Choices drive auto demand; launches scant: Hormazd Sorabjee, Autocar India

There is a report that suggests a Rs 12 gap between what the fuel prices should be at a retail level and what they are right now, if the current jump in crude is to be taken into consideration. It is very unlikely that any government will increase fuel prices by Rs 12 at one go. It might give subsidies but that remains to be seen. Do you think that fuel prices edging up will be the big dampener on demand because we have been paying Rs 100-plus for a litre of petrol for sometime now? Also the fact remains that the demand has not come back to where it was.

Higher fuel prices are going to hit demand quite a bit. Some people are even talking about Rs 130-140 per litre, which makes running a vehicle almost unaffordable for a large section of motorists, even two wheelers.Definitely, it is going to be a big hit.

Also there is a transition, which has started lately, of going electric. What we are seeing is what I call a “very thinning of the model range” at manufacturer levels. If you take Ford for example, from about 7,000-8,000 car units a month, they have just gone in one shot that cannot be replaced.

We have got certain models within manufacturing, which are being discontinued because of regulations be it emissions or CAFÉ. These issues are making it difficult for internal combustion engines to be compliant and it is cheaper for manufacturers to knock certain variants out of their mix and put that investment money on just a few key models.

Net-net, consumers have less choice. You are seeing that in the bottom end of the market, which is really controlled by Maruti Suzuki. The lower end is very weak, which reflects in what is happening in the two-wheeler segment. What is really holding up are the SUVs but I do not think it is enough to compensate for the losses we are seeing.

We were doing our ‘Car of the Year’ judging the year before and we had about 28 cars to select the winner. This year we had just 19 new models. That tells you that even the launch of models has become far and few between. It is a choice that really drives the market. I do not think we have much choice. In fact, if anything, choice is becoming less.

Do you think that post Covid, the requirement for a bubble like demand will continue? Will any kind of increase in prices be absorbed? Do you think that the current situation is going to hasten the transition to EVs?
Price hikes do have an impact. That is why people are hanging on to their cars longer. It is also having an impact on the pre-owned car segment, where there is not enough supply.

It just does not make sense to sell your car because you will get a car that is more expensive and something you will have to wait for ages to receive delivery. WIth fewer model choices, it is not a great time to be a car buyer. This is no longer the golden age. The cars have become more expensive, more complex and yes it does hasten the need for EVs. But I do not think the consumer has a choice. We know what the EV roadmap is for most of the manufacturers but we do not see any big activity happening. The first wave will not come before 2024-2025 and that is going to be led by Maruti Suzuki and Toyota. They are coming with a first year sale of 1,25,000 units including exports.

So it does hasten the need, but you just cannot throw a switch and expect it to happen. It does take time and automakers who started yesterday will still take a couple of years to get into the market.

It has actually caught the industry flat footed. No one thought that petrol prices would shoot up so much. Tata Motors in that sense is best poised to take advantage of this. The more the petrol prices shoot up it benefits companies like Tata Motors.