[CoolFire]

Too early to come to conclusions. Definitely a slow down is there, which I feel is more like a cyclical one after a fairly long period of high growth. Like all such corrections, here too we can find some immediate triggers like NBFC and banking squeeze, cost increases, taxi peak etc.

This will most likely last for a couple of quarters or maybe even more, but after that the industry will run again in a higher pace. Whether Maruti will retain the present near monopoly lead over others is something hard to predict.

Also, hybrids may make a much earlier push than we foresee now or maybe even plug-ins if some breakthrough happens in technology. Anyway it's going to be exciting times for customers except our alarmingly worsening City congestion and inadequate parking infrastructure

[Thermodynamics]

Domestic market slumps, even the most agile is agitated. International scene is better neither, Hyundai reports first loss in years, China-US trade war, JLR affected by Brexit.

All is not sounding well for petrol heads, for investors who have put their hard earned money in automotive segments, for all families employed by automotive and related upstream/downstream industries (chemical, petrochemical, polymers, metals, glass). It is a big employment provider.

I wish some stimulus/policy relief is offered by policy makers to support the industry sail through turbulent waters.

[Kosfactor]

Originally Posted by ACM

Happens in all industries.

1) Iphone and Samsung price drops in recent times. Especially Iphone which didn't do it till recently and have always charged more for less.

2) Gionee F250 MRP 10k odd now for 5.5K in less than 9 months.

Poor sales, stock buildup like in any industry.

Yep Duster, Creta, Scorpio, ALL Toyota models exhibit this kind of unjust pricing now or did so earlier. Even the XUV 500 for that matter.

I bought the Safari EX for about 8.5-9L on road in 2001. It isn't just price inflation that takes it to 17 plus today.

That said a general correction will be both good and bad. While car prices may become better for those who can afford it. The Job market will crash and unemployment will rise.

There is no win-win solution.

True, but I think the manufacturer is surely responsible for this in some way.

From the vehicles you have mentioned, they sure are over priced and yet hardly offers any discounts. But most of them are getting regular updates in some way and stays relevant.

What I see is, as more players enter a segment and the weaker (sales) product start to offer more discounts - they do not have a choice now, this will hit their margins, leading to longer refresh cycles and finally exit the market altogether in some cases.

Its bad for the market, but eventually the blame can be put back on the manufacturer itself for a failed product - survival surely is for the fittest only!

I am very wary of discounts that are too good to be true, the vehicle in itself can end up being a liability in future regardless of the brand.

[SoumenD]

Well this was ought to happen. There's a threshold to everything. Post 2008-09 recession, market saw a decent growth and it was sustained all this while which in itself is great. However compared to previous recession, this time around people will be better prepared am sure and hence probably the caution. It's not just cars, even real-estate hasn't/isn't seeing much growth with pretty good amount of inventory lying unsold without any significant price rise in last couple of years. Many such big ticket purchases are seeing considerable caution.

Moreover the car prices too have shot up like anything. i20 @11L & Honda City @ 15+L OTR wasn't imaginable a few years back.

Add to that the pathetic traffic conditions leading to the advent of shared ride services. I use quickride(both as a rider/passenger) almost 4 days a week now and the sort of vibe I get from people is, they have lost interest in driving around in city. Shared rides for office commute and ola/uber for weekend/airport runs seem to be the norm now.

About BS VI kicking in, barely a handful of enthusiasts know and it noway can lead to such a slowdown

P.S: Hoping against hope, this overall slowdown leads to some sort of rationalization of prices among all such commodities.

[YashD]

