Even though passenger vehicle sales were at an all-time high in the second quarter of FY24, sales of entry-level cars, bikes and scooters hit rock bottom.
While releasing the auto industry’s sales figures, Vinod Aggarwal, president of the Society of Indian Automobile Manufacturers (SIAM), as well as managing director and CEO of Volvo Eicher Commercial Vehicles told reporters that low rural income levels will impact sales of affordable vehicles. Edited excerpts:
Why are we continuing to see this challenge in sales in entry-level vehicles and what is SIAM doing on that front?
Yes, there is a degrowth in the entry-level segment of two- and four-wheelers. But if you look at passenger cars, there is very good growth in utility vehicles, especially SUVs. On an overall basis, the passenger vehicle segment is growing.
The entry-level segment has come down due to two possibilities. One is that more people are migrating towards utility vehicles. The other possibility is that rural consumers’ income is still at a lower level, which is also indicative of the degrowth of the scooter segment and (entry-level) two-wheelers. So, therefore, there is a concern, but overall if you look at the industry, it is growing.
Has the crisis in the rural market abated? Also, what is their contribution to total auto sales?
If you look at the macro factors, things are improving in the rural market – whether you look at the monsoon or the rural economy. There are also positive views if you look at the FMCG sector or some of the other economic indicators. So, overall, things are becoming better.
But as far as overall income levels are concerned on the rural side, there are still some gaps. That is why you see this lower demand in the entry-level two-wheeler and passenger car segments. As far as the contribution of the rural market to passenger vehicles is concerned, there is no data available.
Exports are declining in all segments except passenger vehicles. Could you share the reasons?
If you look at exports, the fundamentals are the same and that is because of the geopolitical situation in some countries. There are foreign exchange-related issues in some countries. So that’s leading to sluggish demand in some markets.
On an overall basis, we are very hopeful that things will improve because there is a lot of work that is going on in this area like trading in rupees. So these are the ideas on which the government of India is working. And let's hope to be able to see some more concrete action on that.
Do you apprehend any impact on logistics due to the Israel-Hamas conflict?
We have not seen any immediate impact (of the conflict on the domestic automobile industry). Our dependence on Israel for trade is not that high. Therefore, the impact is negligible. We have to wait and watch. If it escalates, there would be more concern. As of now, there is no concern.
What is the current scenario on semiconductor availability?
There are no issues. We are out of the woods now.
One research report claims that India can unlock $400 billion in exports. Do we have the inherent capacity to achieve that?
Absolutely. I don't think there will be an issue with capacity. Indians are very entrepreneurial. So if there is an opportunity, I'm sure people will make themselves ready to meet the demand. There is no concern on capacity creation and investments are also being made.
What are the driving factors for growth in the three-wheeler segment?
Growth has been phenomenal in the three-wheeler segment. It grew by 62 percent in quarter 2 (of FY24). It is reaching earlier peak levels. It's also reflective of the positive sentiment. So there is positive sentiment in the economy and there is a lot of pent-up demand as well. This is because this market has been down significantly in the past few years. So it is coming back and that is a good sign.
In the passenger vehicle category, what is the growth in electric vehicles? What is the outlook for the rest of the year?
Electric vehicles continue to be around 1.5 percent of the total market. So it's stable at that level. There are still around 5,000 electric cars every month and so that is continuing. The outlook for the rest of the year is positive only as it will keep on growing slowly and steadily.
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