Plumetting Car Sales - Opportunity for Buyers?

[souravc]

Chanced upon this article on stock piling of inventories at the dealer's end on Mint Showroom stockpiles signal slump in car sales - Home - livemint.com

This confirms a trend where there was perceptible fatigue noticed in car sales clocked in April numbers too . Whats the impact for car buyers like us ? and possible strategies to get the best deals.

- One can live with postponing the purchase of the shiny beauty by a few months but thats a dreaded situation for the dealers , lenders and insurers who live on monthly targets
- Dealers are under pressure so please be relentless in shopping around, cash discount , accessories, freebies, etc should be part of the menu. The best deals should be available where the sales are under pressure whereas for new launches like ANHV / Vento the same may not be applicable .
- Higher interest cost YES but the banks are also seeing lower car loans where the sales guys are worried about their targets. Haggle on the interest rate ( an improvement of more than 0.25% is extremely rare) and haggle more on waiving of pre-payment penalty , etc.
- Target pressures also exist for car insurance sales persons though usually the sales channel here take care of multiple products so the leverage for negotiation maybe diluted to a large extent .

IMO look around and TD your car but move towards a closure around the 3rd week of a month - the best deals are available during that time since the optimism of the sales persons turns into "missing the target" reality around that time

Is this an opportunity ? IMO .. YES ! If one can bargain hard and also minimise the impact of leverage

[ukderebail]

Auto sales might be heading for a recession with a good past year, the high interest rates on car loan which is 12.5% max on a 7 year loan is a real dampner as against 7% just two years back. I believe the buyers will have a gala time in getting wooed with lot of freebies. My advice is never to go for a vehicle with waiting list such as Swift or Wagon R. Better to zero in on vehicles which have plenty of production.

Toyota seems to have cut production by 70% in line with the demand crunch stating that their spares supplies has been affected by Tsunami.

Insurance seems to be tricky for me, i am unable to guess how to go about getting discount on the same, but if prefer PSU insurance company in lieu of transperancy, any idea guys.

[mohandasnikhil]

Petrol car sales have fallen by more than 40% owing largely to the increase in petrol prices. So expect the next month to bring not only rain showers but also healthy discounts on these models.
Diesel cars though are still high demand, the Vento commands a 2month waiting. The Verna nearly 5months now. The Altis Diesel also has a 2 to 3month waiting period. Booked an Innova and its nearly a 3month waiting. The Fortuner is 6months atleast.

[ukderebail]

I believe with laying of Gas Pipeline by GAIL in Blore, the future maybe with CNG or LNG technology, correct me if i am wrong guys, in lieu of domestic production of gas is on the uptrend with lot of private players like RIL, ABAN, ESSAR joining in to hike up gas availability. Diesel subsidy is slowly getting eroded. With high cost of maintainence on diesel will it be prudent to go in for diesel vehicles ? Petrol subsidy is off, but conversion into gas is an opportunity, so maybe a duo technology vehicle is a better choice.

[souravc]

Originally Posted by ukderebail

Insurance seems to be tricky for me, i am unable to guess how to go about getting discount on the same, but if prefer PSU insurance company in lieu of transperancy, any idea guys.

The guys who are most active in the market seem to be ICICI Lombard and TATA AIG , thats what I have seen . They are likely to provide the most competitive rates - as a thumb rule though its always better to check with multiple players since auto insurance is fairly commoditised product .

Originally Posted by ukderebail

I believe with laying of Gas Pipeline by GAIL in Blore, the future maybe with CNG or LNG technology, correct me if i am wrong guys, in lieu of domestic production of gas is on the uptrend with lot of private players like RIL, ABAN, ESSAR joining in to hike up gas availability. Diesel subsidy is slowly getting eroded. With high cost of maintainence on diesel will it be prudent to go in for diesel vehicles ? Petrol subsidy is off, but conversion into gas is an opportunity, so maybe a duo technology vehicle is a better choice.

Umesh , happy to refer you to a detailed thread on the relevant point raised by you http://www.team-bhp.com/forum/indian...ol-diesel.html (*Attached* : Fuel cost calculator, including a comparison between Petrol & Diesel)
I am sure a lot of your queries would be clarified.
Personally I am not a fan of CNG/ LPG run vehicles since they lack the zip and if I am not mistaken , the engine life is also reduced ( opinion built out of feedback from mechanics, taxi drivers )

[ukderebail]

I am sure a lot of your queries would be clarified.
Personally I am not a fan of CNG/ LPG run vehicles since they lack the zip and if I am not mistaken , the engine life is also reduced ( opinion built out of feedback from mechanics, taxi drivers )[/quote]

Thanks Saurav, i believe Diesel is economical, but will the price differential be maintained for long term is an issue. Secondly i agree with you that LNG/CNG vehicles are sluggish, but considering average speed in a metro it would be worth if the cost is lesser than diesel price to consider dual option. Speed is not an essence for metro vehicle users i suppose. Only on highways speed matters, and for speed Petrol with high octane93, would be icing on the cake rather than diesel don you think so.

