BackFalling investor confidence hits big-ticket sales
Falling investor confidence hits big-ticket sales
PremiumFlat demand? An eZone stall at the HomeTown store in Noida. While cheaper consumer durables are still selling, the more expensive ones seem to be sitting on shop shelves for longer. (Photo: Ramesh Pat
Mumbai: Straddled with investments that are losing money in a declining stock market, Indian consumers may be putting off buying high-end cars and expensive television sets, further denting big-ticket sales in an economy that is starting to slow.
Premium and luxury cars are facing the brunt of plunging stock values. In February, the premium and luxury segment, where vehicles sell upward of Rs14 lakh, was down 19% over the year-ago period, even as overall passenger car sales grew marginally. “Nearly 5-10% of the slowdown in our sales is a result of the downturn in the stock market," said Jigar Modi, senior sales consultant at Arya Honda in Mumbai.
Mint spoke with five dealers of different vehicle manufactures, all of whom attributed the market downturn to sluggish sales. Three dealers said it was the single biggest reason, while one gave it average importance while the fifth said it was just one of the reasons for lower sales this year.
While higher interest rates and unavailability of financing have crimped vehicle sales, dealers say that the fall in the Sensex can’t be wished away. In some cases, even the not-so-premium cars are getting hit.
“We are seeing lower sales partly because people have invested in IPOs (initial public offerings) and have lost money there," said Kiran Rajuchil, assistant general manager, Fortune Cars Pvt. Ltd, a dealer for Tata Motors Ltd here, who sells brands such as the Indica.
“Nearly 30% of my customers are deferring their purchases because of a slowdown in the stock market," added an executive with a Maruti dealership in Mumbai, who didn’t want to be named as he is not allowed to make comments to the media.
India’s economy, which grew at more than 8% for 12 straight quarters, is starting to slow and inflation has crossed 5%, a 10-month high. In the latest Budget, finance minister P. Chidambaram slashed tax rates for middle-class Indians to offset slowing consumption, and cut excise taxes on cars.
“The global economy has not been a bright picture since the start of the year. This, coupled with a slowdown in our market, has dampened consumer sentiment. High interest rates is also making things worse," said Neeraj Bhandu, manager, South Asia vehicle forecast at CSM Worldwide.
To be sure, the wallet tightening hasn’t hit all buying. While cheaper consumer durables are still selling, the more expensive ones seem to be sitting on shop shelves for longer.
At eZone, which has four consumer durables stores, and Electronics Bazaar, which has 83 electronics stores, growth for LCD TV set sales slid to 10% in February, from about 40% during the 2007 festive season. A 32-inch LCD TV set costs Rs34,000 onwards, against regular sets that cost Rs12,000- 15,000 for a, say, 29-inch set. “Overall, there is no slowing. But LCDs sales growth...is slowing," Manoj Kumar, chief executive of eZone and Electronics Bazaar, a division of the Future Group, said.
Retailers also say that spending for items such as furniture, mobile phones, laptops and digital cameras is still strong. “The cellphone market is in such a boom phase right now that nothing seems to impact it," says R. Subramanian, chief executive of Subhiksha Trading Services, which runs a discount mobile phone and neighbourhood store chain.
“Our mobile phone business remains strong despite some price deflation here. The predominant customer in mobiles is younger and probably not yet invested in the stock market," said Andrew Levermore, chief executive at Hypercity Retail Pvt. Ltd, which runs a hypermarket in Mumbai. The store sold 20% more units of consumer durables in February compared with the previous February.
ammar.m@livemint.com
Ashwin Ramarathinam contributed to this story.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
