The slackening automotive sales recorded in the last two months has put the car makers operating in the country under immense tension about whether the ongoing gloom will ever end. The car companies are dreading that the upcoming Indian festivities may be a little slow in sales and considering the prevalent market trend, it is going to be extremely difficult to attract the buyers towards their stores. Further, Market players believe that doling out attractive discounts and freebies has proved ineffective so far in luring the customers, and thus, some vital inspiration is required to turn the tides in their favour.
Expressing his views on the company's strategy on festive discounts, Sudhir Rao, Managing Director (MD), Skoda India, said, “This festive season will see lower levels of sales against previous years as negative sentiments continue to impact demand. Festive discounts across the industry will be significant as car makers fight it out for the limited customer pool in the market. However, Skoda's strategy is not to indulge in major discounts, though there can be slight sweeteners.”
According to the apex industrial body Society of Indian Automobile Manufacturers (SIAM), the car sales registered in the country during August 2012, dropped by 19 per cent at 1.18 lac units, as compared to the 1.45 lac units sold in the same month of 2011. The 19 per cent dip in sales is the country's first since October 2011, and the month old lockout of Maruti Suzuki's Manesar unit along with the slack overall demand are regarded as the prime reasons behind it. The depression in demands for vehicles hit most of the car makers including Maruti Suzuki, Fiat, Honda, General Motors and Toyota along with luxury market players like Mercedes-Benz and BMW.
Acknowledging the ongoing auto market gloom in the country, Sugato Sen, Senior Director, SIAM, said, “Now we are entering a desperate zone. If the negative trends continue in September as well, we will have to revise our (growth) targets downwards.”
Reportedly, the vehicle manufacturing industry of the country is seeking bailout from the government. Underlining the desperation of Indian car makers, Sen further said, “Times are difficult and we need support. Car sales are under pressure, two-wheeler sales have gone down and medium- and heavy-duty commercial vehicle volumes are down. The industry needs urgent help to come out of this situation.”
Reportedly, auto makers are anticipating that the discounts and goodies awarded during the festival season might go even further up, as the inventory levels and warehouses populate more. Thus, most of the companies are succumbing to the slack demand and have reduced their production of vehicles, in order to avoid piling of inventories.
The SIAM Director believes that the Indian automotive market needs a catalyst, in order to escape its desperate situation, just like the one tendered during the fiscal 2009 when India and several economies around the globe were in commotion due to the fall of Lehman Brothers in USA.
Affirming the overall sentiments in the market to be poor, Sen appealed the Indian government to lower the excise duty levied on vehicles. According to the March 2012 Union Budget, the excise duty levied on the two-wheelers and sub-4 metre cars marketed in the country was increased by 2 per cent, while bigger cars and Sports Utility Vehicles (SUV) witnessed the duty hiked by 5 per cent.
According to Sen, the Indian government should lift the ban on its various departments and senior officials, which currently prohibits them from investing in vehicles. He said, “Central government purchases formed a crucial part of the overall sales of the car industry. The purchases were done for top officials, apart from various government departments and ministries, government hotels, PSUs, defence and para-military wings etc. These should be revived.”
Sen further said, “If such measures are not taken now, it may be difficult for the car companies to carry out operations. It is already difficult to generate demand as interest rates and petrol prices continue to be high at a time when the customer sentiment is very low.”
Arvind Saxena, Managing Director, Volkswagen Cars, India, said, “There is not much excitement at the moment.”
