A bumpy drive on the slow lane

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: down prices.

So much is the growth potential in the compact car segment that car major Honda Siel Cars India has advanced the launch of its first compact car, the Jazz, by six months.

While companies continued with model refreshments, high inflation and interest rates kept people away from buying inessential items. While inflation had touched a high of over 13% in May, interest rates on cars were hovering around 14-15% after a series of rate hikes. This slowed car sales, which went down by 1.71% in July at 87,724 units vis-à-vis 89,250 units a year earlier. In the very next month, the decline was steeper at 4.56% at 94,584 units compared to 98,893 units in August 2007.

Two-wheelers were the worse off. With rising number of defaults, financial institutions like GE Money, Citi Finance and later on ICICI Bank completely withdrew from financing of two-wheelers. However, a good harvest and farm loan waiver pushed up cash purchases in rural India. This coupled with Hero Honda’s policy of tying up with regional rural banks helped the sector to grow marginally.

Things worsened across the industry by October, so much so that Tata Motors and Ashok Leyland had temporarily shut down while Maruti Suzuki India, Toyota Kirloskar Motors and Honda Siel Cars India have cut down on production for inventory control.

Amidst the ups and downs, one thing that went unnoticed was that certain car models were available at lower rates in December 2008 compared to their prices in December last year, thanks to discounts and a series of duty reduction on these cars.

For instance, Maruti Alto Lxi that cost Rs 2,99,270 (on-road, Delhi) in December 2007 is now available at Rs 2,77,405, a saving of Rs 21,865. Even Wagon R Lxi, which earlier had a price tag of 3,59,162 is now available at 3,23,406 which means a saving of Rs 35,756. Similar is the case with Hyundai cars. Santro GL, the company’s largest selling car that was available last year at Rs 3,39,500 now comes at Rs 3,21,738 while its i10 Delite prices have come down from Rs 3,39,026 in October last year to Rs 3,25,927 now, a saving of Rs 13,099.