Companies & Sectors
Rising costs, rates to affect domestic car sales during festivals

According to CRISIL, rising cost of ownership of cars and strikes are to subdue sales growth in the festive season. Frequent fuel price and interest rate hikes would also impact growth in 2011-12

Rising cost of ownership of cars due to frequent fuel price and interest rate hikes as well as labour strikes are likely to affect car sales in the festive season, says CRISIL.

In a research report, the ratings agency said, recent events at the start of the festive season will impact the consumer sentiment negatively causing the industry to grow at a much lower rate than previously anticipated. This, in addition to labour problems at market leader Maruti's Manesar plant will further dent demand. Frequent fuel price and interest rate hikes are to impact growth in 2011-12.

Cost of owning a car has increased significantly by 12-14% due to frequent increases in fuel price and interest rate. Since its de-regulation in June 2010, petrol prices have increased by 37%. In this fiscal alone, the prices have increased by 13% to around Rs 71 currently (Mumbai prices) from Rs. 63 at the start of the fiscal. Hence, fuel cost for driving a typical compact car has increased significantly by 30%-35% during 2010-11, the report said.

Prospective buyers have to contend with increasing EMIs as well. The Reserve Bank of India raised interest rates four times within the first 5 months of 2011-12. The recent hike of 25 basis points (bps) in the benchmark rates has taken the total increase to 125 bps since the start of this fiscal. While automobile financiers have not fully passed on the increased rates to end users, uncertainty regarding their decision to pass on the rate hikes coupled with the burden of EMIs (equated monthly instalments) of other loans would impact demand for cars.

CRISIL has also revised its forecasts downwards on account of a rise of Rs3 in the petrol prices and a 25 basis points (bps) increase in interest rates. It said growth in passenger cars is likely to decelerate sharply to 2% to 4 % with domestic cars growing at less than 3 % as against the earlier forecast of a growth of 8-10 % due to fuel price and interest rate hikes.

Growth is expected to reach to the levels comparable to 2008-09, when the domestic car sales grew by only 1.4 % due to global recession. This would be only the second time in the decade when industry will grow at sub 5 %.

Demand drifts towards diesel but the limited capacity for diesel engines to limit growth. Diesel prices too increased by 9% during the year but difference in the prices of two fuels will continue to remain huge at 43%. Hence, demand for diesel cars increased significantly, far outstripping the available diesel engine capacities at the OEMs. While investments were made in expansion of diesel engine capacities during the year, most of the new capacities are likely to get commissioned only in 2012-13 limiting domestic sales growth in the current year.

According to interactions, CRISIL had with dealers and OEMs, there are lesser enquiries and footfalls as compared to that of the festive season last year. This has been done by CRISIL Research on the following parameters:

Inventory: Inventory levels on petrol models are high owing to a major shift in demand towards diesel vehicles. On an average, inventory at dealers end for petrol models is as high as 25-30 days against an inventory of 15-20 days a year ago.

Discounts: Discounts have been higher than previous years especially on petrol variants of most models by around 25-30 %. OEMs are engaging in marketing activities like reduction in prices (for e.g. Reduction in prices of Honda's City and Jazz) and special lower pricing for certain models (for instance Hyundai's i10) in order to boost their sagging sales

Waiting period: Waiting periods for petrol models have declined significantly. On the other hand, waiting periods for diesel variants are as high as 5-8 months. For instance, in case of Hyundai's Verna and Maruti Suzuki's Swift, waiting periods are as high as 8-10 months.




5 years ago

Brilliant article, thanks. In addition, the price of used cars has cracked further downwards, and the resale of saloons/3-box cars now matches that of equivalent hatchbacks from the same marquee.

For example, in a resale market, these cars now command very similar prices:-

Maruti Swift hatchback & DeZire
Tata Indica & Indigo

In addition, the steep drop in resale prices for larger cars is now reaching a level where it is cheaper to buy a big car for low-mileage use, assuming you know how to maintain it at low cost.

The real correction will take place when hatchbacks and 3-box sedans start costing the same, new, and that has to happen soon.

Humbly submitted/vm

Royal Enfield adds classic glamour with Chrome & Desert Storm

New Enfield bikes Classic Chrome has an ex-showroom price in Mumbai of Rs1,50,659 and Desert Storm of Rs1,43,967

The style quotient of leisure bikes in India just went up notches. Adding panache are two unique, new bikes from Royal Enfield-the Classic Chrome and Desert Storm.  

The Classic Chrome recreates the magic of old school bikes while offering the best in class technology. With the design philosophy of showing "metal as metal", a styling that suits Royal Enfield Classic the best, the Classic Chrome retains the authentic styling with the unique chrome tanks, wide mud guards and oval tool box, apart from the distinguishing tiger lamps that Royal Enfield bikes are famed for. The single spring saddle seat, the unique tail lamp, the Royal Enfield emblems on the engine and even the font on the speedometer are all inspired by the original styling of the 1950's. The stunning Chrome is accentuated by the artistic paintwork on the tank, crafted painstakingly by our artisans.

The Classic Chrome bike comes with the 500cc TwinSpark, unit construction engine that is designed to thrill the rider with its performance. The 27.2 bhp power output is made available with excellent drivability with a world renowned Electronic Fuel Injection system. The absolute reliability of the Unit Construction Engine, along with the hydraulic tappets, the auto chain tensioner, improved piston and piston rings and a more powerful charging circuit adds huge dependability to the Classic Chrome.

