Forget the Verna and City, small cars back in favour as austerity sets in

**New Delhi:**After many months of decline, when consumer were preferring sedans and Utility Vehicles, frugality is back. Data released by the Society of Indian Automobile Manufacturers clearly shows two things: in these times of austerity, buyers are either looking for cars which burn less fuel and choosing larger cars only if they have been launched recently. This means either hatchbacks or new cars such as Ford EcoSport and Renault Duster.

A third of car facilities in India have been lying idle these six months so it makes sense to cut down production of slow moving sedans and luxury cars, which were popular even at the beginning of this year.

The SIAM data clearly shows that production of star walts such as Honda City, Nissan Sunny, Hyundai Verna was cut back in September.

This was a month when anticipation of higher than usual festive sales pushed car makers to increase production overall. Other cars where production was curtailed were Skoda Rapid, Indigo, Manza and Volkswagn Vento. Hyundai Elantra and Toyota Corolla also found less favour with buyers. Consequently, production cutbacks were seen because even offtake by dealers was less for these models compared to September of 2012.

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As per SIAM data, production of mid-sized sedans was down to 15,553 units (18,106 units) while dispatches to dealers were lower to 12,839 units (15,642 units). For Executive segment of cars, production was down to 1179 units (24170 units) while domestic dispatches were down to 1295 units (2227 units).

But for small cars, this was truly a festive month. Production of minis and compact cars increased to 158,069 units against 149,659 units in September last year. Dispatches to dealers were

[caption id=“attachment_503076” align=“alignleft” width=“380”]  he most dramatic increase in dispatches was seen in Honda Cars India’s shipments last month as Brio and Amaze flew off the shelves.[/caption]

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higher at 119,232 units versus 115,180 units. The most dramatic increase in dispatches was seen in Honda Cars India’s shipments last month as Brio and Amaze flew off the shelves. Dispatches increased from 2620 in September last year to 8131 units last month.

Combined dispatches of Maruti’s M800, A-Star, Alto and WagonR increased to 41,061 units from 39,150 in the year ago period.

The renewed preference for smaller cars comes amid rising fuel prices, rapidly narrowing differential between petrol and diesel fuel prices (many large cars and most Utility Vehicles run on diesel) and rising interest rates for vehicle loans. Smaller the car, lesser is its cost of ownership is the logic at present.

SIAM data shows car dispatches to dealerships were lower between April and September this year than even the gloom period just after the collapse of Lehman Brothers in 2008-09. In fact, car dispatches have been the slowest since 2002-03 this fiscal or the slowest in 11 years.

SIAM President Vikram Kirloskar says consistently high vehicle finance rates, a slowing economy and the absence of any fiscal stimulus specific to the automobile industry despite repeated requests makes it difficult to predict if the remaining six months of 2013-14 will be any better.

Though dispatches have improved across most vehicle categories in September, this could partly be because of manufacturers stocking dealerships in anticipation of higher offtake. A good monsoon this year means vehicle sales in rural areas are expected to be robust and sales of two wheelers are already in positive territory. But this is small comfort to an industry which is reeling an unprecedented slowdown.

Last month, vehicle makers sold 156,018 cars, up 0.7% from a year earlier. Sales of motorcycles rose 17.4% to 885,117 units but truck and bus sales were down 27% at 51,680 units. For the six month period, car sales fell 4.7%. A surprise increase in interest rates and rising car prices last month have tempered hopes for a turnaround in the country’s struggling auto sector.