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Car buyers refuse to bite excise carrot

February 28, 2014 10:28 IST

Car buyers refuse to bite excise carrot

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Swaraj Baggonkar in Mumbai

Automobile companies and their dealers were in a festive mood after the finance minister’s surprise interim Budget announcement of a four per cent excise duty cut on all passenger vehicles.

About 10 days later, the cheer seems to be fading, as potential buyers remain indifferent.

Dealers and manufacturers say sales have remained at around the same level as previous months, while there has been only a marginal increase in the number of enquiries.

This is despite the duty reduction translating into a cut ranging from Rs 1,500 on a two-wheeler to Rs 1,35,000 on an India-made SUV or premium car.

A Mumbai-based dealer with showrooms of Toyota, Tata Motors and Ford says: “There has been virtually no increase in footfalls or official enquiries.

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The image is used for representational purpose only


Image: Models pose by Toyota cars during the 15th Shanghai International Automobile Industry Exhibition in Shanghai.
Photographs: Reuters

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Sales are where those were last month. This is despite eight-10 per cent discount being offered to buyers. (A reduction in) the interest rate cut could have helped, but that looks unlikely.”

Mohan Himmatsingka, president of the Federation of Automobile Dealers Associations (Fada), the apex body representing automobile dealers of India, says: “Customers are not prepared to spend.

“We are reaching out to customers and informing them about the cut. The inventory level at present is of 65 days. If it is of more than a month, dealers start to bleed.”

While companies accept there has been a negligible impact on sales since the cut, they hope demand momentum will gather steam, with a few commercial launches and increased marketing activity, by next month.

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The image is used for representational purpose only


Image: Honda CR-V
Photographs: Courtesy, Honda

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Some new models like the Ford EcoSport, Hyundai Grand i10 and Maruti Celerio are enjoying a healthy demand. From next month, there would be commercial launches of Hyundai Xcent, Datsun Go and Fiat Linea.

Mayank Pareek, chief operation officer (marketing & sales), Maruti Suzuki, says 10 days are a bit too early to make a conclusion.

He expects some positive impact on sales once the information about excise duty cuts spreads further.

Pareek, however, is quick to add that the duty reduction is a welcome step for the industry and the company has promptly passed on the full benefit to customers.

Pawan Goenka, executive director & president (automotive & farm equipment sectors) Mahindra and Mahindra, says: “Traffic has increased. We will know the sales impact only by the month-end.”

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The image is used for representational purpose only


Image: Ford EcoSport.
Photographs: Courtesy, Ford
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M&M, for which 85 per cent of sales comes from utility vehicles, had borne the brunt of a slowdown, with its sales falling 18 per cent to 177,757 units in the first 10 months of this year (against 216,904 units in the same period last year).

M&M controls 41 per cent of the UV market and, therefore, registered a fall higher than the industry average of 4.5 per cent.

Analysts at Axis Capital say the excise duty cut should aid demand revival, while its impact might not be significant in the absence of an improvement in economic activity and income levels.

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The image is used for representational purpose only 

 


Image: Mahindra electric car e20.
Photographs: Courtesy, Mahindra & Mahindra
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Their peers at Ambit Capital say the move is unlikely to bring about a meaningful uptick in demand, as the macro environment continues to be subdued and fuel prices remain high.

Mayank Pareek, chief operation officer (marketing & sales), Maruti Suzuki, says 10 days are a bit too early to make a conclusion.

He expects some positive impact on sales once the information about excise duty cuts spreads further.

Pareek, however, is quick to add that the duty reduction is a welcome step for the industry and the company has promptly passed on the full benefit to customers.

Pawan Goenka, executive director & president (automotive & farm equipment sectors) Mahindra and Mahindra, says: “Traffic has increased. We will know the sales impact only by the month-end.”

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The image is used for representational purpose only


Image: Maruti Suzuki WagonR.
Photographs: Courtesy, Maruti Suzuki
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M&M, for which 85 per cent of sales comes from utility vehicles, had borne the brunt of a slowdown, with its sales falling 18 per cent to 177,757 units in the first 10 months of this year (against 216,904 units in the same period last year).

M&M controls 41 per cent of the UV market and, therefore, registered a fall higher than the industry average of 4.5 per cent.

Analysts at Axis Capital say the excise duty cut should aid demand revival, while its impact might not be significant in the absence of an improvement in economic activity and income levels.

Their peers at Ambit Capital say the move is unlikely to bring about a meaningful uptick in demand, as the macro environment continues to be subdued and fuel prices remain high.

The image is used for representational purpose only

 


Image: Maruti Suzuki Ciaz.
Photographs: Courtesy, Auto Expo
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