Car sales gain momentum after a period of slump

Car sales gain momentum after a period of slump

By SHAILENDRA TYAGI | New Delhi | 24 September, 2016
Tata Motors, Hyundai and Renault have managed to lure customers through their new models.

The fact that car makers have sent higher volumes of passenger vehicles to their respective showrooms both in July and August does point towards a recovery which many feel “looks more sustained now.” The passenger vehicle (PV) segment which consists of cars, vans and utility vehicles is certainly looking up and is expected to grow by over 12% in the next twelve months. Key drivers for triggering such healthy growth would be benign fuel prices and a strong probability of interest rates going down further. “New models continue to drive sales,” says a report by Emerging Markets Automotive Advisors, “thus making August the best ever month for the PV segment. It was the best month for mini and compact segment as its demand in price sensitive retail market is quite strong. 

Tata Motors, Hyundai and Renault managed to lure more customers through their new models, but niche manufacturers like Ford, GM and Volkswagen continue to struggle. While Tiago, a new model by Tata Motors, did wonders for them, customers seem to have evinced equal interest in Renault’s Kwid. “The impact of the good monsoon would boost the sales of mid-sized cars as well as scooters in the rural geography” says Sudarshan Shreenivas, auto maven with India Ratings & Research. Although much of the industrial activity is yet to turn around, good growth in the services sector would keep urban demand for cars alive.  

Apart from the car sales, two-wheeler segments have also gained much momentum in August that many feel is going to continue. The ongoing improvement in rural road conditions has pushed scooters sales quite significantly in rural geographies.

One other factor which has helped drive more sales in the primary market is the well-evolved secondary market (second hand car market) where people find it easy to dispose of their older vehicles at fair prices before graduating to a newer one. “The average tenure for holding on to one’s new car has come down to five years now,” says Shreenivas and that means that rising incomes bring in more aspiration among people to move up their asset possessions. Many organised players like Maruti dot the secondary market, bringing in more confidence among buyers and sellers of old cars.

Apart from the car sales, two-wheeler segments have also gained much momentum in August that many feel is going to continue. The ongoing improvement in rural road conditions has pushed scooters sales quite significantly in rural geographies. “For every 100 vehicles sold in the rural areas, scooters make up about 30%” says Shreenivas.

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