Automakers extend discounts as festive momentum fizzles out

With November winding down, the auto sector is coming to the realisation that the festive bump it saw with October sales has not lasted. CNBC-TV18 spoke to some top dealerships in the country to assess whether the festive mood has had a spillover effect in November, and found that while retail sales this month are less negative than the April-September months, on a year-on-year basis, there’s no improvement to write home about.

Dealers CNBC-TV18 spoke to said retail sales were up 20-25 percent on average for passenger vehicles versus the June-July period, the worst in auto sales this year. Auto dealers saw increased footfall into showrooms this month versus the pre-festive months before October and saw some conversions and spillover of enquiries from October.

However, on a year-on-year basis, excluding the festival of Diwali which fell in the first week of November last year, retail sales were still negative, except they are expected to decline in the low single digits for passenger vehicles, compared to the double-digit decline the industry had been seeing before October. Regionally, North India and urban Maharashtra saw a positive trend in sales, while sales in the Southern states continued to decline. Rural Maharashtra was specifically bad, with a 20-25 percent decline in deliveries due to unabated rainfall in the region, resulting in crop damage.

For two-wheelers, however, auto dealers tell us retail sales are down 10-15 percent on average in November year-on-year. This is because there was much more preponed buying of two-wheelers due to heavy discounting by OEMs, than was the case in two-wheelers. Two-wheeler makers had offered rare, historically high discounts this year. Sales of two-wheelers in October last year were hit hard because of the hike in the cost of third-party insurance, which further led to an increase in the total cost of ownership for two-wheeler buyers.

Passenger vehicle makers continue to offer promotional pricing in November, albeit with a reduction in the quantum of the discounts. Major automakers like Maruti Suzuki, Hyundai, M&M, and Tata Motors have extended their promotional offers this month, finding it hard to convert buyers in the absence of discounts. In the two-wheeler space, Hero MotoCorp has tapered down discounts but continued to offer cash discounts in the month of November. Bajaj Auto and TVS, on the other hand, have rolled back discounts on their products to reduce the price gap between their BSIV models in the market ahead of them rolling BSVI products either by the end of the year or the start of next year.

Dealers say that while there was positivity spilling into the first week of November after the festive period, dealers have found that few buyers have returned to showrooms after fresh stock rolled into auto dealerships, and the forecast going forward is, therefore, not celebratory.