Millennium Post

Car sales crash for middle class... race ahead for super rich

Car sales crash for middle class... race ahead for super rich
As the slowing economy ravages almost all sectors across the country, it is the car-manufacturing industry which has suffered the wrath the most, experiencing a decade-high decline of 6.69 per cent during FY13.

But there remains a twist to the scenario as closely observing the numbers reveals that while the small-car segment fails to attract the consumers during the slump, the luxury car industry ( Audi, Jaguar and Land Rover, BMW and Mercedes ) manages to surprise us with it sales growth.

According to automobile industry body Society of Indian Automobile Manufacturers (SIAM) data, Categorically Micro, Mini and Compact car-sale figures slumped 9.6% year-on-year to 14,19,775 in FY13.

Sluggish market sentiment took a high toll on market leader Maruit sales growth as figures (which include A-star, Alto Wagon R , Ritz ,Swift and Estilo)  suffered a fall of 5.8% to 6,84,871 units in the period 2012-13.  While its arch rival Hyundai Motors India Ltd’s numbers (Santro, Eon, i10, i20 and Getz) were no different either with an ebb of 3.5% to 3,16,962 units in 2012-13.
 
But the spice to the scenario is added by the luxury car makers with a shimmering performance. German auto-maker Audi astonishes with a steep growth of 63% in 2012 by selling 9,003 units. Its dream run continues with a 24.8% growth in January to May period of 2013 and startling performance of 57.4% in May alone.

No matter how bad Tata Motors is performing, its luxury unit Jaguar and Land Rover India is basking in success with a growth of 32% in 2012.
BMW India reported a flat growth of 0.04% growth in 2012 with sale of 9,375 units. However, Veteran in Indian luxury markets Mercedes felt the pinch of slump with a fall of 3.9% in 2012 but in 2013 its E-class has been riding high with a sales increase of 25% in January–March quarter of 2013. With cut-throat competition in the luxury segment, Mercedes India is again creating a sensation with the launch of A-class in India.
Ernst and Young automobile market analyst Rakesh Batra says ‘the customers of both market are completely different as the luxury cars buyers are usually high-net worth individuals who remain nearly intact with any slump in the economy. Whereas small-car buyers get easily affected by any unease in the economy. The pessimistic sentiment prevails in the economy because of high fuel cost and interest rates which strike the middle class.

‘Also intense competition in the luxury market and the growing penchant for SUVs, combined with  new launches in the high-end market, have helped this particular market to outperform the rest.’

With the growth of passenger car sales declining for 8th consecutive month, industry body SIAM  fears it may lead to job losses and demands govt to intervene quickly and provide some stimulus.  Vishnu Mathur, Director General, SIAM says’  Amongst the passenger car sector, the small car segment has suffered the most with a decline in sales of 9.65% in 2012-13. Cars other than small cars have also displayed a steep slowdown in sales growth but the growth remains positive at 3.43% in the year 2012-13. In the first 3 months of 2013-14, the sales has further declined.’

‘This is the first time in more than 10 years that the passenger car industry has shown such a steep and sustained decline in sales which is a matter of great concern to the industry.  The near term prospects also do not show any major improvement in the sales and industry is hoping that a good monsoon and the festival season will bring in some cheer. It would be appropriate for Government to seriously consider offering some stimulus measures to bolster the industry similar to what was done in 2008-9. Having deep vertical and horizontal linkages with the entire manufacturing and services sector, if the auto industry improves, it will help in a recovery in the manufacturing sector as a whole.’
However, we cannot purely say that the luxury segment remains completely unblemished from the current sluggish economy, as the figures reveal in 2011. BMW registered a growth  of 50.03 per cent , Mercedes Benz 27.68 per cent, Audi 83.51 per cent and JLR a stupefying  growth of 157 per cent in FY12. So surely even they are feeeling the heat.

The BMW spokesperson said, ‘There is no segment which is completely unaffected by the slowdown. But yes, the luxury segment has done fairly better than the small car segment’.

However, some analysts say that the Indian vehicle market’s recent sales trends are symptomatic of a larger malady plaguing the Indian economy as a whole — the very limited degree of economic mobility. Basically, new entrants are not coming into the car market. Why is this so?
‘Because the growth of the car-buying population itself remains stagnant,’ they opine. ‘After all, to sell more cars, we need more people who can afford a car.’
Meenakshi Thakur

Meenakshi Thakur

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