india auto dealers introduce offers to revive flailing market
Last Updated : GMT 06:41:18
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Alarm bells ringing after 26% fall in February car sales

India auto dealers introduce offers to revive flailing market

Arab Today, arab today

Arab Today, arab today India auto dealers introduce offers to revive flailing market

Indian car market shrink is a worry for foreign automakers
New Delhi - Arabstoday

Indian car market shrink is a worry for foreign automakers Indian car buyers are being bombarded with "buy now, pay later" offers after once-booming sales skidded to a 12-year low, highlighting the struggle to stimulate consumer demand in a sagging economy. "Go ahead, pinch yourself," says an ad for German giant Volkswagen's $13,400 Vento sedan, giving buyers a chance to trade in their old car, make a one rupee (two-cent) down payment and start paying for the new one a year later.
Other offers dangled include interest-free repayments and up to 20 percent discounts to lure buyers back into showrooms and reduce unsold vehicle pile-ups in Asia's third-largest car market.
"The slowdown has forced automakers to cut prices and offer massive discounts to move the metal," Ammar Master, India manager at global industry forecaster LMC Automotive, said.
Passenger car sales fell 26 percent from a year earlier in February alone, the worst performance since 2000, and are projected to record their first full-year dive in the financial year to March 31 in a decade, according to the Society of Indian Automobile Manufacturers (SIAM).
Sugato Sen, SIAM deputy director general, blames India's sharp economic slowdown in which growth is expected to be just five percent this year - the weakest in 10 years.
"If people don't have to buy a car, they aren't buying, they're holding back on discretionary spending," he said.
The downturn in India's car market comes as sales in China, the world's biggest market, have been gaining traction - highlighting the divergence between the two billion-plus population nations.
China "keeps running out of (manufacturing) capacity in contrast to India where manufacturers right now are facing an excess capacity situation," said Deepesh Rathore, India managing director of industry forecaster IHS Automotive.
India's car numbers are a sharp turnaround from scorching growth in years up to 2010-11 when sales expanded by 20-30 percent annually, prompting foreign automakers to drive into the nation to offset weakness in developed markets.
They poured billions of dollars into plant investment but now are seeing the market shrink at a time when European sales have been dramatically contracting due to the eurozone crisis.
Ford, which has been betting big on India, reported its February Indian sales slid by 44 percent to 4,490 units, citing a "tough" market. GM's domestic sales fell 20 percent to 7,106 units while Volkswagen's sales were down eight percent.
But India's largest domestic vehicle maker Tata Motors, part of the Tata steel-to-tea conglomerate and maker of the world's cheapest car, the Nano, suffered most, announcing passenger car sales down 70 percent in February.
R.C. Bhargava, chairman of Japanese-controlled carmaker Maruti Suzuki, which sells around one out of every two cars in India, said last week he did not want to fan "any optimism" and forecast next year would not be "any different".
"The industry is not going through a good phase," he said. "The trend can change only with better economic growth and more money in the hands of people."
To reduce inventories, automakers have been shutting production lines but investment slowdowns loom if the situation fails to improve, analysts warn.
More broadly, analysts say the market's woes reflect a wider malaise in the economy, plagued by weak consumer demand, stubbornly high inflation, high interest rates and a subsidy-swollen fiscal deficit,
"People aren't getting the right vibes from this economy" to buy cars, IHS's Rathore said.
The lone bright spot has been sales of SUVs, which have become hugely popular with affluent consumers seeking a status vehicle offering more protection on India's lethal roads. SUV purchases soared 35 percent in February.
French carmaker Renault, which re-entered India's market just two years ago, has fared specially with its $14,300 Duster SUV that lifted its total car sales 10-fold to 6,723 units in February.
Longer term, India and its BRICS peers - China, Russia and Brazil - are still seen as the industry's future.
"The headroom in the Indian industry is tremendous," remarked SIAM's Sen, noting just 12 out of every 100 Indians own a car.

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