It is often said today that a good crisis should not be wasted. For the Indian auto industry, which was already facing a slowdown and BS-VI transition challenges even before the COVID-19 pandemic, 2020 has been a crisis unlike any other.
But, over six months into the pandemic, auto sales have shown signs of recovery, and sales figures are increasing month-on-month. With Diwali and the festive season around the corner, traditionally the most lucrative sales period for auto manufacturers, what do industry figures feel for the sector’s revival?
This, and more, were the topics of THE WEEK’s webinar, Indian Auto: Powering Past the Pandemic, featuring Gaurav Gupta, Chief Commercial Officer of MG Motor India; Santosh Iyer, Vice-President, Sales & Marketing and Member of the Leadership Team for Mercedes-Benz India; Shashank Srivastava, Executive Director, Sales & Marketing for Maruti Suzuki India, and Tarun Garg, Director, Sales, Marketing & Service for Hyundai Motor India.
Moderated by THE WEEK senior special correspondent K. Sunil Thomas, the webinar showcased how multiple levels of the Indian auto industry—from new entrants like MG Motor to established players like Hyundai and Maruti Suzuki and luxury marques like Mercedes-Benz—adapted to a pandemic.
“The pandemic gave us a re-look, a fresh start, to rebuild our entire organisation and to understand that the consumer is behaving completely differently in the new normal,” said Gupta.
One advantage MG Motor had was that they were already sitting on a number of bookings before the lockdown. Now, they too are seeing a rebound in sales, amid mounting interest in the SUV category. “We’re still not cleared out of the woods. There are still lockdowns in various parts of the country,” Gupta added, noting that supply chain constraints persist, with migrant workers yet to return in tier 2 and tier 3 cities.
For Hyundai, the new normal was a chance for the company to increase digitalisation. “[For a new car launch], normally, we would do a launch event, take out a hall...here we used the opportunity to go digital” said Garg. The company’s Next Dimension launch event allowed it to garner millions of views, he added.
One theme that all the speakers agreed on, was that auto buyers had changed their mode of consumption from conspicuous to conscious.
Noting that consumers were showing more interest in pre-owned vehicles, Srivastava pointed out that while replacement demand had come down, additional car buying and first-time purchases were increasing.
“People are moving away from what we call conspicuous consumption to conscious consumption. You have people more into functionality and value and I think this is a reflection of a post-pandemic mindset.”
He added that shared mobility, a concept that was gaining traction until the pandemic, was now losing popularity as people avoid public transport. “We see lot of demand shifting towards personal ownership of vehicles. That is why Maruti Suzuki has [offered] the subscription model as an additional choice for consumers, along with cash and financing.”
However, while demand has increased for pre-owned cars, there remain constraints on the supply side, as many car-owners continue to hold onto their old vehicles, points out Srivastava.
Like Hyundai, Mercedes-Benz India also embraced digital sales, seeing in its customers a growing interest in virtual consulting and booking cars online. In addition, purchasing patterns also changed: Speciality cars costing over a crore, like the AMG-badged variants, have sold out to the end of the year according to Iyer.
One big question for automakers is whether they are prepared to offer discounts during the festive season. For Mercedes-Benz, the answer has is no: The depreciation of the rupee against the Euro, from Rs 80 per EUR at the start of the year to around Rs 87 now, has added to cost pressures, even as OEMs and dealers have faced two-to-three months without making money. “There is a lot of stress in the system. To expect freebies or discounts would be a fallacy for the majority of OEMS. But it depends on everybody’s individual strategy,” Iyer said, noting that Mercedes-Benz may have to increase their prices before the festive period.
Instead of discounts, he adds, they could try solve the customer’s problem of finding credit first. “There would be festive offers, but limited to financial products. We must solve customer problem of finding credit first. [They are getting rejected at a high rate] when it comes to banks, who are themselves suffering with NPAs,” he says.
Srivastava agrees—“There are two contradictory requirements, the need to bring volumes up to push [sales] in the festive season, but also cost pressures, adverse currency movements—the rupee has depreciated against most trading currencies, whether yen or against the dollar or euro. And remember, that after BS-VI norms came, the [price of] precious metals which go into the making of BS-VI catalyser have also gone up hugely.”
One thing that all these auto manufacturers did during lockdown was to help in the fight against COVID-19. Hyundai brought in high-quality testing kits from South Korea, MG Motor used their centres to sanitise police vehicles and offer cars to healthcare workers who needed transport, Maruti Suzuki manufactured PPEs and ventilators, Mercedes-Benz set up a 1,500-bed hospital in Pune.
As to what the future holds for the industry, a lot depends on external factors like whether a vaccine will be made available.
Says Garg, "We are happy that the industry has rebounded so well. So, we have to be optimistic. I'm not an astrologer or a scientist. I wish I could know how many days away a vaccine is. But, I would say that the Indian economy has been resilient in the past. Whether it was during the Lehman crisis, or others. I believe very strongly that car penetration being what is is, customers are still looking to buy a car."
For these auto industry veterans, optimism was the attitude they want to take in approaching the future. With the festive season coming up and with monthly sales increasing, there may be cause of cheer in the days to come.
