Festival of discounts as cars crowd dealerships

Written by Roudra Bhattacharya | Rachit Vats | New Delhi | Updated: Oct 7 2013, 08:38am hrs
CarsA priest offers prayers before handing over the keys of a Maruti Suzuki car to its owner outside a Delhi showroom
For the first time in several years, almost any car can be bought off the shelf. Although the festive season is here Navratri was ushered in on October 5 dealer inventories for some manufacturers have risen to almost three months of stock, the highest levels since the slump of 2008-09. Traditionally, sales in the festive season pick up by 20-30%, but this time around, business might not be as brisk.

Maruti Suzuki is currently holding inventory for over six weeks compared to its average of three weeks. Its common practice for dealers to build up additional inventories ahead of the festive season. But our current inventory levels are at six weeks, instead of the usual three that we had last year at the start of the festive season, confirmed RC Bhargava, chairman, Maruti Suzuki India.

Mayank Pareek, COO, sales and marketing, at the countrys largest passenger car maker, told FE he cant recall the last time there was no waiting period. Everyone has stocked up. Although, after such a bad seven-eight months, there are some signs of improvement in bookings, were keeping our fingers crossed, Pareek said. Maruti has a 40% share of the 27-lakh-unit domestic passenger vehicle market.

Manufacturers like Toyota, Volkswagen and Nissan too are understood to be in some pain. Theyre believed to be sitting on larger inventories than volume players like Maruti, Hyundai or Ford.

A top Maruti dealer in North India confirmed there was no waiting period on any car. My stocks are full, but we are beginning to see takers for the Swift, Dzire and Alto and also for some petrol models. Another Maruti dealer said he was holding inventory of close to two months.

One Hyundai dealer told FE that inventories were very high at two-three months in some areas. Interest costs for us are going up and our financials are getting messed up, he said. A Nissan dealer also confirmed stocks were high, hoping buyers would start visiting showrooms soon.

Federation of Automobile Dealers Associations (FADA) estimates the passenger vehicle makers are sitting on inventories worth some R20,000 crore, roughly four lakh units. Thats more than twice the average inventories seen at this time of the year.

Which is why its raining discount schemes: Maruti is offering discounts of anywhere between R10,000 and R60,000 while Honda, whose Amaze has been a hit, is giving discounts of R15,000 on the Brio and up to R1 lakh on the Accord. Not to be left behind, Hyundai is also offering discounts of around R30,000 on some models.

Puneet Gupta, associate director, IHS Automotive told FE that inventories lying with dealers were unusually high this year owing mostly to the carryover from the previous months. While dealers usually stock up for 25-30 days ahead of the festive season, this time they have stocked up twice as much, Gupta pointed out.

A Mahindra dealer wasnt too enthusiastic about about festive-season sales of utility vehicles given rising diesel prices and the recent 3% increase in excise duty for SUVs to 30%. Earlier we had waiting period for Mahindra products, but not any longer. Theres competition now in the SUV space with new players having come in, and moreover, they dont have new launches for the festive season, the dealer observed.

Industry is hoping the festive season will see some pent-up demand coming in the economy has seen some stability in a recovering rupee, a steady stock market and rising exports. Manufacturers are hoping banks will offer loans at lower interest rates after the governments move last week to give them additional capital. Passenger vehicle sales in April-August this year were down 5.30% year-on-year at 9.84 lakh units, while two-wheeler volumes were flat at 57.51 lakh units.