Is it the best time to buy cars?

Dated : 27th August 2019

Update on Indian Market:

Indian markets moved up on Tuesday. Nifty closed 0.43% higher. Among the sectoral Nifty indices, Bank (0.63%), Auto (1.85%), Metal (2.09%) closed higher, whereas Pharma (-0.16%), IT (-1.35%), Media (-0.18%) closed lower.

Is it the best time to buy cars?

Excerpts from an interview of Mr Nikunj Sanghi, Director Federation of Automobile Dealers Associations (FADA) given to ETNOW – dated 19 August 2019

• Large amounts of discounts are given by OEM’s, dealers to tackle the pressure to push inventory out, as BS-VI transition is just around the corner.
• Speaking about the discounts Mr Sanghi says, the discount on diesel vehicles are the highest because in smaller vehicles, diesel as a fuel is taking a hit and the customer is shifting towards petrol.
• Most manufacturers have said that they will not produce diesel variant of small cars, because the cost of small car becoming a BS-VI is higher as a proportion to total cost.
• Mr Sanghi don’t expect further increase in discounts because they are already on peak, also the monsoon has done reasonably and a lot of shortfall of the monsoon has been covered.
• The festive season is also on its way and both dealers and manufacturers are looking at a much better festival season than the past five, six months that they have already seen.
• Mr Sanghi believes that major correction took place in passenger vehicle segment, but inventory continues to be a concern for two-wheeler and Commercial vehicles dealers and manufacturers.
• A relief is expected from the guarantee scheme for the NBFC’s that the government of India has floated, which will help in inventory funding. When money comes in system, it creates a better environment for dealers.
•  Corrections have also taken place in terms of man power a lot of OEM’s are now cutting down production and hiving off staff, he believes the pain is likely to continue for some period of time.
• Mr Sanghi says, that the level of inventory in the pipeline is sufficient for the festival season and don’t expect a build up in inventory as it normally happens.

Our views – In our view, the festive season is expected to be robust because of the heavy discounts offered by auto manufacturers. The other factor is that most of the companies are expected to roll out the BS-VI compliant vehicles as early as this December. This is expected to increase price of vehicles. Hence this might be a strong festive season for companies