People’s ability to buy small cars has eroded: Bhargava

Sales of entry-level passenger cars will continue to decline even during the next year as the ability of people to buy these cars has eroded, Maruti Suzuki chairman R C Bhargava said today.

This decline in sales even during the next year could be a signal towards delayed economic recovery in the rural and semi-urban areas post the pandemic — divide between urban and rural has widened post the pandemic with many watchers terming the recovery in India as K-shaped.

“Everywhere hatchback is sold — whether its urban or rural areas — the ability of people to buy has eroded and therefore the growth of sale in hatchbacks is not happening. The hatchback sector is not going to grow but decline,” Bhargava said in a media interaction after the announcement of the company’s second quarter results. He added that the entry-level passenger car segment saw some traction in terms of sales during the second quarter on the back of festive season sales but added that it is limited and Bhargava does not expect hatchback growth to continue subsequent to this quarter or in the next year.

“The sale in hatchback has been declining for the past three years, hence, it may not be a new phenomenon. Inflation will make it worse because it is the people with limited income, who are hardest hit by inflation. In terms of inflation, India is not as bad as anywhere else and it is gradually coming under control,” he further said. Sales of best-selling low-priced vehicles such as Maruti Suzuki’s Alto, Swift, Celerio, and Dzire; and Hyundai’s i10 and i20 (which cumulatively accounted for around 56 per cent of the lower-priced cars sold in fiscal 2019), have been on a decline for three fiscals now. As a result, there were only around 39 models of lower-priced cars available in FY22 versus around 54 in fiscal 2016. Maruti is India’s largest car maker and its sales are under stress due to decline in sales of entry-level cars — the company offers the largest number of car models in that segment.

While the sales of entry-level cars will be under stress, the automobile industry will grow by 8 per cent during the next year. This growth will be on the back of record sales many companies are set to achieve during the current fiscal. Numbers from industry lobby group Society of Indian Automobile Manufacturers (SIAM) for the first half of this fiscal show that the sales growth is led by sports utility vehicles (SUVs), which constitute a big chunk of passenger vehicles costing over Rs 10 lakh and above.

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