‘Agri output and rural market dynamics to be key in 2024’: Manish Raj Singhania

FADA President Manish Raj Singhania spoke with Autocar Professional about the auto industry outlook for the coming year and why he is optimistic about the prospects for automotive retail in India. 

By Mayank Dhingra calendar 13 Jan 2024 Views icon13198 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp
‘Agri output and rural market dynamics to be key in 2024’: Manish Raj Singhania

Automobile retail, which witnessed a new high in India in 2023 with all vehicle categories showing robust performances, is likely to continue its positive trend as it marches into the New Year. This is despite being on a high base, with the rural market potential particularly emerging as the key enabler to sustain and drive the industry’s growth in CY24. Manish Raj Singhania, President, Federation of Automobile Dealers Associations (FADA) shares his optimism stemming from the country’s strong macroeconomics.

How would you describe CY23 from an automotive retail perspective?

Automotive retail has been somewhat challenging in India over the last couple of years, as the industry had to go through post-Covid-19 recovery, and the market had to evolve very fast. While we saw a narrative of growth, innovation, and strategic adaptation for the industry, we had predicted a single-digit growth for the entire automotive segment owing to a strong base, and that is what we have realised in 2023. We had predicted a single-digit growth for CVs — the true barometers of the sector, as well as the overall industry.

We have achieved our estimates, and the CV segment has benefited from government’s focus on infrastructure development, and the overall economic revival of the country, which have together given a strong fillip to CV sales in CY23, despite the establishment of higher price points for these products. With strong economic projections for the country in the future, CVs will continue their strong march.

While the passenger vehicle (PV) segment has been on an upward trajectory, creating and breaking new sales records month after month, the only concern is the high paid-up stock level, which currently stands at 60-64 days at dealerships across India. We are witnessing heavy discounting in every car segment, particularly the entry-level sedans, hatchbacks, and even entry-level SUVs. It is a huge challenge, and requires rationalisation from OEMs. On the other hand, SUVs, which had a 23 percent penetration in overall PV volumes in 2018, hit the 50 percent mark in 2023 — clearly showing the changing consumer preference towards this body style.

OEMs are realigning themselves to the customer needs and demands, and offering a plethora of options in terms of more products and variants. Customer-centricity, which took a major hit during the supply constraints in the peak of the pandemic in 2020-21, improved by leaps and bounds in CY23, and we saw the foray of technology to ensure consumer delight. While waiting periods are already down to two to six months and are only limited to a few car models, we expect the supply chain to further improve in CY24 to ensure lower waiting periods.

Two-wheeler segment, which initially faced demand challenges, finally saw the rural market responding well during the festive season. However, these are only early signs, and we need to witness consistent performance over a few months to be certain that the rural economy is out of the woods. Though we have been better off in CY23 than CY22, we would require at least two consecutive years of proper rainfall for a complete turnaround of the rural economy.

In the three-wheeler segment, electric models saw over a 50 percent penetration in the market, and while there was a temporary blip with respect to the FAME subsidy, the prices eventually settled down. CY23 was especially challenging for EVs, particularly from a supply chain perspective, and we were also expecting more OEMs to enter the space, which did not happen. Tractors too created a new high and registered a 13 percent growth in April-October 2023, and we expect further growth with the recovery of the rural economy. The tractor segment has nurtured more employment in rural India, especially after Covid-19, and while farming is a short-term use case of tractors, they continue to act as a prominent source of employment, with several infrastructure applications throughout the year.

What are your thoughts on electric vehicle (EV) incentives by virtue of the FAME subsidy getting further extended?

Any kind of incentive acts as a catalyst to kickstart and enables the offtake of a new technology. We do not think the government will increase the subsidy amount with the FAME III scheme that is likely next year, as they have already established electric vehicle (EV) penetration in the market, despite the country losing the advantage to leverage the FAME scheme to its fullest during the two years of the peak of Covid-19.

