Stagflation concerns

by Murali Gopalan 23 Mar 2022


The war in Ukraine could have serious implications for India’s automotive industry which is not in the best of shape anyway.

Quite predictably, oil prices have skyrocketed and the wild fluctuations everyday only reflect the turmoil that is being witnessed across the world. Further, supplies of precious metals used in electric vehicles could be derailed too and there are fears that the chip shortage could now extend beyond September.

To top it all, food inflation is already a reality to reckon with and for those households whose daily expenditure has shot up as a result, the last thing they will want is a bike or car. These are very difficult times both for manufacturers and consumers which will only fuel stagflation, a time when prices go through the roof even while economic growth has stagnated and unemployment levels rise alarmingly.

In a poor country like India, this can have severe consequences for those whose livelihoods were already ravaged by the pandemic. Automakers will, of course, be hoping that demand picks up sooner than later but a lot will depend on how quickly the Ukrainian crisis is defused.

Right now, Russia has been ostracised by practically the whole world while there is no telling what China intends to do. Observers reckon that it will quietly support Russia while taking a vice-like grip over Asia. For India, it will be akin to being between a rock and hard place with challenges plenty both on the economic and political front.

With the BJP reporting a near clean sweep in the assembly elections, it is quite logical to assume that the party will stage an encore during the Lok Sabha elections in 2024. From industry’s point of view, this will mean continuity in policy which is welcome since abrupt changes only make planning difficult. It is quite reasonable to expect the electrification trend to gain even more momentum which means there will be rapid changes in the two and three-wheeler landscape during the course of this decade.

It is quite evident that CEOs are now gearing up for the challenge and, in fact, relishing the prospects of pushing the envelope even further. Be it traditional players or the flurry of startups, the energy levels within the automotive ecosystem are quite staggering when it comes to electrification.

It is also interesting to see some unusual partnerships evolving as a result especially when it means a convergence of the old and new worlds. Our cover story on Yulu examines this subject in great detail where its CEO, Amit Gupta, explains why the partnership with an established player like Bajaj Auto makes so much sense. Finally, it boils down to pooling in competencies and learning from each other in the process.

This is why Hero MotoCorp is upbeat about its prospects with Ather while Mahindra & Mahindra has teamed up with Hero Electric to take the story several notches higher. The global car industry is already seeing such partnerships happen at a faster pace right from Toyota-Suzuki to Ford-Volkswagen since investments for electrification will be high and two heads are, therefore, better than one.

The fortnight that went by also saw Stellantis detail out a roadmap for this decade where India got a fleeting mention in terms of powertrain capabilities and market expansion. For now, this merged entity of Groupe PSA and Fiat Chrysler Automobiles has two plants for the Citroen and Jeep brands where the real growth boom will take some time to happen.

Meanwhile, the powertrain venture is doing well while the joint R&D competencies of PSA and FCA in Chennai will be leveraged for global projects. Stellantis is ready to play the waiting game in growing its presence while being quick to acknowledge India’s competencies as a global hub. It is a balancing act that most MNCs are resorting to in a market dominated by Maruti Suzuki and Hyundai


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