Logan will be rolled out in more cities post-July: M&M

Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » RELATED NEWS M&M May Auto sales up 50% to 18,116 units Mahindra Renault Logan clocks sales of 2786 units in May 07 M&M automotive sales zoom 49.5% Hold on M&M: Amisha Vora Mahindra launches Pik-Up in Australia ALSO READ See latest News about Mah and Mah See previous management interviews See what other Experts & Brokerages are saying about Mah and Mah Mah and Mah BSE | NSE 28/05/12 Are Mutual Funds betting on Mah and Mah?

Rajesh Jejurikar , Exec VP ( Sales & Marketing ), Mahindra & Mahindra , said, the company expects June to be very positive and see the same momentum to continue.

He added that the company is in discussion with its manufacturing divison on how it can ramp up and increase the outputs with the current infrastructure.

Jejurikar added the low value purchase products are more sensitive to the interest rate hike. The company is going to roll out Logan in more cities only after July.

Excerpts from CNBC-TV18's exclusive interview with Rajesh Jejurikar:

Q: There have been lots of concerns about slowdowns. Are you facing any particular at M&M?

A: In fact, not at all. We had a very buoyant May as we announced the figures few days back.

During May, we had shown a 50% growth in the volume, where Scorpio had grown around 30% and our UV portfolio had grown 20% odd.

Plus, we had the Logan kicking in. So, all the brands in our portfolio are actually doing well.

We are also in discussion with manufacturing divison on how we can ramp up and increase the outputs from the current infrastructure that we have. So, we are in a positive mode at this moment.

Q: Specifically looking ahead in terms of June, if you just take the passenger vehicle part: SX4 sold about 3,000 units and Logan of about 2,700. What is the outlook for some of these recent launches and overall picture going forward into June and July?

A: We expect June to be very positive and see the same momentum to continue. Logan will be the first month of all manufacturing days of one shift; we are not yet on two shifts. We will be constrained by our manufacturing capacity, which is currently at about 90 per days.

We would have the maximum output. But the output is driven by what we would have ramped up, not by the demand that we have for the product.

Q: At an industry level how are you reading into these reports which talk about four-wheelers as well as two-wheeler players essentially looking at production cuts and what does it signal in terms of trend? Is it something concerning over two quarters or is it something that probably will taper off with the start of the next quarter?

A: I have a hypothesis on the interest hike impact on the auto industry . Those which are low value purchase products are going to be far more sensitive to the interest rate hike because where the disposable income is lesser for customers, they will feel the interest hike impact on their EMI more than those in the high value products.

So, what I mean is, in case of the customers buying a Rs 5 to 8-lakh product, the impact on EMI is roughly Rs 600-800 a month. For customers of that kind, most of them would have a personal disposable income of more than Rs 50,000 per month easily. Those kind of customers generally do not decide not to buy a product because of a Rs 500-800 EMI per month.

However, an EMI impact of even a smaller value to a customer, whose personal disposable income is Rs 8,000-10,000 per month, is going to be much more because he/she will seriously reconsider making a purchase at that point of time.

So, I believe the sensitivity will be much more on the lower value products than it will be on the higher value product.

Q: Where do you see sales growth for the FY08?

A: We have said that we will see a healthy double-digit growth. At this point of time, we have no reason to change that outlook.

Q: Have you laid out targets for Logan particularly?

A: We have laid out targets; we normally do not share it. We do have a target in mind and so far, we seem to be on course towards that. Currently, we are only in 11 cities and we have done well in those cities.

We will start rolling out to more cities only after July when we will be on two shifts. So, during the month of June, we will have our volume capped by our maximum production capacity.