Worst over, says M&M chief

Auto companies are counting on general elections, favorable monsoon, healthy rural demand to provide the much needed reversal in demand

General elections, favourable monsoon and a healthy rural demand may provide automobile companies the much needed reversal in sustained demand free fall effective since the past several months.

 

The festive demand which is expected to pick up later this week with the beginning of Navaratri will bring in additional volumes, said a top executive of sports utility vehicle market leader Mahindra and Mahindra.

 

Pravin Shah, Chief Executive, M&M, said, "Monsoon was normal, rural economy continues to be buoyant; with those sentiments better, surely we expect rural demand to grow. With the right policies from the government and also the rupee depreciation has stopped, we expect some momentum to come back. These factors impact the sentiments and that's what is makes us believe that the worst is behind us". 

 

The Mumbai-based company posted a fall of 21% in sales of utility vehicles and cars in September at 18,916 units as against 23,808 units sold in the same month last year. During the first half of this financial year the company saw a decline of 14% in sales.

 

A combination of factors such as a three percentage points rise in excise duty in the union budget, consistent rise in price of diesel and rising competition dented M&M's sales this year. 

 

Declining demand has forced the company to operate at two-thirds its total installed capacity, introduce no-production days and lay-off 2,000 workers across all its plants. In addition, all of its products are offered at discounts at the retail level.  

 

"Capacity utilisation is a cause of concern for the industry. We have adjusted our capacity to suit demand and are operating at 70-75% presently", added Shah.

 

Though each of the over two dozen automobile companies present in India is banking on the festive season for a uptick in demand, they are aware that the excitement seen during purchases in earlier years will be missing this year.

 

According to market research firm ZyFin Research consumer sentiment in India is at its lowest level since October 2011 even as the country heads into the festive season.

 

"We expect to perform better in the October-November period. However, we do not see the type of momentum in demand like we had seen in the earlier years", added Shah.