homeauto NewsFrom high inventory & stress in 4 wheeler segment to double digit growth: What’s the way forward for the auto sector?
From high inventory & stress in 4-wheeler segment to double-digit growth: What’s the way forward for the auto sector?
Vinkesh Gulati, former president of FADA, explained that inventory had always been an issue in the dealership space but dealers got lucky post-COVID as the inventories were down. But currently, production is at its height, with all the companies having increased their output. The demand is also good but there's a mismatch.
The auto sector continued to be in focus on January 10, after the December 2023 sales numbers and Bajaj Auto’s buyback. According to the Federation of Automobile Dealers Associations of India (FADA), auto retail sales rose 21% on-year but declined over 30% when compared with the previous month.
In an exclusive interaction with CNBC-TV18, Vinkesh Gulati, former president of FADA, highlighted the stress in the four-wheeler segment as well as the entry level market. “No doubt it has been an awesome calendar year, awesome last three months, quarter three was great but on the side of inventory, cars is where the major stress is.”
Gulati explained that inventory had always been an issue in the dealership space but dealers got lucky post-COVID as the inventories were down. But currently, production is at its epitome with all the companies having increased their output. The demand is also good but the mismatch is again.
“Pre-festive, we were happy to have two months of passenger vehicle inventory, but that was in terms of covering the festive spurt of retail. But as we close the festive season and a very great December, we are still seeing that there has been respite in the inventory, but it's still at a very high level.”
A two-month inventory is not the right inventory to be viable in a market, he said, adding that it’s not good for the customer as well because they get an older manufactured vehicle in such cases.
The two-wheeler segment on the other hand, Gulati highlighted, has shown a very good comeback and rural demand has started supporting. He, however, asserted that it's not back to the original level. “The Bharat is not as Bharat was before, which was supporting the auto retail but it has come back and slowly the entry level market is growing… not to the original level though.”
He expects double-digit growth for the segment this year because of two reasons — slow pace and all OEMs’ electric vehicle products coming in and new products being launched.
Auto industry expert Arun Malhotra, also a former MD of Nissan, meanwhile, said passenger vehicles have done very well last year — 8-9%, but that’s on the top of the 20% growth the previous year.
“To that extent, it's very strong, but going forward since there's such a high base, and it is a record number, the growth will not be more than 5-6% in the next year. But the value of the product is rising because customers are upgrading, new technologies incorporated as production are going up. So that way it is a good year basically in passenger vehicles,” he explained.
Watch the accompanying video for more
(Edited by : Shoma Bhattacharjee)
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