We visited two-wheeler and passenger car dealers in Mumbai and Navi Mumbai. Notably, our observations verify that discounts have significantly increased in Mar '11.
n Massive discounts in March, with Maruti offering the highest. Dealers are offering threefold discount in March vs. Feb '11. OEMs are encouraging dealers to clear their inventories on the back of such discounts. Biggest cash discounts are being offered by Maruti (vs. Hyundai and Tata Motors), especially in the hatchback/small-car space, to effectively face competition.
n Inventory pile up. Dealers are holding significant inventory levels, of ~2x their monthly sales, that we believe is not a healthy sign. As per media reports, only Maruti has been improving on the inventory front, with its average monthly-inventory nationwide reducing to 2-3 weeks from 3-4 weeks in Apr '10.
n Customers choosing premium products. An increasing number of car buyers are entering the market, favoring 'non-entry-level sedans' and 'premium hatches'. This suggests attractive design, roomy interiors/comfort and brand reputation as key reasons for purchase. Further, in two-wheelers, premium bikes (125cc, 150cc and above) are being favored...
n Our top picks. Bajaj Auto and Mahindra & Mahindra.
Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.
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