Perfect time to buy a new car!
Apply for car loan today! If you are looking for a fresh car for your portico, you can’t get luckier. Falling petrol prices, lower interest rates and struggling auto companies will make your life easy even in this recession.
Around fifteen years ago, I first started noticing that the number of cars was growing, while the number of two wheelers was reducing. This was a trend (at least in Bangalore), that continued till about a few months back. Somehow, it seemed as if the number of two wheelers was increasing and the number of cars was coming down.
This, let me hasten to add, is a purely personal observation, and in no way backed by in depth research or painstaking market surveys.
Again based purely on conjecture and conversation with friends and relatives, this could well have been a response to the increased fuel prices and the decreased job security as more people parked their cars in their garages and began to blow the dust off their scooters and motorbikes again.
Now, hard facts tell me that car sales have indeed dropped this year. And so have car prices.
So, is this a good time to buy a car?
This year, there have been so many twists in the auto industry that the answer to that is going to be a long winded one.
On the face of it, yes, it does seem like a good idea. Car companies have been announcing price cuts, interest rates are lower and fuel prices have dropped.
But scratch a little deeper and it is interesting to see why we have this situation at all.
The simplest one first. Fuel prices have been cut a little, a small nod in acknowledgement of the crash in global crude prices. The Government is obviously giving some breathing space for oil companies to recover losses before it (hopefully) announces more cuts.
The price cuts have been driven by a combination of reasons. In October and November 2008, car sales showed a sharp fall, as both individuals and companies put off buying decisions following high interest rates and lack of credit from financing companies, and the general economic condition. Saddled with huge inventories, car manufacturers have announced discounts to get rid of their stock.
Moreover, it is the end of the year, when car manufacturers in India usually drop prices. This is to avoid being stuck with the previous year’s stock, going by the date of manufacture.
Interest rates too are lower, thanks to the various monetary measures taken by the Government. Car makers have also promised to pass on the 4 percent reduction in Cenvat announced by the Government for all manufacturing industries.
So the cars are ready and the buyers are ready, but according to reports, it is the car finance companies, which are acting spoil sports.
As in the housing industry, only demand can drive production and only easily available low cost financing can drive demand. And only higher demand can help the industry out of its rut.
Because, right now, the auto industry has been shutting down factories, bringing down number of shifts and cutting back on production. This situation of excess capacity is likely to last all of next year too.
However, prices will begin to rise if there is no off-take. This, despite the fact that input costs, specially cost of steel, have come down. Companies may not be able to sustain lower prices if the demand continues to be depressed, as they will have to bear the costs of idle capacity.
But new model launches are still on the anvil. Both Maruti and M&M are expected to make some announcements soon. With Tata’s Nano gearing to hit the roads in 2009, you will have a lot more to choose from in future. However, if you are on the look-out for a new car, this is a perfect time. For the first time, you don’t have to worry much on the fuel front with global crude prices sliding downwards on a regular basis.
