10-12 percent in the current financial year.