About 3,00,000 cars estimated to have been sold to such buyers in FY16
A decade ago country’s largest car maker Maruti Suzuki sold five out of every hundred vehicles to government employees. Last year, the car maker sold 16 out of every hundred cars in the domestic market to government employees. In absolute terms, Maruti expanded the volumes to this segment from mere 30,000 units in FY06 to 216,000 units in FY16.
Companies such as Maruti and Hyundai among others have expanded sales to this segment which saw an increase in income on the back of several pay commissions. A sizeable spurt in demand is expected to come this year in the form of a pay hike (effective January 2016) once the 7th Pay Commission recommendations are implemented sometime this year.The number of central government employees looking to upgrade their cars or buy a new one may expand. According to the report submitted by 7th Pay Commission, there are 4.8 million central government employees who along with 5.5 million pensioners will benefit from the hike.
“The Pay Commission helps to enhance disposable income. So after home purchase, the second big ticket purchase for a household is a car. Typically, manufacturers that have established brands or models, enjoy a wide network are high on values like trust reliability and cost of ownership will have an edge over others,” said a Maruti Suzuki spokesperson.
Hyundai, the second biggest player has seen sales to government employees increase from 5.5 per cent in 2014 to 7.2 per cent in 2015. It is working to grow this share to 9.5 per cent in 2016, implying a total volume of 50,000 units. The Korean car maker recently announced an offer for central government employees to grant them benefits of up to Rs 7,000 on different cars.
“We believe that the implementation of 7th Pay Commission will bring an opportunity to grow sales to government employees as it increases their buying capacity. It will help volumes in the compact and entry sedan segment. We have equipped all our dealerships with trained teams to serve the needs of government employees by offering them multiples options and service packages,” said Rakesh Srivastava, senior vice-president (sales and marketing) at Hyundai.
The bulk of buying from government employees is restricted to entry level cars or compact hatchback. In case of Maruti, its entry level car Alto brings over 30 per cent of volumes sold to government employees. Swift and Wagon R bring 20 per cent each. Dzire, its compact sedan also gets 20 per cent of volumes.
Honda, which gets 15 per cent of its volumes from sales to this category of buyers, said its compact sedan Amaze is popular with government employees. “We are putting in place an active action plan through our network partners to increase our reach to these customers. We expect Honda Jazz to contribute additional volumes to this customer segment as the model has been gaining interest among them. Contribution from this segment may grow by 4-5 per cent after the pay commission is implemented,” said Jnaneswar Sen, senior vice-president (marketing and sales) at Honda Cars India.