Auto firms unsure if benefits will be seen in festive season

This year, both rural and urban markets have reported around 18 per cent fall in the first quarter. However, most auto majors expect that by January, there would be a pick up.

Illustration: Dominic Xavier/Rediff.com

While the sops announced by Finance Minister Nirmala Sitharaman on Friday to revive the automobile industry are  expected to help in the second half, the industry is divided when it comes to its effect on the festive season.

This period accounts for nearly 25 per cent of the overall automobile sales.

The passenger vehicles industry saw a 19 per cent fall during Q1 and in July it was nearly 30 per cent.

This was because of slowdown in the economy, poor sentiment, liquidity crunch and confusion over BS-IV vehicles continuity, among others.

On Friday, Sitharaman announced a slew of measures, including improving liquidity, to boost demand.

TVS Motor chairman Venu Srinivasan said sentiment and cash flow were major challenges and they have been addressed.

After announcement of the measures, the sentiment has improved.

The government is finding bottlenecks and removing them. The government is keen to listen to the stakeholders.

That again is very positive and also boosts sentiment, he said.

“Will it (revival) happen in 3-6 months? I wont be able to predict.

"But I do expect that by January, there would be a pick up. You can’t do something in September and think that in October it will start improving.

"I definitely believe that from January, there will be green shoots of growth,” said Srinivasan.

Shashank Srivastava, executive director, marketing & sales, Maruti Suzuki, said the government’s moves are good in the long run and will positively boost sentiment in the short term, just ahead of the festive season.

For revival, the rural story is important. Last year, the company reported an overall growth despite slowdown in urban market.

This is because the rural market grew by 10 per cent.

Enquiry levels for the company’s petrol range this year are good for the current festive season (better than last year’s), but this may not reflect on wholesale numbers, considering dealers already have inventory.

This year, both rural and urban markets have reported around 18 per cent fall in the first quarter.

Despite floods in Kerala and Maharastra, sales would be good as sentiment will improve.

Vikas Jain, national sales head of Hyundai, said the Centre’s announcement should improve the confidence and sentiment among consumers for the upcoming festive season and thereafter.

“We are optimistic that this move will boost customer sentiment in the current market scenario and encourage buying of cars in the coming festive season.

"But how much it will be effective, we need to wait and watch,” he said.

While automakers are not able to put any numbers, Icra’s senior group vice-president Subrata Ray says despite addressing liquidity and sentiment issues, passenger car and two-wheeler sales are expected to close with negative growth of 6-7 per cent.

The fall would have been higher had these measures not been taken.