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Hyundai Eon in the slow lane


After scripting its success in the midsize sedan segment with the new Fluidic Verna, the country’s second largest car maker Hyundai Motor India Limited (HMIL) launched small car Eon last month. Weak consumer sentiments in a market burdened with high interest rates and fuel prices, however, has meant that the company has managed to get only 9,000 bookings for a car that was set to challenge Maruti Suzuki’s dominance in the category.


Hyundai did get over 96,000 enquiries for Eon since the launch of the car on October 13. However, due to the depressed market conditions, conversion rate to actual sales has been low at less than 10 per cent.




Arvind Saxena, director (marketing and sales), Hyundai Motor India Limited (HMIL) admits that the bookings have been lower than what the company had initially estimated. “The market has been impacted by frequent hikes in interest rates and gasoline prices. Eon is for the entry-level buyer who is particularly sensitive to increase in lending rates. Many of our target consumers may have already availed of home loans and are now deferring purchases so as not to increase their outgo in EMIs”, says Saxena.


Between April and October this year, sales in the A2 segment, which comprise Alto, WagonR, Estilo, A-Star, Eon, Santro, i10, Spark and Beat, have dropped by 13.7 per cent to 1.01 million units.


Eon, targeted at first-time buyers, is the smallest car developed by Seoul-headquartered Hyundai globally. The car, priced at Rs 2.69 lakh- 3.71 lakh (ex-showroom Delhi) is pitted directly against Maruti Suzuki’s best-selling car Alto. In 2010, MSIL sold 300, 956 units making Alto the first car to outsell global best sellers such as Volkswagen Golf and Fiat Punto. Alto is available in 800 cc and 998 cc engine options and is priced between Rs 2.32 lakh and Rs 3.17 lakh (ex-showroom Delhi).


According to industry sources, HMIL dispatched 13,503 units of the Eon to dealers over the last two months but have seen off-take of only 9,000 units.


Experts are, however, not surprised. “What has happened is that after the recent hikes in petrol prices there has been an increased preference for diesel cars in the market. That Eon is available only in the petrol fuel option is not helping in pushing sales”, says Abdul Majeed, leader automotive practice, PricewaterhouseCoopers.


Ajay Shethiya, auto analyst at Centrum Broking, agrees, “The price differential between petrol and diesel is as high as 35 per cent now. The entry-level buyer who cannot afford a diesel car tagged upwards of Rs 5 lakh is simply deferring purchases, thus affecting sales of models in the sub Rs 3 lakh segment.” For Maruti Suzuki too, sales of the Alto have slipped from a monthly average of 30,000 units to around 23000-24000 units.


Others, however, say the pricing of the Eon could have proved a dampner in boosting sales of the car. An industry observer said on the condition of anonymity, “The base version of the Eon is available for Rs 2.69 lakh which is priced almost Rs 40,000 higher than 800 cc variant of the Alto. If a buyer has to opt for an air-conditioned Eon, he would consider purchasing Alto K10 in 1000 cc engine configuration.”


Shashank Srivastava, chief general manager (marketing), Maruti Suzuki India, says, “Over 65 per cent of consumers who opt for Alto are first-time buyers who are less experimentative. They prefer established brands. Our products are known for their quality and low cost of ownership and therefore enjoy strong brand loyalty. Alto sales have dropped due to the overall slump in the market.”


Till October this financial year, the share of the A2 segment in overall passenger vehicle sales have come down to 36.1 per cent from the earlier 39.8 per cent.


Saxena is, however, confident that sales of the car will spruce up over the next few months once interest rates moderate. “We expected more bookings than we have got but I am sure we will be able to achieve our annual sales target.” The company expects to hawk 140,000-150,000 units of the car within a year of launch. The company is working on increasing its footprint in non-metro areas to cash in on potential demand when the market recovers.


HMIL has set up 750 sales touch-points to retail Eon over the past one year. Saxena informs, “We asked our dealers to identify five probable sites around their outlets. We then set up three kinds of touch-points at these locations – we engaged salespersons with mobile vans at some places to offer demonstrations and test drives for the Eon. At other places we either put up small sales branches which can display up to two cars or two-way sales and service workshops.”


The plan is to increase footprint to 1000 locations by the end of the year. This would beef up the network of 336 dealer outlets and 150 sales branches the company has across the country at present.