Automakers welcome govt sops but are divided on festival season impact

Most agree, though, on the long-term benefits that the measures will bring in

While the measures announced by Finance Minister Nirmala Sitharaman on Friday to revive the automobile industry are expected to help in the second half, industry is divided on their impact on the festival season, which accounts for nearly 25 per cent of overall automobile sales.

Passenger car sales declined 19 per cent during Q1 and and by almost 30 per ceny in July, due to the slowdown in the economy, poor sentiment, liquidity crunch, and confusion over the continuity of BS-IV vehicles, among other factors.

On Friday, Government announced a slew of measures, including improving liquidity, to boost the demand.

Shashank Srivastava, executive director, Marketing & Sales, Maruti Suzuki, said that the steps taken by  the government are good in the long run and will positively boost sentiment in the short run, just ahead of the festival season. 

Enquiry levels for the company's petrol range this year are good for the current festival season, better than last year, but this may not reflect on wholesale numbers, considering dealers already have inventory. Despite the floods in Kerala and Maharastra, sales would be good going forward as sentiment will improve. “By the second half, we will have a clearer picture,” he said.

Hitting the brakes
 

• The passenger vehicles industry saw a 19 per cent fall during Q1

• Economic slowdown, liquidity crunch and confusion over BS-IV vehicles continuity to be blamed

The rural story is important for revival. Last year, the company reported an overall growth despite slowdown in the urban market, because the rural market grew by 10 per cent. This year, both rural and urban markets have reported 18 per cent de-growth in the first quarter. One of the reasons for this was poor monsoon till June 2019.

While the extensive flooding in states like Maharastra and Kerala may impact festival sales, sentiments are generally improving and will reflect in the overall year's sales, Srivastava added.

Vikas Jain, national sales head of Hyundai said the government's announcement should improve confidence and sentiment among consumers during the upcoming festival season and in the months following.

"We are optimistic that this move will boost customer sentiment in the current market scenario and encourage customers' acquisition of cars in the coming festival season, but to what extent, we need to wait and watch," Jain said.

He added that the move is definitely a booster, especially for tier-III and IV markets as the government's deferment of  the proposed hike in registration, improvement in liquidity and rate of interest, will benefit the volume segment consisting of cars priced less than Rs 5 lakh. "We need to wait and watch how it reflects the festival season, but definitely it will improve sales from January, from the depreciation point of view," said Jain.

TVS Motor Chairman Venu Srinivasan said that sentiment and cashflow were major challenges and they are addressed.

"After the announcement, sentiment has improved," Srinivasan said. "The government is finding bottlenecks and removing them. That is the first and most important thing. The government is keen to listen to the stakeholders, that again is very positive and that also boosts the sentiment."

Srinivasan was confident that lending would increase significantly with money coming into the banking system, adding that the money flow is currently missing, which is impacting sales.

“Will it (revival) happen in 3-6 months? I wont be able to predict. But I do expect that by January, there would be a pick up. You can't do something close to September and think it will start improving things in October. I definitely believe that from January, there will be green sprouts of growth. I think 3-4 months is the time it will take,” said Srinivasan.

While the automakers are not able to put any numbers, Icra's Senior Group Vice President Subrata Ray says despite addressing liquidity and sentiment issues, passenger car and two-wheeler sales are expected to close 6-7 per cent lower, way below what was predicted earlier.

Ray asserted that the announcements came a bit late for the festival season, as the flow down of measures, especially those relating to liquidity, will take time.