Reality check as buyers prefer diesel

A year later, how things have changed. Last month, SIAM slashed its forecast for the current financial year growth to between 2-4 percent, the second time in the year that it has had to so. The first indications of the incipient leaner phase of growth were possibly sown in June 2010 when the government decided to deregulate prices of petrol. It put on hold the decision to deregulate prices of diesel. But with nine hikes in petrol prices since then, the impact on sales has been quite unexpected.

Sales have fallen from 203,470 units to an estimated 192,251 units in September 2011. Sales have fallen consistently from April due to rising petrol prices and higher interest rates, the latter being the consequence of the government’s decision to make fighting food inflation its top priority. With cars now more expensive to maintain – especially if you own a petrol-engined model – and more expensive to buy, buyers either delayed their decisions or decided not to buy petrol cars.

So, the first consequence of this was the colossal swing towards diesel. At a press conference to launch the new Ford Fiesta, the head of Ford India, Michael Boneham said the ratio of petrol to diesel which was to 70/30 had in fact, turned the other way around with diesel now accounting for 00 percent of sales. This also held good for the VW Polo which, from a 50/50 petrol to diesel mix has moved to 60/40 in favour of diesel.

What perhaps explains the fact that the swing isn’t as much as smaller compact is the fact that the Polo is a premium product as compared to other models in the segment. General Motors India launched a diesel Chevrolet Beat and saw sales top 5,000 units in the very first month of the car’s introduction. In the midsize segment, OEMs such as Maruti were quick to leverage the swing to diesel and launched a diesel SX4 saloon to take on the market leader Honda City and a formidable competitor in the VW Vento which completed a year in September. In this period, the model, VW’s first saloon sold 32,000 units and ran neck and neck with the City for some months. Meanwhile, in a shock move, Honda slashed prices of the City, with the base model’s price being cut by Rs 66,000. With a month, it offered a Rs 175,000 discount on the premium Jazz to clear inventories and launched a face-lifted Jazz that was cheaper than the outgoing model. Sales of this hatch that had fallen to between 100 and 200 on a monthly basis, more than perked up with sales of 600 units in August.

Hatch match underway

To woo new buyers, the car sector in this fiscal's first half has seen a virtual avalanche of new models including the all-new Swift, Nissan Sunny, Toyota Liva and Honda Brio. For compacts, this has been a time like never before with a variety of aesthetically-pleasing models making their debut.

At the top end, Audi launched the corporate edition Q5 and also the top-end A8 with a W12 engine. BMW launched two 5-series diesel saloons to tap the swing towards diesel and Mercedes rolled out a refreshed C-class. Several OEMs launched refreshes and no model did better than the Mahindra Bolero which totted 9,764 units in September even as the company’s new XUV500 garnered a record 8,000 bookings which forced the company to close its order books, at least for now.

In a month’s time, as OEMs tally up their Diwali sales, it will be a time to see how customer preferences for diesel have impacted individual models, the acceptability of new brands such as Nissan and Renault and, above all, the customer reception to a raft of small, fuel-efficient compacts from big names such as Toyota and Honda which have, for the first time, forayed into the arena of the bigger and more established players.