Automobile manufacturers and dealers are offering attractive discounts to liquidate the 2011 manufactured inventories. Discounts are 10-15% higher this month compared with the same period last year. On sequential basis, the discounts are 7-8% higher than November. While the discounts are more prominent on the petrol models, reflecting high channel inventory, even a few diesel models such as Ford Fiesta have opened offers to boost slowing sales. The dealer component of the discount is expected to increase further this week.
While most of the dealers pointed out higher bookings, the retail for December is expected to be lower as customers prefer taking the delivery with 2012 registration. Low retail sales have put in additional pressure on dealer finances which are already under high interest rates. This is expected to improve from January 2012 onwards, as the deliveries scheduled against the bookings will get in process.
Demand for diesel models grew 20-22% in the April-October period while that for petrol vehicles fell 14-15%. While the demand for diesel models is rising, the supply ratio is still close to 70-75%, considering capacity constraints with most of the manufacturers.
We reiterate our preference for Maruti Suzuki India Ltd and Mahindra and Mahindra Ltd based on product portfolio, new launches planned and vast sales and service network.
Edited excerpts from a report by HDFC Securities Ltd. Your comments are welcome at firstname.lastname@example.org