Sunday, 31 July 2011

New US standards to boost sales of small car like Tata Nano, Alto, A-Star

For years America has been the last bastion for gas-guzzling big wheels. Now a new industry commitment on mileage could change all that, offering India's booming small car market access to the Mecca of Motown-USA . 

The new CAFE (corporate average fuel economy) targets that White House and theDetroit biggies have finally agreed upon is 54.5 miles per gallon by 2025. 

For India, that means the final frontier for big cars and pick-ups will now be forced to go mini in search of mileage nirvana. That packs in huge opportunities not only for vehicle makers likeTata Motors with strong small car DNA but also component companies and even MNCs likeSuzuki that have honed their small car expertise in theIndia market. 

SaysKumar Kandaswami, senior director , Deloitte: "( The new) CAFE standards would mean the cars in the US are likely to get smaller in the coming years. Given India is amongst the largest manufacturing bases for small cars, it could mean opportunity for exporting vehicles or components." 

Auto industry experts say India's small car focus has offered both home grown companies like Tata Motors and MNCs like Suzuki the opportunity to hone their skills in this market. 

"India is now the largest producer of small cars worldwide and companies like Tata Motors and Suzuki have demonstrated how to make money on small cars which is something other MNCs are still struggling to do," says Rakesh Batra, automotive sector leader at MNC consultancy firm Ernst and Young. That's where India's famed frugal engineering and mini marketing skills will come into play, he adds. 

At 54.5 miles per gallon, the US standards are definitely far more modest than what Indian industry has signed up for. According to theSociety of Indian Automobile Manufacturers (SIAM), the apex body for the auto industry, currently India's CO2 fleet average is 155 gms per litre -the same level (250 gms per gallon) that American carmakers are targeting by 2016. India's target is to hit 123-125 gms per litre by 2020 which would mean cars that are lot more fuel efficient than US CAFE's 24 km per litre target for 2025. 

Already cars like theTata Nano offer 27 km per litre under test conditions. Others like the Suzuki Alto and A-Star range between 20-23 km per litre while the Chevy Beat is 18 kms/ litre. 

Auto experts say since the CAFE targets refer to the fleet the vehicle makers sell, car companies will have to introduce smaller vehicles in their range to keep the average mileage performance up.


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