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COVER STORY |
CAR SALES In the last few years, the
capital has woken up to a thriving car market - especially the 2-box family cars.
The variety of models running in the crowded city thoroughfares belies the small
size of the market. Though less than 1,500 such cars are sold in the country each
year (more than 80 percent in the capital alone), the growth potential seems to have
attracted manufacturers from Daihatsu to Tata and from Toyota to Maruti. The
percentage of Nepalis who can afford the luxury of owning a car remains paltry, but
it appears to be growing by the day, marking the arrival of a new set of upwardly
mobile families. By SANJAYA DHAKAL After rummaging for three months amid
seemingly endless visits to car dealers, Dipesh Karki (name changed upon request)
finally decided to present his family with the latest model of Tata Indica V2 this
Dashain.
A middle-level officer working in one
of Kathmandu's proliferating joint-venture banks, Karki got a loan from his office
to buy the car. "I really didn't know that we had so many varieties of cars
available here," Karki said. "While some friends told me to buy a certain
model, others gave entirely different suggestions. I was simply flabbergasted by the
array of models available." Unable to make up his mind even after
scratching his head for months, Karki began surveying the market himself, weighing
the pros and cons of each model. "It was then that I found out how impressive
the models were. Some were economical, others were high-powered and still others
were spacious. They were all so very good. But I had to choose one - and I
did," he said. Karki and his likes do have an impressive
array of family-car models to choose from. While only a few years ago, anyone
wanting to buy a car had to go either for the highly expensive Japanese models or
the limited versions from Indian manufacturers, today's dealers are literally
cutting each other's throats to impress the people with their sleek models.
Whether you're interested in space,
power or appearance, Nepal's automobile market is full of models of different
shapes, sizes and price tags. Following the boom in India's car market,
the floodgates in Nepal didn't take long in opening. From Daewoo to Hyundai and from
Tata to Diahatsu, all names are available in the country. And each of these
manufacturers has come up with different models. For instance, Maruti comes with
Zen, Alto and 800; Tata with Indica and Indica V2; Opel with Astro and so on. That
apart, each of these models comes with a variety of options like AC/non-AC, power,
engine-type, interior facilities like music systems and so on. The
addition/deletion of these facilities raise/reduce the price as well. The bulk of the sales is in Kathmandu,
which occupies 80-85 percent of country's total market. Pokhara, Narayangadh and
Butwal follow the capital. Most of the major car manufacturers have opened showrooms
in these cities, too. Buying a car seems to be the latest fad for
the upper and middle classes of Kathmandu. While the more affluent buy Prados and
Pajeros costing millions, most of the buyers are content with riding cheaper ones.
But in this market, cheaper does not necessarily mean bland. Scrambling to get their
attention, the manufacturers are building sleeker models all the time, slashing the
prices as well. What Are Small Family Cars?
Though there is a wide variety of
cars available, they can be broadly grouped in two categories in Nepal's context.
They can be either 2-box small type like the Maruti 800 - 5 seater - or the 3-box
sedan-type like the Maruti Esteem/Baleno. Since the prices of the sedans are
relatively higher, they are beyond the grasp of the majority of the middle-class
population. Because of lower prices, people from this group prefer smaller versions,
which have been conveniently called family cars. The revolution of the small family-car
market began with the middle-class boom that coincided with economic liberalization
in neighboring India. The Indian middle class has become economically so strong that
there are more than a million Maruti 800 owners in that country. Lured by the expanding size of the Indian
market, many international car manufacturers like Fiat, Suzuki, Toyota, Hyundai,
Daewoo have opened their plants in the world's second most populous country,
churning out tens of thousands of attractive models each year. The spill-over effect from the Indian
market can be witnessed in Nepal, too. All the latest variety coming up in India
make their way towards this Himalayan hinterland every so often. The result: one can
find Kathmandu's streets literally brimming with the latest versions of modern cars. Many believe the market for these small
cars have the greatest potential to explode. Price constraints do not permit most
Nepalis to choose from Japanese models. They are finding solace in the cheaper
brands.