I don't know who should be blamed for this.
Way back in 2003-04, the C Class retailed at 26 - 27 Lakhs on-road. In 2012, The prices were somewhat around the 40 Lakh mark on-road. Now, the same vehicle is almost 60 Lakhs on-road.
The same goes for hatchback segment, in 2009 the i20 was 6.1 Lakhs on-road and now its almost touching the 11 Lakh mark!
We all know how the Toyota prices have shot up.
One may say, the cars now has advanced drastically compared to the older times with a lot more equipment and technology, accepted! On the other hand, are they really that expensive that doubled up the price with every new generation?
Secondly, the consumers too never complained regarding the constant hikes and accepted the vehicles with whatever pricing it was launched in (Valid for mainstream products & manufacturers only.) Another point which needs to be considered here are the marketing costs incurred by the companies have increased drastically due to digitalisation. Also, I feel a lot of manufacturers are trying to cash in their goodwill created over the last few years in order to sustain in the competitive market as their margins are going down with the increased competition as more and more new players are coming in and segments are literally getting saturated with ample of options. I feel, the consumers too have become a lot more smarter now forcing the manufacturer dealers to give higher discounts as they too know about the wide range of options available and how they can cross shop in different segments with the same budget. For e.g with a budget of 15 Lakhs now the consumers have so many options to choose from like you may get a compact SUV, a Cross hatchback, a C Segment sedan and also, a couple of models from D Segment like maybe the base variant of Elantra with discounts or a premium SUV like Harrier. Hence, by smart negotiating tactics they end up creating such a vibe that the manufacturer ends up giving them the highest discount possible so that they don't loose a potential customer.
I don't know if my insights are valid enough or am I correct but this is what I feel has been happening in the Indian Auto market for a quite a while. You go to buy a WR-V but end up getting a Verna home and they're several such stories. I think, Manufacturers needs to start playing it smartly, keep a limited line up and understand their fortes attacking those particular segments so that nobody touches them in that segment. For e.g MS has identified the same and hence they focus so highly in the budget 10 Lakh mark segment. Toyota knows about it UVs and hence both the Crysta and Fortuner are untouched by a huge margin. Right now, it seems to be the best way in order to sustain in the market and make money though having said that, I would also say just focusing on certain segments won't get them the heavy returns, one expects hence they should get multiple different kind of products in the same segment. To be clearer, we can see the Crysta and Fortuner's pricing or Maruti's line up under the 6-7 Lakh mark. They make sure, a customer doesn't ends up leaving their showrooms without purchasing a vehicle in their respective price points. I hope I was able to explain my points clearly.

[WorkingGuru]

Suzuki, of all companies should not be cribbing! All their cars sell exceedingly well. R&D and tooling depreciation is achieved with ease.

Discounting only proves the manufacturers inability to gauge the market. Comparatively to other countries, we Indians pay thru our noses for the kind of cars sold here.

As for rest of the car makers, they have brought it upon themselves that they need to extend discounts. Frowning upon the market (buyers, essentially) has become a menace IMO. Especially when Indians pay exceedingly well compared to other countries, that too with no lemon laws and essentially no safety regulations.

An example of the situation why products need to be discounted :

Shankaran Pillai wanted to buy say, a Honda City in 2014. It used to cost 12L OTR back then. So he had been saving up & trying to grow financially to be able to afford a vehicle of that segment. Now it's been 4-5 years and he's saved ~14L, but the price just keeps increasing leaps and bounds, that same car costs 18+ Lakh now! So, he doesn't feel like giving up SO MUCH for a car that used to cost 65% the present price back then and hopes for a reasonable small 5% discount. Demand tapers off because sellers don't offer it.

[dark.knight]

Originally Posted by Thermodynamics

Domestic market slumps, even the most agile is agitated. International scene is better neither, Hyundai reports first loss in years, China-US trade war, JLR affected by Brexit.

All is not sounding well for petrol heads, for investors who have put their hard earned money in automotive segments, for all families employed by automotive and related upstream/downstream industries (chemical, petrochemical, polymers, metals, glass). It is a big employment provider.

This industry is very tricky and we'd all be better off on the fence from now on. I have briefly worked in related industry of injection polymers and fibre-glass moulding. All I can say is that this mode of transport has only seen about 100 years in the known time-line of mankind, and the damage it has caused in this brief period has also been catastrophic in terms of pollution, damage to the ecosystem, whether it is in terms of production of aluminium, fuels, paint, fibre-glass, leather, rubber, etc. That's only for starters.. then there is the actual burning of fuel by cars, the accidents and subsequent parts consumed etc. Cars contribute to 70+% of nitrogen-oxides and 50+% of carbon monoxides, globally, both these gases are unnecessary in such high volumes, I'm ignoring the carbon-dioxide output since all mammals breathe in certain volumes of CO2 and we cannot survive without it since earth is, essentially a carbon-based planet, trees do their bit as well in consuming CO2 and without trees we cannot have oxygen.

Without a steady plan on recycling and using recycled components in cars in the future, the industry will soon be looked down upon for its wasteful ways. America had 1 billion tyres at a point of time in land-fills, yes 100 crore tyres and adding up by the day just so that Michelin, Continental, Bridgestone etc make money. They introduced tyre recyling in Europe and Americas and now that number is down to about 5%, still big but great job nonetheless. Now imagine also recycling polymers, metals, glass etc which are very much possible but require large amounts of heat and energy to do so. I'd say vehicular production is the chief enemy that we have today.. paints and primer which expel approximately 70% of the VOC (volatile organic compounds) of the entire production which are key carcinogenic agents which can only be disposed of when inhaled and lodged into the lungs of all mammals, are gradually being modified into water-base agents which are far less deadly. Then there is the cocktail of chemicals, electrostatic primer wastes, anti-corrosive agents and dirt/grime that are let into rivers world-wide from this industry.

