CAR MAKERS - EVERYTHING HINGES ON FESTIVE DEMAND
By Ruma Dubey
Festivals and marriages are the only time when people generously loosen their purse strings. All the pent up desires break barriers and there is usually a flood of demand for all and sundry – right from cosmetics, clothes, buying a new house, home décor , cars and more. So naturally, it is the time when companies also make the most of this ‘pent up demand’ and help people spend faster wit enticing discounts and sales.
This is also the time when auto companies brace for the best season of the year. The second half is usually their best, with festivals, New Year and then the fiscal year tax rebates. Not surprisingly then, the Indian car market will witness a total of 30 new cars this festive season. With the inauspicious ‘pitrupaksha’ ending on 15th Aug, two news cars have already been launched – the much awaited Alto 800 from Maruti and Rexton from M&M’s Korean arm, Ssanyong. There are four more launches this week – two new cars from Tata Motors - Indigo Manza Club Class and Safari Storme, which is to be launched today and the new Figo from Ford. Honda is launching tomorrow, the automatic transmission version of its compact car Brio.
And this is just the beginning; there seems to be an avalanche waiting to come rolling down as the festivities reach their zenith. A total of 30 cars (these 6 included) are scheduled for a launch in the coming days and months. And this is when the question pops into the mind like a bulb getting switched on – is there a demand for so many cars?
Well, the companies would have surely done their bit of research and with an ear to the ground they would have surely recognized that there will be buyers. This is in sharp contrast to the industry figures. The overall growth in domestic sales during April-September 2012 was 3.62% on a YoY but Sep’12 sales were down 9.43% over Sep’ 11. More importantly, passenger car sales for Sept, on a YoY was down 5.3%. And that’s not all. The Society of Indian Automobile Manufacturers (SIAM) cut the FY13 car sales growth estimates, expecting it to grow just 1-3%. SIAM had already cut its initial estimate of 10-12% growth to 9-11%.
Car sales have taken a beating due to much obvious reasons – increase in price of fuel, with diesel now at the same price of petrol as in 2010. So it is no longer a cheaper option. Maybe this could see more people buy petrol-only cars or many opting for CNG vehicles. The other reasons are overall pessimism in the economy, high interest rates and rising inflation, leaving very little money to make such bug ticket purchases. But car makers feel that the bad patch is now over and expect rates to start softening, which will make car loans cheaper. High price of fuel is something which we all will have to live with but the growing affluent middle class now feels that a car is a necessity. And with many having put off buying a car for so long, could now let of all this pent-up demand.
Kudos to the optimistic spirit of the car makers but the fact remains that they are sitting on a huge pile-up of inventory and even till end of Sept, it had not cleared up. And despite discounts, footfalls and enquiries also remained tepid. Many dealers say that inventory period for petrol cars is almost 60 days compared to 3-4 weeks earlier and some variants of diesel cars are available off the shelf. Maybe we can expect Oct and Nov to be good as the ‘inauspicious’ period fell in Sept and mid-Oct and with that behind us now, maybe things could look up. Yet, it is not expected to be as upbeat as last fiscal. Usually, this festive period sees an almost 20% uptake in sales but this time, it is expected to be around 7-9% only.
Though there are festive launches and discounts, the underlying moods are somber and this festive season, despite so many new cars, car companies might have much to celebrate, with the exception of Maruti. The company already has a pre-launch order of 10,000 cars for its Alto 800 and at present, the Manesar plant is rolling out about 800-1,000 units a day and expects production to return to complete normalcy by the middle of October. So Maruti is the stock and Alto 800 is the car to watch out for this festive season!
PS: 30 new car launches? As such we are stuck for hours in traffic, what happens when more cars come onto the road? Dinner in the car?