Auto industry will only grow from here

Interview/ Rajeev Chaba, president & managing director, MG Motor India

Q/ Over the course of the pandemic and looking forward, what has changed for India’s auto industry?

A/ 2018 was the peak for India’s auto industry, with around 3.5 million cars sold. Then there was a slowdown in 2019, and last year Covid happened. Last year I would have said that the auto industry had slipped by one and a half years. But after the second wave, I think we have gone back by two years. If you go month by month, the picture looks rosy. But if you compare it with 2018, we are nowhere close, yet.

The second wave has been devastating, but we have learned our lessons. From that perspective, I think the auto industry will [only] grow from here. I believe strongly that we will cross 2018 figures next year. Only downsides we need clarity on are chip shortage, mismatch in logistics and raw material prices going up, which will force OEMs to pass on the cost to consumers.

Q/ What are the reasons behind the semiconductor shortage and raw material prices going up?

A/ It is all due to a global mismatch of demand and supply. Most economies had scaled down their production during the pandemic. Suddenly, as countries start opening up, there is an unusual surge in demand for everything, because post-Covid everyone is trying to buy items and indulge. At ports, there is a shortage of equipment, lifts and labour—even the containers are not there. There is a huge global mismatch. So, the freight rates have gone up. In China, one container used to cost $3,500, but now they are charging $14,000!

And there is a huge shortage of chips, needed for everything from mobiles to the auto industry. There is chaos right now. These are all unusual dynamics. Hopefully next year, they should sort out. But a return to actual prices may take up to two years.

Q/ One of the shifts we have seen is the growing popularity of SUVs. Another is electric vehicles. Do you see a big uptake for EVs?

A/ EV as a trend is catching up. EV volumes maybe only 10 per cent in five years, but we have had a great start. MG Motor has disrupted the market in EV and our offerings represent the future of mobility. The Hector was the first connected car. Our EV is the best in the industry. The Gloster is an autonomous level one car, first in the segment. We will come out with more mobility solutions this year based on our CASE (Connected, Autonomous, Shared and Electric) vision.

Q/Going forward, what are the shifts you foresee in consumer preferences?

A/ An obvious change we see globally and in India is connected cars. Touch screens, streaming music, live weather and traffic, call centre connections, these are going to become the cost of entry in the future.

Millennials globally are much more conscious about sustainable supply chains, ethical sourcing and environment. The discussion in the mainstream segment will be much more than fuel efficiency and horsepower—it will be about entertainment, information, connectivity and sustainable way of doing business. In India also it will become very important in the next five years. Covid has accelerated this kind of thinking.

In terms of trends, mobility solutions will come back. It may take one and a half years to two years to stabilise and settle down to pre-Covid situation, but it will come back—whether it is shared mobility, (car) pools or EVs.

Q/ As a company, and the industry in general, how would you say you have transformed in the last 15 months?

A/ Covid taught us that staying connected to the community and ensuring we have the latest technology was fundamental. Community here means employees, dealers and customers. During both waves we did a lot of initiatives, whether it was making ventilators, producing masks or providing ambulances.

Secondly, sustainability and digital. We are trying to make ourselves a very flexible company and provide very digital non-human contact solutions to buy a car, from our website to our showrooms. We are working with a lot of startups and trying to find a lot more solutions.