Car sales lose pace in January as price hikes hit demand

NEW DELHI: Car sales began the New Year with a 3% growth in January, slower than 15% recorded in December, as a hike in retail prices dampened sentiments of buyers.
Most of the companies announced price hikes across models from New Year, following withdrawal of excise duty incentives. The hikes were upwards of Rs 10,000 for even entry-level cars like Maruti Alto and Hyundai Eon, impacting demand in the large-volume category.
According to numbers released by industry body Society of Indian Automobile Manufacturers (Siam), car sales in January stood at 1.69 lakh units against 1.64 lakh units in the same month last year. Nine of the 14 carmakers that reveal numbers to Siam reported a decline in volumes and these included the Indian subsidiaries of Honda, Ford, General Motors, Nissan and Volkswagen. Those managed to stay in the positive territory included Maruti, Hyundai, Tata Motors and Toyota.
Car companies are demanding a relief in the Budget to tide over what they term as difficult times. Discounts have been at record levels and companies say that margins remain under pressure.
High interest rates are one of the key factors that have impacted demand and companies are now demanding a “sharp cut” from RBI, which had recently slashed them by only 0.25%. Lower fuel prices have also not helped in pushing the volumes as an overall subdued sentiment keeps the demand low.
“For sustained growth, the need of the hour is a reduction in interest rates and rationalisation of taxes to increase the inflow of the first-time buyers,” said Rakesh Srivastava, senior VP (sales & marketing) at Hyundai India.
Other players also expressed similar sentiments. “The withdrawal of excise duty benefits has significantly affected demand. High interest rates and weak economic fundamentals continue to put pressure on car purchases,” said P Balendran, VP at GM India. “The sector’s turnaround is possible only if interest rates are reduced in phases and government announces big-ticket reforms in the upcoming Budget.”
Sugato Sen, deputy director general of Siam, said car sales may remain subdued in February and March on consumer expectations that the government may reduce taxes across industries, including on automobiles, in the Budget. Motorcycle sales started 2015 on a negative note as sales fell 6% in January. Hero Moto and Bajaj Auto’s volumes were negative, according to Siam.