Sales of Indian cars in August-September this year suffered its biggest drop in 10 months with exports falling 26 percent, the highest in 11 years, but car industry executives are still hopeful that they can recover during the upcoming festival season.
"This is the time when wholesale numbers should be picking up as dealers stock up to meet the festive season demand, but this has not happened," said Sugato Sen, senior director, Society of Indian Automobile Manufacturers (SIAM).
"We are entering a desperate situation and we need help from the government," Sen added.
Because of the fall in sales, Indian car manufacturers are now dishing out lucrative discounts targeting customers who might make a splurge on the run-up to Diwali, the main festival celebrated throughout the county two months from now.
German car maker Volkswagen, whose sales fell nearly 28 percent in the month of August, has slashed prices of the top-end variants of its popular Polo and Vento models.
However, the car marker is wary of its brand image and says that the lower prices do not mean the company is offering discounts rather it aims to give "more value" to the customer.
"Instead of offering a plain discount, we are offering a better value proposition to the customers," said Arvind Saxena, managing director, Volkswagen Passenger Cars. "I don't think anyone likes giving discounts and the cut in prices of the top variants of the Polo and Vento is more of a value proposition for buyers."
Volkswagen has slashed prices for its top-end variants of Polo and Vento by over 20,000 rupees (364 U.S. dollars) each. The car maker has also refreshed the two models with a host of new interior and exterior features.
Polo's top variant, the Highline, makes up for 40 percent of total sales of the model, while Vento's top variant accounts for the remaining 60 percent. Volkswagen also continues to offer lucrative financing offers at interest rates lower than that being offered by Indian banks.
"Right now, heading into the festive season, we need to create excitement for our products," Saxena added. "Traditionally, the last quarter of the year has been good for car sales and we expect this year too won't be any different."
The rising price of petrol has had a big hit on the sales of car makers who do not have a diesel car in their portfolio.
Sales of Japanese car maker Honda in August fell 21 percent to 5,470 units. The company has decided to offer car insurance at a nominal cost of one rupee on select variants of its models to attract buyers.
"Though the macroeconomic indicators are not very encouraging and the general inflationary trends have led to low consumer sentiments, affecting the demand of cars, we are hopeful that the situation will improve quickly and there will be recovery in the market during the festival season," said Jnaneswar Sen, senior vice president for sales & marketing of Honda Siel Cars India.
Nissan, another Japanese car maker, which will soon launch the urban-class utility vehicle Evalia in the country, is also offering discounts on its models Micra and Sunny. The company is clubbing cash discounts along with lower prices offered for insurance.
Tata Motors, Ford India and Maruti Suzuki, all of which have seen falling sales, are offering discounts up to 60,000 rupees (( 1,090 U.S. dollars) depending on location of purchase to try and push up sales during this festive season.
Ford, incidentally, had started special offers on its cars from last month itself to coincide with the festival of Onam in India' s southern state of Kerala. However, the company, instead of giving cash discounts, is offering free accessories on its sport utility vehicle Endeavour.
In addition, for existing customers who wish to exchange their cars, Ford is offering discounts of up to 20,000 (364 U.S. dollars) .
Tata Motors' discounts range from 10,000 to 50,000 rupees (182 to 909 U.S. dollars) on select models. Despite having a very strong diesel car portfolio, Tata Motors' sales have been sluggish through the year as its models have failed to create excitement.
Although these are bad times for the automobile industry, the upcoming festive season might just work to the industry's advantage, and any thoughts of the automobile industry mirroring the gloomy August scenario might be dispelled, to an extent, by Diwali.
The good news is that the industry is showing some optimism.