Auto makers pin hopes on new model launches to boost sales

Mumbai: Auto makers are banking on introducing new models, some of whose launches will coincide with the festive season, to boost sales. Almost a dozen new models are expected to hit the roads in the next four-five months.

Interestingly, quite a few of these models are utility vehicles, a segment that has seen sales accelerate even as high petrol prices and a slowing economy have discouraged car purchases.

The sales of utility vehicles expanded 51% to 79,643 units in the first two months of the current fiscal from a year earlier even as passenger car sales expanded by a mere 3.10% to 331,580 units in the same period. Customers are preferring diesel-run cars as the fuel is Rs 32 per litre cheaper than petrol. About 90% of utility vehicles are diesel-driven, one of the reasons why it has found favour with buyers.

Typically, diesel models are dearer by Rs 1 lakh, compared with the petrol ones. The payback period to recover the upfront cost premium on a diesel car has reduced from five years in 2008 to three years in 2012, according to a Icra Ltd’s report released last week.

Auto makers are gearing up to launch new models, most of them diesel driven, to boost sagging sales and cash in on the festive season which starts with Raksha Bandhan on 2 August.

Mahindra and Mahindra Ltd, the country’s largest maker of utility vehicles, plans to introduce the mini Xylo and a shortened version of the Verito sedan.

While the new variant of the Xylo is expected to be introduced next month, the Verito will be available in a couple of months. “Any new model introduction expands the market as the novelty is welcomed by the customers,” says Pravin N. Shah, chief operating officer at Mahindra and Mahindra’s automotive sector.

“The auto makers are in for a tough time,” said Rakesh Batra, partner and national leader of automotive sector at Ernst and Young. While the new models may help in reviving sales to a certain extent, they are unlikely to lift the market. It will take a while before the industry can come back to the 20% growth levels, he said.

Meanwhile, encouraged by the fast-expanding utility vehicle segment and the success of models such as the Mahindra XUV 5OO and Maruti SuzukiErtiga, the local arm of the French auto maker Renault SpA is set to introduce its sport utility vehicle (SUV), Duster, in India next month.

“The display model will be available in the showroom from 4 July. We have been accepting the bookings,” said a Mumbai-based dealer. Renault will pit the five-seater model against the Mahindra Scorpio, Tata Safari, among others.

To be priced in the range of Rs 8-12 lakh, Renault expects the Duster to be popular with the Indian buyer.

Renault currently sells the compact car Pulse and sedan Fluence and Koleos crossover in the country.

Tata Motors Ltd, which has been ceding ground to rival Toyota Kirloskar Motor India Pvt. Ltd and Mahindra and Mahindra in the SUV space, plans to introduce the new Safari—called the Storme. The model is expected to be unveiled sometime in August, according to a Mumbai-based dealer. This variant will sell alongside the existing one, he said. The new Safari, of which Tata Motors plans to sell 1,000 units a month in the initial phase of the launch, will have a more powerful engine and better interiors, said suppliers associated with the project.

Pune-based Force Motors, which entered the personal transportation segment with the Force One in October last year, plans to introduce a variant of the model with four-wheel drive, airbag and other features. “It’s under homologation and should be ready for launch in the next two-three months,” Prasen Firodia, managing director at Force Motors, had said in an interview with this paper on 6 May. Homologation is the certification process for vehicles to ensure these are roadworthy and match government standards.

The SUV offering has met with little success so far, and is falling short of the 4,000 units it had planned to sell in the first year of its launch.

Among compact cars and sedans, Hyundai Motor India Ltd plans to introduce the new Elantra while General Motors India Pvt. Ltd plans to launch the new Chevrolet Cruze. To be produced locally, the new Elantra will compete with Honda Civic, Volkswagen Jetta, Toyota Corolla Altis and Chevrolet Cruze among others. The car will hit the roads by the end of the current calendar, Arvind Saxena, director (marketing and sales), Hyundai Motor India, said in an interview last week.

General Motors India Pvt. Ltd, which saw its sales take a hit in the absence of new-model launches, plans to introduce at least two models—Sail hatchback and sedan—by the end of this year, “These models will generate excitement in the market and should increase our share in the market, “P. Balendran, vice-president of corporate affairs at General Motors India, had said in an interview last week.

The Sail hatchback will compete with Hyundai’s i20, Volkswagen’s Polo and Honda Siel Cars India’s Jazz while its sedan version will compete with Verna, Volkswagen Vento and Ford Fiesta.

Meanwhile, one of the significant launches in the compact car market expected this year will be from market leader Maruti Suzuki India Ltd. The car is expected to be introduced during the festive season.

The Icra report cited earlier said the new models are unlikely to offer any relief to the auto makers. “The profitability metrics of the industry participants are unlikely to have any meaningful respite in 2012-13 as we expect discount levels to increase and pricing power to remain restricted in the wake of intense competition,” the report said. “Further, with auto makers poised to stay active in their quest to introduce new models while tapping new customer segments, the trade-off between growth and profitability is likely to remain a daunting balancing act.”

Amrit Raj in New Delhi contributed to this report.

shally.s@livemint.com