7th Pay Commission Latest News – Maruti looks for surge in sales on 7th CPC implementation – Scenario after earlier pay commission provides this hope for the largest car manufacturer in India
The nation’s largest car maker is out to woo government employees, who it expects will soon have some extra cash in hand.
Maruti Suzuki has put together a massive database of nearly 17 million people — 4.7 million central government employees, 7 million state government staff and 5.2 million pensioners — and is targeting as much as 18% of its overall sales to come from this group over the next two to three years. In the just ended fiscal year, government employees bought about 16% of the over 1.3 million vehicles the company sold in the domestic market.
This is kind of a hedging strategy by the company that makes one in every two cars sold in India.
An uncertain economy, consecutive years of drought that hurt the farm sector and weakened the purchasing power of rural consumers, as well as policy concerns have badly hit the auto market in the country.
Maruti has so far managed to post healthy sales volume, but spending on advertisements and large discounts to attract buyers have dented margins and, for the first time in two years, it posted a lower profit for the quarter ended on March 31.
It is projecting double-digit growth for the fiscal year that began on April 1. Though the economy is showing some improvement and rains are expected to be better this year, these factors may not work out the way it is predicted. Government employee Government employees, with them soon getting a salary hike based on the Seventh Pay Commission recommendations, can be a surer bet.
“In the case of the Sixth Pay Commission, there were two-three big arrears that gave momentum and push to the sales to government employees. In the Seventh Pay Commission, there are no arrears, but it will help enhance disposable income,” said RS Kalsi, executive director for sales and marketing at Maruti.
“The second big ticket purchase for a household after home is a car. Besides, customers have the option to upgrade, exchange or buy additional car.”
Government employees are cautious buyers, who prioritise purchase of home, education of children and expenses on marriage over procuring a vehicle, Kalsi said. But established brands with widespread sales and service network enjoy preference when they do look for a car to buy, he added.
“We are upbeat about the impact of the Seventh Pay Commission on our vehicle sales. Referrals, reliability, credibility of the brand, cost of ownership all play a decisive role in converting enquiries into purchases with this customer set,” he said”. We expect staggered results, spread over two-three years.”
Maruti Suzuki has sold 1.5 million vehicles to government employees since the 2006 launch of the Wheels of India initiative targeted at them. The Sixth Pay Commission had resulted in a significant rise in the salaries of government employees. Many received arrears, which left them with cash in hand to purchase vehicles. Sales of passenger vehicles grew around 19% in 2009-10 and 28% the following year, and industry experts cite the pay increase to government employees as a reason. Though that may not be the case this time, as no arrears are expected to be paid, Maruti hopes the increased salaries will still allow many to afford EMIs.
At 30%, the Alto hatchback is the car that most government employees buy, followed by other compact cars such as WagonR, Swift and DZire. The Seventh Pay Commission has recommended an aggregate salary hike of 24% to central government employees and pensioners, which is expected to boost consumption spending.
The minimum basic salary of central government employees will range between Rs 18,000 and Rs 2,50,000 a month.
Source: The Economic Times