First-time buyers drive up car sales; Maruti Suzuki, Hyundai in fast lane

Written by Anil Sasi | New Delhi | Updated: Sep 8 2014, 17:16pm hrs
Maruti WagonRSales of Maruti?s entry level cars saw considerable movement, with the Wagon R posting an all-time high sales of 17,000 units in June.
FOR the auto sector, a rebound in consumer sentiment visible over the last couple of months has a silver lining first-time buyers. The countrys top two carmakers Maruti Suzuki India and Hyundai Motors are both seeing sales being driven by those buying their first car, with Marutis percentage of first-time buyers up sharply from 39 per cent in the first quarter of last year to 43 per cent during April-June this fiscal.

Sales of Marutis entry level cars saw considerable movement, with the Alto sales picking up sharply since April and the Wagon-R posting an all-time high sales of 17,000 units in June.

Hyundai Motors, the countrys second largest carmaker, has also corroborated the trend. The entry segment is clearly seeing traction... especially those wanting to upgrade from two-wheelers to four wheelers, apart from customers wanting to exchange used cards for new entry cars. This is largely on account of stability on both interest rates and fuel prices, Hyundais senior vice president, sales and marketing, Rakesh Srivastava told The Indian Express.

Srivastava said that while he was not in a position to share the disaggregated sales numbers for Hyundai, the trend involving a surge in sales driven by first-time buyers has led to a sharp increase in sales of its entry-level Eon hatchback in the urban areas and both the Santro and the i10 in rural parts.

C V Raman, Maruti Suzukis R&D head and executive officer (engineering), said while the extension of excise duty benefit and higher levels of sales promotion expenditure by the car major have helped stoke demand, the underlying factor for the boost in sales of entry level cars is the visible optimism with regard to the nascent economic recovery. The uptick is clearly visible, especially in the entry-level performance, Raman said.

Mayank Pareek, chief operating officer (marketing and sales), Maruti Suzuki, said that while the company, on an average, had been getting about 5.5 lakh inquiries a month (including showrooms, over the phone and the web), conversion of this into actual sales had not been happening earlier. The first-time buyer is more defensive. But now, clearly, there is a distinct improvement in sentiment, he said.

The improvement in overall sentiment at the customer level is reflected in Marutis decision to effect progressive cuts in discounts offered on its cars since the start of this fiscal. As against average discounts of Rs 21,000 per unit offered during the first quarter, the July discount was down to 20,000, in August 18,000, and is expected to be down to Rs 16,000 per unit this month.

During the first quarter this fiscal, while passenger vehicle sales in India, excluding Maruti Suzuki, declined by 4.8 per cent, the sales recorded by the company which specialises in the small-car segment and is the most important player in the entry-level category grew by 10.3 per cent.

The other discerning trend is a sharp bounce back in urban sales for both carmakers, even as the buoyancy in rural sales in the first quarter has continued. Marutis rural sales grew by 26 per cent during the first quarter while the corresponding figure for the companys urban sales was about 13 per cent. This helped boost the companys overall market share in the country from 40.4 per cent in the first quarter of the last financial year to 44 per cent in the first three months of this fiscal, a gain of 3.6 percentage points.

Hyundai too has seen a sharp uptick in urban sales. There is a change in the trend growth in urban demand... Rural demand was always holding up but a revival in urban demand is encouraging, holding out hope for the coming months, Srivastava said.