However, while the initial push and momentum required for EV adoption has been created, the government must now focus on strengthening the charging infrastructure, and particularly setting up battery swapping centres. Battery swapping in 2w- and 3ws would automatically make EVs affordable and we will see a phenomenal change happening with the swapping concept coming to life. That will be a revolution that India must focus on if we are committed to the EV transformation.

How do you see the BNCAP regime and AC cabins in trucks impacting vehicle sales going forward?

With an aware and tech-savvy customer, safety is becoming important for the Indian car buyer, and is clearly proof of the sales of the fully-equipped higher trims of cars and SUVs.

So, customers have developed an inclination towards technologically-advanced and safer vehicles, and vehicles complying with the standards set by the government will be better accepted in the market. Several OEMs are already testing their vehicles against the BNCAP norms that conform to global crash test standards. We witness many road deaths in our country, and given the rapid advancements in road infrastructure, we must have safer vehicles on the roads.

Regarding AC cabins in trucks, the regulation that kicks in from October 1, 2025 is a welcome move and has been applauded by the industry. It was a major miss so far, especially in long-haul trucks, as the cost of the equipment is miniscule compared to the gains in driver productivity and safety. From an industry standpoint, it will go a long way in improving CV driver availability, their safety, as well as productivity, thereby contributing to the businesses of fleet operators, and the Indian economy. I do not think that there will be a lot of pre-buying of trucks next year before air-conditioned cabins are made mandatory in CY25, and I would rather expect OEMs to start manufacturing such trucks on an immediate basis, as the AC cabins would receive a very high acceptance from fleet operators.

What is your outlook on automotive retail for CY24?

We expect the PV segment to grow at a low-single digit rate next year on account of a high base, and still ensure record numbers. The two-wheeler segment, on the other hand, is likely to clock a high-single-digit growth rate, given the current buyer activity in the market, and the overall expectations of the rural sentiments significantly improving in the future.

We are also witnessing new products getting introduced in the two-wheeler space, creating excitement among consumers. While the two-wheeler category has matured in urban centres, it is rural India which will now contribute to the growth of the segment. It is here when government schemes like the MNREGA, and higher crop MSPs will support the rural economy.

However, with 2ws being critical elements of mobility in rural India, we would strongly advocate that the GST on entry-level 2ws must be brought down from 28 percent to 18 percent to ensure their inclusion in the country’s economic growth. For CVs, we continue to expect a robust double-digit growth rate in CY24, and expect the three-wheelers, which have been clocking 1,00,000 vehicles every month, to perform similarly. The foray of e-three-wheelers has eliminated the need for permits and these vehicles are now playing a crucial role in the last-mile mobility segment and enabling the mobility of masses in India.

With robust economic growth projections, the Indian automobile industry is well placed to continue witnessing strong growth in CY24. However, a lot will depend on the agricultural output and rural market dynamics. We still have a huge potential left, particularly for the rural market, which is expected to start contributing towards the growth of the auto industry in the next two years. That market is untapped right now, but offers a strong potential for the industry, and it will eventually respond with the complete revival of the rural economy.

RELATED ARTICLES
'We are willing to disrupt the established insurance norms': Shanai Ghosh, CEO & MD, Zuno General Insurance

auther Autocar Pro News Desk calendar25 Feb 2024

For digital-first Zuno General Insurance, 2023 was a year of significant milestones and impressive growth, marked by a s...

'Indian designers will understand our market:' Pratap Bose

auther Autocar Pro News Desk calendar11 Jan 2024

Pratap Bose, Chief Design and Creative Officer of M&M Auto and Farm Sector discusses the role of creativity, technology,...

‘Born Electric will create categories where none existed:’ Rajesh Jejurikar 

auther Autocar Pro News Desk calendar09 Jan 2024

M&M’s Rajesh Jejurikar talks about how the company intends to use its lead in ICE to leapfrog into the EV space, using d...