Dealers wilt as car buyers shun heat

Sales in May are sharply down from the previous month as well as the same period a year ago, dealers said, adding they are rolling out discounts on popular models and offering doorstep service for test drives. What has also hurt sales is the focus on ongoing elections, as well as the lack of auspicious wedding dates that typically fuel car purchases in May.

“During the peak heat hours from 12 pm to 4 pm, it feels like the showroom is closed. Only customers with planned deliveries are coming in," said Vinkesh Gulati, director of United Automobiles, which runs 12 passenger vehicle and two-wheeler showrooms in the National Capital Region and Eastern Uttar Pradesh. “Footfall is 30-35% less compared to April, and even after 5 pm, there are few people who show up. Peak activity now only happens around 6pm, which has always been the case, but we are unable to cover up for the slow periods," he added.

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Heat stress

On Monday, temperatures at 17 locations in India crossed 48 degrees, including parts of the national capital. The government's weather office on Tuesday issued a ‘Red Alert’ for Wednesday and Thursday for Rajasthan, Punjab, Haryana, Delhi-NCR, Western UP and Madhya Pradesh. Some relief is expected after three days due to a western disturbance, the India Meteorological Department said.

“Inquiries are fewer due to the elections, heat, and lack of marriage events. May retail is down by 10% so far, and we don’t see a very positive overall outlook," Gulati of United Automobiles added. “We are not seeing a lot of customers interested in buying cars right now. The extreme heat is a significant deterrent," Gulati noted.

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Last May had several dates considered auspicious for wedding, leading to passenger vehicle dispatches and retails at nearly 335,000 units and 306,000 units respectively, the highest for any month of May.

“Our sense is right now inquiries have dropped 15% on average in May due to the extreme temperature", Manish Raj Singhania, president, Federation of Auto Dealers Association (FADA) said. However, both Singhania and Gulati added that new launches like Mahindra's XUV3XO are seeing strong interest.

“We clearly see that the industry will moderate and grow less than 5% in FY25, given that the pent-up demand has got exhausted, the channel inventory is high and in the first quarter, we will face certain factors like that of elections, heat wave which might dampen the demand temporarily for Q1FY25", Shailesh Chandra, managing director, Tata Motors Passenger Vehicles, said in an investor call earlier this month.

Doorstep test drives?

Dealers and manufacturers are fighting back, offering higher discounts and doorstep test drives. Discounts on some popular models are up by 15-30% in May compared to March and April, data gathered by Mint shows. However, these measures have still not fully made up for the fall in footfall.

“We book test drives over the phone and send vehicles to customers’ homes, but there are limitations in terms of available vehicles and time," explained Fada's Singhania, who is based in Chhattisgarh's Raipur, a city gripped by high heat.

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While some dealers expect May passenger sales to be the lowest in two years, for some, it was a better month than April in terms of inquires. “Showroom footfall for us accounts for only about 17-18% of the total inquiries we get. The rest of them come via referrals, digital, and print—we haven't seen a slowdown here and as long as fresh inquiries from other channels are strong, we are assured of demand in the future. Although what's happening right now is lead conversion is taking time," a Mumbai-based dealer said, agreeing that discounts for fast-moving models have gone up in May from two months ago.

Discounts and inventory stress

Dealers now expect vehicle stocks to swell in June. “We are seeing a build-up in inventory, especially for entry-level SUVs and some other models for which we usually expect high demand ," a dealer said on condition of anonymity.

Tata Motors, Hyundai Motor India, Maruti Suzuki and Mahindra have raised discounts on several models and variants, the dealer cited above added. “All brands have increased discounts in May compared to March. Discounts have gone up by as much as 30% in some cases," the dealer said.

“Discounts on our top-selling models are up versus March. The net effect of OEM discounts as a contribution to sales is up by 5% approximately", a Maruti Suzuki dealer said, adding discounts on some slow-moving models have been dialled down.

For example, customers can get discounts of ₹10,000 on some variants of the Brezza in May (compared to no discount earlier), while discounts on the CNG variants of the Baleno, Grand Vitara and Fronx have been raised in the range of ₹3,000 -10,000. Offers on other models such as the Ignis, Ciaz, Alto K10 and S-Presso (except CNG) have been reduced. Tata Punch, the country's largest selling car for the last two months, is available at a discount of ₹20,000 for its diesel variants, with cash discounts of up to ₹50,000 also available on models including the Tiago (petrol and CNG), Tigor and Altroz, for both petrol and CNG variants. The Hyundai Exter is available for a cash discount of ₹10,000, while the i20 has offers worth up to Rs45,000 in May.

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Road ahead

Dealers remain cautious. They anticipate a potential revival in the second half of the year, driven by new model launches and the onset of the festival season. “We expect a 5% growth by year-end. The second half will see major activity with new launches, particularly on the BEV side, and the ratio of H1 to H2 will improve this time," Gulati said. The transition from Internal Combustion Engine (ICE) vehicles to Electric Vehicles (EVs) is also affecting sales dynamics. “The shift to EVs is hurting ICE vehicle sales, but we anticipate a revival in the December to March quarter," he added.

Interestingly, the two-wheeler market remains resilient. Despite the overall downturn, two-wheeler sales have been stable, with some dealers even reporting shortages in supply. “Two-wheelers haven’t seen a good two years, but we started seeing growth from January this year. May retail is lower than April, but we are not seeing a significant decline," said a Honda two-wheeler dealer, wanting to not be named.

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