"Petrol powered entry level cars like Alto, Nano & Eon keep pace with diesel cars"

MUMBAI: Diesel-powered cars may be the talk of the town, but petrol-powered entry-level cars-Tata Nano, Maruti Suzuki Alto and Hyundai Eon too are making their presence felt in the auto industry as rising interest rates and fuel prices impact the purchasing power of many car buyers. 

Sales of entry-evel cars, or those cost less than Rs 3.5 lakh, crossed 50,000 units a month for the first time in February in what some analysts call the first sign of revival in the car market. 

"This was the segment which pulled down the market over the first three quarters of 2011, but now a sustained month-on-month increase clearly shows that this is the first sign of

revival in the market," V G Ramakrishanan, VP of Frost & Sullivan, said. 

"This indicates that the confidence is gradually coming back and if the interest rates comes down, we expect the market to grow by 8-10% in the coming fiscal," he added. 

Factors such as lower initial cost, higher fuel efficiency and lower maintenance costs are among the key driving forces boosting demand for Nano, Alto and Eon. With interest rates increasing by over 300 basis points and petrol prices going up by almost Rs 15 a litre in the last 24 months, the operating cost for vehicles has increased significantly and many customers who would have preferred bigger cars are settling for entry-level cars, say experts. 

Umesh Karne, auto analyst at BRICS Securities, said rising cost and growing ownership cost are making people shift to entry-level cars. "With the further increase in car prices, we expect more demand for entry-level cars going ahead," he said. 

In February, sales of both Alto and Nano more than doubled from the lows of October 2011, when 15,197 units of Alto and 3,868 Nano were sold. Hyundai Eon, launched in mid-October last year, has helped expand the segment. 

Industry experts say apart from the purchasing power pressure, big offers and discounts, introduction of new variants like Hyundai D'Lite, festive season in some part of the country and fear of increased duty in the budget all helped increase demand for entry level cars. 

The domestic passenger vehicle market grew merely 2.95% during April 2011 to February 2012 at 23, 25,954 units, with passenger cars growing marginally by 0.31% at 17,86,249 units. And this is after a heady domestic market growth of over 25-30% in 2010-11 at 19,82,702 units.