Indian car sales full throttle on discounts

Friday, 22 November 2002, 08:00 Hrs
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NEW DELHI: In a country once known for its swarms of steadily pedalling rickshaws and rickety buses, the new car craze is unmistakable.

Rock-bottom interest rates and financing deals have propelled car sales in the last few months across India, helping auto majors like Ford, Hyundai and DaimlerChrysler to respond with bold investment bets and splashy new products.

Passenger car sales rose by a whopping 34 percent to 45,317 units in October, up from 33,871 units sold in the same month last year.

"In the last few months, car sales have defied all gloomy predictions, thanks largely to attractive discounts offered by manufacturers and falling interest rates on finance schemes," said renowned auto industry expert Murad Ali Baig.

"Signs of recovery in the country's economy after last year's terror attacks on the U.S. are also helping the growth in car sales. The overall auto market is definitely moving upwards," Baig told IANS.

India's economy grew by a better-than-expected six percent in the April-June quarterly period of the current fiscal year, compared with 3.5 percent in the corresponding period last year.

Sales of passenger cars in the domestic market posted a growth of just 0.48 percent in the year ended on March 31, 2002, to 570,473 units as an industrial slowdown and fears of war with Pakistan forced buyers to defer purchases.

The car market, however, has revved up in the past few months following a virtual scramble among the carmakers to woo the elusive buyer by offering discounts, freebies and easy loan options in an arrangement with the auto dealers.

Maruti Udyog Ltd., India's biggest carmaker, saw a sales growth of 47.4 percent in October to 23,011 units.

Industry observers say sales of Maruti, a unit of Japanese carmaker Suzuki Motor, were lifted by a sharp price cut of up to nine percent in July on the Maruti 800, the country's largest selling small car.

Minis and compact cars make up 83 percent of India's nearly 600,000-a-year new car market.

"The options for buying a car for a customer have never been so good. It has completely become a buyer's market," Aman Syal, director of Atil Auto, one of the dealers of Fiat cars in New Delhi.

"Even before a customer sees the car, comes his query -- what is the discount you can give me or what are the other facilities you are offering with the car? This has made the market very competitive."

Syal said he offers "cash discount on the financed amount" to customers on purchase of Fiat's successful Palio hatchback.

"The buyer can also opt for a free music system with the car in case he doesn't want cash discount. The bottom-line is more discount per car is the new mantra in the car bazaar these days."

Another car seller admitted that in some cases dealers were forced to offer discounts on their own and the manufacturer did not contribute "a single pie".

"In addition, if a customer is opting for finance, he will get back another three to four percent of each 100,000 he borrows. Buyers may also win a free trip to any exotic overseas locale or free accessories for the vehicle," said the seller.

Financiers are also vying to attract customers by lowering interest rates on car purchases and offering value-added services like free insurance.

"Interest rates on car loans have fallen from 15.5 percent in the beginning of the year to around 12.5 percent now," said Harpreet Singh, vice-president and head (auto loans divisions) of Standard Chartered Bank.

"A customer can bring this down further by one or two percent depending on his bargaining skills with the car dealer.

"The low interest rate and attractive structuring of repayment plans have made even the luxury cars affordable to Indian middle class," he said, adding that the boom has forced the bank to expand its finance biz from 15 cities last year to 30 now.

Such come-ons have helped Ford India, which sells the popular Ikon and Mondeo models, increase its sales by a staggering 56 percent in October over a year-ago period to 10,053 units.

Honda Siel Cars India Ltd., a unit of Japan's Honda Motor Company that makes the luxury City and Accord cars, also boosted its sales by 53.4 percent to 1,135 units last month.

"Foreign automakers have been teaching the domestic carmakers that vehicles are sold, they're not bought," said auto industry analyst Baig. "Most of the car companies are now trying to hang on to the volume growth at any cost."
Source: IANS
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