Mini hatchbacks and affordable non-electric motorcycles and scooters are expected to see bumper sales in the coming months as India prepares to celebrate its first ‘normal’ party season after a two-year hiatus. An “above normal” monsoon, positive consumer sentiment and generally upbeat mood are also expected to boost entry-level vehicle sales.
Automakers, for their part, are developing aggressive plans focused on attractive discounts and new products to convert demand into sales.
Manufacturers such as Maruti Suzuki, Hero Motocorp and Honda Motorcycle & Scooter India (HMSI) are betting big on the festive levy, with expectations of more than half of pent-up demand for two-wheelers and entry-level cars which will pass during the holiday season this year.
They say a significant percentage of buyers, especially in the hatchback segment, are first-time buyers and many of them are in B&C cities.
“For these buyers, buying a car is an important step in their life journey and they obviously want to start these steps at an auspicious time,” said Shashank Srivastava, Senior Executive Director at Maruti Suzuki. “Generally, festivals are times when families expect something to celebrate and bringing home a new car is definitely a celebration.”
As automakers prepare new products to launch during the season, banks, public and private, are working on offers and incentives to entice customers as they see a surge in demand for retail loans.
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“We expect momentum to build in the coming months due to a combination of several factors, including healthy GDP growth in the country, a normal holiday season after a two-year gap, better monsoon season resulting in a decent agricultural harvest and positive consumer sentiment,” a Hero MotoCorp spokesperson said.
The automotive market has recovered well from the impact of Covid with the reopening of schools and offices. However, factors such as compliance standards and rising raw material and fuel prices have increased the cost of ownership for vehicle customers.
This has impacted demand, especially in the entry-level car segment and contributed significantly to lackluster two-wheeler sales, said Atsushi Ogata, Managing Director, President and CEO of HMSI. “With that in mind, we are approaching the holiday season. While the season has certainly set the tone for us, we are confident that the coming months will bring balanced growth,” Ogata said.
Sales have lagged for entry-level cars in the recent past. But they recorded a slight year-on-year increase of 0.88% between April and August this year, with Maruti Suzuki accounting for 90% of sales. Maruti Suzuki sells Alto and S Presso in this segment.
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The entry-level motorcycle segment, the largest contributor to total motorcycle sales, was led by Hero Motocorp, with sales of its Splendor and Deluxe rising 18% during this period, according to the latest data from the SIAM.
Dealers also expect to see improved retail sales of entry-level motorcycles during the holiday season. “The footsteps and inquiries have increased, but that has yet to translate into sales,” said Nikunj Sanghi, owner of Rajasthan-based JS Fourwheel Motors, which has stockpiled entry vehicles. range, as their supply remained constant while demand took a hit.
While holiday season sales are expected to rise 10-15% over the past year, they still won’t reach pre-Covid levels anytime soon, two-wheeler dealers have said.
Although the number of cars and two-wheelers per capita in India is steadily increasing, there is plenty of room for growth. According to consultancy Jato Dynamics, India, which has 300 million households, had 22.5 million cars in 2019-20, up 1.5% from 2016; and 149 million two-wheelers, an increase of 12% since 2016.
These segments are not yet saturated and there is still a lot of growth potential, said Ravi Bhatia, President of Jato Dynamics.