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Passenger cars competition on the rise - Views on News from Equitymaster
 
 
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  • Aug 29, 2000

    Passenger cars competition on the rise

    Passenger car sales for the month of July have reported a decline of 10% YoY. In the small car segment the worst hit has been Maruti Udyog which has reported a decline of 26% YoY. However others like Hyundai Motors and Daewoo Motors have reported buoyant growth rates on a year on year basis.

    Telco's Indica too did not fare well as its volumes declined by 14% YoY from 4,189 cars in July-99 to 3,583 cars in July 2000. This is not very good news for the company as it delays the break even on its car project. The company was earlier expecting to break even on the Indica car project in the current year, however as it is unlikely to reach the target level of 90,000 vehicles per annum this will happen hopefully now in the next year.

    Car sales for July decline
    Companies Jul-99 Jul-00 % change
    Maruti Udyog Ltd 37,404 27,665 -26.0%
    Hyundai Motors 4,949 7,265 46.8%
    Daewoo Motors 2,801 4,110 46.7%
    Ford India 302 1,502 397.4%
    General Motors 220 648 194.5%
    Tata Engineering 4,189 3,583 -14.5%
    Honda Siel 850 606 -28.7%
    Mercedes 88 55 -37.5%
    Hindustan Motors 2,038 1,941 -4.8%
    Total car sales 52,841 47,375 -10.3%

    In the mid sized segment, the Ford Ikon has done very well. In the month of July 2000 Ford India sold 1,502 cars, a growth of 397% YoY. General Motors too has reported a robust growth of 195% YoY.

    While some players have done well, others have not. This can be attributed to not only a slowdown in the overall automobile segment but due to higher competition in the passenger car segment. With companies coming out with new models, adding features and price wars, competition is on the rise.

    In the longer term as it will not be viable for all players to survive, consolidation in the Indian car market is bound to happen like it is happening globally currently.

    The reasons for the slowdown in the passenger car market as is in other segments of the automobile industry in the current year, is imposition of uniform sales tax. However the future looks bright for the passenger car segment with lower interest rates, availability of attractive car finance schemes, improvement in the economy and pick up in the second hand car market. Price increases have been minimal in the small car segment as competition is intense, this should continue to spur the volume growth in this segment.

     

     

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