Maruti, Hyundai Eye European Markets

The big car players in India, Maruti Suzuki and Hyundai Motors are expecting huge profits from the stimulus package offered by the European government. The new scrappage scheme has created an intense debate in the European countries. While local people verify the pros and cons of the scrappage scheme, Maruti Suzuki and Hyundai Motors see a window for big opportunities.

Several European countries have introduced scrapping scheme as part if the economic revival package. The scheme results in three main benefits.

· Revives several financial sectors including the auto industry, and steel manufacturing.

· Will phase out old cars to make way for new fuel efficient cars. This will result in lower emission and cleaner environment.

· Will bring in an economic turnaround and create more job opportunities

The Scrpappage system means that the government will offer cash incentives to people who surrender their cars older than 10 years. Car fleet companies have been instructed to renew their old cars. Car owners can surrender the car to local dealers and will be immediately entitled to cash compensation. They can also exchange their old cars for new one. The European governments are laying special thrust on purchase of small cars as they are more fuel efficient and costless. As per an estimate by the UK government, the new cars sales are likely to cross 3,00,000 units in the current fiscal year.

The European Automobile Manufacturer Association (ACEA) too has recommended fleet renewal programme. Some of these companies include big economies like the Austria, France, Germany, Italy, Portugal and Spain. More eastern European countries are likely to introduce similar schemes in near future. Every car surrended under the scheme will attract a cash reward of €1000 to €1,500.

In a scrappage scheme introduced in some European countries in February, it was noted that new cars sales increased significantly. In Germany, new car registrations went up by 30 percent under the scheme and as many as 20 percent of all old cars were replaced with new cars in France. In Portugal as many as 16 percent of new cars sold during 2008, under the scheme, replaced old cars.

As the scheme was in vogue in February over several companies, Hyundai Motors received order for 11,000 units from a single dealer in Germany. The scheme has helped Hyundai receive consistent order for i20. Maruti Suzuki has exported 19,000 units of only A-star (badged as Alto) to European markets. India’s largest car manufacturer Maruti Suzuki has a export target of 1,50,000 units of which 90,000 units are meant for Europe only.

Hyundai Motors and Maruti Suzuki view these developments as an opportunity to push their products into European markets. Currently, Hyundai Motors exports the small cars i10 and i20 in Europe. Maruti Suzuki exports its leading cars like Swift hatchback, Alto and Zen Estilo.

Based on the UK model, many more European countries are likely to introduce the scrappage scheme again. The aim is to create a cleaner environment without sacrificing on convenient mobility.