Will cheaper cars help drive sales?

With the current global market going through a bad phase, the US car market declined by 37% in November 2008, hitting the lowest in the past 26 years, with the three giant auto makers- General Motors, Chrysler and Ford’s sales figures declining by more than 40%. The current US car market has been adversely hit and a few manufacturers might shut down if this trend continues.  

The Indian car market wasn’t spared either, but it wasn’t hit as badly. The domestic passenger car sales in the month of November declined by 19.38 percent, 83,059 units were sold this November as compared to 1,03,031 units sold in November 2007. This is the fourth drop in the last five months and for the first time the drop is in double digits. October signaled the start of the festive season; yet the decline in the last four months was the highest in the same month, when sales dipped by 6.6 percent.

Compared to October, the decline in sales tripled in the month of  November. Hence, to accelerate growth, December kicked off with discounts from most Indian car manufacturers. To boost this further, the government reduced excise by 4%. Most of the manufacturers have already passed on the benefit to their customers by slashing prices even further.

The steps that were undertaken have definitely increased the response from the common man. When the Civic Hybrid received a 40% discount, it sold out in a few days. The Fiesta’s case is similar. CarWale has also has witnessed an increment in its traffic (website visits) by 35% and there is an daily increment of up to 60% for new car price quotes since the day the cut in excise has been announced.

Tags: Car sales, cheaper cars, Effects of Discounts on the market, Excise reduction effects, More sales, Recession