The percentage of first-time buyers and additional vehicle buying have boosted in the midst of the coronavirus crisis as customers prefer personal mobility over public transport, a senior official of Maruti Suzuki India said.
The company also believes that while auto sales have increased in July, the outlook for the festive season will depend on how the coronavirus crisis pans out, and the long-term vehicle demand will also depend a lot on the factors of the economy.
“First-time car buying is increasing and replacement buying is declining, which means exchange is down. However, additional car buying is also up because of the functionality requirement,” said Shashank Srivastava, Maruti Suzuki India Executive Director (Sales and Marketing).
Describing the reasons behind the development, he said that this means people are preferring personal transport over public transport. At the same time, their income levels are also probably going to be low for some time. “Therefore, the trend is towards what we call ‘telescoping of demand downwards’, that is logical and intuitive. It is also reflecting in the data which we have so far.”
The automaker had observed the share of first-time buyers increasing by 5.5 percent to around 51-53 percent during the first quarter of this fiscal as compared to the fourth quarter of 2019-20.
The automaker has also observed inquiry levels reach 85-90 percent of pre-coronavirus levels with a higher share in mini and compact segments at around 65 percent against around 55 percent before.
In July, sales of the automaker’s mini segment cars making up Alto and S-Presso increased by 49.1 percent at 17,258 units as against 11,577 units in the same month in 2019 but that of the compact segment included models like WagonR, Swift, Celerio, Ignis, Baleno, and Dzire dropped 10.4 percent at 51,529 units as against 57,512 units in the year-ago month.
The company’s total domestic passenger vehicle sales in July increased by 1.3 percent at 97,768 units as compared to 96,478 units in July 2019.
When asked if July sales data show recovery in the automobile market, Srivastava said, “There is a relief and optimism based on July numbers…It does indicate restoration of normalcy in terms of production, supply chain and that is the defining characteristic of July (sales).”
Srivastava, however, cautioned that the July numbers were over a low base of last year “which is way off the high levels we have seen in the past”.
“Going forward we have to carefully observe. Long-term demand will depend on the fundamentals of the economy. Also, it will depend on which way this ‘COVID sentiment’ moves, that is a very uncertain thing. We have to also closely watch the local lockdown because it does disrupt the momentum of retails at both the dealer end as well as the consumer end,” he said.
The localized lockdowns have also had an impact on the working of the company’s retail outlets, he said.
“We have 3,080 outlets, out of which at one point in time we had more than 2,800 functioning. Then local lockdown started and it keeps on varying because at different places sometime lockdown is for one week, sometimes for five days,” he said.
He added that the present total number of the company’s outlets that are open is varying between 81-91 percent of total outlets.
On festive season outlook, he said, “Since it is a discretionary purchase it will depend a lot on how sentiments are. In festival times car buying generally increases because consumers have a bigger intention or inclination to spend money but sentiment this time is little unprecedented.”
“While festive season does bring in some positive sentiment every year, this year we have also to be careful about sentiments as regards the COVID-19 situation.”
He further said, “We have to see if there is a positive development in the ‘COVID side’, then obviously festive season could be good. However, if there is negative on the COVID side, let’s say there is a second wave or there are more lockdowns, or spread of COVID even more then that can impact sales negatively in the festive season.”