Auto Industry in higher interest rate problems

Car makers are managing to withstand the impact of higher interest rates; motorcycle manufacturers are still facing the heat. Passenger car sales have witnessed a double-digit growth at 16.36% in June 2007 as compared to over 20% experienced in the same month last year but it was a mere 9.06% growth about a month ago.

However, motorcycles continue to witness a fall and this time it is steeper at 17.17% (16.35% in May), thanks to the hardening rate that is hovering at around 21% and lower quantum of loan from banks.

According to Society of Indian Automobile Manufacturers (Siam) figures of the 13 carmakers, 10 registered positive growth. On the other hand, the top three bike makers – Hero Honda, Bajaj Auto and TVS Motor – posted a year-on-year decline in sales during the month. Overall, the Indian automobile industry registered a decline of 6.48% with total vehicle sales at 751,360 units as against 803,487 units in the same month last year.

High interest rates have an acute effect on two-wheelers because of an additional payment made by an individual in terms of total cost of ownership. This along with falling lending quotient of the banks has resulted in further dip in sales in the last few months.

However, though passenger car sales is reviving the figure is still less than the over 20% growth witnessed last year adding that the industry body is optimistic about sales picking up as a result of some correction in the interest rate and fund flows.

Though the actual percentage growth may not be as high as last year, it will still be a double digit growth and volumes will increases because of higher base.

Domestic three wheeler sales also registered a decline of 7.21% at 31,161 units as against 33,585 units in June last year. The burden of hardening interest rates was also felt on the commercial vehicles sales, which managed to grow by just 4.14% at 35,390 units as against 33,980 units in the corresponding month a year ago.

Total passengers car sales with 80,784 in the same, month a year ago, according to a statement.

The biggest gain came in the mid size segment, where Maruti’s newly launched SX4 premium sedan helped contribute to a 46.4% rise in monthly sales to 3,923 units.

Sales of commercial vehicles — trucks and Buses – climbed 4.1% to 35,390 units in June from 33,980 but the outlook for the segment is marred by high costs and greater competition.

Stagnation in the auto sector globally is seen according to the top brass of large Auto Industries.

Auto manufacturers, considering malls to speed up sales:

Smitten by the retail explosion auto makers are looking at newer methods in retailing and redefining brand strategies. And with the auto sector slowing down, even as competition gets more intense, such strategies to catch customers’ eyeballs, experts say, will acquire an element of urgency.

A number of auto makers are said to be looking at a presence inside malls. Like Rolls Royce did earlier in Mumbai’s Atria Mall, BMW will show case products in Ambi Mall, Gurgaon. It had picked the location keeping in mind the arrival of The Leela Kempinski in the neighborhood.

Maruti and Toyota are mulling with the idea of opening showrooms in malls. The millions or more footfalls that some malls receive in a month make them great areas for attracting the attention of potential buyers.

Even two wheeler manufacturers are toying with this idea. Sources say that Reliance Retail and Big Bazaar are in talks with a number of two wheeler manufacturers to set shop in their hyper markets.

According to one Indian two wheeler manufacturer Hypermarkets are coming up as retail channels. As other durables get there, we will also get there adding that it will be more cost effective and feasible to open shop in a hypermarket than a mall where rentals are often prohibitive.

The city Select Mall in New Delhi is planning on having a turn-table at the lobby of its upcoming luxury center – the dome – where luxury cars would be on display.

This display route, termed interactive advertisement, is seen to have wide appeal. This form of branding will cost less than what a half page advertisement in a newspaper or a few seconds slot on television would cost.

Audi gives a common architectural look and feel to its showrooms world-over – the design of a hangar creating immediate brand recall. Now it is creating a futuristic concept for its showrooms based on a modular structure with flexible solutions.

The corporate architecture is the brand ambassador and their aim is to captivate customers with presentation of luxury products in a distinctive environment. Audi is opening another six showrooms across the country by end of 2007.