A'bad used-car dealers reduce margins to liquidate inventory

With gap between diesel, petrol reducing rapidly, demand shifts back to petrol cars

While the slowdown in the used car market in Ahmedabad continues, dealers are now reducing their margins to work out schemes with financiers to offer more attractive rates of interest to the buyer. What's more, as diesel prices continue to climb, the scale has again shifted back to petrol cars. The used car market in the city has been on a slow lane for the last three to four moths. Dealers claim that in May the market has dipped by around 15-20 per cent during May on a year-on-year basis.

"This month has been especially slow, down by around 15-20 per cent compared to the same month last year. Apart from general slowdown in the economy, one of the reasons behind this is that with new launches and discounts, customers are taking their time to understand the dynamics of the new car market," said Rajiv Mathur of Auto-Terrace, a used-car selling outfit in the city. He also added that while diesel car demand had shot up last year, the trend has reversed now, and demand for the petrol car is back. "Most people are now opting for petrol sedans. The demand for the Honda City petrol version which had shrunk earlier, has picked up considerably," said Jainee P Gordhandas, promoter of BigGaddi.com.

The gap between diesel and petrol has almost halved in a year, and in the Ahmedabad market currently a litre of petrol costs around Rs  66.42 in comparison to a litre of diesel which costs around Rs  55.28. As a result, enquiries for petrol cars, especially sedans, have increased by around 25-30 per cent claim city-based dealers.

However, with demand for petrol sedans rising, the demand for diesel sports utility vehicles has fallen. "With fluctuating fuel prices and, in turn, volatile demand, it has become very difficult to maintain inventory these days. Earlier as demand for SUVs were on the rise, dealers had stocked up these vehicles," claimed a Navrangpura-based dealer.

Further, with slowdown in demand, dealers are now trying to liquidate inventory by reducing their margins. While many dealers are straight-away reducing prices in order to boost sales, few others have worked out schemes with financiers to offer lower rate of interest. "As such the rate of interest on used-vehicles financing is higher than that of new car financing. We have worked out deals with banks whereby, the customers would be able to avail lower interest rates, while we bear the difference. While this erodes our margins, it helps to liquidate inventory," explained Suresh Waghnani of Jolly Motors, a used car dealer at Navrangpura, an area in Ahmedabad considered as one of the biggest used car trading markets of Gujarat.

According to market estimates, Ahmedabad-based used-car dealers are sitting on an inventory of around one to 70,000 to 85,000 cars at the moment.