Expect sales performance to improve in May-Jun: M&M

It has been a dismal year for India's automobile industry, and industry body Society of Indian Auto Manufacturers feels its woes are likely to continue well into next year.

Arun Malhotra, Chief Sales & Customer Care Officer, Automotive Division, M&M says traditionally April always looks slower coming on back of March because March being the last month of the financial year is a peak month in terms of sales. Mahindra and Mahindra saw a marginal jump of two percent in sales for April 2-13. “April has been a very challenging month for the overall auto industry,” he states.However, hje hopes to see pick up to improve for the month of May and June. At M&M they are also confident of holding their market share he adds. Moreover, with the government having decided to stick to the excise duty hike of imposed on sports utility vehicles (SUVs), Malhotra says, “This additional three percent excise which is put on SUVs, is a big dampener and a disappointment.” Below is the verbatim transcript of his interview on CNBC-TV18 Q: What is the kind of pressure you are facing because of the competition in the SUV space? Take us through the performance and the pressures you may have faced in April itself? How will things pan out in May now that there is more competition and a little more tax to pay? A: April has been a very challenging month for the overall auto industry. If you look at figures of most of the major companies, they are either flat or they would decline sharply. Having said that our volumes have grown by nearly two percent and passenger utility vehicles have grown by one percent. It is less a problem about market share because we are holding on to that strongly but more an issue that the industry overall has been very badly hit in April. Now this three percent additional excise which has been put on a certain set of vehicles is impacting. You will see the impact wherever you see that three percent. So, overall I think it is more to do with the market and the sentiments than to do with the performances because as I said our market share is still holding strong. Q: There is also an overall pressure coming on diesel vehicles not just because increase in diesel prices but also because petrol prices have been falling rather rapidly. Do you sense competition therefore from that category of vehicles overall for your entire automotive space? What kind of projections can you make for the first quarter itself? A: If you look at diesel and petrol vehicles, in the passenger Utility Vehicles (UV’s), all vehicles which are there in the segment or whichever companies, they are all diesel. The way the vehicles are planned out, they are all diesel. But within cars, there was a major shift towards diesel vehicles in which the petrol and diesel both were available. You would see a change happening in the car segment, where the proportion of diesel vehicle would go down and petrol go up but as far as SUVs are concerned, since they are primarily diesel, they are not impacted by petrol or diesel. Q: Since all these pressures will gather in the months to come, that explains your sales being down 20 percent month on month. How will therefore May pan out? Does this trend play out of month on month slowdown? A: Traditionally, if you look at out last year or that of any other company, March is generally the peak month that is the end of the financial year. April figures are lower than March. Last year, it was around by 14-15 percent, this year it is going to be around 20 percent. So April, coming on the back of March, always looks slower, not only this time but in the past also. Definitely, the overall market sentiment has been quite low this year. When I am talking of this, I am not talking only of UVs, I am talking of across segments whether they are small commercial vehicles, whether they are three wheelers, whether you take cars. I think a lot needs to be done to put a point on that and this additional three percent excise which is put on SUVs, is a big dampener and a disappointment. Q: I am trying to get at some kind of guidance from you. Do you think that May will also be lower than April and basically? Could you give us a year-on-year (Y-o-Y) quantification of how this quarter will be compared to the year ago quarter. A: It is difficult to project the future but to go by past indications, every year, April in the first quarter is the lowest month and May generally does improve. That’s the way the trend has been. Let’s hope that trend goes in this manner. There should be some pick up in June for the industry. Q: Do you have any advantage of lower raw material costs because globally commodity prices are falling? Will you get some margin elbow room? Will you even contemplate passing it on in the form of lower prices so as to keep the demand going? A: There has been a softening in the commodity prices especially in the last two-three months but I think the deals which are done are over a slightly longer period. If these commodity prices which are now much softer remain that way, it will definitely help in terms of out input cost. The material input cost is fairly high in automobiles to the tune of 65-70 percent of the total cost. Q: Y-o-Y, your sales are up two percent for the month of April. There is no seasonality, I am comparing April to April, it is only two percent higher. So for the quarter, may we get a negative number - May and June? A: We don’t want to give any forward figure. It is very difficult to predict the market. But I believe we should definitely improve.