[noopster]

The way the article starts sounds a warning bell in this skeptic's mind:

As far as India’s car makers are concerned, what you see is not what you get. While they maintain that all is well, data of actual purchases by consumers reveal that there are substantially fewer passenger cars on the road than those supposed to have been sold.

It goes on to grandly announce:

Citing data on Maharashtra, the single biggest market that accounts for 13% of car sales in the country, the channel showed that RTO numbers in fiscal 2010-11 for Maharashtra indicate that 293,673 cars were registered, while Siam data pegs sales at 327,655, implying that dealers were left holding 33,982 cars. Siam gives wholesale data of cars released by the companies to the dealers.

The cars that the dealers were "left holding" make up 10.37% of the total cars sold- is that really an alarming amount? I can understand if one in 4 or even 5 cars went unsold. But one in 10? What's the normal ratio of unsold cars to total invoiced cars? What was it in FY 2009-10?

After setting the context using MH data, the article suddenly starts quoting a dealer frm all places- Bihar:

According to a Bihar-based Mahindra and Mahindra Ltd dealer, sales have almost halved this year. “The stock is piled up. The company has increased the sales target this year. The start has been really bad,” said the dealer. “Most of the time the company gives a fixed target but sometimes they also send more than the required number of vehicles.”

The emphasis is mine. Car sales have halved? What are you smoking, livemint? Maruti sold 38,000 Altos in March out of the 1 lac plus vehicles they managed to push into the market the same month. Even in April, a traditionally lean month, they pushed out 85,000. Hyundai is doing equally well. VW has a its hands full with the Polo and Vento selling 6000-8000 units every month. Every data point we have so far points at a bustling Indian market.

In fact, if anything the supply front is constrained because of the tsunami effect from Japan, which definitely affected primaries in April for Honda and Toyota (50% and 70% according to these companies themselves). Also, we know that VW has been struggling keeping up with demand for its highline Vento, esp. the diesel; at MSIL, waiting lists for even the humble Swift are at 6 months.

In fact, reading that Bihari dealer's comment again, I get the feeling that the "stockpiling" may be a perceived effect of companies pushing slow-moving brands or variants out to dealers. As a former FMCG sales professional, I can identify with this: companies do a lot of unwanted-SKU-pushing especially in the last month of the FY! So while there are long waiting lists for a particular variant, the company may be pushing its dealers to accept variants that are easily available but not as fast-moving (simple case in point the VW Vento petrol TL).

I don't think it's time to ring the panic button yet. Sure, the fuel price hike will have its impact, but EVERY SEGMENT of the market is hot now as it's never been before. As a consumer all I can do is sit back and watch manufacturers tempt me with their wares. If that means their dealers stock a little inventory more than usual then so be it!

[Sheel]

Had to call up 3 showrooms today to inquire about Cars for an acquaintance of mine. Diesels, all across, have a waiting period stretching anything between a month to 3 months.

Petrols? They are available off the shelf.

A funny article appeared 3-4 days ago depicting that blokes, for their dowry, are disowning petrol Cars and now warrant a diesel instead. (Tried to source the article, but can't find the news paper)

[souravc]

Originally Posted by Sheel

Had to call up 3 showrooms today to inquire about Cars for an acquaintance of mine. Diesels, all across, have a waiting period stretching anything between a month to 3 months.

Petrols? They are available off the shelf.

A funny article appeared 3-4 days ago depicting that blokes, for their dowry, are disowning petrol Cars and now warrant a diesel instead. (Tried to source the article, but can't find the news paper)

Trust Indians to find out some twisted way !
Well ,the last hike in petrol price somehow has drawn more attention towards the price difference between petrol and diesel than it deserves.

[souravc]

Originally Posted by noopster

As a former FMCG sales professional, I can identify with this: companies do a lot of unwanted-SKU-pushing especially in the last month of the FY! So while there are long waiting lists for a particular variant, the company may be pushing its dealers to accept variants that are easily available but not as fast-moving (simple case in point the VW Vento petrol TL).

I don't think it's time to ring the panic button yet. Sure, the fuel price hike will have its impact, but EVERY SEGMENT of the market is hot now as it's never been before. As a consumer all I can do is sit back and watch manufacturers tempt me with their wares. If that means their dealers stock a little inventory more than usual then so be it!

Good point drawing parallel with the SKU stocking at the dealer's end in FMCGs, a cushioning of the bad news is possible ( upto a certain extent) through the same . Its not as much of a fuel price hike issue as that of a hike in car financing interest rate, the same rate which used to range around 9% a year back is now ranging anywhere between 11-12% and that too banks are sometimes reducing the amount of financing [80% instead of 90%]. Usually banks lose appetite for risk when interest rates are rising so fast as it is today and this is specially true for fast depreciating assets such as cars. This interest rate scenario is not going to improve in the near term for sure.

I asked some of my banker friends on car loan disbursals and for sure the volumes are significantly down - so either people are buying less cars or they are taking less loans

For the dealer , high inventory means higher working capital cost (at borrowing costs which are 2-3% higher than a year back ) so he would try to get the stock moving at the earliest even if it means offering discounts. The gravy train has slowed down due to the overhang of high interest costs

This would though be an opportune time for a buyer of a slow moving car - a buyer of say Vento petrol TL