New Delhi: The automobile industry is slowly limping back to life. Pawan Goenka, Managing Director of utility vehicles maker Mahindra & Mahindra (M&M) on Friday said that the automobile demand has bounced back up to 35 percent when compared to pre-covid levels.
Even though May sales figure was just a timid reflection of what the companies reported in the same month last year, it’s still better than big zero seen in April. The factories have been operating 25-30 percent installed capacities after being shut for more than a month due to nationwide lockdown.
According to Goenka, the opening ramp-up has been faster than expected however it will probably taper down again and will take a while to reach 100 percent. “I will wait two more months to see how quickly demand and supply come back and then make a call on how long will it take to reach the demand to pre-covid levels.”
The automobile scion was speaking at the BNEF New Delhi Summit where he pointed, “The demand in rural areas has been picking up well and a positive boost for the sector as it is probably at 70-80 percent. For those companies that are primarily rural, they are doing better than primarily urban India companies.”
The demand in rural areas has been picking up well and a positive boost for the sector as it is probably at 70-80%~
Commenting on the government’s latest push to promote, ‘Make in India’ and move towards an ‘Aatmanirbhar Bharat’, the industry veteran opined that it will require a 5-10 year strategic plan to enable that.
“The problem is we cannot grow manufacturing simply by forcing people to invest because the investment cannot happen because X said so or Y said so. Investment can happen only if the company investing gets a return on investment. That’s a very simple economy”, Goenka said.
“Today when companies are leaving China, we know very well very few are coming to India. We have to ask ourselves, Why and how do we attract investments? It can be done, but with a 5-10 year strategic plan to move in that direction,” he added.
India needs to become cost-competitive in manufacturing and build scale to attract investment. Domestic demand is a very big enabler for scale.
The country should aim to become a producer of products through its own technology rather than outsourcing them. Licensing and tariffs are not long term solutions for promoting local manufacturing. Competitiveness, productivity and technology are the key, underlined Goenka.
Raising his concerns on this aggressive push towards insourcing, M&M MD said, “This whole move towards insourcing is something that I worry about because if every country wants to get into a cocoon and isolate themselves from the rest of the world, we will move back 50-60 years and that’s not what will bring prosperity and growth to the economy.”
“If I start creating redundancy for ‘just in case’, cars will become 15-20 percent more expensive then who will buy them then. OEMs cannot absorb that extra cost obviously as we cannot go to investors and say that you’re going to see lower profitability and lower dividends.”
Countries are looking at it because of Covid-19 and thinking we must protect ourselves just in case, but if we are going to make such changes for once in a 100-year event and increase the cost of the product by 15-20 percent, then it is not going to work, he added.