Experts said despite a softening in retail demand this month, long waiting periods of up to a year for some models and oversupply of others have led to discounts, reflecting a highly uneven market.
For example, while sport utility vehicles (SUVs) are popular, small cars not so much. Meanwhile, all prices have gone up in the past three years.
Companies are trying to balance supply and demand
Higher prices are threatening to put the brakes on car purchases as inflation reduces disposable income. Last year, the semiconductor shortage affected models across segments. This time the discount and waiting period are model-specific, said Shashank Srivastava, senior executive director, Maruti Suzuki India Ltd. High interest rates and rising prices continue to have a negative impact on sales of entry-level models.
According to estimates by Jato Dynamics, models from Maruti Suzuki, Hyundai, Mahindra and Tata Motors have longer waiting periods, which is proving frustrating for customers. These range from two weeks for the Maruti Suzuki Alto to 62 weeks for the Mahindra XUV700.
Manufacturers are trying to balance supply and demand as customers cannot buy the models they want and others are discounted. This lowered the forecast for PV sales this month from 350,000 to 310,000 units.
SUVs account for more than half of the PV segment. With short waiting periods of one to three months, there has been a lull in demand in the sub-Rs 10 lakh segment of cars. Vijay Nakra, President, Mahindra Automotive said, “The slowdown is visible in the price sensitive segment.
Vijay Nakra, President, Mahindra Automotive said, “The slowdown is visible in the price sensitive segment. He added that when the value proposition is strong and the product is well differentiated, consumers are willing to wait longer for a model.
Some experts pointed out that 3.9 million would be a record but only 14% more than FY19 sales. Srivastava said that if seen from a historical perspective, it is an incremental growth.
In the current market, many buyers are finding it difficult to buy popular new vehicles despite visiting multiple dealerships. Meanwhile, car prices have increased significantly in the last three years and this has forced many buyers to review their choices, said Ravi Bhatia, chairman, JATO Dynamics. To be sure, a long waiting list is generally viewed with caution as it may reflect multiple bookings and is liable to a large number of cancellations, Srivastava said.
Economic fundamentals indicate some stress as higher inflation, rising interest rates and slower growth will reduce disposable income and hence less inclination to spend on discretionary products such as cars. This is already evident in the small car segment.