Cars: Near rebound

With lockdowns over and life gone more or less to normal, auto sales are climbing back up. In 2MFY21, recorded car sales stood at some 20,000 units which is about the same as last year’s cumulative number. In Aug-20, both Honda and Indus Motors saw their sales resuscitate back strong—growing by 79 percent (Civic and City) and by 49 percent (Corolla and Yaris) for respective companies.

Suzuki sales fell 15 percent as Alto witnessed a 30 percent decline during the month compared to the corresponding August last year when the model was newly introduced. Though the hype may be over, the vehicle has shown improvement in month on month performance indicating a continued upward demand movement over the next couple of months. Another reason for the slower rebound in Suzuki may be the delayed re-opening of the factory after the lockdowns were lifted. However, one should also remain circumspect about how fast sales will climb for the so-called middle-class cars as they have become markedly more expensive than they were last year.

Cheaper financing due to substantially lower interest rates will boost some demand and it is likely that more consumers will opt for bank borrowing over the next year to lessen the burden of the incremental cost for these cars—about Rs100,000 to Rs300,000 from last year. Purchasing power has not improved too much for consumers as economy is still finding its footing in the wake of covid-19. However, the outlook for consumption is positive.

For Honda and Corolla buyers, consumers are able to absorb the higher price against getting the car on time. In these segments, competition is growing and would remain a developing threat. Kia and Hyundai’s offerings are doing well in the market according to sources and users’ reviews are pointing toward a dispersion of the market shares out of the hands of the Japanese OEMs onto new entrants—by at least a small margin. What to watch out? Hyundai Tucson which was just launched—expected volumes will go up over the next few months. Kia on the other hand will continue to perform well in Sportage and Picanto as the market seems to have embraced the two models.