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A leading Indian car maker plans to tell its distributors to increase discounts to woo customers back to their showrooms. "Customers are shocked by the hike in interest rates, and it usually takes 4-6 weeks for them to absorb the impact," said a worried executive of the car company.
A Fiat dealer in Delhi said his showrooms were virtually empty. "We see customers preferring to postpone their purchase -- a scary thought," he said.
For car manufacturers, March may have looked bad, but April could be worse. Sales growth decreased to a mere 2.8 per cent in March this year against a 23.5 per cent high registered in February this year. This is unusual because March is traditionally a high sales month.
Dealers say sales have already dropped 10-15 per cent in the first two weeks of April with interest rates on automobile loans, which account for 80 per cent of sales, jumping from 11 per cent to over 16 per cent in the last few months.
But car companies are also fighting back, focusing on total cost of ownership. They are offering customers lower interest rates, extending monthly repayment schedules and raising dealer discounts.
For instance, for its largest selling model, the Aveo, General Motors is offering customers an option of lower interest rates of around 10 per cent or free services or accessories worth Rs 20,000.
"Customers can choose any of these and also opt for a total maintenance plan to control operating cost," said Ankush Arora, director, (sales and marketing), General Motors. The 10 per cent interest rate is offered to all other General Motors cars, too.
Market leader Maruti Udyog Ltd increased rebates on its small cars from Rs 5,000 to Rs 15,000 a few days ago to reduce the cost of ownership.
Honda-Siel is working with ICICI Bank to extend the tenure of the loans from five to six years to help customers absorb interest rate hikes. "With this, customers will pay 10 per cent to 15 per cent lower EMIs than what they are paying now," said NR Narayanan, ICICI Bank's business head for car loans.
The second-largest car maker, Hyundai, which is offering its flagship car Santro at a lower rate of 8.99 per cent, might extend this offer to other cars. It has tied up with ICICI Bank, HDFC and Kotak Mahindra for the Santro for a deal in which around Rs 30,000 per car is being absorbed by the dealers, banks and the manufacturers.
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