Car makers forced to persist with special discounts and schemes

Car manufacturers in India are facing a peculiar situation that’s a not a favourable sign. Manufacturers are likely to persist with discounts and finance schemes due to continuing rise in petrol prices in hopes of pushing their sales into the market. The so-called promotional events did help some of the manufacturers to sell petrol cars to a fraction higher.

Furthermore, the hike in interest rates has made manufacturers launch finance schemes for the 3rd successive month as most of the Indian cars are purchased on credit, which accounts to nearly 70% while only 30% buy cars on cash.

Chief GM, Shashank Srivastava, Marketing, MSIL, says the change in situation accounts for the prolonged slowdown in the sales of cars.

SIAM (Society of Indian Automobile Manufacturers) reported that car sales have dropped to 7,43,358 units at 1.26% in 5 months from January to August when compared to the previous year. Sales were completely down in July, which was recorded as the lowest when compared to sales in the last 2 years.

Car makers forced to persist with special discounts and schemesOil retailers that are State owned did hike petrol rates to Rs. 66.84 per litre, a hike of Rs. 3.14, on Thursday in Delhi. On top of that, RBI made a 0.25% hike in its policy rates on Friday that made loans expensive now.

Due to the ongoing situation here, car makers are not comfortable and fear these circumstances would only hamper sales when in October festive season starts.

P. Balendran, VP, GM India says, during festivals, sales shoot up to 20%, but due to the current situation expects around 5% sales.

Director, Arvind Saxena, Marketing & Sales, Hyundai India, says the rise in petrol would only create more problems.

Director, Neeraj Garg, Volkswagen India, says due to the rise in petrol consumers would not be going for petrol cars, and they would still be persisting with aggressive schemes to push sales further.

Volkswagen’s finance schemes are offering as low as 6.99% on Polo and Vento (petrol) models, interest rates here are half of what commercial banks are offering.

A Volkswagen dealer in Delhi told the schemes introduced so far did help in cutting down petrol models’ inventory from forty five days to twenty five.

Amit Kasat, analyst, Standard Chartered Security, says the schemes and discounts are attributable to slowdown in sales rather than the increase in petrol recently.

Kasat further said the time is not far when one would see a slump in diesel cars with options limited when going for diesel cars. He made this statement with Hyundai not active in the diesel segment and Tata’s Indica not doing well when it comes to making individual choices.

An unidentified Nissan dealer for Nissan Motors India says they’re also launching similar schemes regarding interest rates and would also be persisting with this and so far have been seeing mixed responses.

Mumbai dealers are benefiting from such schemes with good sales while Delhi dealers are facing the blues and say customers are not even thinking of buying petrol cars despite attractive schemes offered. Delhi dealers say they’ve recorded 10% growth in sales over the past few months selling petrol cars.

Another analyst says the overall idea in luring customers into buying petrol cars was to cut down ownership costs and make the sales of petrol cars equal to that of diesel cars. The analyst feels this idea might be helping manufacturers push their sales, but in the process of doing so, would have to make a sacrifice regarding good profits.

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