This year’s festive season is crucial for the fuel price & interest rate battered Indian automotive industry. But will the festivities lift the mood?
After Maruti Suzuki pushed the iconic Ambassador and Padmini out of the picture in the mid-80s, the Indian consumer graduated from a two-wheeler to a four-wheeler with just one practically available choice – the 796cc hatchback Maruti 800. However, due to the huge demand and limited production, consumers had to wait for months before they could get themselves behind the wheel. And unlike today’s scenario, if the consumer got the delivery of the vehicle during the auspicious festive season then, it was more out of sheer luck rather than a well organised and efficient marketing set up. The scenario remained the same for almost a decade before the floodgates of economic liberalisation were opened in the early 1990s. Within a few years of the new economic reforms coming into action, Indians were considering various options like Hyundai Santro, Daewoo Matiz, Ford Escort, Opel Astra et al while purchasing a new set of wheels. From just an 800, the Indian consumer was getting spoilt for choice as new names were added to the list during the mid-90s. Names like Hyundai, Ford, General Motors, Toyota et al, were vying for the expanding volumes of the Indian passenger car market.
In fact, during the past two decades of economic liberalisation in India, the automobile industry has come a long way. From a market worth 35,000-40,000 cars every year during the early 80s, the Indian passenger car market is today the 11th largest passenger car market in world selling close to two million passenger cars every year. Going by the estimates of J. D. Power & Associates, India is expected to become one of the three largest automotive markets in the world by 2020. And even as you read this, marketers are gearing up for the busiest phase in the year – the much-awaited festive season.
To lure more consumers in the festive season, carmakers not only launch new products during this season but also offer freebies and hefty discounts. As buyers get the best deals during this period, the festive season becomes a win-win for both marketers and car buyers. However, considering rising fuel prices and interest costs that are a double whammy on car-buying sentiment, how will this festive season fare for marketers in the automobile industry?
RBI has raised interest rates 11 times since March 2010 and petrol prices have gone up by Rs.11 since the beginning of this year, so the overall negative sentiment of consumers is making things worse for marketers. Launches of new products like Maruti Suzuki Swift, Toyota Etios & Liva Diesel, Renault Koleos, Skoda Laura RS, Volkswagen Vento & Polo Breeze have been able to boost demand to an extent but failed to really lift the sentiment of the consumer. “The festive season this year is totally different from what we have seen last year. As the overall mood of the market is negative, this discount season will most probably extend longer than the normal cycle as the inventory level is currently high,” admits Shashank Srivastava, Chief General Manager – Marketing, Maruti Suzuki. As per market reports, discount levels are currently up by 20-25% as compared to last year as the industry is sacrificing margins and eying growth in the festive season. For the April to August period this year, domestic sales of passenger vehicles has registered a figure of 977201 units, a growth of just 1.94% yoy. This is certainly inadequate as compared to growth in production of 8.5% yoy in the same period to reach 1249464 units. Exports, meanwhile, show a different trend, growing by 22.44% yoy to reach 220256 units in the same period (as per SIAM data).
After Maruti Suzuki pushed the iconic Ambassador and Padmini out of the picture in the mid-80s, the Indian consumer graduated from a two-wheeler to a four-wheeler with just one practically available choice – the 796cc hatchback Maruti 800. However, due to the huge demand and limited production, consumers had to wait for months before they could get themselves behind the wheel. And unlike today’s scenario, if the consumer got the delivery of the vehicle during the auspicious festive season then, it was more out of sheer luck rather than a well organised and efficient marketing set up. The scenario remained the same for almost a decade before the floodgates of economic liberalisation were opened in the early 1990s. Within a few years of the new economic reforms coming into action, Indians were considering various options like Hyundai Santro, Daewoo Matiz, Ford Escort, Opel Astra et al while purchasing a new set of wheels. From just an 800, the Indian consumer was getting spoilt for choice as new names were added to the list during the mid-90s. Names like Hyundai, Ford, General Motors, Toyota et al, were vying for the expanding volumes of the Indian passenger car market.
In fact, during the past two decades of economic liberalisation in India, the automobile industry has come a long way. From a market worth 35,000-40,000 cars every year during the early 80s, the Indian passenger car market is today the 11th largest passenger car market in world selling close to two million passenger cars every year. Going by the estimates of J. D. Power & Associates, India is expected to become one of the three largest automotive markets in the world by 2020. And even as you read this, marketers are gearing up for the busiest phase in the year – the much-awaited festive season.
To lure more consumers in the festive season, carmakers not only launch new products during this season but also offer freebies and hefty discounts. As buyers get the best deals during this period, the festive season becomes a win-win for both marketers and car buyers. However, considering rising fuel prices and interest costs that are a double whammy on car-buying sentiment, how will this festive season fare for marketers in the automobile industry?
RBI has raised interest rates 11 times since March 2010 and petrol prices have gone up by Rs.11 since the beginning of this year, so the overall negative sentiment of consumers is making things worse for marketers. Launches of new products like Maruti Suzuki Swift, Toyota Etios & Liva Diesel, Renault Koleos, Skoda Laura RS, Volkswagen Vento & Polo Breeze have been able to boost demand to an extent but failed to really lift the sentiment of the consumer. “The festive season this year is totally different from what we have seen last year. As the overall mood of the market is negative, this discount season will most probably extend longer than the normal cycle as the inventory level is currently high,” admits Shashank Srivastava, Chief General Manager – Marketing, Maruti Suzuki. As per market reports, discount levels are currently up by 20-25% as compared to last year as the industry is sacrificing margins and eying growth in the festive season. For the April to August period this year, domestic sales of passenger vehicles has registered a figure of 977201 units, a growth of just 1.94% yoy. This is certainly inadequate as compared to growth in production of 8.5% yoy in the same period to reach 1249464 units. Exports, meanwhile, show a different trend, growing by 22.44% yoy to reach 220256 units in the same period (as per SIAM data).
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Source : IIPM Editorial, 2011.
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
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