To understand the current state of automobile market in India,
we met numerous people in the supply chain, users and prospective buyers over
the last few days. Both rural and urban markets were covered in 4 states - UP,
Haryana, Punjab and Delhi.
The key takeaways from my discussions could be noted as follows:
(a) A sizable number of
existing 4W passenger vehicle (4WPV) users has postponed their replacement
decision in past one year. Most of the users who have replaced their vehicles
in past one year have up traded. SUV still remains a preference in rural area.
(b) Almost 65% prospective
4WPV buyers (mostly first time buyers) of entry level vehicles have postponed
their decision to buy. Most of these prospective buyers are not likely to buy
in next 6 months also. The postponement of decision is due to a variety of
decision - economic uncertainty (job, profession or business), poor
availability of credit, buying vehicle decision linked to buying or shifting
house which has got postponed, wait for new model, were some of the common
reasons.
(c) Only 20% of the
prospective 4WPV buyers of higher variants have postponed their buying
decision. Most of these prospective buyers plan to buy a new vehicle in next 6
months. Most prominent reason for their decision postponement was cited as
waiting for new model.
(d) Less than 30% existing
and prospective 4WPV users were aware of the impending changeover to BSVI
emission norms.
(e) Fuel price does not
appear to be a key factor in decision making for anyone. However, insurance
cost is a matter of concern, though not a deterrent.
(f) The situation in 2W
passenger vehicle (2WPV) is quite the opposite. Here a small minority of the
existing users have postponed the replacement decision; while almost 60% of
prospective buyers have postponed their buying decision. Economic uncertainty
and poor credit availability are cited as the primary factors in postponement
decision. Nonetheless, most of the existing users seeking replacement and
prospective buyers have expressed their intention to buy a new 2WPV in next
6-12months. Only 18% of 2WPV users indicated that they may up trade to a 4WPV
in next 12 months.
(g) All the local motor
repair workshops reported material decline in business in past 12 months.
(h) All dealers of second
hand passenger motor vehicles indicated 30-40% decline in transactions over
past 12 months. Most local dealers are yet not worried about the impact of the
growing presence of large national players in this trade.
(i) The spare parts
dealers reported huge jump in sale of unbranded and spurious parts post GST.
Almost all dealers reported 25-30% fall in revenue over past 12 months. It is
felt that there may be 20-25% elimination in this space before the business
normalizes in next 6-9months.
(j) The dealers of both
4WPV and 2WPV indicated sizable rundown in inventory over past 3months.
However, only a few of them indicated intentions to rebuild the inventory in
next 3 months. Almost all of them highlighted decline in NBFC finance to be one
reason for poor demand. About 20% of these dealers indicated intentions of
quitting the business over next 24months.
For commercial vehicles and tractors the sample we got was
meaningless.
We intend to cover the states in west and south over next three
months for taking a view about investing in auto sector stocks.
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