Consumer pattern baffles Anand Mahindra

He says the 'enormous suppressed demand' will take form only after the general elections

In his three-decade career, Anand Mahindra, chairman and managing director, Mahindra and Mahindra, has “never seen the consumer pattern” he is briefed about at every M&M brainstorming session.  

"I have never been at a situation where (demand slump) is unrelated to your pocket spend or the recession; there is enormous money out there. But people are saying they want to wait. Demand for goods is going up. Truck makers are postponing decisions, people are buying used cars instead of new cars, so Mahindra First Choice sales go up 50 per cent. Everybody is in a state of limbo, I have never seen anything like this before," said Mahindra.

Mahindra was talking to a few select journalists over a lunch on the sidelines of the 12th edition of the biennial Auto Expo, which kicked off on Wednesday in Greater Noida. He explained how there was “enormous suppressed demand”, which would likely take form only after the general elections.

Irregular fuel price increases, policy paralysis, rises in central and state-led levies, among other reasons have defused consumer sentiments, not only of those going for cars and sports utility vehicles but those buying heavy duty trucks.

"Demand for goods is still there but even then, people who are buying trucks and fleets are not interested. They want to wait and watch what happens next. There is enormous suppressed demand: The only trigger to break this pause is if someone comes with a product which is simply irresistible," added Mahindra.

He was referring to some stand-out models in the market, which have defied slowdown and are on a waiting list with some extending to more than 12 months. The Ford EcoSport is one such product. The demand for which has forced its company to terminate bookings indefinitely.

Sales of utility vehicles, once a red-hot segment, dropped 4.4  per cent in the nine months ended December at 385,000 units as against 402,000 units sold in the same period last year.

Adverse decisions made by the finance ministry during the last year’s budget severely impacted UV demand. Mahindra’s Scorpio, XUV 500 and Bolero, among its other models, controls 41 per cent in the domestic market. M&M UV volumes came down to 158,521 units, a drop of 17 per cent compared to 191,850 units sold in the two comparable periods.

However, even during a slowdown, the luxury brands had been doing exceedingly well, noted Mahindra. “I see premium brands are going to do very well because the world is getting affluent. There will be a polarisation. There will be premium brands and then there will be those whole bucket of other brands which don’t say much. And I hope the place where Mahindra will play is not only its core DNA of ruggedness but it also means accessible technology,” added Mahindra.

 

Mahindra also noted that not only the Scorpio beat the Renault Duster again combined sales of the Scorpio and the XUV500 beat sales of Duster and Nissan Terrano.