GM plans to join compact SUV bandwagon

Move comes as government mulls levy on diesel cars

GM plans to join compact SUV bandwagon
General Motors India plans to join the compact SUV rat race riding on the back of the country’s fascination for small and fuel-efficient cars. “There is an opportunity for us to do a small sports utility vehicle. Indian consumers are looking for is a small nimble and efficient SUV. I think we need to go where the market is headed,” Lowell Paddock, president and managing director, General Motors India told Financial Chronicle.

Compact SUVs are roaring for huge success pitch in India after US-based rival Ford Motor globally displayed the EcoSport at the auto expo earlier this month drawing huge hype and anticipation about the niche category falling between Rs 7,00,000 and Rs 10,00,000. These SUVs have smaller engines between 1.0 litre and 1.5 litre against the typical engine size of 2.0 litre to 3.0 litre found in large fuel-guzzling SUVs. Paddock didn’t give a timeline for launch of the compact SUV.

“SUV is one product which everybody wants to own. People want to have a vehicle to suit their requirements during weekends, which is also fuel-efficient,” said Abdul Majeed, auto practice leader, PwC. Compact SUVs may lead to confusion on which car to choose between a mid-sized sedan and an SUV given the fact that mid-size sedans such as Honda City and Hyundai Verna fall in the Rs 7,00,000 to Rs 10,00,000 range. Typically, people own a sedan along with an SUV in India, according to Majeed, but the latter are not fuel-efficient.

The move to launch yet another SUV comes at a time when opinion has been building up in the government to levy extra cess on SUVs and diesel cars as diesel is heavily subsidised.

Oil minister S Jaipal Reddy is reported to have formally proposed to finance minister Pranab Mukherjee to slap an additional excise duty of Rs 80,000 on diesel vehicles in the next budget. The idea of additional excise levy has been proposed by the oil ministry since 2008-09 as a way of raising funds to at least partially meet the centre's diesel subsidy bill.

The American automaker that sells the Captiva SUV in India at present, will go big on volumes with the small SUV following Ford’s EcoSport and French carmaker Renault which is also preparing to tap the niche segment later this year with Duster. Maruti Suzuki showed its prowess unveiling a concept compact SUV named XA Alpha for the first time in 26 years at the auto show. The car market leader identifies compact SUVs as ideal vehicles for the young in urban areas who are looking to own their first utility vehicle that is aggressive in design and at the same time powerful and fuel-efficient.

GM’s compact SUV is expected to be developed in close collaboration with Chinese partner Shanghai Automotive Industrial (Saic) for low-cost advantages. Betting on big volumes, competitor Ford Motor is pumping in as much as Rs 750 crore to make the EcoSport in Chennai. Sales of large SUVs (Rs 15,00,000 to Rs 25,00,000) rose 12 per cent to 17,549 cars between April and December 2011 against year-ago period, according to Siam data.

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