Automakers hopeful that Auto Expo 2016 would reignite demand for cars

Auto Expo 2016, which is going to be world’s biggest show of its kind, would see as many as 80 products being unveiled. This has sent hopes to the hearts of automobile manufacturers, who look forward to the new models spurring growth as the policy road map remains dicey.

Even though India's passenger vehicle industry ended on a high note last year, registering a growth of 7.86% to 2.77 million units, and was the best to have happened in four years, the recovery was not spread evenly, as solid performances by market leader Maruti Suzuki and Korean rival Hyundai Motor took most of the part.

Also, with authorities targeting the auto industry for increasing air pollution in cities, manufacturers are not too hopeful about the policies that might sprout up in the near future.

"The industry has not made a turnaround. In 2015, the industry grew by 7-odd per cent. If you take out the top two companies, volumes have declined over the previous year," RC Bhargava, chairman of Maruti Suzuki, told ET. "All the product unveilings lined up during the Auto Expo show that every company is trying to grow. Hopefully, 2016 should be a little better."

Market leaders Maruti Suzuki and Hyundai India sold nearly 1.77 million units between them in 2015, giving the rest of the players just 1.0 million together. Amongst these, Honda Motor and Renault were among the few that posted growth in numbers in the past year.

"Industry has not turned a corner yet. Volumes have grown but if you look at the dynamics; discount levels too are huge. What the passenger car industry requires is positive consumer sentiment, that is still to happen," Jnaneswar Sen, senior vice president for sales & marketing at Honda Cars India, told ET.

In this case, over pollution has come as a challenge to the industry. The government has mandated that the automobile industry needs to implement BS VI emission rules by 2020. As per industry experts, an estimate investment of Rs 50,000-80,000 crore is needed to update technology for this, leading to a consequent increase in car prices by Rs 50,000-100,000. This in turn would dampen the demand of cars.

"The concern over pollution is quite valid," said Bhargava. "But pollution in India is very different from pollution in Europe and the United States. The IIT-Kanpur study shows that one of the major causes of pollution in India is dust. Cars contribute 2%. The odd-even rule was implemented apparently to curb rising pollution levels, but how does keeping off roads petrol cars, which do not add to pollution levels help."
Some executives propose that phasing out of old vehicles to boost the industry.

"We need to take a strong decision to unclog roads by phasing out old, ageing cars which are less fuel-efficient polluting and do not meet safety requirements," said Renault India Chief Executive Sumit Sawhney.

"We need a 360-degree approach to address pollution concerns, right now the focus is only on the transport sector." The main challenge faced by the automotive market in India has been instable policies, Andreas Lauermann, managing director of Volkswagen India, told ET. "This has a cascading effect on the entire industry. Once there is a stable framework in the country, the automotive industry might even see stronger growth," he added.

Auto Expo would see several models, including upgrades, debuting, which indicates the importance of India as a growth market for the industry, even amongst all these challenges.

"Global demographics are working against developed markets such as Europe and the United States and to the benefit of India," said VG Ramakrishnan, managing director of consultancy firm Avanteum Advisors.

"Also, given the level of vehicle penetration here (18 per 1,000 people), India has the potential to sustain this growth over the next 20-30 years ... no OEM (original equipment maker) can afford to not be here and we will see that show of strength at the auto show."

It is important for the economy that the automobile industry be revived, as it accounts for 6.5-7% of GDP and 48% of the manufacturing GDP.

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