High depreciation cost and lack of novelty is hitting the A4, or the executive car segment hard. Consider this. The high-end segment which includes Honda Civic, Hyundai Elantra, Skoda Octavia and Combi, General Motors (GM) Optra and Toyota Corolla has been witnessing a negative growth over the last four months.

According to the Society of Indian Automobile Manufacturers (Siam), while the segment posted a negative growth of 5.04% in October on a year-on-year basis at 3,520 units, its cumulative growth for April-October was up marginally at 23,991 units as against 23,023 units sold in April-October 2006. This is in contrast to the passenger car industry that witnessed a double-digit growth of 14.6% at 1,05,878 units sold in October.

According to an auto analyst, the A4 segment or the lower D segment cars are primarily losing out on depreciation front. ?With the cost of depreciation as high as 50% in just three years, these cars are losing sheen to individual buyers and are mainly catering to corporate honchos who do not have to shell out from their pockets,? he says.

Adds Dilip Chenoy, director general, Siam, ?There are multiple reasons that account for the declining market share of these cars. For instance, high interest rates that were on the rise since December 2006 and have stabilized at a high of around 13-14% are also hitting the purchase of bigger cars, as it means higher EMIs for individuals. Lack of new launches and inadequate marketing of the executive cars by a majority of the car manufacturers has led to a dip in sales over the last few months.?

While, Hyundai?s Elantra was the worst performer with a 74% dip in sales, Honda Civic, Skoda Octavia and Toyota Corolla did not fare any better with all the three witnessing a negative growth of 17.91%, 4.43% and 10.24% respectively in October on a year-on-year basis. ?Elantra was not well accepted in the market as a result of which it is set to be phased out in about six-seven months,? says Hyundai?s official spokesperson.

However, GM bucked the industry trend with the company witnessing 81.67% growth during this period, thanks to its recently launched Chevrolet Optra diesel.

?An increasing number of choices in the SUV segment like Mahindra Scorpio and Toyota Innova that have an edge over executive cars in terms of space as well as availability of their diesel variants. That too at more or less at the same price leading to a slight diversion of customers from the executive to the SUV segment, thus affecting growth,? says Ankush Arora, vice-president, GM.

?Moreover, as these cars are generally not the first car to be bought by an individual, people tend to postpone their purchase till they get a best deal out of it,? he adds. However, Arora is optimistic that the segment will recover with interest rates having stabilised and overall economic indicators being good.

Though DaimlerChrysler?s C-Class posted a 12.12% growth with 74 units sold during October as against 66 units sold in October 2006, an industry expert says it was largely due to a huge discount offered by the company as part of its stock clearance activity. While the company?s officials were not available for comment, it is learnt that the company is in the process of phasing out its existing C-Class and come up with an all new C-Class executive car in an effort to enhance its presence in the already ailing segment.

Another reason that has popped up for the decline in this segment is the act of balancing of production capacity between various models by car manufacturers. Industry sources say that constrained by limited production capacity, of some of them have been forced to cut down on production of their less popular models in order to meet the demand for their more popular models. More attractive offers in the A3 segment?be it in the form of new launches, new variants, huge discounts or gift vouchers?in the recent past also seems to be drawing customers from the executive cars to the mid-size cars. For instance, Maruti?s new sedan SX4 or Honda?s new version of Honda City or Hyundai?s Verna, have captured a huge chunk of customers by offering products that have value for money.

?There is no denying the fact that new products, enhanced features and attractive pricing or sops always attract car buyers and with the executive segment offering none of these over the last one year, there has to be a decline in popularity,? says Rajan Pental, senior vice-president, HDFC Bank.

?Moreover, with car manufacturers offering additional features like sun-top roof, airbags etc, that were once exclusive to the executive cars in compact and mid-size cars, there is not much reason left for buyers to splurge that extra amount on these bigger cars, he added. Adds Anita Sharma, Honda?s spokesperson: ?Lack of excise benefits and new products has impacted the growth of this segment much like other segments except the A2 and the A3 segment that includes the compact cars and the mid-sized cars.? The company?s great performance in 2006 was due to the launch of the new Honda Civic, which actually drove the growth of the entire segment in 2006.