Sales of entry-level cars dip in August; 2-wheelers upbeat

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Pricey fuel, costly loans and high inflation have shrunk the population of small & compact car buyers, denting the prospects of India’s largest passenger carmaker, Maruti Suzuki Ltd. But, the bad news for carmakers apparently brought cheers to two-wheeler makers.

August figures show Maruti’s sales dropped, the first time this year, by 10.15% in the domestic market. Maruti, which has a market share of around 52% in passenger cars, sold 54,113 units last month against 60,229 units in August last year.

Rival Tata Motors, the third largest player, posted a dip of 6% in the sales of passenger vehicles at 15,573 units in the home market against 16,620 a year ago.

On the contrary, good agriculture, and hence, greater money in the hands of rural India as well as greater availability of finance--after manufacturers like Bajaj have ventured into the two-wheeler finance—helped the two-wheeler industry post a positive growth last month.

For Maruti, the A1 segment, which includes Maruti 800, was the worst hit, despite the recent launch of an LPG variant. The sales of the 800 model declined 32.2% at 3,717 units vis-à-vis 5,480 units. The A2 segment, which includes Alto, Wagon-R, Zen and Swift, posted a dip of 9.7% at 37,667 units compared to 41,736 units a year earlier. However, the A3 segment, comprising SX4 and Swift DZire, registered a growth of 12.2% at 5,427 units against 4,839 units.

For Tata Motors, its only product in the A2 segment, the Indica, posted a dip of 31.9% last month at 7,756 units compared to 11,389 units a year ago. However, Indigo and indigo Marina in the A3 segment recorded a combined sales of 4,460 units vis-a-vis 2,186 units, a growth of 104%.

“The four-wheeler industry is feeling the crunch of liquidity, with only banks financing it, that too at exorbitant rates, unlike the two-wheeler industry where manufacturers like Bajaj Auto are growing their finance business. Consequently, people who generally migrate from two-wheelers to four-wheelers and opt for entry-level cars are holding back their decision of buying a car till there is some ease on the finance side,” says Abdul Majeed, analyst, PricewaterhouseCoopers.

"This has resulted in a low outflow of money and subsequently a slowdown in demand for entry-level cars," he adds.