Consumers are spending more on automobiles due to YOLO factor: FADA President

FADA President Manish Raj Singhania

Founded in 1964, the Federation of Automobile Dealers Associations (FADA) is the apex national body of the retail automobile industry engaged in the sale and service of 2/3-wheelers, passenger vehicles (PVs), SUVs, commercial vehicles and tractors.

Talking exclusively to Moneycontrol, FADA President Manish Raj Singhania said that despite ongoing challenges in the economy, consumers are spending more on automobiles as they believe in the YOLO (You Only Live Once) philosophy. Edited excerpts:

How has this month been for the auto dealer fraternity in terms of sales, especially of passenger vehicles and two-wheelers?

Since last month, we have seen decent growth of about 10 percent across all segments. We have created new records as PV sales were the highest ever for the month of August (3,15,153 units). This month too, the Vahan numbers have been very positive to date for both these segments. The Ganesh festival has just started and I think in the coming days the numbers will grow.

Retail sales were high last year as well. But the supplies were not as per the demand. In terms of percentage, I expect to see high single-digit growth in PV sales.  Over the last three to four months, we are seeing consistent growth and improvement in the two-wheeler industry as well, where we expect somewhere around 10 to 15 percent growth in September and October.

Talking about the festival season, what kind of incremental growth do you foresee and what would be the key growth drivers?

The festival season is a 42-day period, beginning with Navaratri and lasting until 10 days after Diwali.  The sales growth is due to a combination of factors. After Covid, we have seen spending going up, especially in the premium Rs 10-20 lakh SUV segment.

Sales of premium SUVs were below 20 percent of the PV market pre-Covid, but now they’re almost 50 percent of the PV market. With better roads, better finance and better supplies, personal mobility is taking off.

Last year, there was a semiconductor crisis due to which we saw waiting periods of two years. But now we are seeing waiting periods of up to six months. Moreover, new launches generate a lot of interest in this segment.

While we have seen a lack of demand due to stress in the rural economy,  during the last festive season, rural sales picked up on auspicious days. If that trend continues, it will bolster volumes this financial year.

Are you seeing an improvement in the rural market?

Yes, this year the rural condition is slightly better than last one. We have had a decent monsoon, which will ensure a decent harvest. Given that and the Minimum Support Price (MSP) offered by the government, farmers will have money in their hands, which will allow them to spend on vehicles, as mobility is a necessity and not a luxury in rural India.

Many OEMs have flagged demand headwinds such as high-interest rates, inflation, rising insurance premiums, modest growth in salaries of working professionals, etc. How are you still confident of buoyancy in the market?

A lot of things have come into play and the psyche of the customer has also changed. We are just seeing reports that savings are at an all-time low in India. So, people are not saving and are rather spending money on automobiles, etc. That is largely attributed to the YOLO (You Only Live once) factor.

Mobility is not a luxury in India. If you look at the car penetration per 1,000 people, we are nowhere compared to global standards, so there is tremendous potential. That's why the government has been investing heavily in road infra. You may prefer going on a road trip instead of going by train or plane because your personal vehicle is always at your disposal.  These are important factors that are contributing towards increasing the passenger car market.

Recently, the Ministry of Road Transport and Highways made an audacious statement about imposing a 10 percent additional GST on diesel vehicles. While the ministry has since backtracked, what do you think of the consumer sentiment about diesel?

Whether they buy diesel (vehicles) or not, they'll still buy automobiles. Also, our diesel vehicles are now compliant with global standards. In fact, we are better than the standards of a lot of countries. So why should a particular category of vehicle be punished?

We are already talking about BS-VII emission standards and if my product is complying with set norms, then what is the logic of taking that vehicle out of the system?

Every product has a unique proposition and that’s true for diesel as well. Everything is not negative about diesel and positive about petrol. We are definitely focussing on electric vehicles, ethanol, methanol, etc., and trying to get into hydrogen.

It is the market dynamics which will subsequently establish a particular type of fuel. For instance, CNG is very well established in the markets it's available in. The consumer understands the logistics and economics of operating such vehicles. You don't have to convince a three-wheeler customer to buy an EV because they understand the advantages.

Are you witnessing a significant penetration of EVs?

At present, EV penetration for passenger cars is almost 2.5 percent, and for two-wheelers, it is about 5 percent. Among the things that need to be addressed is the price of the battery once it is mass & locally produced, and the resale value of the product after 5-7 years of ownership whenever the customer wants to upgrade. And the charging infra, which is still not in place.

About 95 percent of consumers are charging their EVs at home. Once charging stations are spread across the length and breadth of the country, consumer confidence will go up and you will see the penetration of EVs grow manifold.

Going forward, do you foresee a sizeable chunk of EVs being sold in the rural market?

The rural market is very price sensitive and the current prices of  EVs are almost twice that of an ICE vehicle. So, to address that market, we need to make entry-level EVs more affordable. And their range also has to be decent because in rural markets distances are very high. Again, the lack of charging infra is a big challenge.

While EV sales in rural India will grow, it will take some time.  Right now, the focus should be more on urban markets where EV adoption would be faster.