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Mid-size car sales on the upswing - Views on News from Equitymaster
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  • Oct 9, 1999

    Mid-size car sales on the upswing

    News reports reveal that there is an upsurge in passenger car sales in the mid-size/premium segment.

    Car sales figures for the month of September 1999 indicate that mid-car sales at 5,244 units, posted 33% surge in sales (YoY). Cumulative sales in 1HFY2000 at 35,534 units rose only marginally over the corresponding period last year (34,578 units). Moreover, 1HFY2000 sales failed to match the 42,868 units sold in 1HFY97.

    Mid-car sales have witnessed demand growth (YoY) since April 1999, with only July sales failing to match the previous year's figures. If this trend continues, the premium segment will experience positive growth this year, the first time since calendar year 1996.

    Demand upswing in mid-car sales is encouraging for manufacturers, who were disheartened at witnessing negative demand growth in their segment, while the small car segment continued to witness robust demand. Signs of a demand revival in the mid-car segment seems to indicate that the entire car sector is on the upswing, and not just the small car segment.

    Sales growth in the mid-car segment is attributed to new launches by Mitsubishi (Lancer) and Honda (City), with both selling 1,500 units each. Even Fiat Siena's sales picked up steadily, and achieved volumes of 826 units in only the fifth month since its launch.

    But whether demand revival is a temporary phenomenon will be tested when other manufacturers launch their products. Hyundai plans to launch the Accent in mid-October, Ford will come out with the Ikon in November, followed by the Opel (Corsa) and the stationwagon version of the Fiat Siena.

    It remains to be seen whether the slew of launches will expand the market, or manufacturers will only be eating into each other's market shares. When the Matiz, Santro and Indica were introduced in the small car segment, they expanded the market, which resulted in explosive volume growth. For this to happen in the mid-car segment, manufacturers will have to post higher volumes.

    Higher Mitsubishi Lancer and Honda City sales underscore a very interesting fact - there is demand for a quality car priced in the premium segment (Rs 700,000-750,000). However, future launches have targeted the sub-premium segment (Rs 500,000-600,000) and seemed to have ignored the premium segment, fearing low demand growth.



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