THE MANTRA we are looking at is rethink, reimagine and recalibrate your business,” said Shashank Srivastava, executive director of Maruti Suzuki, at THE WEEK auto webinar on ‘Powering Past the Pandemic’. As the lockdown and its business travails ricochet across the board, this is a philosophy that is helping not just Maruti, but all automakers to weather the Covid storm.
‘So far so good’ seemed to be the consensus in the webinar panel, which included Gaurav Gupta, chief commercial officer of MG Motor India, Santosh Iyer, vice president (sales & marketing) of Mercedes-Benz India, and Tarun Garg, director (sales and marketing, and service) of Hyundai Motor India, besides Srivastava. Rebound has been positive, and better than expected, they all agreed. Yet, with the precarious state of the economy, change in consumer behaviour, worries over a second wave of infections, and more crucially, uncertainty over the arrival date of a vaccine, there was no magic mantra anyone was proffering to break the coronavirus spell.
“I am not an astrologer or a scientist,” quipped Garg. “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. I believe very strongly that car penetration being what it is, customers are still looking to buy a car.”
But the rules of the game have changed, perhaps irrevocably. Despite being the third largest in the world, the past few years have not been good for the Indian auto industry. Even before the pandemic hit, it had become the poster boy of the country’s economic slowdown, with sales in a free fall right from the autumn of 2018. Since then, it has been all downhill, with threats of newer technologies like electric mobility, youngsters preferring shared cabs to buying a vehicle, stricter emission norms and the hike in the cost of insurance and loan, all taking a toll.
THE WEEK webinar, thus, came at a crucial juncture—what the industry is planning to do will have a domino effect not just on the auto sector, but the very trajectory of the economy and the consumption patterns. And, the four doyens had all the answers.
“The pandemic and the lockdown have given us a great chance to relook at what we were doing,” pointed out Gupta. Even while helping local communities and tying up with ventilator makers, auto companies also started looking inwards. This meant new ways of doing business, from cutting costs and newer models to increased digitisation.
“The pandemic has made us much more agile, more innovative and more flexible,” said Garg. For instance, a launch usually would have meant fancy hotels, inviting scores of journalists and influencers, test drives and road shows. But Hyundai was forced to launch a new model through an online webcast during the lockdown, only to realise that it could reach millions of potential buyers instantly.
What buyers want
The triple effect of a global disease spread, the lockdown and the resultant churn in the jobs market were bound to change customer behaviour. The thing is, auto makers are still figuring it out.
Take, for instance, the spiralling popularity of sports or multi utility vehicles. Though as a category it went up 8-9 per cent in the past few years, it dramatically shot up by 26 per cent as sales re-started after the lockdown, something Srivastava found “surprising”. “There is a huge uptick in pre-owned cars. And, first-time buyers are increasing,” he said. With the fear of infection topmost in public mind, it seems the shared cabs success story has been brought to a fateful halt, at least for now.
“Customers are looking for brands that can provide solutions, something very different,” suggested Garg. This has already translated into subscription models, balloon schemes, and different formats of loans and EMIs.
Clutching at green shoots, auto companies have been relieved by the sales rebound in June, July and August. September, November and December make the festive season when sales normally stay robust. But worries abound. “There has been a faster rebound than expected, especially in the SUV segment,” said Gupta. “Having said that, we are still not out of the woods.”
And the carmakers have modest expectations. “Even if we can come to last year’s level (when the slowdown had already led to decline in sales), I would call it great,” said Iyer.
Of course, there is one tried and tested formula to push sales—give discounts. The problem? While sales are down, costs have gone up, right from the investment in BS6 technologies to currency exchange fluctuations that make import of components costlier.
“We will have to increase prices,” said Iyer. “There is a lot of stress in the system. So, to expect freebies or deals will be a fallacy, at least for a majority of OEMs.”
The other companies, however, are still in a dilemma. “We need to get volumes up, but cost has also gone up. We are debating on how to balance this out,” said Srivastava. There would be more offers on the financing aspect, mobility membership programmes, add-ons and faster delivery, rather than outright price discounts.
“The auto industry-GDP co-relation is very high,” said Srivastava. “Going forward, auto demand will depend on the GDP performance, as also on (public) sentiment. Cars are a discretionary purchase.”
While the rebound after the lockdown has been satisfactory, there is a worry that there could still be a dip after the festive season, once the rural harvest bonanza and the urban Diwali bonuses run out. As such, projections are that the overall industry will be down by around 23 per cent this financial year. Adding to the uncertainty is that it could still go either way—a vaccine upside (if it hits the market faster) and a virus downside (if the spread continues unabated).
If there is one sentiment that is powering all the four honchos to look beyond the woes of the pandemic, that is hope and optimism, though tempered with some caution. “We remain optimistic!” exclaimed Gupta. “This is like a T20 match; you play every over and try to get the maximum runs.”
Iyer summed it up succinctly: “Why waste a good crisis? If we can figure out new ways of doing business, that would be a positive outcome to this crisis.”