Festive season looks quite good, 53% sales come from SUVs: Hyundai's Tarun Garg

Tarun Garg (Image: Autocar Professional)

Tarun Garg, director of sales, marketing and services at Hyundai Motor India, is optimistic about offtake in the festival season.

In an interview with CNBC TV18 on September 7, Garg spoke about the contribution of SUV sales to the overall market share, which is 41 percent. He also touched upon the demand trends during the season for auto companies. Edited excerpts:

There is this massive surge that we’ve seen, especially in the SUV segment in which you’re the second largest player overall. Can you tell us what the trend in the festive season is so far? Where have you seen a pickup? And overall, what kind of growth are you looking at?

I believe that the auto industry in India is the prime example of resilience. Because globally when we see, you know, inflation, interest rates, we are seeing a pretty stable and strong demand in the auto sector (in India).

If I talk about SUVs, (the segment is) now contributing 41 per cent to the overall market. Last year when it touched 34, 35, 38 percent, we thought it was a peak but it continues to go up, which shows that the customer is continuing to move up the chain and as far as Hyundai is concerned, of course the festival season is looking quite good. Fifty-three percent of our sales is coming from SUVs; Onam as well as Ganesh has started on a very stable note and now we enter Navratri, Dussehra and Diwali, so things are looking up.

Also, I think what is aiding is two things. One, the back order is very strong. Even we are sitting on a back order of close to 230,000. And second, the semiconductor situation which we all have been facing for the last one year seems to be easing now.

For example, if I talk about Hyundai, January to May we were doing about 43, 44 (thousand units a month) in the domestic market and now we are looking at 49 (thousand), so clearly a 10 percent uptick has happened. So much so that now we are looking at calendar year 2022 as the highest ever domestic sales by Hyundai Motor India. So I think things are looking pretty good out here.

That’s quite a huge achievement. You said that you’ve seen a very strong festive season so far. Can you give us a sense in terms of how percentage growth in volumes has been year-on-year? If you were to compare it to, say, pre-pandemic levels, what is the volume trajectory you’re seeing?

This is interesting. First I’ll cover the pre-Covid level. If you see the industry, in 2018 the industry saw its highest ever sales. At Hyundai Motor India, we did sales of 550,000 (units) in 2018. As we all know, 2019 was very challenging and things started to kind of almost fall apart and we saw a big dip in volumes across the industry. And then 2020 and 21, the Covid years, with all the problems like the supply chain issue. Now in 2022 we are looking at, like I said, the highest ever sales, beating that of 2018, so that is the first point. In the last few years, we achieved sales of about 505,000 (units) and now we are looking at 550,000-plus, so very clearly we are looking at 9-10 percent of positive optics. And this is, of course, considering that we had shortages for the most part of the year in terms of semiconductors, so this is the first part of it.

The second part of it is the festival season. It is ongoing because we will see the Onam results in the next couple of days and Ganesh also, September 9 is the visarjan day, so we still have some time to go for it. But we can see good traction, dealers are asking for more vehicles, which is always a very good sign. We are seeing a good booking trend as well. Things as of now are looking good. Why this is more special is because in the last couple of months, frankly speaking, because of this geopolitical situation and because of inflation and interest rates going up and 80 percent of the cars being financed here in India, we were kind of apprehensive that how all that would affect car demand.

What is the market share currently that you’re sitting at? You were at about 16 percent at the end of FY22, where is it now?

Market share is at around, if I talk about retail, 15-15.5 (percent) but mind you, market share so far has been a reflection of the ability to supply more than the demand. I think going forward and especially in calendar year 2023, probably, market share will reflect through demand. And I think that is where we can really look at things in a much more objective way.

You said Hyundai would be one of the biggest in the SUV space. How much as a proportion of overall vehicle sales was of SUVs say three-four years ago and what is it now? What rate is it going at and what does the future look like?

If I talk about 2015, SUVs used to contribute 13.5 percent to the overall industry. Today, they’re contributing 41 percent. So just see, in six-seven years, 13.5 has become 41. That is the first point. Second, hatches used to contribute 50 percent and are now 34/35 percent. So very clearly, there has been huge growth in SUVs, which is a reflection of one, that the Indian customer is evolving, he is not ready to compromise on quality, he wants more space, he wants more features.

The second thing is the kind of models which have been launched. Today, more than 80 percent of the models launched are in the SUV space. If you look at Hyundai, we launched the Tucson last month. We already are sitting on a back order of 5,000. Mind you, earlier we used to do 1,000-1,200 Tucsons a year, and now we are looking at 5,000 Tucsons. So just see how things have really moved as far as Hyundai is concerned. More and more, we can see that the percentage of vehicles above, say, Rs 15 lakh, which used to be 1-2 percent of our portfolio, is now more than 15-16 percent. So everywhere the chain is going up and customer aspirations are going up. Also, the customer is travelling much more, he is spending more time in the car, which means he’s looking for connectivity, he’s looking for more features, he’s looking for ventilated seats, he’s looking for safety—all these things are really coming to the fore rather than only just a car as a means for going from point A to point B.

You have lagged some of your peers in the electric vehicles segment. There is also the complaint that the Kona (Hyundai’s electric SUV) is much more expensive than rivals. Do you plan more launches in the EV space? An affordable EV perhaps?

This is a very important point and you have to understand the strategy. If you see the IC (internal combustion) space, we started with the Santro and then we moved up. In the EV segment, it’s a different ball game altogether. As you know, in 2019 we launched the Kona and at that time people were only talking about EVs and we had a production SUV with a range of 450 km, etc. So we are now working on the ecosystem, and now know much more about the customers.

We have already announced that we’re going to have six BEVs (battery EVs) by 2028 and it will be across segments, body types, etc. We have already announced the launch of IONIQ 5, which is the world car of the year and world design of the year. I think, going ahead, we are very much committed to launch more battery electric vehicles and the charging infrastructure. We had a partnership with Tata power on that.

So we are looking at the entire ecosystem rather than only the product and you will be hearing from Hyundai in this space very frequently.