In an interview with CNBC-TV18, Vikram Kirloskar, President of Society of Indian Automobile Manufacturers (SIAM) and Vice Chairman, Toyota Kirloskar Motor Ltd (TKML), spoke about the state of the auto industry and what it will take to kick-start growth.
Also read: Auto sales to pick up from the second half of 2014: Report
Below is the transcript of the video.
Q: The numbers that we have so far from Maruti Suzuki, from Mahindra and Mahindra (M&M) as well as from Escorts, with the exception of M&M’s tractor business, they have all been dismal. What is your outlook for all of the auto space in the months to come?
A: Next six months look very tough. Next year is going to be a year of challenge with a lot of things upheavals in the way we manufacture and sell. There are going to be some new launches, which will help motivate sales. But I think until the sentiment in the country stabilises that we are on a growth path, it is going to be difficult. We need a gross domestic product (GDP) growth of 6-7 percent to see some growth in the auto sales.
We are working hard on improving our exports. I think not only in my company but in all the companies. That is the only bright lining we have.
Q: In that case do you think SIAM should do away with guidance for next year because this year sales are going to fall quite short of that guidance?
A: The whole last 12 months we have not given any guidance because none of our guidance is coming correct. Next year’s guidance also looks difficult.
On January 9, we will be having a press conference to discuss our results for the last quarter but I think it will be very difficult to give a guidance for the next quarter.
Q: There was a minor positive blip around October but most people had put that down to a lot of inventory dumping at the dealers end, has that inventory now been cleared out, do you have any insight on what that end of the situation looks like?
A: I don’t have details of the other manufacturers so much as yet. I know for TKML and our factory inventory was almost two-three days at the end of December that is all we had. We are very careful to control our inventory.
I imagine in the current situation, most manufacturers are also very careful not to build up too much inventory around. It doesn’t help in the long run.
Q: Are we going to see maybe more scheduled plant shutdowns?
A: I don’t think so because we are not running at that much lower -- there is 30 percent excess capacity which you can manage by reducing from shifts, etc. Companies will spend time on training team members, upgrading skills as well as looking at what kind of changes we need to make to models -- to add more appeal and features to attract the market.
During the Lehman crisis, there was some activity by the government which helped car sales tremendously. [We need] some kind of indication from the government that we will do something to make the economy grow. It will make a big difference to auto sales.
Q: Do you think it’s also about the kind of initiatives some companies have taken? For example, you have the MUV category where you have seen record sales, you have seen a wait periods of one year to one-and-a-half years. Similarly, if you come to two-wheelers, there is Eicher Motors where we have seen big sales growth so some targeted sales have done well, do you think maybe more new launches would help revive the sentiment?
A: We have an auto show coming up from February 5 where there will be a lot of launches. My most optimistic view is that the auto show will motivate sales and I hope it does.
We are sincerely looking forward to all the new launches at the auto show from most manufacturers and we hope that will motivate sales.
But it definitely looks like you have to understand your customer very well, make vehicles much more specific for a customer group to improve your sales.
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