Car sales in traffic jam, but some find a way

Car sales in traffic jam, but some find a way

Slowing economy, high interest rates and exorbitant fuel prices have  slowed down car sales. But some have managed to grow with better product offerings.

Nothing reflects the state of the economy better than the sales of automobiles, specially passenger vehicles.

Reflecting a slowdown in the economic activity, particularly in industrial production, India’s total sales of passenger vehicles at 18.04 lakh in the April to December 2011 period has failed to grow. Within this, the sales of cars at 13.79 lakh were 2.27 per cent lower than the same nine months period last year. In the last financial year of 2010-11, car sales had grown a whopping 30 per cent.

Yes, the 14-players passenger vehicle industry has suffered but different players fared differently, depending on their market sustenance strategy. While some companies have done extremely well riding on new launches, some have either stagnated or suffered a sharp drop in sales.

Among the winners of manufacturing passenger vehicles, the Bangalore-based Toyota Kirloskar has almost doubled its vehicle sales to 1,07,929 during the April-December 2011 period. The company, which commissioned a new small car manufacturing facility at Bidadi, near Bangalore, in the current financial, did extremely well in selling two new cars: Etios and Liva. Toyota sold 35,619 Etios, a compact sedan and 20,260 Liva a compact car in April-December 2011 against virtually nothing in the previous year.

 Commenting on the year’s performance, Toyota Kirloskar Deputy Managing Director (Marketing) Sandeep Singh said, “The past year has seen good sales in TKM despite challenging market conditions and unforeseen, unfortunate occurrence of a Tsunami in Japan and floods in Thailand.” The company’s sales of utility vehicle Innova at 37,713, however, a shade lower than what it sold in the same period previous year.

Another player that benefited in a big way from new launches is Volkswagen India, selling 57,637 vehicles, 87 per cent more than the same period last year. The German car maker, who is also the largest car seller in Europe, aggressively pushed sales of its compact car Polo, both diesel and petrol, to 28,427 in April-December 2011, against only 18,697 in the same period previous year. The company’s compact sedan Vento was also a big hit as it sold 25,842 units.

The home grown auto major Mahindra & Mahindra (M&M) fought well and ruled supreme in its turf of passenger utility vehicles with a 35 per cent growth in sales. While the re-launch of compact sedan Logan under a new name Verito has helped in doubling sales to 12,915, M&M’s bread-and-butter utility vehicles (multi-utility vehicles, sports utility vehicles etc) like Bollero, Scorpio, Xylo and the latest XUV500, helped the company sell 1,43,632 vehicles in April-December 2011, 17 per cent more than same period last year.

New launches also helped the second largest car maker in the country, Hyundai India to sell 278,952 units, 5.42 per cent more. Good demand for its highly successful i10 and Eon helped the company maintain sales of small and compact cars to the previous year’s level. But the company’s newly launched Verna with a new engine and new fluidic design was such a big hit that it topped the entry-level sedan segment by selling 36,608 units. General Motors also managed to show a positive growth thanks to the diesel version of Beat, launched last year.

The country’s largest auto company Tata Motors, which manufactures the “world’s smallest car” Nano and also large trucks and buses, maintained its sales by refreshing its models. While Nano sales have regained its average monthly levels after a lot of effort from the company, the relaunch of compact car models Indica, Vista and Indigo CS helped Tata Motors sell 1,10,979 cars in this segment. However, at the entry level sedan, the Indigo and Manza lost out to competition and its sales more than halved to 12,920 in April-December period.     
Among the companies that registered lower sales in April-December 2011, the most prominent one is the car market leader Maruti Suzuki Ltd. It sold 6,84,892 cars in the first nine months, 16 per cent lower than same period last year. The primary cause for Maruti’s debacle was the labour strike that took place between September and November 2011 at its Manesar plant, one of the two main manufacturing hubs. The company lost production of around 80,000 cars due to strike and, more importantly, production of popular models Swift, Dzire and SX4 were completely stopped. Bad market also took its toll as Maruti’s overall car sales dropped 1,22,000 or 16.51 per cent in April-December period.

Though the plant operations have now stabilised and the company is working overtime to clear the backlog, supply constraints for engines and some other critical parts are a major challenge for the company. To ease the situation, Maruti, last week, signed an agreement with Fiat India to source 1,00,000 diesel engines in a year. “The production for MSIL will start in the fourth week of January,” a statement said.

This supply will be in addition to the 1.3 litre MultiJet SDE engines already licensed by Fiat and manufactured by Suzuki Powertrain India Ltd. To revive the market, Maruti is also relaunching its popular compact sedan Dzire on a new platform and with more efficient petrol and diesel engines. There will now be more excitement as the company has showcased a few soon-to-be launched cars at the recently concluded Auto Expo.

But launching new models is not always a sure fire strategy for growth as Honda and Ford have recently realised. Honda Siel Cars India had added two new compact cars to its existing three: Jazz and Brio, which together sold 5,343 units. Yet the total car sales of the company dropped 27 per cent to 32,771 in the April-December period as its existing models: City, Civic and Accord lost out to competition. Similarly, Ford India’s hugely popular Figo also reported lower sales.

Varied factors

In the car market, though some companies did well and some did not in the last nine months, on the whole, the market has remained sluggish. Even the sales of small and compact cars at 10.75 lakh, accounting for three-fourth of the Indian car market, had a negative growth after many years. The reasons for such a downward trend have been a continuous hike in interest rates, increase in commodity prices (steel, copper, plastics), overall inflation in the economy lowering the disposable income, rising wage cost, depreciation of rupee making imported parts costlier and, above all, very high prices of petrol and diesel.

No wonder, Tata Motors Vice-President (Passenger Cars) R Ramakrishnan expects the negative factors to impact future car sales. He recently said, “As we see it today, it is (sales of Nano) going to be subdued for some more months. It would start picking up in the second half. So (if) that will take us to double-digit growth is anybody’s guess.” He said the growth of the economy was subdued compared to projections and hence, sales did not grow as expected.

Another worry for the car makers now is the possibility of government slapping an additional excise duty on diesel cars for which there is always a waiting period as they have become extremely popular due to large price differential between petrol and diesel. In 2010-11, diesel cars accounted for 28 per cent of all cars sold against 21 per cent in the previous year. 

Apprehending imposition of higher tax on diesel cars, automobile industry body SIAM (Society of Indian Automobile Manufacturers) has said that such a move will “stigmatise” diesel technology which will be very unfair to the sector. SIAM Senior Director Sugato Sen recently said that it was wrong to assume that a large portion of diesel has been consumed by passenger vehicles. Citing a study, he said, “Out of a total of 61.68 million tonnes of diesel consumed in India in 2010-11, diesel personal cars consumed only 1.03 per cent, while for diesel taxi segment it was at 1.82 per cent.”

Amidst gloom, one bright spot, however, was higher export of cars. Clearly marking the trend of India becoming a manufacturing centre for many cars sold abroad, total exports jumped 18 per cent in April-December 2011 period to 3,68,862 from 3,11,826 in the same period last year. Companies who did extremely well in selling Indian-made cars abroad were Hyundai Motors, Maruti Suzuki and Nissan Motors.

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