There is little doubt the concerted action on all fronts - from lowering excise duties to interest rates - helped, but it's also true that February 2008 was a bad month.
DILIP CHENOY,
Director General, Society of Indian Automobile Manufacturers
‘Clear and concerted actions such as reducing interest rates and cutting excise duties have helped revive growth’
The surge in growth, particularly in the passenger vehicle segment for February, clearly brings home the point that given leadership in policy formulation and concerted action by all stakeholders, it is possible to address the current downturn and bring back growth in the economy. The February growth was possible because of the government decision to reduce excise duties, introduce a buying programmme, restore the DEPB rates, the RBI’s decision to increase money supply while creating an environment for lower interest rates, the banks’ decision to reduce rates and the proactive steps of many public sector banks to increase exposure to the passenger car market. Simultaneously, vehicle manufacturers have reduced prices, introduced new models, explored new markets, stepped up exports, and continued with expansion plans and R&D. A point that needs to be underscored is the quick and coordinated action across a broad range of areas.
A similar story is not yet unfolding fully in the two-wheeler segment. Credit flow has not restarted and with many banks still being out of the sector, financing is just not available in some states and the interest rates are still prohibitive. Yet industry initiatives such as the introduction of new models, reduced prices and focus on rural markets are leading to some growth which is perhaps not up to the potential.
There is still more to be done — repossession guidelines, expansion of credit flows and further reduction of interest rates, among other measures. An important aspect of the stimulus package was the impact on sentiment and the expected restarting of economic activity. Yes, there is the backdrop of lower sales last year and that is why the next few months are all the more important. There is no reason to believe that if this concerted action is continued and taken to its logical conclusion, growth will not be sustained in the coming months. Growth may dip in a few months, but that is part of the revival cycle.
Commercial vehicle growth rates are still in the negative territory and will continue to be so till the vehicle replacement and the bus-purchase programmes actually go past the tender stage and vehicle deliveries start. But even at this stage, these programmes, coupled with the increased depreciation benefit, are a huge sentiment-booster. When the special purpose vehicle for NBFC finance is introduced and repossession issue is addressed, increased sales might be possible. Once the additional infrastructure spending results in increased economic activity, freight movement could increase, signalling improvement in overall economic growth and positive growth in the segment. This is not impossible in the last quarter of this calendar year. However, care should be taken that other measures such as licensing of imports and imposition of prohibitive duties on raw materials do not create impediments to growth.
There are still many other policy instruments, both fiscal and monetary, like rationalisation of the excise duty structure, income tax rebates for purchase of vehicles, introduction of a fleet modernisation programme, restructuring of loans taken by companies, and so on. Growth in the automotive industry will drive growth in other sectors as well and, therefore, needs to be pursued. The message from the passenger car segment: Clear policy announcements and implementation leads to a turn around, which, when extended to other sectors, would lead to similar results there as well.
ARVIND SAXENA,
Sr Vice President (Mktg & Sales), HMIL
‘February 2008 was a very bad month and that is why the 2009 sales look good. You won’t see the same thing in March’
It is true that we are in the middle of one of the worst economic slowdown which have taken place in the recent past, and the automotive industry is no exception to the prevailing market conditions that have affected the entire world. While mature markets are being impacted more severely than emerging markets, no country or region is completely immune to the turmoil.
It is true that automobile sales figures for February 2009 appear to paint a somewhat a rosy picture, giving the impression that the bad times are over. It is, however, premature to suggest that one month’s good performance means the industry has turned the corner. It is only when we see a few months of consistent growth that it will be possible to say that the industry is out of the woods and is ready for future growth.
Before the slowdown actually hit India, we had been growing steadily with double-digit growth figures — we would be lucky if we end the current year with even a flat growth figure for the automotive industry as a whole. For even that to happen, many things have to change. Auto-financing has to improve because one of the main reasons for car sales’ slowing down is both the cost of finance as well as the availability of finance. There are enquiries which do not get converted into final sales because of the non-availability of finance — the fact that the cost of loans have gone up, not only for automobiles but for almost all sectors, also affect personal affordability.
The government has done its bit by way of stimulus packages, reduction in Cenvat and a drop in fuel prices. But I still feel it will take a while before the effects start showing, and the benefits are passed on to the consumers. This will result in better availability and lower cost of finance, and once that happens there is all the possibility that the auto market will bounce back.
As for the February sales for Hyundai, we rode on a strong product portfolio which includes the recently-launched i20 which has once again received a tremendous response, and the strong segment-leader (the i10) which continues to dominate the market.
It is also important to keep in mind the fact that February last year was a bad month. So, the base with which the February 2009 sales are being compared was a low one to begin with. Customers were expecting an excise duty cut in the Budget, and so sales in February 2008 were depressed. This is exactly what happened, and this led to a huge demand-surge in March 2008.
Given the surge in demand in March 2008, industry will be hard put to match the growth in March 2009. Too much should not be said about the March 2008 figures because the sales of February and March had got lumped together to create a large base because of both the anticipated as well as the real excise duty reduction.
To put things in right perspective, we must look at the entire quarter rather than just sales figures for any single month — to be able to announce that things have gone back to being normal, we must at least have a couple of steady months or even a slow-growth quarter. Till that happens we will certainly not be heading for a steady growth scenario.
