rediff.com

NewsApp (Free)

Read news as it happens
Download NewsApp

Available on  

Rediff News  All News 
Rediff.com  » Business » Motown winter: Can sales revive if RBI lowers rates?

Motown winter: Can sales revive if RBI lowers rates?

Last updated on: January 8, 2013 12:40 IST

Motown winter: Can sales revive if RBI lowers rates?

     Next

Next
Business Standard in New Delhi


December turned out to be a mixed bag for the country's carmakers, throwing up confusing signals.

Maruti Suzuki, the country's largest car maker, reported a 6 per cent rise in domestic sales during the month over December 2011. Mahindra & Mahindra's sales were up 18 per cent.

On the other hand, Hyundai, the second-largest car maker, saw sales drop almost 10 per cent. Tata Motors was down a staggering 51 per cent.

Toyota was down almost 25 per cent during the month, while General Motors fell over 20 per cent. Honda and Ford reported 300 per cent and nine per cent gains, respectively, but on a smaller base.

These top eight carmakers, which together account for over 90 per cent of the market, sold 175,613 cars during December 2012 - 6.23 per cent less than 187,285 in December 2011.

Click NEXT to read further...


Photographs: Babu/Reuters

     Next

Motown winter: Can sales revive if RBI lowers rates?

Prev     Next
Prev

Next

This in spite of the new launches by many of them (General Motors' Sail U-VA and Tata Motors' Manza Club Class sedan and Safari Storme, for example) and the heavy-duty discounts put on offer by car dealers.

December, every year, is a lean month for car sales because buyers like to wait for the next year.

It comes in handy during resale - imagine owning a 2012 model when by waiting for a month you could have owned a 2013 model. Carmakers say this shows that consumer sentiment is at rock bottom.

But there could be another factor at work here: expectations that banks may soon lower interest rates.

Finance Minister P Chidambaram has made innumerable statements that the government has done its bit to rein in its fiscal deficit and curb inflation, and therefore it's time for the Reserve Bank of India to cut interest rates.

Click NEXT to read further...


Image: Tata Safari Storme.
Photographs: Courtesy, Tata Motors

Prev     Next

Motown winter: Can sales revive if RBI lowers rates?

Prev     More
Prev

More

All of this has strengthened the expectations of an interest rate cut when the next review of monetary policy takes place later this month. Ad that took its toll on car sales in December.

That's perhaps why Maruti Suzuki's entry-level cars such as the Alto, A-Star and WagonR, which cater to highly price-sensitive buyers, saw a 15 per cent dip in sales during December, while the compact segment (the Swift, Ritz and Estilo) grew almost 10 per cent.

In that sense, December sales could be a blip, and demand could pick up whenever interest rates are lowered. The headroom for growth is still there.

Careful analysis of the December numbers shows that Maruti Suzuki's growth has been led by two models: the Swift D'Zire and the Ertiga. Both cars are available in models that run on diesel.

Mahindra & Mahindra's strong performance too is led by the heavy presence of diesel SUVs in its portfolio. People are still buying diesel cars in large numbers in the hope that the government will not reduce the subsidy on the fuel.

The government continues to delay "biting the bullet" and cutting subsidies. If it does, that could add another twist to the unfolding drama in the car market.


Image: Alto 800.
Photographs: Courtesy, Maruti Suzuki India

Prev     More
Source: