In a latest interview to The Times of India, Santosh Iyer, who will take over because the CEO and MD of Mercedes-Benz India in January, mentioned that clients are suspending shopping for luxurious automobiles as a result of they need to proceed investing by systematic funding plans (SIPs). SIPs are an everyday method of investing in mutual funds (MFs), notably fairness MFs.
The level that Iyer is making is that individuals are selecting to proceed to take a position into MFs by SIPs quite than purchase costly automobiles. Iyer mentioned: “They (SIPs) are our opponents.”
Iyer’s logic presumably stems from the truth that the recognition of SIPs has grown in leaps and bounds. In October, a complete of ₹13,041 crore was invested in MFs by the SIP route. The inflows in April 2016 had stood at ₹3,122 crore and have consistently grown since then. The variety of excellent SIP accounts as of October stood at 59.3 million, up from 52.7 million on the finish of March. So, are folks investing by SIPs and within the course of not shopping for costly automobiles?
Let’s begin with the gross sales of passenger automobiles. Within passenger automobiles, let’s first have a look at mini and compact automobiles (3,201mm to 4,000mm). These are the automobiles that almost all first time consumers have a tendency to purchase.
Data from the Centre for Monitoring Indian Economy (CMIE) means that their gross sales from April to October had stood at 952,298 items. In comparability, the gross sales throughout April to October 2018, earlier than the financial slowdown hit the Indian economic system and the covid pandemic broke out, had stood at 1.24 million items. It must be identified right here that the CMIE knowledge for April to October this yr doesn’t embody gross sales of Tata Motors. The knowledge from 2018 did. Even if we add Tata Motors gross sales knowledge for 2022, the gross sales in 2018 could be considerably increased than gross sales in 2022. Further, the gross sales of those automobiles are round 30% increased than in 2021.
Now let’s have a look at govt automobiles (4,501mm to 4,700mm). These automobiles are way more costly than the entry stage automobiles. Their gross sales stood at 14,684 items for the interval April to October. This is way more than the full gross sales throughout the identical interval over the past 4 years. The gross sales of premium automobiles (4,701 mm to five,000mm) throughout April to October stood at 1,556 items, way more than the gross sales throughout April to October 2018 or the identical interval in any of the years since then.
Now let’s check out multi-utility autos, which are typically way more costly than entry stage automobiles. Their total gross sales throughout April to October stood at 1.12 million items, having greater than doubled from 2018 and near 47% increased than 2021. In reality, there’s a big ready interval for a lot of of those autos.
Further, multi utility autos priced larger than ₹30 lakh noticed gross sales of 23,001 items this monetary yr, which is greater than 10 instances the gross sales throughout April to October 2018.
What does all this inform us? It tells us that the demand for costly automobiles has gone up huge time this yr. This is the Okay-shaped restoration that economists hold speaking about, the place the wealthy have turn into richer and have expressed their richness by shopping for dearer automobiles. Clearly, allocating cash in the direction of SIPs is just not holding them again.
The similar might not be true for folks looking to buy entry stage automobiles. As talked about earlier, the gross sales of mini and compact automobiles, that are entry-level automobiles, throughout this monetary yr has been considerably decrease than in the identical interval in 2018, although higher than the gross sales in the identical interval in 2021.
It’s well-known that the common SIP dimension of a number of the greatest MF distributors in India is within the vary of ₹2,000-3,000. Hence, for folks trying to purchase an entry stage automobile and having SIPs of round ₹10,000-15,000 monthly, it would actually be a alternative between shopping for a automobile or stopping the SIP. Actually, this is likely to be additionally true for these trying to purchase a brand new two-wheeler and having SIPs within the vary of ₹2,000-3,000. Two-wheeler gross sales from April to October have been at 9.81 million items, decrease than the identical interval in 2018 and 2019.
To conclude, SIPs are clearly not the chance price in relation to shopping for costly automobiles. But they could be a possibility price for these trying to purchase an entry stage automobile or one other two-wheeler for that matter.
Vivek Kaul is an financial commentator and author.
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