Govt staff steer car sales growth

About 3,00,000 cars estimated to have been sold to such buyers in FY16

Carmakers have seemingly found an ideal customer base in government employees. Many of them are now looking to increase sales from this category of buyers, which could see increased spending as a result of the Seventh Pay Commission’s award.

Approximately 10 per cent of the 2.6 million passenger vehicles (PVs) sold in domestic market in FY15 was to government employees. In FY16, when 2.78 million PVs were sold, the share improved to 11 per cent.

Maruti Suzuki, which sold five of every 100 cars in the domestic market to this category a decade ago, sold 16 of every 100 cars last year. In absolute terms, it expanded volumes in this category from 30,000 units in 2005-06 to 216,000 units in 2015-16.
 

SMOOTH DRIVE

• In FY16, 11 per cent of passenger vehicles were sold to govt employees
• They accounted for 16% of domestic sales of Maruti Suzuki in 2015, against 5% a decade ago
• For Hyundai category accounted for 7.2% in 2015, against 5.5% in 2014
• 15% of Honda customers belong to this category

Maruti and Hyundai expanded sales to this category, whose income has been rising after several pay commission reports. The number of central government employees looking to upgrade their cars or buy a new one might expand. There are 4.8 million central government employees, and 5.5 million pensioners, who will benefit from the rise.  

“The pay commission helps enhance disposable income. After home purchase, the second big purchase for a household is a car. Typically, manufacturers with established brands or models, enjoying a wide network will have an edge,” said a Maruti Suzuki spokesperson.

Hyundai, the second biggest carmaker in India after Maruti, has seen sales to government employees increase from 5.5 per cent in 2014 to 7.2 per cent in 2015. It is now looking to increase this to 9.5 per cent in 2016, implying a total volume of 50,000 units. The Korean carmaker recently announced an offer for central government employees of benefits up to Rs 7,000 on its cars.   

“Implementation of the pay commission report will help volumes in the compact and entry sedan segment. We have equipped all our dealerships with trained teams to serve the needs of these employees by offering multiple options and service packages,” said Rakesh Srivastava, senior vice-president (sales and marketing) at Hyundai.

On Thursday, Tata Motors announced a scheme for central and state government employees offering them benefits such as additional cash discounts or the option to buy extended warranty policy, annual maintenance packages as well as accessories package on the purchase of a Tata car, except for the recently launched Tiago.

Honda, which gets 15 per cent of its volumes from sales to this category of buyers, said its compact sedan, Amaze, was popular. “We are putting in place an action plan through our network partners to increase our reach to these customers. We expect the Honda Jazz to contribute additional volumes to this segment, contribution from which might grow by four-five per cent after the pay commission is implemented,” said Jnaneswar Sen, senior vice-president (marketing and sales) at Honda Cars India.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.