Pay hike brings cheer to auto sector, consumer durables

Maruti Suzuki is eyeing an over 25 per cent growth in sales to government employees.

Top carmakers, including Maruti Suzuki India, Hyundai and Honda, are expecting a spike in their sales following the implementation of 7th Pay Commission recommendations.

Car market leader Maruti Suzuki India (MSI) is eyeing an over 25 per cent growth in sales to government employees and pensioners at 2.5 lakh units this year, riding on the hike in their salaries.

"Central and state government are a high potential segment for us, contributing about 17 per cent to the total volume.

With increase in disposable income in the hands of 50 lakh central government employees and 58 lakh pensioners, we expect an impetus to car sales in this segment," an MSI spokesperson said.

Last year, MSI sold over 2 lakh vehicles to the central and state government employees.

"This year, with the implementation of 7th Pay Commission, we are expecting to sell over 2.5 lakh plus units in this segment this year," the spokesperson added.

With sales network of over 1,900 touch points and a slew of new models like Ciaz, Ertiga SHVS, Baleno and Vitara Brezza, the company is set to leverage this opportunity, the MSI spokesperson said.

The company said it has sold a total of 15 lakh vehicles under 'Wheels of India', a special programme for government employees since 2006.

Expressing similar sentiment, Honda Cars India Senior vice-president (Marketing and Sales) Jnaneswar Sen told PTI, "It is positive for the auto industry. Arrears and increments will lead to more cash in hand for consumers which will lead to more discretionary spending. At least in the short-term we are looking to increase in sales of automobiles."

Hyundai Motor India, general manager, marketing, Puneet Anand said the decision will go a long way in fulfilling the aspiration of the one crore central government employees and pensioners.

"Hyundai Motor India will further enhance the delight of these discerning customers through over Pride of India offer under which customers will get additional benefit up to Rs 7,000 over and above the prevailing offers," he added.

In a bonanza for over 1 crore government employees and pensioners, the Cabinet on Wednesday approved implementation of the 7th Pay Commission, which had recommended an overall hike of 23.5 per cent. 

Boost for consumer durables sector

Implementation of the 7th Pay Commission recommendations will give a much-needed boost to demand in the consumer durables sector, which has witnessed sluggish sales in the last couple of years, industry players said.

Terming the Seventh Pay Commission as key to boosting demand especially when the global economy is reeling under the Brexit impact, Consumer Electronics and Appliances Manufacturers Association (CEAMA) President Manish Sharma said consumer spending is expected to rise.

"We strongly believe that consumer spending will be on the rise owing to an increase in income levels by 23.55 per cent.

"With the rise in disposable income and scaling of e-commerce, the consumer durable industry is expected to grow by 15 per cent in this fiscal," Sharma said in a statement.

Echoing similar sentiments, South Korean manufacturer LG said that both urban as well as rural sales will improve.

"Certainly Seventh Pay Commission implementation will have a positive impact. We expect people will upgrade their consumer durables post increase in disposable income," Niladri Datt, head, corporate marketing, LG India said.

According to Sony India Sales Head Satish Padmanabhan, the hike would have a quite positive impact as more money would come into the market.

"Overall sentiment is looking quite good because of on par monsoon and all in all, it would be a good bonus for the business," said Padmanabhan.

Panasonic India Head, sales and service, Ajay Seth said, "With the festive season approaching imminently, we have already channelised our businesses to meet the heavy demand for consumer durables and smartphones."

Videocon COO C M Singh said that the pay panel recommendations would favor 50 lakh central government employees and 58 lakh pensioners, which in turn will trigger purchases.

"This will certainly have an impact on the sales and trigger purchases. Favoring a tilt in demand for premium products, we expect the new age technologies segment to boost our business," said Singh.

Whirlpool of India managing director Sunil D'Souza said, "This is great positive for the consumer durables industry since this will definitely spur demand for discretionary and aspirational products".

"We look forward to this contributing to good growth in the later part of this year," he added.