Expect 4Ws to grow at 3-4%, 2Ws at 8-10% in FY16: SIAM

Vikram Kirloskar, President, SIAM, sees a better auto sales growth in FY16 as against FY15 in case the interest rates improve. In an interview to CNBC-TV18, Kirloskar said he expects the four-wheeler segment to grow at 3-4 percent and two-wheeler space to continue to grow at 8-10 percent in FY16.

Below is the transcript of Vikram Kirloskar’s interview with Sumaira Abidi & Reema Tendulkar on CNBC-TV18.Sumaira: The reason we wanted to speak to you today is to try and asses what could be the impact on at least rural demand because we have seen a lot of unseasonal rains which have damaged at least about 50 lakh hectares of crops. Do you asses that at least the tractor sales which have already been under pressure could see further downside from here?A: Tractor sales I can’t talk about as Society of Indian Automobile Manufacture (SIAM) does not represent tractors. However, on the two wheelers and some of the other rural vehicles that are sold like the lighter and the cheaper sport utility vehicle (SUVs), there is definitely going to be some affect of the unseasonal rain. Last quarter of last year we saw there was some reduction rural sales especially in two wheelers, urban sales were very good. It could be a combination of both Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) in the last quarter, reduction of money going out. However, in this Budget they have said that the MGNREGA is going to be increased by Rs 5000 crore. It may make some difference in the rural sales as well.

Reema: Overall what can we expect in terms of trend for the two wheelers? If there is going to be an increase in spend in MGNREGA it will only happen in the next fiscal year. In March will this slowdown in two wheelers continue, will it be similar to what we saw in February or perhaps worse because of what is happening with respect to untimely rains, will it impact the rural consumption? A: I think it is hard to tell but I am sure people will be looking at their dealers for picking up some extra stock also at this time. So, it will be hard to tell, each companies policy will vary what you will end up seeing. I think it is not going to be that easy. Very frankly we are seeing the growth in the economy, these new change in numbers are there but we are not seeing the kind of buoyancy across the broad as we were expecting both in four wheelers and two wheelers. Sumaira: Four wheelers otherwise has been reporting healthy volume growth. You are saying that there is not much buoyancy.A: When I say buoyancy it is not like the 15-18 percent buoyancy we were seeing two or three years ago. Last two years were very low numbers so we are looking at some buoyancy from last years numbers. We are still not hitting the kind of growth rates that we were few years ago and there is still a lot of excess capacity in the industry.

Reema: Overall what is the expectation for FY16, at least from the Budget the expectation was that perhaps we will see more of a direct support to the auto industry so it can start contributing to the gross domestic product (GDP). So, it has not happened that way from the Budget. So, FY16 what would be your estimate for the total auto growth in FY16, if you could break that up in passenger vehicles as well as commercial vehicles?A: I will tell you what I estimate for four wheelers. Four wheelers if there is no change in interest rates, the interest rates remain the same and the present excise duty structure which has not changed we estimate between 3-4 percent growth. If there is improvement in the interest rate, reduction in the interest rates this 3-4 percent may go to 5-6 percent or even 7 percent.Regarding commercial vehicles I don’t have clear data but what I am seeing and what I understand from the other commercial manufacturers is that all these big infrastructure projects slowly they are starting to see some steam and there is even more announced in this Budget. So, on that basis they are looking forward to some good increase in the next few months or in this coming financial year. Two wheelers will still grow at the rate that we had last year, whatever 8-10 percent that will also continue. It is not going to be reduction. Last year was reduction in some sectors, year before last was also reduction. I think we will definitely have growth across all sectors. I don’t think it is going to be in those big numbers that we had four or five years ago but it will be a definite growth. Reema: On the whole FY16 would you say will be largely similar to FY15 or perhaps just marginally better?A: I think better. I don’t think fantastically better unless interest rates come down but definitely better. However, if the interest rates come down I think we are looking at something which will be quite good.Reema: There was also an increase in the custom duties from 10 percent to 40 percent for commercial vehicles. What impact will this have for the Indian auto space? A: I don’t think there is much impact. There is hardly any import of commercial vehicles. I think it is just a notional duty has increased. I don’t think it is going to make much difference.