The Desert Storm draws inspiration from the World War era, with its bold, macho sand colour scheme. The matt finish paint job, with the Royal Enfield monogram on the tank and the thigh pads, portray the same strength and grit that of a true veteran.

The Desert Storm is also equipped with all the technical features of the Classic Chrome like the wide mud guards, oval tool box, the signature Royal Enfield tiger lamps, single spring saddle seat and the unique tail lamp. It comes fitted with the 500cc TwinSpark, unit construction engine and the 27.2 bhp power output is made available with the Electronic Fuel Injection system.  

Classic Chrome and Desert Storm, being limited edition products, would be available at select brand stores and dealerships across the country.


Share prices may strengthen: Thursday Market Report

Nifty may go up to the level of 5,100 if today’s lows hold

The market, which opened trade in the negative, bounced back at noon and closed near the day's high on select buying in auto and IT stocks after brushing aside global concerns. In yesterday's market closing report we expected to see the Nifty move in the range of 5,010 and 4,880. The market opened lower on domestic worries and on a plunge in metal prices in the global market overnight. Nervousness ahead of a crucial German vote to expand Europe's bailout fund due later in the day also played on investors' minds. The US indices had closed sharply lower last night.

The Nifty opened 22 points lower at 4,924 and the Sensex started the day at 16,388, down 58 points. After making a low in the initial hours at 4,906, which was lower as compared to yesterday's low, it started its upward journey. It ultimately went on to hit a higher intra-day high at 5,034 just after 3pm. The Nifty settled 70 points up at 5,015 and the Sensex jumped 252 points to close trade at 16,698. The Nifty closed near to its 20-day moving average at 5,019. We may now see Nifty going up to the level of 5,100. The National Stock Exchange (NSE) saw volume of 68.32 crore shares.

The advance-decline ratio on the NSE was 741:970.

Among the broader indices, the BSE Mid-cap index declined 0.16% and the BSE Small-cap index fell by 0.11%.

BSE Auto (up 2.35%), BSE IT (up 2.03%), BSE Fast Moving Consumer Goods (up 1.82%), BSE Oil & Gas (up 1.49%) and BSE Bankex (up .46%) were the top sectoral gainers. On the other hand, BSE Consumer Durables (down 1.36%), BSE Capital Goods (down 0.89%) and BSE Healthcare (down 0.13%) ended up as losers.

The top performers in the Sensex space were Jaiprakash Associates (up 6.29%), Tata Motors (up 3.21%), Infosys (up 3.04%), HDFC Bank (up 2.94%) and Mahindra & Mahindra (up 2.93%). The laggards were led by Larsen & Toubro (down 2.47%), Coal India (down 1.32%), Sterlite Industries (down 1.17%), State Bank of India (down 0.94%) and Sun Pharma (down 0.79%).

JP Associates (up 7.07%), Kotak Bank (up 3.74%), Infosys (up 3.23%), Siemens (up 3.19%) and BPCL (up 3.14%) were the major gainers on the Nifty. Sesa Goa (down 2.27%), L&T (down 2.15%), Reliance Capital (down 2.09%), Sterlite Ind (down 1.41%) and Reliance Infrastructure (down 1.24%) were the main losers on the benchmark.

Markets in Asia closed mostly higher on hopes that the German parliament will vote to expand Eurozone's bailout fund. However, reports of international auditors reviewing Greece's austerity measures to qualify for a fresh aid kept investors guarded.

The Jakarta Composite gained 0.68%, the KLSE Composite advanced 1.16%, the Nikkei 225 surged 0.99%, the Straits Times rose 0.26%, the Seoul Composite jumped 2.68% and the Taiwan Weighted climbed 0.50%. Bucking the trend, the Shanghai Composite declined 1.12% while markets in Hong Kong were closed due to the Typhoon Nesat.

Back home, foreign institutional investors were net buyers of stocks worth Rs184.97 crore on Wednesday and domestic institutional investors pumped in funds worth Rs115.59 crore in the equities segment.

In its first acquisition of a US energy asset, state-run gas utility Gail India today said it will buy a 20% stake in a shale gas area operated by Carrizo Oil and Gas Inc for $95 million. Gail will pay $63.7 million in cash to Carrizo and bear $31.3 million of the Houston-based firm's future costs to develop the area in the Eagle Ford deposits in Texas, the companies said in separate statements. Gail rose 0.55% to close at Rs425.95 on the NSE.

Hindustan Construction Company (HCC) today said it has sold 14.5% stake in its step-down subsidiary HCC Concessions to Xander Group for Rs240 crore. At present, the Rs 5,500 crore HCC Concessions' portfolio includes six NHAI concessions-one annuity project and five toll roads. HCC closed at Rs29.40, up 4.07% on the NSE.

Bharti Airtel has entered into an agreement with Nokia Siemens Networks (NSN) to expand its 2G network and roll-out its 3G network in seven African countries for an undisclosed amount. Under the agreement, NSN will manage network operations, including planning, design and implementation of 2G and 3G networks for Airtel in seven African countries. The stock fell by 0.59% to Rs377 on the NSE today.


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