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Input costs plague auto firms

New Delhi, Dec 27, 2013, DHNS:

Incentives galore as heavy discounts are difficult to absorb

Stung by single-digit percentage vehicle sales for the entire period of 2013, auto firms are looking for ways to perk up their sales. Giving big-time offers and freebies may not be sustainable due to high input costs.

The next best option seems to be handing out some incentives post-sale. In one such initiative, General Motors India on Friday launched a round-the-clock free roadside assistance programme for customers who buy new Chevrolet vehicles from January 2014.
The announcement for added incentive comes exactly a week after General Motors India said it will hike prices of its entire range of vehicles by up to Rs 10,000 from next month in order to partially offset impact of rising input costs.

“The initiative has been specifically designed to enhance the ownership experience of our esteemed customers and provide round-the-clock hassle-free support in case of an emergency anywhere in India,” according to P Balendran, Vice-President, General Motors India.

The initiative includes services like free taxi provision and towing facility anywhere in India in the event of a vehicle breakdown. The facility will also be available for existing Chevrolet owners on payment of Rs 1,000 for a year or Rs 2,700 for three years.
Prior to that, Hyundai Motor India (HMIL) had announced an increase in prices of its products across all models by up to Rs 20,000 from January 2014 to offset pressure of input costs on account of rupee depreciation and inflationary trends.

Maruti Suzuki, Mercedes-Benz, BMW, Audi and Honda have all said that they will hike prices of their cars from January.

Analysts said, car sales were expected to be subdued till the end of the financial year 2013-14, yet companies cannot offer heavy discounts owing to the prevailing weakness in economy and rise in input costs. Hence, the second-best option is to give other incentives such as some free services.

A noticeable trend among car and bikemakers is taking their vehicles to the doorstep of potential buyers in the Indian hinterland. With urban sales dwindling and even exports declining, companies like Maruti and Hero have begun to get aggressive on rural sales.
Good monsoon has left a good amount of cash in the hands of the rural populace and car companies are cashing in on that, analysts said.


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