Change course as high petrol prices, interest rates eat into volumes.
With increased interest rates and fuel prices dampening consumer sentiments, automobile manufacturers are betting big on new car launches, sale of diesel variants and discount packages to rev up sales.
Toyota, Ford, Hyundai, Honda and General Motors have lined fresh launches. Sales growth of passenger cars had slowed to seven per cent last month, the lowest in over 20 months, forcing car makers to review strategy.
“The tightening of credit, higher fuel prices and interest rates has impacted sales but the 30 per cent growth rate recorded last year by the automobile industry was not sustainable. We are expecting low double-digit growth this year, which is reasonably good over the numbers posted in 2010”, said Michael Boneham, president and managing director, Ford India.
Boneham added the company had left unchanged investment plans and product launch schedules for the Indian market and is expecting to outperform the market with the launch of Fiesta later this year. “This is a short-term aberration. Over the long term, growth prospects in India are promising and we will stay by our commitment to launch eight new models here by the middle of the decade.” Ford has projected the Indian passenger vehicle market would double to five million units by 2015.
Hyundai is ramping up production of the new Verna to reduce waiting period of the product. Arvind Saxena, director (marketing and sales), Hyundai, said, “The growth rate has been lower over the past few months than what was registered by the industry in the beginning of the year. We have, however, recorded increased footfalls at our dealerships after launch of the Verna in May.”
The company has registered 20,000 bookings for the sedan. Work is on to introduce an entry-level small car to be positioned below the Santro. Saxena declined to specify when but industry sources say this car may hit Indian roads early next year.
While Honda Siel Cars India is busy expanding dealer network before launch of small car Brio in October this year, General Motors is readying itself to foray into new segment with two light commercial vehicles from its Chinese partner, Shanghai Automotive Industry Corporation, early next year.
Karl Slym, president and managing director, GM India informed, “We know there are eight cars per 1,000 people in India. We know there is an underlying demand for personal transport with a rapidly growing middle-class in the country. The slowdown in sales will be short-lived and it does not affect our investments plans here.” The company plans to double industry growth to sell 135,000 units in 2011, with the launch of its new diesel Beat this month.
Toyota, too, has drawn up a blueprint to double sales to 140,000 units in 2011. Sandeep Singh, deputy managing director (marketing and sales), Toyota Kirloskar Motor said, “We have not been affected much due to new launches. We expect to sell 60,000 units of the Etios and Liva in 2011. This will go up to 100,000 units next year.”
“Original equipment manufacturers are not looking at rolling back investments, as without capacity expansion they cannot participate in the next phase of growth without losing market share. Interest rates are likely to come down once inflation levels fall. In the interim, companies are offering free maintenance packages, adjusting production processes to roll out more diesel vehicles and working out easy financing schemes with banks,” said V G Ramakrishnan, senior director, Frost & Sullivan.
After the rise in petrol prices, Ford, General Motors, Maruti Suzuki and Volkswagen are all adjusting production processes to produce more diesel vehicles. Mayank Pareek, managing executive officer (marketing and sales), Maruti Suzuki informed, “Nearly 65 per cent of sales used to filter in from the diesel variant for cars, in which we had the fuel option. However, after the latest rise in petrol prices, the proportion of sales coming from the diesel variant has increased to 80-85 per cent.”
Easy financing schemes are being offered by dealers. A Delhi-based dealer for Volkswagen India informed the company, through its financial services arm, was offering interest rates of 12 per cent on both petrol and diesel variants of small car Polo and sedan Vento.
In contrast, public sector banks are offering loans at rates as high as 13.75 per cent.
