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Compact segment dented as micro demand surges

Last Updated: Tuesday, June 14, 2011 - 16:31

Siddharth Tak | Zee Research Group

As against an overall 7 percent growth in car sales in the May this year, the most popular segment comprising compact cars actually registered a negative growth last month. The segment comprise cars like Maruti’s Ritz, Swift and Estillo, Hyundai’s i10, i20 and Getz, Tata Motors’s Indica and Indigo CS, and Ford Figo.

The second most popular segment comprising the mini cars registered just about 2 percent growth in May. The mini car segment comprises Alto, Wagon R, A-Star, Maruti 800, Hyundai’s Santro and General Motors (GM)’s Spark. The compact and the mini segment together form the backbone of the passenger car market enjoying on an average about 75 percent market share.

A study shows that compact cars registered 0.87 percent negative growth in May 2011 as compared to May 2010. Compact car sales fell from 65,368 in May 2010 to 64,799 in May 2011.

The mini car segment registered a marginal 2.02 percent growth in the month of May 2011 as compared to May 2010. Mini cars showed marginal increase from 50, 793 in May 2010 to 51, 817 in May 2011.

Executive cars that consists upto-5 seats and length normally between 4500-4700mm, has shown 15.37 percent decline during May. The executive car sales decreased from 4502 in May 2010 to 3810 in May 2011. The segment comprises GM’s Optra Cruise, Toyota’s Corolla and Honda’s Civic.

However, the silver lining came from the low volume micro segment comprising the Nano, sales of which jumped by 83.52 percent in last one year. It jumped from 3,550 cars sold in May 2010 to 6,515 in May 2011.

Maruti Suzuki chairman RC Bhargava said, “Given that the last two petrol price hikes were quite steep there would be an adverse impact and it would be difficult to match the stupendous auto industry growth levels achieved last year.”

Sugato Sen, senior director, Society of Automobile Manufacturers (SIAM) cautioned against any move to let petrol prices run amok. “A developing county like India cannot have curbs on mobility. We have to continue to provide appropriate economic solution to people so that the economy activities do not suffer.”

But given the established linkage now between petrol price movement and trajectory of car sales in the country, the road ahead looks bleak. “If fuel price rises to Rs 100 per litre, the impact on sales could be felt over a period of say one or two years before they stabilise or international prices come down,” Abdul Majeed, head, auto practice at PwC apprehended.

The petrol price hike, however, have had no impact on the mid-size and premium and luxury car segment in the country. Mid –size cars that having the seat upto-5 & length normally between 4250-4500 mm, showed a 13.2 percent growth as sales jumped from 12,405 in May 2010 to 14,043 in May 2011. Premium car segment and luxury car segment grew by 20.97percent and 13.25 percent respectively last month.

Kirit Parikh, the brain behind the fuel price deregulation, is not surprised at all by the trend. “There is a growing number for whom the buy decision does not really get impacted by a petrol price hike. This number would swell but a runaway hike would hurt indeed.”

Sen at SIAM argued, “As long as the GDP grows in a healthy manner and people’s disposable income increases, there will be strong demand for vehicles since the headroom is high. The penetration of passenger cars in India is around 14 per thousand people and the same for two wheelers is 75 per thousand people.”

First Published: Tuesday, June 14, 2011 - 16:31

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