Automobile industry grapples with low demand, capacity

The festive season has started on a subdued note for automakers.

Car sales, despite some much-touted launches, have been sluggish, said dealers.

“It has been slow. The market is down despite new launches and price cuts in Honda City and Jazz. There have been new launches in the C segment where City rides. With more choices in hand, customers are diverting. That’s why we are offering around Rs85,000 additional cash discount on the City,” said a Honda dealer in Mumbai. He did not want to be identified.

Dussehra, which was on Thursday last, is considered the most auspicious day to buy vehicles and implements.

Car dealers said the footfalls and enquiries were good, but conversions weren’t a patch on last year.

A Mumbai-based Maruti dealer said he got 12-13 bookings, half of last year on the day, while he delivered more than 100 vehicles that day.

The aforementioned Honda dealer said bookings were down a fifth from last year.

But Santosh Desai of Concorde Motors, a Tata Motors dealer, said the company’s finance schemes have worked well. “This has led to a good number of bookings,” he said.

Company officials at most carmakers were unavailable for comment.

For market leader Maruti Suzuki, it’s a bigger mountain to climb. “Last year we sold 107,000 units in October. Though we are very positive about this season, reaching last year’s numbers will be difficult. Dealer inventory is also increasing,” said a company executive on condition of anonymity.

Seva Automotive, a Maruti dealer for Maharashtra, said it has delivered almost 250 plus cars on Dussehra.

“However, the festive season in not as buoyant as we expected. There are inquiries, but the conversions are slow,” said Sanjeev Bafna of Seva Automotive.

A lot of hope rides on new launches this season, the important ones being Maruti Suzuki Swift, Mahindra & Mahindra’s XUV 500, Honda’s Brio, the Nissan Sunny etc. Hyundai, too, has started bookings of Eon, which competes with Maruti’s bestseller Alto, from October 1.

“New launches always help in triggering the demand. But that’s not leading to sales growth. The new cars are only eating away the share of the existing products. Demand has been affected by the slowdown for past 7-8 months,” said Kasturi Lal, managing director of Mumbai-based Wasan Motors, one of TaMo’s biggest dealers.

Vineet Hetamasaria, head of research and PINC Research, concurs. “The launches will only cannibalise. We do not expect any additional demand to be created. But then, things would have been worse were it not for these launches.”

Paradoxically, some aren’t able to meet demand. “We have around 60-65 pending bookings for the Jazz. The waiting period on the car is around 4 months,” said the Honda dealer.

Similarly, after a blockbuster response to the new Swift, Maruti has slowed down bookings due to production issues and capacity constraint. “People are moving to other diesel options due to non-availability of the vehicle,” said Sanjeev Bafna of Seva Automotive.

Similarly, Mahindra’s new XUV 500 has drawn over 5,000 bookings a week into launch. However, production capacity at its Chakan plant is just being ramped up to 2,000 vehicles a month. So the queue builds there too.