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Disclaimer: The idea is not to encourage or discourage customers from buying cars. Nor it’s to appreciate/criticize the actions taken by OEMs.
The objective of the write-up is as always, to keep sharing articles backed by data and share insights with our readers time.
PRICE HIKES:
The pandemic struck us and struck hard. The auto industry was reeling under great financial stress. Almost all OEM’s went out of their way to help the dealerships to survive. They were supports rolled out in various forms, be it support for fixed incentives, Adhoc advances, waiving off charges, etc….
As the effects of the Pandemic reduced, we have started to experience the concept of Price hikes catching up. Of course, one would not expect the OEMs to bear the high cost of an increase in input costs, the forex changes, rise in commodity prices.
The impact of price change definitely helps the OEM’s enhance their revenues. We have started seeing price hikes from Jan 20201. However, one also needs to see the price hike from the customer's perspective, it is not the most welcoming thing to do, towards customers who are planning to buy their cars.
We need to remember the fact that we already had a price hike recently, where the BS-VI migration had already come with its effect of a hike in the prices. Now. The January price hikes are not the best thing for new car buyers.
While there is a big pipeline of customers who want to buy cars, one should not get blinded by the existing pipeline of booked / interested customers, these price hikes make the fence-sitters shy away or postpone their buying decisions.
OEM Wise Change in Price of Top Selling Models, as on 15th Feb 2021
WAITING PERIODS
Almost all OEM’s have cars in waiting.
So, if a customer is interested in buying a car and is told to wait for about a few months, this again acts as a dampener. Further, pushes the fence-sitters/ interested customers away from the idea of buying new cars.
This also pushes the customers to look at even more premium cars, under the used-car options. We are experiencing a huge surge in volumes in the used car segment. A good chunk of it can be attributed to this set of customers, who shy away from buying new cars with waiting periods and don't mind upgrading their cars to a bigger and better car at the same price.
OEM Wise Average Waiting Period of Top Selling Models, as of 15th Feb 2021
Note: The Above Mentioned waiting period is applicable on all new bookings. The waiting Period may differ on the basis of the color of the vehicle or variant.
Conclusion:
Yes, we have a huge spurt in demand today. All Dealers are happy that they do not have stocks with them. Their inventories are liquidating fast. The OEMs have their production in full swing and have orders from their dealerships in the pending list. But, if you dive deep into the actual CAGR for the industry for the last 5 years. It is a staggering low of 1.5%.
So, if you are looking to get the industry to grow in the double-digit figures (which is the aspiration of almost all OEMs), we would have to consider the fact that the customers in our country are price sensitive and are value evaluators. And the Price Hikes and Huge waiting periods are definitely not helping.