Car sales are down, companies are shutting down plants for a few days. Even in two-wheelers, other than Honda, nobody is growing and if it wasn’t for exports even companies in that sector would be crying.
At a recent get-together with folks from a auto company, the entire talk was about how the industry can appeal to buyers again. Personally, the cars on Indian roads, with some notable low-cost exceptions, have never been better. The sales decline, however, according to some in the industry and some auto-dealers is due to the replacement market drying up.
This is due to two reasons, with a gradual weakening of the economy, prices for second-hand cars have dropped in most markets. Petrol price hikes mean that petrol-engined cars from 2008-09 have almost no demand in larger cities. In addition, most buyers of small to medium cars are salaried employees, and many of them are holding onto their older cars because they are unwilling to take on a new loan burden.
That said, the launch-cycle for cars has not slowed down. In the next few weeks, the much-awaited Ford EcoSport is expected to be unveiled. There will also be the Nissan Terrano which is Nissan’s version of the Renault Duster. Mahindra’s interesting re-engineering of the old Renault logan into the Verito Vibe is also quite interesting, but frankly I doubt that car will set the charts alight.
And even in the luxury segment, Mercedes is expected to launch the new E-Class soon after launching the A-Class. Even BMW and Audi are in on the ‘luxury hatch’ game and the 1-series and A3 are also on their way to India.
Cars that excite consumers are still selling, the Renault Duster is still doing very well, the Honda Amaze apparently has a six-month long wait-list for the Diesel model. The Nissan Terrano and Ford EcoSport are both expected to do well. Now, more than ever before, car companies are trying to create ‘buzz’ through marketing. But it appears that the marketing cannot really excite beyond a point.
The fact remains that the Indian economy remains fundamentally weak and worse still, sentiment, particularly among the consuming classes is very weak. How can a company sell a car if no-one wants to buy a car. And unless things improve, demand will stay subdued for the next few months.
But that may not be a bad thing. Car companies should take this opportunity to withdraw older models and do some spring cleaning of themselves, and some companies are doing just that to prepare for the next upturn. However, no company knows when that upturn will come. But a good monsoon might change everyone’s fortunes for the better.