With the Coronavirus lockdown putting people’s livelihoods in danger, India’s largest carmaker Maruti Suzuki said initial trends indicated more customer inquiries smaller cars.
The company’s showrooms had shut on March 23 and re-opened only earlier this month.
“Initial inquiry trends that we have seen so far, since the showrooms have opened, suggest that trend,” said Shashank Srivastava, executive director and head of sales and marketing for Maruti Suzuki.
“Lower end hatches seem to have higher demand, as far as enquiries are concerned,” he said, adding that it was very early to come to a definite trend.
TRADING UP
Like other carmakers, Maruti Suzuki had seen, over the past 5-10 years, a trend of ‘trading up’ among its customers.
At one time, Maruti Suzuki’s small cars — first the venerable 800, followed by Alto — were its unquestionable flagships, and accounted for as much as half of the company’s total car sales.
It was in May 2017 that a mid-segment car — Swift, priced at around Rs 7.5 lakhs — overtook the Alto, priced around Rs 4 lakh, for the first time.
The Alto briefly regained its position at the top of the charts, only to lose it again for good in mid 2018.
Mid-size hatchbacks, such as Swift and Dzire, have variously held the top position since then.
As of February, Maruti sold just 16,000 mini cars (Alto and S-Presso) compared to 40,500 compact cars (such as Swift, Celerio and Dzire).
The trend, seen worldwide, is attributed to rising prosperity levels that fuel greater ambitions.
However, Coronavirus seems to have brought about at least a temporary pause to the long-term trend.
“Our interaction with customers and research indicate that there would be shifting down, what is known as a transfer of demand,” Srivastava said.
“So, to the upper segments, the demands comes a little lower, to the lower segment, further lower and so forth. The trend might be towards a smaller car.”
At the same time, he added that the total number of enquiries are not comparable in numbers to the pre-COVID-19 situation. Deliveries, he pointed out, are taking place mostly, if not exclusively, to those who had booked their cars earlier, but couldn’t take possession because of the pandemic.
PREFERENCE FOR PERSONAL TRANSPORT
On a positive note for the company, Srivastava said research points to the possibility that the Coronavirus threat will spur the sales of more personal vehicles, as people become wary of traveling via public transport.
He said this would especially be the case if the Coronavirus threat remains on the horizon, which will be the situation if no medicine or vaccine is invented for the virus for at least a year.
Srivastava said he believes the virus threat will remain for some time.
“All research indicates very strongly that people will prefer personal transport over public transport, and going forward, we see that becoming a trend as long as the fear of COVID remains. Our projection is that it is going to remain for quite some time.”
PETROL, DIESEL & BS-VI
Maruti Suzuki is also betting on an increase in the share of petrol vehicles in the overall sales mix due to the implementation of the BS-VI emission standards.
The company is betting on petrol cars and has not launched BS-VI versions of some of its diesel cars.
BS-VI emission standards came into effect on April 1, and all vehicles sold in India today have to conform to the stricter emission standard.
While petrol engines can be relatively easily modified to conform to the new emission standard, it has turned out to be harder — and costlier — to modify smaller diesel engines to conform to the standard.
“The conversion cost is much more for diesel than for gasoline,” a Maruti Suzuki official said, adding that the difference between a diesel and petrol model is in the 1.5-1.8 lakh range for most popular car models.
He pointed out that, even before the introduction of BS-VI, the share of diesel vehicles among cars and SUVs has been on a falling trend.
“Last year, it came down from about 37% to 29% in the industry. If you look at figures for March and February, it is less than 15%,” he said, adding that the main contributor for the trend seems to be the narrowing price gap between petrol and diesel.
Diesel has traditionally been about 15-20% cheaper than petrol on a liter-to-liter basis, and also offers about 25-30% more fuel efficiency. As a result, many were willing to shell out an extra Rs 1.5 lakh in the expectation that they would recoup the investment in the first 3-4 years of using the car or SUV.
However, said the official, the recent changes in the tax structure — especially in urban areas like Delhi — has reduced the price difference between a liter of petrol and diesel to less than Rs 2.
“Because of this difference in the initial cost of acquisition and the decrease in difference in running cost, it looks as if the diesel percentage is going to reduce further,” he said. In smaller cars, the share of diesel is less than 5%, he pointed out.
“It is only in the mid- and upper-SUV category that there is a significant percentage of diesel,” he pointed out, adding that even that seems to be changing.
“The initial demand for the new launches in the SUV category — whether it is the [Kia] Seltos or [MG] Hector or even [Hyundai] Creta — indicates that there is a lot of traction for gasoline in those segments.
“That is what fuels our optimism that the diesel percentage in the industry will further come down,” he added.and the decrease in difference in running cost, it looks as if the diesel percentage is going to reduce further.
The company will soon unveil the BS-VI version of its S-Cross mini SUV petrol.