Auto makers continue with new launches despite economic slowdown2 min read . Updated: 07 Jul 2020, 06:36 PM IST
- Massive investments have gone into the development and many consumers have been waiting for the next generation of models
New Delhi: Despite the covid-19 induced slowdown and the consequent plunge in vehicle sales, some auto manufacturers aren’t shying away from launching new vehicles at higher price points.
Honda Cars India Ltd is scheduled to launch the fifth generation of its best selling product, mid-size sedan City, on 15 July. MG Motor India Pvt Ltd, a new entrant, is also about to launch its multi-utility vehicle, Hector Plus, during the month.
Last week, the country’s second largest vehicle manufacturer, Hyundai Motor India Ltd, also launched a new transmission system known as the Intelligent Manual Transmission with its compact sport utility vehicle, Venue.
On 30 June, Hero MotoCorp Ltd – country’s largest two wheeler manufacturer- started wholesale dispatches of its new premium motorcycle, Xtreme 160, as the company seeks to expand its portfolio of premium motorcycles to compete with competitors like Bajaj Auto Ltd and TVS Motor Company Ltd. Middle-weight premium motorcycle manufacturer, Royal Enfield is also expected to launch new offerings in the second half of the year.
According to Puneet Gupta, associate director, IHS Markit, car manufacturers at present don’t have a choice but to launch models even when sentiments are weak and the dealer channel is not fully charged up.
“Today the question is how long the car manufacturers will keep on waiting? Massive investments have gone into the development and even many consumers have been waiting for the next generation of models like Hyundai Creta, Honda City which are already established brands/models. I think times are uncertain but everybody is choosing to live with Covid -19 rather than bringing life to stand still," added Gupta.
According to rating agency ICRA, due to the repeated extension of lockdown measures and prevailing economic slowdown, sales of passenger vehicles during FY21 will decline in the range of 22-25% compared to 10-15% expected in the first phase of the lockdown.
Most automakers are yet to remove inefficiencies in their supply chain network in order to ramp up production closer to pre-covid-19 levels due to factors like increased infections on shop floors, lack of availability of manpower and lockdown measures in different parts of the country. Delaying of new product launches might hit the OEMs, suppliers and dealers financially.
“Auto makers work on product strategy for atleast three to four years ahead of the launch and it’s difficult to change the plan since suppliers and dealers are also dependent on them. Honda’s dealers depend on the City for a significant part the total sales and a delay would hit them in an already stretched market," added a senior industry executive requesting not to be identified.
Despite the current disruption in sales and production, most automakers have continued with their investments in product planning and development.
Also in the last few years, launching new products has been the only way to ensuri growth in wholesale and retails for OEMs.
“There will be no change or delay whatsoever in any of our planned investments as we work with a five-year vision principle. We may have to expedite our introduction of new models (because of the crisis). Our capacity is sufficient for two years. This crisis has given us the opportunity to work more closely with our Indian vendors and enhance our localization efforts," said Ganesh Mani S., director, manufacturing, Hyundai Motor India, in an interview to Mint in May.