The odd-even regulation as proposed by the Delhi government to restrict plying of private cars on the roads is going to impact car sales in the capital. The government is proposing the regulation to combat alarming levels of air pollution in the Delhi. Auto analysts like Sudarshan Sreenivas with India Ratings & Research, foresee similar green regulations in future and fear that “such restrictive ownership would discourage people from buying cars in the cities”. To gauge the practicality of such a regulation, Delhi government plans to conduct a trial of the proposed scheme from 1 January 2016. If other states also imbibe the Delhi model then “car buying decisions would surely be impacted,” says Sreenivas.
Car sales in India, especially from April to October this year, have been growing decently at 11.5% at a year-on-year basis. Experts expect car sales for the full year (FY16) to be up by 12% (y-o-y basis) but, this growth has come on a lower base of past years. “So, while the sale numbers are encouraging, it still does not reflect the uptake in the economy,” says Sreenivas.
Experts are of the view that car sales, especially in the mass market segment, have been driven by lower fuel costs and lower interest rates. “So, it is the lessening of the cost of ownership that has increased sales rather than higher salary levels of the buyers,” says Sreenivas. Sales due to higher salaries are yet to happen. Growth of car sales has been driven by petrol vehicles, a logical outcome due to the bridging of the price gap between petrol and diesel. Petrol is perceived to be a cleaner fuel than diesel. The recent activism shown by the judiciary and the National Green Tribunal to protect the city environment from pollutants may force auto makers to invest heavily into environment-friendly vehicles and this may increase the cost of vehicles.
What has boosted the sales is the increased number of new launches by every other auto major in the industry. All the newer models have been doing well with buyers. Popular launches this year so far have been Hyundai Xcent, Maruti Celerio, and Renault KWID. Tata’s Bolt and Zest models have helped them to improve their sales. Sensing the price sensitivity of Indian buyers, companies, especially the foreign ones, have launched new models in compact and super compact segments that start from 4 lakh and go up to 9 lakh.
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