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Mar 14, 2013, 05.47 PM IST | Source: Moneycontrol.com

Passenger vehicles going at a discount as sales remain slow

Passenger car sales in India have slumped over the last one year amid high fuel prices and expensive loans apart from the overall economic slowdown. And with no signs of any turnaround, discounts, which are typically offered around festivals and towards the end of the year to get rid of inventory before new year models roll out, have continued.

Moneycontrol Bureau

Passenger car sales in India have slumped over the last one year amid high fuel prices and expensive loans apart from the overall economic slowdown. And with no signs of any turnaround, discounts, which are typically offered around festivals and towards the end of the year to get rid of inventory before new year models roll out, have continued.

Moreover, the discounts have slowly crept in on the utility vehicle space too, given the heightened competition, especially in the compact UV space and the reducing gap between petrol and diesel prices.

Tata Motors , which is among the worst hit, recently slashed prices of its Indica hatchbacks and Manza sedans by Rs 29,000-50,000. On top of that it has launched a buy-back scheme on the Manza club class sedan, where in the company will buy back the model after three years at 60 percent of its price.

Other companies including Hyundai Motor, the second largest car maker in India, Ford and Toyota have offered discounts and incentives.

According to a dealer check by Deutsche Bank, the Alto 800 and Wagon R hatchbacks from India's top car maker Maruti Suzuki  are available at about 7-7.5 percent discount over the on-road price.

Hyundai Motor is offering discounts ranging from 1.4 percent for the Verna Diesel to over 6 percent for the i10, and the Toyota Liva and Etios petrol are available at around 5 percent discount, the report says.

"Our channel checks with car dealers across India confirm the weakening demand scenario across segments. Discounts have become broader based, reflecting the moderation in demand for diesel variants. Entry segment cars have witnessed sequential increase in discounts; still the levels are significantly lower than the last festive season," said Deutsche analysts Srinivas Rao and Amyn Pirani.

On the utility vehicle front, models like Mahindra 's Bolero, Scorpio and XUV500, Toyota Innova and Maruti Ertiga are available at a 1-4 percent discount, they note.

As demand for PVs has fallen, so has the waiting period. For instance, demand for major UV models is down to 2-3 weeks from 6-8 weeks last Oct. The waiting period for popular diesel variants like the Maruti Swift and DZire and Hyundai Verna have also come down to less than a month from 2-3 months plus last festive season, the analyst add.

Domestic passenger car sales plunged 26 percent to a 12-year low in Feb, according to data released by Society of Indian Auto Manufacturers earlier this week. Vikram Kirloskar, VP, SIAM, who is also the vice chairman of Toyota Kirloskar Motor, expects the year ahead will also be a difficult year for the industry.

This is despite the fact that loan rates have come down to 11-12 percent from 12-14 percent, a year ago.

Other analysts too are not expecting a pick up anytime soon, unless there is a general turnaround in the macro-economic sentiment. That means discounts are likely to continue for at least some more time.

Nachiket Kelkar
nachiket.kelkar@network18online.com

Tata Motors stock price

On November 21, 2014, Tata Motors closed at Rs 530.45, up Rs 5.80, or 1.11 percent. The 52-week high of the share was Rs 550.80 and the 52-week low was Rs 331.05.


The latest book value of the company is Rs 59.58 per share. At current value, the price-to-book value of the company was 8.90.

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