Column : Price sensitivity on wheels

Written by Yogima Seth | Updated: May 5 2009, 03:43am hrs
Discounts seem to have become a part and parcel of the Indian automobile industry and a major deciding factor for sales across all major segments, especially passenger cars. Consider this: after a poor sales performance in October, November and December, huge inventory had piled up with most auto manufacturers. Subsequently, there were huge discounts, ranging between Rs 5,000 and Rs 35,000, offered by all players from January onwards which, in turn, pushed up sales in the following months. There is no denying the fact that the two stimulus packages, one each in December and January, also pushed up demand. But it was mainly discounts that helped all major players to register growth on a month-on-month basis.

In fact, Maruti Suzuki registered its highest-ever sales in the month of March at 73,855 units. Even Hyundai Motor India registered a growth of 16.7% in March at 24,754 units, compared to 21,212 units in February. However, the monthly growth seems to have hit the roadblock in April after car companies decided to go slow on discounts and all major players announced a 1-2% increase in prices with effect from April 1. As a result, the total volumes of Maruti and Hyundai in domestic market have come down in April vis--vis March. While Maruti Suzuki, the largest car manufacturer of passenger cars, registered a dip of 12.1% in April at 64,857 units, compared to 73,855 units in March, sales of Hyundai Motor India fell by 10.1% at 22,247 units last month, compared to 24,754 units in March.

This is not for the first time that discounts are playing a major role in influencing the purchase decision of Indian buyers. In the past also, auto companies have been offering discounts in lean months to maintain the growth momentum. Moreover, with new models being launched by all players every now and then, car companies are using discounts and freebies as ways to continue selling old models and keep the customers in its fold.

Is it that all car companies are now cashing on the price-sensitive Indian buyers, especially at the time of a slowdown, with a shift in their marketing strategies