Demand falls: After a reasonable pick, Wagon R loses the thrust

Company attributes substantial drop in sales to import of used cars.

KARACHI:

There is a desperate need for an economical car and the market feels it. This is the reason why Pak Suzuki’s Wagon R managed a reasonable response in the first couple of months after its launch. However, a little over eight months, the model has become a chink in the company’s armour.

Its production has continuously declined with the company’s spokesperson attributing the rise in import of smaller used cars as a market grabber in the segment.

“We believe the sharp decline in Wagon R sales is the result of the increased import of small used cars in the country,” Pak Suzuki spokesperson said firmly. “Our plans, investments have all been disrupted by the import of used cars.

“We have been requesting the government to control the import of used cars. Otherwise, the local industry will continue to feel the brunt,” he said.



“We feel that we have not been taken into confidence on the new auto policy. We expected that the government will take all stakeholders on board just like the first auto policy which was presented by the previous government,” he added. Since the discontinuation of Suzuki Alto and Daihatsu Cuore on June 30, 2012, Wagon R was the first locally assembled car in the 1,000cc-or-below engine category.

The car, a much-awaited model, was expected to ignite interest among majority buyers who have been waiting for a vehicle in the smaller engine segment.

Wagon R sales from April to June 2014 jumped sharply to 2,208 units. However, July 2014 onwards, its sales plunged severely. From 714 units in July, production dropped to 579 in August, 427 units in September, 88 in October, and to a meagre 17 in November.

“We agree with the management of Pak Suzuki that the sudden drop in the sales of Wagon R is a direct result of used imported cars,” a leading automobile’s part maker told The Express Tribune on the condition of anonymity. “Unfortunately, this plunge in sales can create serious problems for the company.”

“Local auto parts makers are the victim of disagreements between two major players: the government and the carmakers. Since the auto parts makers are dependent on the local car making industry, they want to see growth in the sales of locally manufactured cars,” he argued.

According to the company spokesperson, Pak Suzuki has recently revised the prices of all its models including Wagon R. In its cheapest variant, the price was revised downwards by Rs50,000 to Rs849,000 (-5.6%). In the other variant, prices were slashed Rs90,000, bringing one down to Rs959,000 (-8.56%) and another to Rs999,000 (-8.25%).

“While the favorable rupee parity with Japanese yen played a role in reduction in prices, we believe depressed sales of Wagon-R prompted cut in prices by the management,” JS Research reported in its recent report. Despite the current dismal situation, some analysts are still upbeat about Wagon R.

“It is true that Wagon R sales have unexpectedly dropped in the last four months, but this is not at all a lost case for Pak Suzuki,” Global Research analyst Imran Ahmed Patel told The Express Tribune.

Every model takes time to gain the acceptability of customers. Suzuki Swift also saw this same problem when it was launched but then it regained its lost ground gradually. “There is a demand for Wagon R but since it is a different car, its sales will gradually pick up pace in the next year,” said Patel.

The recent price cut in Wagon R prices will also play an important role in higher sales in coming months, he added.

Published in The Express Tribune, January 8^th, 2015.

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