Maruti Suzuki India Ltd has launched a cheaper, more powerful and fuel-efficient version of its Alto - the world's best-selling small car - as competitors including Hyundai and Tata Motors flex their muscles in the entry-level market.
Since 1984, Maruti's entry-level models have outsold anything in India's car market, as millions of middle-class families and first-time owners in the developing country flocked to its Maruti 800 model and its successor, the Alto.
Cheap to buy and run, both cars became instant best-sellers in a sector that Maruti Suzuki dominated until the late 1990s. But as more automakers move into the market, and more Indians get the cash for larger cars, its grip has slipped.
Sales of Maruti's entry-level models are down 21 percent so far in the current fiscal year, hit by greater competition from rivals including Hyundai Motor Co's Eon and Tata Motors Ltd's Indian-made Nano.
The company, controlled by Suzuki Motor, has priced the Alto 800 at 244,000 rupees, cheaper than its predecessor but still more costly than the Nano, which starts at around $2,685.
India's per capita income in the 2010-2011 fiscal year was estimated at 53,331 rupees, according to government data. A five-day family holiday to Darjeeling starts from around 15,000 rupees per person.
"This is certainly going to boost Alto sales that have lagged recently. It will boost the brand," said Ashish Nigam, auto analyst at Antique Stockbroking in Mumbai. "But given the competition... this won't be a game-changer."
China's biggest-selling small car, Chery Automobile's QQ, starts at around $8,800, while the Volkswagen AG Gol, Brazil's most popular small car, starts at $13,750.
Maruti spent 4.7 billion rupees developing the car. The petrol model offers 15 percent greater fuel efficiency than its predecessor, the company said.
"I am sure it will help us in reviving the numbers," said managing executive director Mayank Pareek told reporters at the launch event. "The proof is in the pudding. 10,000 customers have booked the car already, without having any idea of the price."
Maruti Suzuki shares were up almost 2 percent at 2:03 p.m.
In 1983, India was selling around 40,000 cars a year. For those able to afford the luxury, choice was limited mainly to heavy, oversized replicas of British cars, most famously the Ambassador, a converted Morris Oxford still made by Hindustan Motors and a favourite of Indian politicians.
Maruti's 800 changed all that, offering a mass-produced vehicle that then-Prime Minister Indira Gandhi dubbed the "people's car". Until 18 months ago, Maruti Suzuki sold every other new car in India.
In the fiscal year that ended in March, it sold over 310,000 Altos, making it the world's biggest selling small car. Indians bought 2.02 million cars that year.
Nissan Motor Co, which recently doubled its Indian production capacity, has said it will use its revived Datsun brand to bring a low-cost small car to India in 2014.