Festive sales led to positive growth in the auto sector: Vinkesh Gulati, President, FADA

Vinkesh Gulati, President, Federation of Automobile Dealers Associations (FADA), talks about the festive sales, demand trends, new launches and response of the customers to inventory levels among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:

Q: Big festive sales have just happened. How it is reflecting in the numbers and are you satisfied with the kind of response that you received from people?

A: Festival is an opportunity that comes once in a year, which happens during Diwali, Dhanteras and Navratri. Many customers consider this time as an auspicious day or period occasion for buying a vehicle. So, for us, it is always a month that we look forward, which is a dealer friend on the ground. And, if seen exactly, then during the festival, we received a good growth not across segments but in some segments. For instance, if we talk about the passenger vehicle, we received a 14% growth during the festival period of 42 days – which happens from Navratri to Diwali – which is in green and this is a good sign after the COVID lockdown. Even today there is a fear of COVID, so, it is a good sign during this period for us.

However, all the categories have not seen such good growth but the ongoing degrowth has come into control. For instance, if we will talk about the two-wheeler segment then it has been at degrowth of around 7% festive-to-festive, while the total industry has been down by just 5%. If you see, then there was a two-month lockdown and after that even today we cannot say that life is normal completely. Nevertheless, degrowth of 4.74% during the festive is a very good point for our industry for the future as well as for present because we have been through a slowdown. So, positivity has come in this industry due to these festive sales.

Q: There is a rural play in both, two-wheelers and tractors, and rural demand has been good this time. What kind of demand trends is visible in these two segments?

A: Tractor, especially the agricultural tractor, sales is highly linked with harvesting and sowing of paddy. It was a major period and we have seen growth during the period. Despite this, the growth is going on and we hope that it will continue but it is going down, however, it will continue to be in the green. About its future, I think, the way, the government is increasing its spending on road and other infrastructures will encourage the sales of the commercial tractors, which will keep the segment on the growth path.

The agricultural tractors have peaked up but the commercial tractors are still not running too strong. As far as two-wheelers are concerned, it is quite based on rural. But there is an additional segment in the two-wheelers segment, which is seen after the schools are opened when someone graduates or gets his first job after graduating and buys a new bike. A normal bike is a commutable bike and remains somewhere around 100cc and we are seeing a challenge there, which is a ground reality because schools are running from the home, similarly, work from home is going on. So, until both of these things are not normalized completely, then we will continue to lose the category which comprises of 10-20% in the segment.

The way, in which CORONA’s all-India figure is going down, no doubt, still there is a fear that it doesn’t spike again. I feel these figures will improve in the next 2-3 months. And, if you notice, the rural support to the two-wheeler segment was very strong at the start when Unlock-I and Unlock-II were going on. But city support is still not present on the commutable segment of the two-wheelers. No doubt, we are getting good support on 125cc and above. Even, if you have a look on the costlier bikes than they are short supplied, yet and if you go on the costliest bikes, like Triumph, BMW among others, they are also short supplied. So, anything in 125cc and above is good but there is some challenge in the 100cc, which would improve gradually over the period.

Q: We have seen several launches from every manufacturer and the response to the new products has also been good. Do you think that at the retail level, the customers’ preferring high-end cars and is the trend in cars are going towards the top-variants? Also, tell us about the response to the new launches and has it met the expectations?

A: In the passenger vehicle segment, we got support in two ways. The growth that has come due to which we seeing the passenger vehicles in the green is natural to some extent due to the personal mobility because people prefer not to use the public transportation out of COVID fear. But we are getting a huge percentage of growth on the new model and I am not just talking about the post-COVID period but it has been with every launch that has happened in the last one to one-and-a-half year.

In which a customer who was sitting at the home has initiated that a new model has been launched, it has new features and look-wise, the vehicle is good and this instigation has led to the growth. Practically, this segment in which new models have been launched in the last one-and-a-half year have been the small compact segment in the car, it is an SUV category car and SUV mixture. It is being led by many brands, like Kia has launched Sonet, Hyundai has launched Venue, Mahindra has XUV300 and many more such launches are there and they instigate a customer to visit the showroom and have a look the vehicle and find its feature and then buy it.

So, obviously, the personal mobility has supported the entry-level cars in the passenger vehicle segment apart from it the new launches have also supported a lot to the segment. And, all these new launches range between Rs 8-15 lakhs, which is a premium product for a normal customer. If we don’t talk about the super-premium then in normal cars, this is a premium product. During the festive, the demand for the top-model has increased a lot because it is a time, which is an auspicious occasion for people and they are happy due to which they want to buy.

Q: Tell us about the inventory levels with the companies? Also, three-wheeler and commercial vehicles are still subdued, so, by when a turnaround is expected there?

A: Inventory level is very controlled in the passenger vehicle segment. Federation of Automobile Dealers Associations (FADA) has always said that it should be of 21 days but it is of around 25-30 days, which is okay. We have a little challenge in the two-wheelers segment because we have an inventory of around 45 days, which is a very high inventory. And for the same, several times, we have requested to the OEMs and in future also, we will continue to request the dealers to be conscious because high inventory means high cost. And, at this point, any cost that affects our liability should not be there.

As you have described the three-wheelers then it is a segment that seems challenging in the future as well because the shift towards the personal mobility from public transportation will have maximum impact on buses and three-wheelers. So, negligible sales of the buses have had an impact on the commercial vehicle. The complete three-vehicle category is under a challenge, today, thankfully, it is improving slowly but it will take a lot of time to improve completely.

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When it comes to commercial vehicles then the dealers are very happy for the commercial equipment because equipment like tipper, dumper among others, which are used in construction work is almost short-supplied. I have already talked about the buses and freights are not doing well in the case of the trucks due to which growth is not coming in the segment.