COMMENTARY
INTERVIEWS
SPECIALS
CHAT
ARCHIVES

Car-makers breathe easy as sales rise in April, May

Veeresh Malik in New Delhi

April and May 1999 gave several anxious moments to the automobile industry in India, reeling as it was under the Supreme Court directive on car emissions in the National Capital Region. There were fears that a drop in sales -- Delhi accounts for about 25 per cent of the market -- might unsettle the industry. The fears seemed to dampen the euphoria generated by the entry of several MNCs that made multi-million-dollar investments in recent years.

However, sales figures for April and May 1999 show a positive trend. This is in the face of the abysmal performance through 1998 and first quarter of 1999. A cursory look reveals that the best upward movement was in the small car segment.

Market sources say the segment fared well for a variety of reasons. The Indian consumer, as is his wont, always seeks value for money with frugality. Easy finance was available. The segment redefined itself beyond the Maruti-800/Omni, to include the higher end Maruti Zen, Hyundai Santro, Daewoo Matiz, Fiat Uno and Tata Indica.

A wider choice, therefore, does seem to spur higher numbers. Auto dealers say the Indian middle class no longer feels that buying a Zen/Santro/Matiz/Indica is socially incorrect -- not very long ago, it was perceived as an attempt to reach above one's station. The added value that these new cars provide over the traditional Maruti-800/Omni is viewed as a tangible benefit, not just a statement.

Daewoo and Hyundai dealers reveal that lower-end models of the Matiz and the Santro have emerged as entry-level cars for 80 per cent of the first-time car-buyers. Maruti dealers reveal, similarly, that converting a prospective Maruti-800 buyer into a Zen owner is very easy and commonly done. Encouraged by easy finance and enhanced awareness, the first-time buyers have learnt to steer clear of second-hand vehicles, they say.

The proliferation of cost-effective dealerships at cheap, non-metro locations has facilitated a large number of hesitant car-buyers to take a close look at new cars. This has also improved the "localisation", in terms of service and maintenance, of these cars. Market leader Maruti has made the deepest inroads into the non-urban market.

The mid-size luxury car segment has been encountering a "wait-and-watch" attitude among prospective buyers. Hyundai's LC is expected to be launched in June, Ford's Ikon is slated for an October launch and the new range from Maruti is in the pipeline. So, the buyers seem to wait, anticipating a drop in prices shortly.

A discount war is already on: free vacations await the Maruti Esteem buyers; reduced price beckons buyers of the Daewoo Cielo (renamed the Executive recently) and the Fiat Siena. Deals are available at the higher end, too, including the Mercedes-Benz. "When there are too many discounts in the market, the consumer gets confused, he withdraws, waits, and buys after the dust settles. Interim, they buy small cars," says a dealer.

Reports that the Euro-I and Euro-II norms would be implemented across India shortly have also affected the sales of existing mid-size models while pushing up sales of Euro-fit small cars, marketmen say.

One more factor is the movement of money from the stock markets to property. And property sellers, flush with cash, seem to splurge it on new cars and white goods.

Election years are, traditionally, periods when vast sums of monies enter the country and percolate down. Some of this seems to be moving towards cars. A car-dealer says a powerful politician sought to buy cars in bulk the other day, apparently to add a touch of class to his election campaign.

Industry sources say the large cars are off the shelf, so to say, while the small cars command waiting lists.

Rohtash Mal, general manger of Maruti Udyog Limited, says that the sudden increase in sales in April and May is due to a technical correction, brought about by low sales during 1998 and early 1999. The lack of success of certain recently launched models has, also, to some extent, meant that customers who were waiting and watching for long, have now gone in for existing models. Maruti, he says, has a waiting list that varies from a month for the Zen to almost six months for the Omni.

B V R Subbu, director (marketing), Hyundai, is quite pleased with his company's sales figures and is looking at June bookings touching almost twice the production capacity, which is currently about 4,500 Santro cars per month. An additional shift for workers is being planned. The Santro has a waiting list of about six weeks, he says.

The Daewoo Matiz is available "off the shelf", and is apparently selling well after the launch of the lower-end models.

G P Dodeja, a retired technocrat, had this to say, moments before making his payment for a new Hyundai Santro: "Any new car launched in India needs to be purchased only after it has completed at least one hard Indian summer with customers. The increase in sales is, partly, due to this reason."

ALSO SEE

The Supreme Court order on car emissions and the impact on the industry

Business news