Straight out of the assembly lines,
the latest models find throngs of customers ready to take them. Until a few years
ago, there used to be a long queue of people waiting to get their hands on these
cars. Because of increased imports and other reasons, customers today do not have to
wait that long. Who Buys These Cars? The price range of small 2-box family cars
is not too high. They are available from Rs. 657,000 to Rs. 1,200,000. Most of the
Indian joint-venture models come in between this range. Japanese and other foreign
models cost considerably more. The increase in the number of Nepalis who
can afford to buy cars is surprising. The middle and upper middle classes are the
main customers. From bankers to businessmen and from professionals to executives,
the bracket of buyers is expanding. That apart, with facilities like
hire-purchase, installments and loans on offer, people are scrambling to lift new
models off the showrooms. The traffic jam of customers still gets intense at times,
forcing them onto the waiting list again. "When I wanted to buy a car, I had to
encounter showrooms that were empty. Everywhere I went, I was told to wait. But
having no particular model in mind and being an impulsive buyer, I instantly bought
the car that was in the showroom," said Sunil Shrestha, a computer professional
who owns a gleaming red Hyundai Santro. But not everyone is as impulsive as
Shrestha when it comes to making that kind of investment. Karki waited for a couple
of months before buying the model of his choice. The varied behavior of buyers
raises another set of questions about the factors underlying car sales. The surge in car sales can be attributed to
the diminishing alternatives for investment. "Thanks to the economic slowdown,
people have very few places to put their money in these days. Consequently, they are
investing in vehicles," said Rajan Shrestha, technical manager at the Tata
Engineering, Sipradi Trading (P) Ltd. But not everyone is sanguine about the
future of Nepal's car market. "No business in the country is doing well at the
moment. The same is true for the automobile sector," Lokmanya Golchha,
president of Nepal Automobile Dealers' Association, was quoted in a daily recently.
"This sector had witnessed good growth over the last two years. But during the
last six months, there has been a big recession." Golchha's sentiments are echoed by J.R.
Bhandari, vice-president of the Chaudhary Automotive Division, which is the sole
agent for Maruti in Nepal. "Our sales have taken a dip following the June 1
killings in the royal palace," he said. Despite this dismal prognosis, there seems
to be no let-up in the import of top-of-the-line models in the country, perhaps
because many people feel the current slump to be temporary. Favorite Models In terms of price, there is no alternative
to Maruti 800, which is the best-selling model in Nepal. The Hyundai Santro, too, is
a favorite among many for its sleek look and attractive price. The Tata Indica was
introduced here in September last year. Since then, sales have been picking up quite
impressively. "In Nepal, there is an annual market for 1,200-1,300 cars in
the 2-box category alone. And this is increasing at the rate of 14 to 15
percent each year," said Shrestha. According to Shrestha, the market share of
Tata Indica is already 37 to 38 percent. Last year the company sold 450 units.
"However, over the last two months or so, business has been really picking up.
In Dashain and Tihar, we witnessed a sharp increase in our sales," he said. Road Condition The condition of roads, however, is
appalling. Compared to the rate in which the number of vehicles is growing, roads
have remained stagnant. With every passing year, congestion in the streets of cities
like Kathmandu only gets worse. "While the growth rate of family car sales is
14-15 percent, roads are expanding by less than 1 percent a year," rues
Shrestha. According to the Department of Transport
Management, the rate of vehicles entering Nepal has been increasing by 10-16 percent
every year since 2046/47 (1990/91). Official figures (updated in June 2001) show
that there are 305,395 vehicles registered in the country, with the bulk of them
(171,678, or 56 percent) listed in Bagmati zone alone. Among the total number of
vehicles, motorcycles comprise 57.7 percent and private car/jeep/van form
19.3 percent. Ride Ahead Despite the bumps it has encountered,
Nepal's car market seems set for a smooth ride ahead. In the decade since the
restoration of democracy and adoption of economic liberalization policies, the surge
in the sales of private cars has been all too apparent. Till now, Nepal is still the extended arm
of Indian car market and no manufacturer has been focusing its attention solely on
the market here. However, companies are beginning to take a closer look. A decade
ago, it was rare to see fleets of private vehicles parked outside a department store
or a movie theater. Today, wherever you go, whether it is a marketplace, parks,
zoo or other public places, stacks of neatly parked Alto, Zen, Matiz, Indica,
Santro or Cuore are a common sight The increase in car sales, especially small
family cars, has also indicated the arrival of a completely new set of well-to-do
middle class in Nepal. These people have money to spend on vehicles and are doing
that. As the middle class is considered the
engine of economic growth everywhere, the surge in this segment of Nepal's
population is a welcome sign. But the country has a long way to go before a sizable
proportion of the people start driving around in their own cars. Some of the models available (in 2-box
family car type) with indicative prices (in NRs): a. Maruti 800 -- 6,57,000 2. Tata a. Tata Indica 3. Daewoo a. Matiz -- 8,45,000 4. Diahatsu 5. Hyundai 6. Fiat a. Uno 7. Nissan a. March (Sedans) 8. Toyota a. Echo -- 23,00,000 9. Opel a. Astro b. Corsa 10. Maruti a. Esteem b. Baleno c. 1000 ‘Kathmandu Has The Lion's Share Of
The Market’ — RAJAN SHRESTHA Rajan Shrestha, technical
manager at the Tata Engineering, Sipradi Trading (P) Ltd., has been observing
Nepal's car market for years. A former employee at Maruti and Toyota, Shrestha is a
mechanical engineer. He spoke to SANJAYA DHAKAL about the status of small family car
market in the country. Excerpts: How do you find the market for
small cars in Nepal? Well, the market is expanding. The trend is
positive. Every year 1,200 to 1,300 of such family cars are sold here. Despite the
economic slowdown, we are keeping our fingers crossed. The slowdown is everywhere.
