With just a few days to go for the New Year to set in, the passenger vehicle (include cars and utility vehicles) industry will be keen to put the year 2013 firmly behind. It has been a terrible period for the industry.

Passenger vehicle (PV) sales are expected to be down by high single-digit percentage for the calendar year.

A combination of factors— a challenging macro-economic environment, high fuel prices, interest rates and inflation and weak income growth—took a heavy toll on car sales, and pushed PV industry into negative growth lane. Though PV firms have been trying to woo buyers with heavy year-end discounts, special offers and price hike threats, the weak demand trend continues. “The most telling aspect is the lack of demand for long periods after a decade of growth,” said Kumar Kandaswami, Senior Director, Deloitte.

“During January-November 2013, total PV sales fell by about seven per cent at 2.17 million units when compared with about 2.33 million units in the year-ago period,” according to Society of Indian Automobile Manufacturers (SIAM). Barring a couple of brands, all other firms have been battling with falling volumes. Maruti Suzuki is expected to post a marginal growth in sales. But the year saw a winner—Honda Cars. The Japanese auto giant came out with its diesel-driven compact sedan Amaze, which has taken the market by storm. It is expected to help Honda end 2013 with double-digit growth in sales.

While hatchbacks continued to dominate, 2013 also saw the emergence of compact SUVs (sport utility vehicles). The first one to become popular was Renault Duster, launched in July 2012, which created a strong platform for the segment. Ford EcoSport, touted as an urban SUV, also met with huge customer response. “New model launches by global brands have captured consumer interest, which has led to global players outperforming the home-grown ones. In this fiscal, UV sales of home-grown brands (including M&M, Maruti, Tata Motors, Force Motors, Hindustan Motors) fell sharply by 22 per cent mainly due to lack of new model launches,” stated Ajay Srinivasan, Director-CRISIL Research.

2013 also signalled a increased appetite for features-rich cars among buyers. While Honda Amaze and Ford EcoSport continued to attract buyers, Hyundai Grand i10, launched in September this year, emerged as the fifth largest selling model in November.

“Such a trend, where sales of feature-rich cars growing, could be a result of lower sensitivity of higher income bracket consumers (who typically purchase such cars) to economic downturnand high cost of ownership rather than a sudden change in consumer interest. Entry-level buyers, who purchase small cars with basic features, have been worst hit by the macro-economic headwinds, and have been postponing purchases. Therefore, the share of high-end feature-rich cars in total sales has increased,” said Mr. Srinivasan.

“There have been two other trends – the focus on used cars, where there is money to be made, contrary to popular belief. There was activity around branding the used-car network and offering warranties. Two, the mix of petrol and diesel corrected back in favour of petrol, with diesel prices increasing consistently,” said Mr. Kandaswami.

In 2013, companies also cut production, expanded distribution further into semi-urban & rural markets that continue to do well, increased localisation, and invested in new product development.

More In: Industry | Business