Passenger vehicle (PV) demand is expected to maintain growth momentum in the coming months despite rising ownership cost as well as production challenges.
Accordingly, PV market leader Maruti Suzuki India believes the upcoming festive season will boost buying sentiments.
Lately, the sequential sales’ momentum has been subdued due to rising ownership and operating cost.
According to Shashank Srivastava, Executive Director (Marketing & Sales), Maruti Suzuki India: “Healthy sales momentum is expected to be maintained during the main festive period starting from mid-October. Till now, the festival of Onam saw a decent sales uptrend. However, there are uncertainties on the supply side.”
In India, the main tranche of the festive season commences from Navratri till Diwali.
“Factors such as shift to personal mobility from shared transport, lower interest rates, migration towards established brands as well as pent up demand are giving a push to sales momentum,” he said.
“Rural sector is also doing well because the income levels have improved.”
Presently, the auto giant’s 40 per cent sales come from the rural areas while 60 per cent is from urban India.
Last month, the auto major’s total sales rose to 130,699 units from 124,624 units sold during the corresponding period of 2020.
The total sales in the month included domestic sales of 105,775 units, off-take to other OEM of 4,305 units and exports of 20,619 units.
However, on a sequential basis, it had sold 162,462 units in July 2021.
“Production has been impacted due to electronic components shortage in August. This is critical as cost and waiting period increases due to lesser production.”
The automobile major has reported an 8 per cent fall in its vehicle production in August.
It produced a total of 113,937 units last month, compared to 123,769 units in August 2020.
Besides, vehicle acquisition cost has gone up due to rising commodity prices and high regulatory levies.
India’s auto market is considered to be highly price sensitive unlike those of Japan and the European Union.
At present, the industry is grappling with rising costs of steel, plastics and rare metals in addition to high forms of levies, insurance and road tax.
Recently, the company had to go in for a price hike due to rising commodity prices, especially those of steel, copper, rhodium and palladium amongst others.
“Earlier, we tried not to raise prices to revive demand by cost cutting and other measures. But continuously rising material cost has left us with no options.”
Notably, 70 per cent of the overall vehicle cost is of manufacturing materials.
“Till now, we had to increase prices four times, in January, April, July for CNG cars and Swift and in September. Currently, commodity prices have started to soften-up a bit, the industry believes that the material cost will plateau out on these levels and soften more in Q3FY22 and Q4FY22.”
Furthermore, this phenomenon has in some degree countered the positive effects of easy availability of finance along with low interest rates.
Additionally, vehicle operating cost has surged as a result of exponential rise in fuel prices.
“Running cost, largely depends on fuel efficiency and its price. Costs of diesel and petrol are at their peak, thereby negatively impacting car sales.
“Positive thing is that CNG running costs are now much less than before and CNG cars are gaining traction.”