The 12th edition of the Auto Expo opened here on Wednesday with a flurry of launches and unveiling of concept cars but grim prospects of any immediate turnaround in sales. While automobile companies unwrapped concept sedans, crossover utility vehicles and compact SUVs to lure buyers, executives said green shoots of an industry-wide recovery were yet to surface.
“There is a lot of excitement around the expo but it will not translate into business immediately. The first-time buyer, who accounts for over 40 per cent of sales in the passenger vehicle industry, has been deferring purchases due to uncertain economic conditions. Any likely recovery in the market may happen only in the latter half of the year,” said Mayank Pareekh, chief operating officer (marketing & sales), Maruti Suzuki India. (HOT WHEELS)
Mahesh Kodumudi, president and managing director, Volkswagen India, added, “Passenger vehicle sales fell for the first time in over a decade last year due to uncertain political and economic conditions. From our perspective, the industry is not going to see a rebound in sales immediately. A lot will depend on the elections and the formation of a decisive government at the Centre.”
That assessment, however, did not seem to sit well with Anand Mahindra, chairman and managing director of Mahindra and Mahindra. “I am optimistic (about the demand). Everybody in the world is holding their investments; everybody is saying what is the point in doing anything until we know what is going to happen. It is sad. The funny thing is that when we do our budget reviews these days, we find this very strange behaviour that even consumers are saying they are going to wait till the elections. That is bizarre,” he said.
Meanwhile, in terms of action at the expo, Tata Motors (with the Zest), Ford India (Figo Concept) and Hyundai Motor (XCent) announced their entry into the sub-four-metre sedan segment. Nissan evinced interest in joining the bandwagon.
GM India unveiled a new concept compact SUV badged the Chevrolet Adra. The compact SUV is based on General Motors’ global small-vehicle platform called the Gamma 2. Fiat (Avventura) and Volkswagen India (Taigun) showcased sub-four-metre concept SUVs. The Avventura, an off-road crossover based on the Punto platform, has a tailgate-mounted spare wheel. “The sub-four-metre sedan segment has grown 39 per cent at a time when the overall market for passenger cars has shrunk by seven per cent. We are going to launch the Hyundai XCent next month to meet the demand in the category,” said Rakesh Srivastava, senior vice-president (marketing and sales) at Hyundai Motors India.
Key upgrades of existing models in the offing include the new Linea by Fiat, Santa Fe by Hyundai, Corolla Altis by Toyota, Yeti and Superb by Skoda and the new Beat by General Motors India.
The differentiated tax structure for smaller and larger vehicles in the Indian market has resulted in the emergence of a unique category of compact sub-4 metre sedans and utility vehicles which are finding increasing favour among consumers. Excise duty on sub-4 metre vehicles at 12 per cent is less than half of 27 per cent excise duty levied on larger vehicles. Manufacturers can reduce the length of the vehicle and introduce products at aggressive price points in the market, making product launches in the category an attractive proposition.
To off-set the challenge of growing sales in urban markets which has been hit sharply by such negative sentiments, companies are additionally working on growing sales in rural areas. Maruti Suzuki, which for one struggled to draw buyers in urban markets, has registered sales growth of 18 per cent in rural areas. Pareekh says, “Rural sales contribute to over 30 per cent of our overall volume today. The target is to reach 100,000 villages by the end of this financial year.”
“This year we are going to strongly focus on boosting sales in rural markets. We are going to increase our reach by having in place 300 rural sales outlets by the end of the year”, informs Rakesh Srivastava, senior vice-president (sales & marketing), Hyundai Motor India Limited (HMIL). Rural markets currently contribute 18.7 per cent to Hyundai’s overall volumes, up from around 15.8 per cent a year earlier. Srivastava says the company would aggressively push products through an extended distribution network to rev up numbers.