Price is the only factor that can drive car demand: TVS chief

Chennai: Reducing the car prices and improving the road network are the two major factors that will drive up the auto sales in India. An example to this aspect is the increasing two-wheeler sales.

"Two-wheeler prices have come down and India has to learn that prices are to be driven down," said Venu Srinivasan, managing director, TVS Motor Company. He was speaking at Auto Evolution 2003 conference organised by CNBC India.

And the basic economics is that if the prices have to go down volumes have to increase. "If that has to happen the India-based multinational car manufacturers should introduce models produced elsewhere in the world here so that the component industry can derive and pass on the benefit of economies of scale. In the last 10 years there has been lot of low volume vehicles being launched," said Suresh Krishna, chairman and managing director, Sundram Fasteners.

Such a strategy will enable component exporters to offer all-round price cuts. "There is nobody in the world who can supply radiator caps cheaper than us. Given the volume India can produce quality and at low prices. If there are no volumes where is the question of price reduction," he posed.

Clarifying that there is no conflict between component manufacturers and original equipment manufacturers (OEM), T K Balaji, CMD, Lucas TVS, said: "The issue faced by both the players is the market expansion. Cost issues based on excess capacity is a different issue altogether." Referring to the emission standards he said India should leapfrog in technology than go in stages, which in turn will not give the economies of scale.

According to David Friedman, managing director, Ford India, the challenge in India is to establish a viable business proposition. "Small car manufacturers are now losing money and it is the mid-sized segment that is growing." It is a conundrum. The mid-sized car segment does not afford volumes that will drive down the prices.

Referring to Hyundai Motor India's component sourcing strategy, B V R Subbu, president, said: "We started with 50,000 cars first and till date we have sold 3.3 lakh Santros. We firmly believe in a single source for components so that the vendor derives the economies of scale." The company has 69 vendors here.

On the other hand Tata Engineering and Locomotive Company (Telco) follows the platform approach to cut costs. "Most of the large OEMs have embraced the platform approach, said Dr V Sumantran, executive director (passenger car business unit)