This isn't a rant or complaint, just an indicator of rising awareness and the direction the world needs to take as a result. Automobiles are soon going to be more luxurious, more aspirational and more expensive than ever before, specially when the electric vehicles start coming in (the fact that lithium-ion is also a big toxic raw material will also be published soon). Sales will dip world-wide and at the retail end, they can only do business by discounting the inventory, as without rotation the business is pointless, even at the obvious side-effect of reduced profits. The manufacturers in my view, should have absolutely no business in dictating the terms to dealers as long as they get what their price is, sure with increasing discounts there is a risk of prices falling and/or speculative buying, but that seems to be the direction this industry is heading to. Yes, diesels will also soon be stopped.. Germany, France and America have dictated that quite clearly, and those 3 are key automobile hubs. We cannot afford to be sentimental about this industry anymore.

[Superleggera]

Well, this is ought to happen when the manufacturer overprices the product.

The Price of a full size SUV is equal or more to the price of a house in India, which shows the extent of overpricing.

The average house price in USA is $200,000 and and you will get a decent passenger car for 10% of the money, and for 25% you will get a fully loaded luxury SUV.

[kiku007]

Manufacturers aren't happy? Of course. It's about time the inflated prices are brought down.

https://www.team-bhp.com/forum/india...ml#post4391322 (Overpriced cars : Myth or reality?)

[CARDEEP]

Originally Posted by kiku007

Manufacturers aren't happy? Of course. It's about time the inflated prices are brought down.

https://www.team-bhp.com/forum/india...ml#post4391322 (Overpriced cars : Myth or reality?)

it's the prices that are too high, & in case of Japs those are astronomical sans the products/ pedigree they harp on.

Plus, where's the disruption in sales that can also help in lowering selling costs. BTW Maruti Suzuki doesn't need any star to sell & with MS Arena Dealerships Nexa is incremental cost than the returns that do not justify. But feel their top management has employed this strategy to keep select dealers happy in name of image building.

Regarding low sales, & many other economic indicators, I have suggestion for RBI - lower the interest rate, it will make people loosen up purse strings & help increase manufacturing/ construction activities. There are other benefits to this as well, but I'm yet to fail magnanimously to be economist recognised at top .

[Chillout]

The margins on cars are minimal, it's only the duties and taxes that result in significantly higher prices. It's going to be increasingly difficult for manufacturers as economy isnt showing a robust growth and demand is also tapering down quickly.

[Superleggera]

Originally Posted by Chillout

The margins on cars are minimal, it's only the duties and taxes that result in significantly higher prices. It's going to be increasingly difficult for manufacturers as economy isnt showing a robust growth and demand is also tapering down quickly.

I would like to disagree. I am sure that toyota makes at-least 30% margin on the Innova and Honda also makes the same on their cars, with the exception of Amaze.
Maruthi may makes slighlty less due to their volume strategy.

[born_free]

Originally Posted by Superleggera

I would like to disagree. I am sure that toyota makes at-least 30% margin on the Innova and Honda also makes the same on their cars, with the exception of Amaze.
Maruthi may makes slighlty less due to their volume strategy.

30 % profit margin is quite high for any industry and even IT companies who work on wage arbitrage have 20 % profit .

Automobile sector being capital intensive has less profit margin and relies on volumes.

From annual reports on valueresearchonline.com I could see that Maruti Suzuki had net profit margin in the range of 6 to 10 percent over last 5 years.
For Mahindra its much worse at around 3- 7 percent.

This is not surprising as big chunk of money goes out as GST and road tax out of every car sale.

[drmohitg]

I think it's a simple demand and supply question. I for a record do not agree with the exponential increase in prices of cars across the segments. Have the salaries/incomes also increased with the same factor? Mine didn't and the same is with my colleagues. Recently a colleague was out in the market for exchanging his 1st gen i20. The car had costed him 5.5L when he bought it it in 2011 and now the same car costs 10L. But his salary has not matched this.

The biggest contributors to this trend are the luxury car makers. Recently enquired about the X1 and without any negotiation, was offered 8L off the price. This is completely insane. Why price it so high and then offer nearly 25% off on the OTR price. Price it sensibly from the start.