The Hindu Business Line : Income uncertainty turning potential car buyers away

New Delhi, Dec. 20 Till a few weeks ago, it was high interest rates and lack of financing that were cited as the major reasons for declining car sales. But now, with many manufacturing sectors witnessing job cuts, several potential car buyers are wondering what tomorrow holds for them.

The uncertainty of incomes is forcing the prospective consumer to defer a decision of purchasing a new vehicle. Car dealers across segments – be it compact or premium cars – are finding that the downturn has affected consumer confidence.

“I am interested in buying a car. But these are not happy times. When a close family member has lost his job, I am not sure if it is an appropriate time to make such a purchase,” was one customer’s justification to a car dealer.

Similarly, a marketing official at Toyota Dealership here cited low income expectations that were bringing down the showroom footfalls.

“Whether it is a business man or an employee, no one is expecting a 25-30 per cent growth in their income or increments. This is dampening sales,” said Mr D.T. Naik, General Manger (Operations), at MGF Toyota Dealership.

Till recently, car makers had been raising concerns over banks being stringent in lending to prospective buyers of vehicles.

Despite the decrease in prices following the excise duty reduction and huge discounts being offered by automakers, sales have not revved up and customers’ response continues to be lukewarm.

“Liquidity was an issue in October and till mid-November. But after the monetary measures announced by the Reserve Bank to pump in money into the system, most of the banks are liquid. Today, it is a question of demand and not interest rates,” said Mr S.V. Parthasarathy, Executive Vice-President, Consumer Banking Division, IndusInd Bank.

Salaried class cautious

The uncertainty of income is worrying the salaried class more than any others, according to Mr Jayendra Kachalia, Director at Navnit Group, which has dealerships for Maruti, BMW and Land Rover amongst others.

“The excise duty cut and high discounts have helped to revive the business somewhat. But it is nothing like what it was earlier and far below what every one was expecting.

“Unlike the business class, the salaried class customer tends to be more cautious in an uncertain market environment as they have to pay their loans from their salary.”

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