Urban India is still seeing demand and enquiries and that any hike in car prices are likely to hit demand there in the near-future, given the long waiting list for deliveries, said Vinkesh Gulati, President at FADA. In an interview to Tamanna Inamdar, Gulati said the major distress is being seen where the Bharat is i.e. rural India. Edited excerpts:
The monthly numbers that FADA has put out suggests the tractor segment witnessed the biggest hit. THe FADA outlook for the sector is now negative from neutral due to the Russia-Ukraine conflict. Can you explain to us why?
The overall situation is not good and the numbers replicate that. We were frankly expecting things to ease. If you see the negative sales percentage growth is improving. In January, the degrowth was 15 per cent, which has improved to 10 per cent. We were expecting to be back to normal slowly and steadily.
The monthly numbers that FADA has put out suggests the tractor segment witnessed the biggest hit. THe FADA outlook for the sector is now negative from neutral due to the Russia-Ukraine conflict. Can you explain to us why?
The overall situation is not good and the numbers replicate that. We were frankly expecting things to ease. If you see the negative sales percentage growth is improving. In January, the degrowth was 15 per cent, which has improved to 10 per cent. We were expecting to be back to normal slowly and steadily.
But given the Russia-Ukraine conflict and the increase in crude oil prices,our outlook has changed from ‘neutral’ to ‘negative’. We expect semiconductor shortages increasing with this conflict. We also see some commodity problems coming in and obviously. As far as crude prices are concerned, we have been lucky a bit because of elections.
But election results on March 10, and we see a big jump in fuel prices, given crude is trading at $114 a barrel level. I hope any hike is staggered and not a one-day spike. Obviously, it will affect the market on the ground. Our report clearly shows that the entry level segment is a major problem area, be it two-wheelers or entry level cars.
The lower middle class or the rural India or the tier four, tier-three towns are where major distress is. Any jump in fuel prices will hurt the industry. That is why the outlook has changed to negative.
OEMs who we have been speaking to have already hinted and are pretty clear that beyond a point, there will be more price hikes. There is really no other way and customers will have to pay. Is that going to be a major dampener in your view?
The passenger vehicle segment is already going through a shortage. We are seeing a lot of waiting periods and every company has at least two or three models, which are seeing waiting periods of more than six months.
The demand is good and the enquiries still continue. I do not see any effect of price increase in the car segment at least for a six months period. I do not know what will happen post that. Any price increase, if it affects the two wheeler, that is where already the distress is at the highest level.
We were averaging 14 lakh plus units of two-wheelers per month pre-Covid days. Today, that average has come to around 10 or 11 lakh units. That is where the major distress level is.
If the two wheelers are not selling, it means the base economy of our country or India’s economy is clearly not in the right spirit. We normally are very buoyant on our rural economy and for the past four months, we have seen that is where the major distress is. Urban India is still seeing demand and enquiries. But the major distress is happening where the Bharat is, where the rural India is.
Any price increase happening in the two-wheeler segment will really hurt the sentiment. The car segment we will be able to cover up till the time the supply chain gap is there.
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