Automakers look at ways to offset demand slowdown

Continuing slide in demand for new cars in Europe has made Maruti Suzuki edgy about business, but the automobile major is still looking forward to bagging export order for hatchbacks from Nissan this year.

Nissan Motor Company sources the five-seater five-door hatchback Maruti Suzuki A-star under a contract to sell in Europe after renaming it as Pixo. This compact car acts as the entry-level model for the 1933-founded Japanese firm in Europe.

Trouble started last year as recessionary trends in key countries led to a 25 per cent decline in the sales of the compact car in European markets. Maruti now fears it will face a substantial cut in Nissan’s sourcing order which is valid till 2013.

“During the best times,” points out Shinzo Nakanishi, managing director of Delhi-headquartered Maruti Suzuki, “the deal was for 50,000 units (of the Pixo). Now it is about 15,000. I am not sure whether this will keep them (Nissan) interested. I hope they continue with their interest.”

During the last financial year, the sales of the Nissan Pixo — a car which is positioned slightly higher than the Suzuki A-star (renamed as Alto in Europe) — dropped to 27,629 units from 36,930 units sold in the previous financial year in Europe.

Similarly, Hyundai Motor India (HMIL), which is India’s largest exporter of passenger cars, is expecting a nine per cent cut in export orders from its sister concerns in Europe. The second-largest Indian car-maker ships its best-sellers such as Santro and i10 to Europe and other countries. With about half of its overall production from India being shipped abroad, exports constitute a major part of the business of the Chennai-based firm. The EU accounts for nearly 45 per cent of its exports.

From about 2,47,000 units the company, which is a wholly-owned subsidiary of Korea’s Hyundai Motor Company, is expecting to sell 225,000 units this year in exports. HMIL, set up in 1996, currently exports cars to more than 115 countries across EU, Africa, West Asia, Latin America and Asia Pacific.

Maruti Suzuki, the country’s largest car-maker established in 1981, is forced to explore new geographies in an attempt to arrest the consistent slide in demand from export countries for its compact cars that cater to countries in Europe. So far this financial year, the company has seen a near 23 per cent decline in export volumes to 39,600 units. Like with Hyundai, EU remained Maruti’s largest market. Exports contribution this year so far has eroded to 10 per cent down from around 15 per cent last year.

A main reason behind the sudden boom in demand for compact hatchbacks followed by an extended lull in demand is the withdrawal of the government-backed scrappage incentive scheme which was launched by several countries. With many buyers advancing the date of their purchases to benefit from the scheme in earlier months and with the ongoing financial crisis in several European countries forcing buyers to postpone their purchase, almost all car manufacturers are expecting no revival in demand, say analysts.

According to the European Automobile Manufacturers Association, the EU witnessed a two per cent slide in demand for new cars — 7.27 million units in the six months period ended June 2011 from 7.12 million units sold in the same months previous year.