Discount dhamaka: Will car sales sparkle this Diwali?

New Delhi: Demand revival in two-wheelers this festival season may be doubtful but for passenger cars, festivities may have already begun. Not only have analysts begun talking of an overall demand revival in select models, many are now also pointing towards increasing enquiries and improving demand of petrol cars, where discounts are already on the wane.

So will this year’s Diwali be a sparkler for petrol cars at the cost of bike sales? Auto loan rates have declined somewhat and petrol prices are holding steady. So will demand revive or is too much being read into the return of petrol powertrains?

[caption id=“attachment_488734” align=“alignleft” width=“380”]  Even bigger cars, which have been typically registering scorching growth numbers, are coming for hefty discounts. Reuters[/caption]

“Our extensive channel checks with car dealers across India suggest that while diesel vehicles continue to be preferred by buyers, the discounts on entry-level gasoline models are showing signs of a downtrend. We also note that the waiting period for diesel vehicles has begun to moderate, which reflects better availability,” Srinivas Rao and Amyn Pirani of Deutsche Bank Market Research said in a note to clients this morning.

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And from what the two analysts have found on the discounts front, this may be as good a time as any to go buy that car.

Maruti WagonR is being sold with one of the highest discounts among petrol cars at Rs 65,000 (cash discount and exchange bonus) while Tata Indica diesel comes with one of the steepest discounts for diesel cars at Rs 55,000 (cash discount and exchange bonus).

The highest discount as percentage of on-road price of a car is being offered by Hyundai Motor India for Santro at Rs 42,000 or 5.6%. Chevy Beat petrol is now retailing at total discount of Rs 33,000, Hyundai Eon Sportz at Rs 27,000, Ford Figo petrol at Rs 18,000 and Figo diesel at Rs 21,000.

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Even bigger cars, which have been typically registering scorching growth numbers, are coming for hefty discounts. The two analysts found that Mahindra Xylo comes with discounts of Rs 44,000, Scorpio with Rs 29,000.

Another interesting point which emerges from the note of these two analysts is that Maruti Alto K10, the lowest priced car among all the models they have collected data for, comes with a hefty discount of Rs 48,000 (cash discount, exchange bonus and corporate discount). So Maruti needs to watch out on pricing the new Alto 800, which is slated for launch next week.

But Surjit Arora of Prabhudas Liladhar said in a note to clients on Monday that this new car would add 30,000 units more to the company’s annual sales volumes this fiscal. “Maruti is working on a production schedule of 800 cars per day for the new Alto 800. Currently, the old Alto production is pegged at 500-600 cars a day. Hence, in our view, the incremental volumes from the new car could be 200 cars a day. This would add around 30,000 units to our FY13E volume estimate.”

Meanwhile, Jamshed Dadabhoy and Arvind Sharma of Citi Research said in a note on October 8 that Maruti and competitors have hiked prices by about 1-2% across models “ostensibly to pass through costs, but we think its because companies sense that customers are returning to showrooms.”

These two analysts also note that there are early signs of recovery in retail volumes for Maruti. They quoted the Maruti management to say that early signs from festivals like Ganesh Chaturthi (Maharashtra) and Onam (South India) indicate consumer sentiment is improving and customers are returning to showrooms.

“Management reckons industry volume growth in FY13 could be between mid to high single digits, especially if the festive season (Diwali and Dussehra) results in better volumes.”