Rural demand behind V-shaped recovery of auto sector, says CII Manufacturing Council Co-Chair Sunjay Kapur

The COVID-19 global pandemic has presented the sector with an opportunity to localise production, says Kapur.

October 23, 2020 / 05:25 PM IST
Representative image

Representative image

The unprecedented demand from the rural sector has been the key factor behind the Indian automotive sector's V-shaped recovery after it logged zero sales in April due to the lockdown restrictions in place to curb the spread of the deadly coronavirus.

Tractor sales in rural India went through the roof with some of the tractor manufacturers witnessing their highest-ever sales in the month of September 2020. Tractor sales in India reached 1,08,649 units in September 2020, which is a growth of 28.4 percent compared to sales in September 2019. Almost all the tractor manufacturers reported a jump in year-on-year sales.

Sonalika Tractors reported the highest-ever monthly sales of 17,704 tractors in September this year, recording a jump of 51.4 percent over September 2019.

Sunjay Kapur, Co-Chairman of the CII Manufacturing Council, and chairman of leading auto component manufacturer Sona Comstar, said the huge rural demand has created a unique problem for the automotive manufacturers.

"For the first time, we are witnessing a problem of supply. Earlier the problem used to be of slower or lesser demand. But a resurgent rural sector along with the improving demand across the automotive chain has led to a V-shaped recovery of the auto sector. This has also created some supply-side problems," he said.

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He also said that demand and sales are increasing fast.

"Due to supply chain and logistics issues, it is tough to keep up with orders. This is happening when there are still certain pockets in the country where a lockdown-like situation continues, which is not helping suppliers to manage sustainable production runs. As things look up ahead, we will witness a further uptick in sales," he said.

He said the demand also rose as people feared using public transport.

"There has been a surge in the purchase of automobiles as most of those who can afford are trying to have their own private vehicle to travel and avoiding use of public transport," Kapur said.

According to a recent survey by ASSOCHAM and management consultancy Primus Partners only one in five Indians are willing to use public transport. The survey revealed that a whopping 73 percent of respondents said they would prefer to use their own vehicles (either 2-wheelers or 4-wheelers) and shun buses, cabs, auto-rickshaws and metro trains. The figure of 21 percent still opting for public transport is a whopping 34 percent lower than the pre-lockdown levels of 55 percent. This is what is translating into auto industry sales.

Kapur feels the COVID-19 global pandemic has presented the sector with an opportunity of localising production.

"We have an opportunity to make India an auto component manufacturing hub. And this opportunity today is more real and much bigger than it has ever been before. We have the wherewithal to seize this opportunity that is available to us." He said Indian companies have over the years spent hugely on research and development and are today ready not only to expand their own operations but also attract new players into the sector.

Kapur said besides the local know-how, Indian companies can look into bringing newer technologies. This will go a long way in getting companies to shift their manufacturing base to India, he said.

"So far as Sona Comstar is concerned, we are constantly upgrading in terms of technology and products. We have gone on over the years from a single product company to multiple products as well as from a component supplier to a system supplier. A majority of our manufacturing units are in India, and all our future expansion and investments are happening in India. We are in fact building a new facility at Manesar in Haryana. We believe in India's growth story. We have the ecosystem for growth and India's manufacturing sector will stride ahead.," he said.

Coming back to the skyrocketing demand from the rural sector for India's automotive manufacturers, Kapur said in the United States farm equipment comes under essential commodities. This led to a huge demand for component manufacturers in India.

"We continued to supply in great quantities to the United States as well. For Sona Comstar, this led to a huge jump in our export earnings. Today, 77 percent of our total earnings come from export," he said.
Moneycontrol News
first published: Oct 23, 2020 05:25 pm

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