Car, commercial vehicles to see single digit growth: SIAM

Kirloskar said multiple new launches shows investors' faith in the auto industry. It not only stimulates the market, but benefits all players, he said.

The upcoming used car sales business and new launches will help in creating a dynamic market with multiple choices for consumers.

Below is the transcript of Vikram Kirloskar’s interview with Anuj Singhal and Ekta Batra on CNBC-TV18.

Anuj: The last time when we spoke to you at the start of the month of June you did say that there is quite a bit of pickup in car sales and commercial vehicle (CV) sales. Has that upward trend continued?

A: I think it is still strong, it is not in the double digit strong but still it is in single digit strong. I haven’t seen the numbers on the two wheelers and the light commercial vehicles (LCH) as yet for the month of June, but I expect them to be flat. The heavy commercial vehicles (HCV) are strong.

However, I would like to say something about the industry itself. The last couple of years have been fairly tough for the industry. I am very bullish on the industry because the industry has been able to respond to this very well. When I say respond I mean in the way it works; it works internally, the industry has become much more efficient, much more quality conscious and getting closer to global standards at every level.

If you see our export growth, export growth has been tremendous across all sectors and we are one of the larger automobile exporters now in the world, one of the top ones and that is again because of competitiveness - high quality, good cost and good delivery. If you look at some of the other things that are happening, voluntary recalls. Voluntary recalls is something which shows that the industry is maturing.

Even for the smallest issues, we are having good voluntary recalls, the response has been good and the customer confidence in our industry has also been improving. I think these are some of the things which makes our industry mature, makes me bullish about the industry that we are going forward on a very strong wicket.

Ekta: One of the takeaways that we had from the IndusInd Bank management when they came out with numbers is the medium and heavy commercial vehicles (MHCV) segment is seeing a pickup as compared to earlier. What is your sense in terms of how the MHCV segment is doing at this time, why is it seeing a pickup if that is the case or why not and is FY16 going to see MHCVs outperform the other sectors?

A: MHCV as in heavy vehicles? Is that what you are saying?

Ekta: Yes, medium and heavy commercial vehicles.

A: The heavy vehicles have been doing well. They did very badly in the last couple of years. We are talking of doing very well from very low numbers. We are still not up to real capacity utilisation, big capacity utilisation in this. But one thing that is indicative of this heavy commercial vehicle sales is that some of the infrastructure projects have start moving.

I think it says goods for the economy as a whole that whatever work has started with this new government in trying to revive the economy, trying to get infrastructure projects going, it has started moving.

As we see these accelerate, you will start seeing the heavy commercial vehicle industry also start accelerating much more. I am quite positive on this; next year should be good.

Anuj: What is going wrong with the motorcycle industry because the only space where we are seeing good sales data is the aspirational consumption, the high end bikes, the likes of Royal Enfields and all, but otherwise it has been quite flat?

A: I think the low end bikes go across the country; it is not only urban, it is rural, it is all over the place. Perhaps the high end bikes are more aspirational, they are more urban kind of sale areas. But the rural markets is something, we keep reading about different stories and I am not sure what is the real pin-point for rural markets to remain flat. It could be the monsoon, it could be buying support price, it could be, there are various things out there.

After the monsoon, we will get a clear idea how the crops have come out, what is happening to agriculture income, what is happening to the various subsidies like Mahatma Gandhi National Rural Employment Gurantee Act (NREGA) and those kind of schemes that are going around, how they will help the rural economy.

Rural economy obviously seems to be a little not doing as well as expected and that can be seen from the sales. Also if you look at inflation, inflation is at such a low level. I believe even food inflation, all the inflation stuff are coming down. So, I assume rural income is also on a little bit of a stagnated level and therefore the sales of these are under pressure.

Ekta: The industry has lined up quite a few launches within the passenger vehicle segment. For example I was reading the Honda Jazz, the Hyundai Creta, the Maruti S-Cross. Even though the industry itself is anticipating sluggish sales, the launches are quite bullish this time. What is your sense in terms of whether the industry is actually anticipating a second-half pick up or maybe it has become very model specific that for example if I do have the money, I am going to buy the one model which interests me the most and hence there could be selective market share gain that we could see in FY16?

A: Let me talk a little bit on the car industry. Typically, the life cycle of a vehicle is perhaps of a platform maybe 6-7 years, 8 years and halfway through we do some minor changes to it and have a second launch in between. Every four years there is some kind of a new launch on a vehicle and every 7-8 years a major launch on the same kind of platform. So, that is one story.

It takes about two-three years, four years, to plan new vehicle launch, so once you set that in motion, it is going to happen, but that means you have to plan your investment cycle way ahead of time. One thing is for sure- the way the new launches are coming out is that the industry feels. The investor and the industry have a lot of confidence in the Indian market, otherwise there won’t be so many new launches and it totally simulates the market.

Every time there are new launches, we see it is not only the new launch which does well but other makers also do well because it excites people into going into showrooms, seeing what all is there for offering and this along with a used car industry which has started picking up, this combination is certainly helping making our market more dynamic and good for the consumer, consumer has lot of choices now.