Even in India, vehicle consumption has come down. But here in Nepal, people with
money increasingly prefer to invest in cars. They have been withdrawing money from
banks and, with nowhere else to turn to, are spending it on vehicles. How is the Tata Indica doing? Tata as a whole is doing good in Nepal.
Last year, the growth rate of Sipradi Trading was highest among all the subsidiaries
of the Tata system in the world. In the small car market, too, we introduced Indica
here last September. Ever since, we have been experiencing a reasonably good
response. Our market share is 37 to 38 percent. In the last two months, our business
took off really well, maybe because of the festive season. We sold 107 cars
then. Most of them were diesel-type. What are the specialities of Tata
Indica? Nobody can beat us on safety. We have cases
where people have come out unscathed from badly toppled cars. Our vehicles are
fitted with a crumble zone between the engine and bumper. The bumper itself is of a
shock-absorbing type. Which models are popular here? Earlier, Maruti had a monopoly. Then Santro
came and picked up quite well. But now, Indica is coming up strongly. We are already
No. 1 in India. Earlier in India, Contessa was known for its luxuriousness,
Ambassador for spaciousness and Maruti for economy. Tata Indica has tried to combine
all three of these characteristics. We have sleek models, five people can easily
travel in Indica and our price is not very high compared Apart from Kathmandu, which other
cities are these cars sold in? Kathmandu still has the lion's share of the
market. Almost 83 to 84 percent of cars are sold within the valley. Pokhara is
second largest market. Then come cities like Hetauda, Butawal and Narayangadh.
Bordering towns like Biratnagar do not register high sales due to various reasons.
Around 7/8 cars are sold in average in Biratnagar each month. What are the major problems of the
country's car market? While the growth rate of family car is
14-15 percent per year, the expansion of road is less than 1 percent. Kathmandu is
already quite crowded. The cars also suffer from high taxation. They have to bear
almost 143 percent custom duties, 10 percent VAT and all. 'Our Sales Have Not Improved Since The
Royal Palace Killings' — J.R. BHANDARI J.R. Bhandari is the
vice-president of the Chaudhary Automotive Division. The division is the sole dealer
of Maruti for Nepal. He spoke to SANJAYA DHAKAL on the car market in the country and
Maruti's performance. Excerpts: What are your impressions of the
car market here? Last year, sales had taken off strongly
because of facilities like hire purchase and installations. But this year, following
the royal massacre, we have witnessed a dip in the sales of passenger cars and others. What models of Maruti are available
in the car/van category and how are your sales? Last year we sold 1,200 vehicles in car/van
category. Among all the manufacturers active here, we have the most models on offer.
Besides the 5 basic ones, we have 9-10 varieties of models. We cater to both the
small family car market (Zen, Alto, 800) to high end ones like Esteem and Baleno.
Except the high end models, others cost between 670,000 and 1,050,000. Why is the Maruti 800 the leading
model in terms of sales? The reason lies in its price as well as
performance. Besides, many of them are used for passenger taxi as well. All of the Maruti
products are Euro II compliant. You said your sales took a dip
following the royal palace killings. Could you elaborate? After the royal killings, our sales have
not improved. The tourism sector is faring badly. The whole economic scenario is
dismal. Compared to the previous fiscal year, our sales in the 2058/59 could come
down by 30 percent or so if the situation does not improve. What is the profile of car buyers? Mostly they are professionals and
executives. Institutions are other big customers. As far as families are concerned,
the decision to buy a particular model of car is made collectively most of the time. How do you see the future of
Nepal's car market? Well, it does not seem very impressive at
present. Road congestion is increasing. Taxation is on the higher side. |
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editor: spotligh@mos.com.np |
