Dealers offer freebies as car sales hit road humps

Talking to various car dealers in the City, Deccan Herald learned that they have recently devised many new promotional schemes which are innovative and enticing for car buyers. While some are paying road tax for the buyers, others are giving cash discounts, free accessories, offering attractive interest rates, lucky draws, no petrol price hike for the rest of the year, and so on. One may dismiss these as mere gimmicks, but be sure the benefits are real. 

It is true that car sales have slowed down quite a bit in the last two months and more so in May, as the data from the car makers’ body, the Society of Indian Automobile Manufacturers (SIAM) shows. The industry sold 1,58,817 cars in May 2011, only 7 per cent more than 1,48,425 cars sold in same month last year. The growth was a far cry when compared with the annual sales growth of 30 per cent in the financial year 2010-11.

“This is the slowest sales growth in the last 24 months, since May, 2009, when the increase was just 2.77 per cent,” SIAM Senior Director Sugato Sen pointed out.
Reasons for the slowdown are many. The number one culprit is the steady hike in interest rates, nine times in the last 14 months, by the Reserve Bank of India.

Auto loans today are far more expensive at around 13 per cent (against around 9 per cent a year ago) as banks have passed on higher interest cost to customers. Worse, non-banking finance companies will not get bank re-finance for auto loans as per RBI’s new norms. Car companies were also forced to raise prices as all essential inputs like rubber, steel, electronics etc became expensive.

According to Sen, retail sales were affected because of bottlenecks like higher interest rates, non-availability of finance, rising fuel prices and higher prices of vehicles. “The sentiment in the market is not very positive and next month, we expect this to reflect in the sales numbers,” Sen said.

Freebies galore

Add to it a peculiar problem of inauspicious month of ‘Ashada’ (when most major investments in assets are discouraged) in the Karnataka market beginning from the middle of June.

Dealers are naturally worried and in a hurry to off load stocks. Talking to Deccan Herald, Advaith Hyundai Director (Sales & Marketing) L N Ajay Singh said, “We are offering multiple offers to customers like three per cent rate of interest for a loan amount of three lakhs, free insurance on select models, exchange and loyalty bonus to entice customers.”
“As a dealer initiative, Advaith Hyundai has organised a painting competition for children from June 6-30, where the final winner will win a trip to visit our Chennai plant”, Singh added.

The ‘Ashada’ effect

Mandovi Motors, dealer of  Maruti Suzuki, is also offering various cash discounts and exchange bonus on select models. When asked about ‘Ashada’, Mandovi’s Chief General Manager K Yeshwant Rai said, “Mandovi Motors sells around 40 per cent of its cars to corporate customers, majority of whom hail from North India. Only orthodox South Indians believe in this tradition. The customers can book the car now and take the physical delivery afterwards.”

Rai also pointed out that car sales were unusually high in February and March this year as people feared a budget-induced duty hike from April that did not happen. This is another reason why the sales in April and May slowed down. To boost sales, Tata Motors is offering Rs 10,000 cash discount on Indica petrol and diesel variant. On its sedan Tata Manza, it has added free insurance plus Rs 20,000 exchange bonus.

Nissan is offering free insurance on Micra petrol version. Another large player, General Motors is running exciting offers this month like free insurance plus Rs 5,000 worth of free accessories with exchange bonus of Rs 10,000 on Chevrolet Beat and paying for entire road tax on its small car Spark, said GM Karnataka Zonal Manager Vishant Nayak, who thinks the impact of petrol price hike is only a short term eventuality.  As fuel prices and interest rates are unlikely to soften in the near future, car sellers certainly face bumpy roads ahead.