Auto News

Costlier fuel, high interest rates puts brakes on car launches

By Motortrend India Staff   |   30 November,2011

A steep rise in fuel prices and high interest rates have dealt a blow to a spate of car launches in past six months with firms including Hyundai, Ford, Nissan and Renault failing to generate much customer enthusiasm. Many of these companies are now offering attractive discounts or other sales incentives to draw in customers. Hyundai’s stylish Eon which was expected to take on Maruti Suzuki’s workhorse and largest selling car Alto, could not live up to pre-launch expectations. The company sold average 6,500-7,500 units of the small car per month, almost half of its own estimate of 12,000 units.

Within just six months of roll out, Ford Fiesta, Nissan Sunny and Renault Fluence, that failed to strike a chord with customers who are plagued by tough macroeconomic environment of high inflation and rising rates, are giving discounts or insurance benefits.

Wider choices of models along with cut-throat competition on prices and features have also forced some of these new cars out of contention, he says. In the past three months, Hyundai India has managed wholesale volumes of 18,000-18,500 units of Eon. The company, which opened Eon bookings on October 1, said last month that it has got bookings for more than 9,000 Eon cars.

A large number of dealers are already carrying an inventory of 30-45 days for the car. The company has also scaled down production in the last one month keeping in mind lower sales.

Despite impressive showroom walk-ins of more than 1 lakh people, Hyundai could convert less than 10% into sales. At the time of launch, the company planned to sell 1,50,000 units of the car within a year. An e-mail sent to Hyundai India did not elicit any response.

Earlier in the month, Arvind Saxena, senior vice-president, sales and marketing at Hyundai India, had told ET, “The enthusiasm among the people for Eon is very good but that has not translated into actual conversion in sales as we would have liked.” He said people are deferring purchases due to high interest rates and increase in fuel prices.

“Initially the response to the topend variant was more, but now we have seen an increase in demand for the base variants too from the tier-II and tier-III markets and we hope the momentum should pick up,” he said. Experts say Eon’s premium pricing may have kept prospective customers away. “Eon as a product looks impressive, but what’s gone against the company is timing of the launch. The overall sentiment is tough and people are deferring their discretionary purchases at the moment,” said an executive from a rival auto company.

Related Content