Car purchases by govt employees in top gear

High growth in sales to govt employees due to improved purchasing power after revised wages

India’s second biggest carmaker, Hyundai, was hoping to notch up a sales figure of 50,000 units to government employees during the 2016 calendar year. This would have translated into a sharp increase of 43 per cent from 2015. But thanks to a hike in wages and pensions of government employees, Hyundai surpassed its own estimates by selling 60,000 units to this growing segment of buyers.

Maruti Suzuki, which enjoys a share of about 47 per cent in the domestic market, has sold 211,000 vehicles to government employees in the first three quarters of FY17. This is not very different from the volume of 217,000 vehicles that the company sold in the entire FY16. A company spokesperson said its sales to government employees (central and states) had grown 28 per cent in the first three quarters of the current financial year. The rising importance of this segment is evident from its contribution, now at one-fifth of Maruti’s domestic sales. In FY16, the segment formed 16 per cent of the company’s domestic sales.

The spokesperson said the company has dedicated teams to drive growth in this segment. It continues to bring special promotional schemes for government departments with high potential. Maruti had launched a “Wheels of India” initiative in 2008 when the revised wages of government employees under the Sixth Pay Commission were implemented.

In case of both the companies, growth from this segment is much higher than the average volume growth. Maruti’s domestic volume growth is 9.2 per cent while for Hyundai it is 4.5 per cent (April-December, 2016). According to the companies, the high growth in sales to government employees can be linked to improved purchasing power after revised wages last year and special incentives and discounts rolled out exclusively for government staffers.

Under “Wheels of India”, Maruti sells its entry-level cars like Alto, WagonR and Swift without any down payment. The bulk of buying from government staffers is for entry-level cars or compact hatchbacks. Maruti’s entry car, Alto, brings around 30 per cent of volumes. Its Swift and WagonR bring 20 per cent each. Dzire, its compact sedan, gets another 20 per cent.

“Government employees are evolved customers and give high preference to tried and tested brands which can offer higher value for money. Our dealerships are equipped with trained teams to serve the needs of these buyers by offering multiple options and service packages,” said Rakesh Srivastava, senior vice-president (sales and marketing) at Hyundai. The Korean carmaker is getting about 12 per cent of its domestic sales volume from this fast growing segment.

Wages and pensions of government employees and pensions went up last year with the implementation of the Seventh Pay Commission. There are 4.8 million central government employees and 5.5 million pensioners, who benefitted from the hike.

Growing segment

• Hyundai sold 60,000 units to government employees in 2016, surpassing its own estimates of 50,000 units

• Maruti Suzuki has sold 211,000 vehicles in the first three quarters of FY17; it had sold 217,000 units in FY16

• This segment now contributes one-fifth of Maruti’s domestic sales, up from 16 per cent in FY16 

• 4.8 mn central government employees and 5.5 mn pensioners benefitted from pay hike following implementation of the Seventh Pay Commission last year