New Delhi: After all the hype of Auto Expo and the recent budget expectations/ announcements, India’s auto industry is trying to get a grip over the fact that there seems to be no golden El Dorado ahead.
Murad Ali Baig, auto expert and columnist
Passenger car sales during the last 11 months of the financial year appear to show a healthy growth of 12.8% though this has largely been sustained by launches of new models like the Zen Estilo, Spark, i10, Fabia, Logan and SX4 as well as discounts that have propped up most of the older models since last September.
The more aggressive looking utility vehicles and SUV’s like the Scorpio’s, Sumo’s and Safari’s have actually declined by 33% while the utilitarian mini vans like the Omni have continued to quietly grow.
The situation is worse among the two-wheelers that have declined by 8% with motorcycles (that account for 80% of two-wheelers) dropping by an alarming 12.4%.
Except for a few solid brands like the Hero Honda Splendour and Passion and the Bajaj Pulsar, few of the newer brands seem to be in a position to sustain consumer loyalty. They will probably crash ignominiously after their much hyped launches.
Also with Hero Honda and Bajaj accounting for 83% of motorcycle sales, all the other brands are being squeezed out. TVS, Yamaha and Kinetic make for good bikes but are finding the going to be both tough and unpredictable.
It seems that many two-wheeler buyers are moving from two to four wheelers. Even without the low cost Nano, excellent second hand cars are today available at not much more than double the cost of a bike and they mostly have air-conditioning that is fast becoming a standard need in a country that has long months of heat and humidity.
Most women also do not like driving two-wheelers. Resultantly, many working families are shifting to a new pattern, where the small car is for the wife and family and a bike or scooter for the man.
Increasing middle class affluence makes this trend easier but bestows little benefit to the two-wheeler manufacturers. They were disappointed that the budget did not give them any benefits and even if there had been an excise cut of say 4 or 6% it would have made very little difference to the total price or the market trend.
Despite the apparent chaos on the roads, India actually has a very low density of cars and bikes at about one car and four bikes for ever 100 set of people. If 80% of these vehicles are used in urban areas that have about 60% of the population, it means that there would still approximately be just one car for every 16 urban families and one two-wheeler for every four urban families. Until there are better city roads and more parking spaces, demand for cars and bikes is unlikely to increase very fast.
Better public transport will also dampen car and bike demand even though world experience shows that most people want their own personal transport as well. But the increasingly affluent people in urban India want much more comfortable air-conditioned public transport. It will unfortunately take years before metros and better buses make any significant impact. India’s metro cities also have much better air-conditioned taxis and many families are opting for taxis instead of the high costs and inconveniences of keeping a second car.
While urban roads in most cities remains a nightmare, the improvement in highways is more palpable, so it is not surprising that buses and trucks have been showing quite healthy growth rates. The total number of truck sales are also not very impressive and these are deceptive because there are many more bigger trucks with big engines and multi axles for moving larger loads.
The management of the highways is however a continuing disaster. Self interested state governments continue to allow overloading that endangers lives while damaging highways. Despite a now uniform sales tax rate, they have not dismantled the inter state toll barriers with the result that there is a huge waste of time, fuel and increased pollution.
The auto market is thus in a state of flux with chaotic conditions to make product and market planning very difficult. But despite the many uncertainties, the sheer size of the Indian market is attracting all the foreign auto makers who find most other world markets in the doldrums.
Murad Ali Baig is one of India’s foremost auto experts. Feedback to his column can be sent at firstname.lastname@example.org