After weak January-February, conversions have picked up significantly in March. Growth in inquiries has remained healthy over the last two months, particularly after the excise duty cut announced in the interim budget. However, conversions remained weak, as consumers delayed purchases in anticipation of better year-end deals.
Higher discounts, excise duty reduction and announcement of price hikes effective April, coupled with Celerio launch, have helped improve conversion rates. We estimate retail sales for the month at 1.3 lakh units, nearly two times the January-February average of 70,000 units.
Though short-term demand outlook remains cautious, given pent-up demand (FY14 being third consecutive year of weak PV industry demand), any positive trigger for consumer sentiment could drive strong growth.
Given its leadership position and three new launches (Celerio, Ciaz sedan in Q2 and compact SUV in Q4) in FY15, we expect MSIL to be a key beneficiary of this demand upturn.