To say the least, it has not been a happy Diwali for most car companies operating in the Indian car market. Statistics for the month of October were revealed recently and unfortunately, the expected surge in sales has not materialised into something substantial. Reports revealed by Society of Indian Automobile Manufacturers (SIAM), have depicted an overall decline sales as compared to the corresponding period in 2012. Figures suggest that the Indian car market recorded domestic sales of 163199 units in October 2013, which is around 4 per cent less as compared to 169788 cars sold in the same month last year. Ironically, story for two-wheeler market has been the exact opposite as it clocked highest ever sales for a month, which can be considered quite impressive. However, this dip in performance of car makers is a worrying sign and in a lot of ways, could set the tone for months to come.
The tremendous progress shown by the two-wheeler market is backed by clear cut reasons with high demand in rural areas being the main one. Due to good rainfall and subsequently, an excellent harvest, the demand for two-wheelers in rural areas rose swiftly. Incredibly, there was a growth of around 18 per cent in sales of scooters and motorcycles, accounting to around 1.52 million units. In fact, it is due to high sales of two-wheelers that there was an overall growth of 13 per cent in total vehicles sold.
Vishnu Mathur, Director General of SIAM, spoke on this issue, explaining both sides. "There was a big respite due to the stupendous scooter and bike sales with a high 18% growth in October, which pulled the entire auto industry out of the negative zone. Car sales continue to remain sluggish and commercial vehicles posted their 20th straight monthly decline. The two-wheeler segment's performance signals some change in consumer sentiment,” he was quoted as saying.
Since these figures have been released, experts have tried to analyse reasons behind this sort of decline taking place. This fall in sales is peculiar as two months before October had created a window of opportunity for companies as the car market went into positive territory. However, it seems as if there was huge loophole in the projected growth and real picture has emerged now. Auto makers, before the beginning of the festive season, were hopeful about clocking good sales as the month of October is considered quite auspicious to buy a car. Despite this, market conditions remained poor due to slow economic growth and increasing reluctance of consumers to buy new cars. Strangely, demand for small cars in rural areas provided some respite to auto makers.
Although the sluggish condition of economy has affected the market, two reasons have contributed to this dip in sales. In the first place, rising fuel prices have compelled buyers to think twice before going for a new purchase as the running cost directly gets affected. Secondly, there has been a rise in interest rates, thereby leading to a rise in cost of vehicles. Industry experts feel that the government need to step in and take evasive measures before the situation gets out of hand.
A handful of car makers are positive about the future, despite projections of analysts stating that the situation is not likely to improve soon. Companies feel that continuous introduction of new models will slowly and steadily help stabilise the situation. Rakesh Srivastava, Vice-President at Hyundai Motor India, elaborated on how it has generated a positive response from customers. "We have received some overwhelming customer response to our new hatchback Grand i10. Despite the challenging market environment, sales have increased over last month by 17% on account of good monsoons and rural demand, which helped us sell 11,519 units of new Grand i10 within the two months of its launch,” he said.
