No Fun Summer for Automakers in Delhi

High interest rates aggravated by the off-season demand slump has affected most of the summer’s new model launches. Despite the claims of some of the automakers that production constraints were the reasons for their low sales, auto analysts have a different observation. According to them the low sales experienced for this summer is due mainly to the decline in certain segments in the car industry of which includes the midsized sedan C segment.

As a fact, the producer of Saab fog light, General Motors with its small car offering, Spark which has previously sold 2,000 units last May has dropped by 1,504 units last June. General Motors’ Vice-President for marketing, sales, and aftersales Ankush Arora explained, "The reason there has been a dip in our Spark sales is because this is off-season and also because we are facing production constraints. We anticipate a production ramp-up by August-September, just in time for the festive season."

He also added that the increase in interest rates has affected the industry. Likewise, auto analysts also believed that the hike in interest rates has hit the compact car segment severely. Basing on the SIAM sales figures, the compact segment has increased by 14 percent from April to May this year while its growth only records over 20 percent that is before interest rates and started to decline earlier this year according to a senior auto executive.

On the other hand the C segment has been struggling with only 2 percent growth selling only 34,198 units from April to May of this year. A marketing executive of an auto company said, "The C segment has been flat for the past two months although it was growing in double digits before that."

Most of the new launches have experience good sales at least in the first quarter which last until the sixth month. But unfortunately, new model launches in the volume segments have failed to sustain growth in the passenger car market this year.

Even Honda City’s tight competitor the Maruti Suzuki SX4 has experience plunging sales to 1,995 units in the second month of its launch. According to Maruti’s Vice-President for Marketing and Sales Mayank Parekh, "We have not seen any slump because even after working at full production capacity we have not been able to churn out enough. We can make only about 2,000 units per month. We are actually exploring ways and means to increase capacity."

Mahindra Renault has also experienced sales dipped when it launched its Logan in April it sold 2,786 units in May but dropped in June to 2,380 units. Mahindra Renault’s CEO Rajesh Jejurikar said, "We are churning out cars as per our production capacity. We produce about 90 cars per day. We are ramping up capacity for Logan and expect to produce about 3,000 units in time for the festive season."