India Passenger Cars:The evolution of automatics - can AMT make inroads into the mid-size segment?

As the Indian passenger car segment gets more competitive, we believe that the introduction of automatic variants willbe an important differentiator. In our conversations with OEMs, they highlight that automatics account for 25-35% ofsales across models – from entry level hatchbacks to mid-size sedans (which is significantly higher than the 5-10% levelsearlier). However, the view is divided on the usage of the various transmissions – AMT, CVT and the conventionalautomatics across the product segments. Our View: We believe that OEMs will have to strike a balance between drivequality, fuel efficiency and pricing. As the entry segment is price conscious, the higher mileage AMTs have gained acceptance.

    However, in the mid-size segment, consumers will be more discerning about the drive refinement, in our view – CVTs offerimproved mileage as well as a smoother drive, though they are more expensive.

    Traditionally the resistance to automatic variants in India has been due to: i) lower fuel efficiency, ii) higher price, iii) ease /refinement of the drive. OEMs have been introducing alternative technologies including the automated manual transmission(AMT) and the continuous variable transmission (CVT) to address these issues. While AMTs offer higher fuel efficiency and arecost effective, they are not as refined to drive (as the gearshifts are slower). The conventional automatics (with torqueconverters) are low on fuel efficiency as well as more expensive while the CVTs are more fuel efficient than manuals, howeverthey are expensive.