After several original equipment manufacturers (OEMs) posted record sales during the festive period in October, things are not only back to where they were, but might actually have become worse.
“When everyone achieves record sales overnight, you have to be alert that you may have preponed your future sales. People who would have otherwise bought in November and December, some of them have certainly preponed purchases. That explains why most of us had historic sales in October,” explained Rajiv Bajaj, managing director of Bajaj Auto to CNBC-TV18.
The entire duration of the festive season between Navratri and Diwali fell in the month of October this year, which is rare, considering the festive season usually spills over two months.
“Oct to Oct last year, in our case, it would seem retail was higher by 36 percent, but that would be misleading as you say (considering the festive period last year was positioned differently). Taking the period from the start of the festive season to its end, it is close to about 24 percent. Even if this 24 percent has elements of postponement etc, it is significant considering the negative 10 percent trend in preceding months.” Bajaj said, adding that festive buying resulted from a combination of positive festive sentiment, strong promotions by manufacturers and postponed buying.
Back To Slowdown
Now here’s the dampener. Despite the festive relief, Bajaj said, “Fortunately all of us had written down inventory, so primary billing may still be at a healthy rate, but there is absolutely nothing to suggest that the difficulty, whatever it was, has eased after the festive season.
“November sales are quite slow. As compared to normal sales, not festive sales, November sales are, in recent days, at half that level” he said, adding that 15 days, however, may be too early to judge.
How is the financial year likely to end for the auto sector?
“In the last quarter of this financial year, from Jan-March, there will be two factors at play, largely. One is the base effect of last year will catch up. That's positive - it will make it look like growth is back. The second is BSVI is going to come. Now, where will the penny fall ultimately? I suspect it will be more negative than positive” Bajaj told CNBC-TV18.
“If there is no change in GST, Rs 8,000-Rs10,000 price increase will have a very significant dampening effect on the market. So definitely this (thw slowdown)will continue for a little longer. We can look at what happened when insurance costs went up, we can see what happened recently when 150cc bikes had to have ABS and there was an Rs 8-10,000 increase. The switch to BSVI will also have that kind of impact”, he added.
On the macro front, too, things aren’t looking up yet.
“Like cost pressures, liquidity is a very tangible area. At least as far as our dealers are concerned, haven't seen anything to suggest that things are any easier. As of now, liquidity is still a problem for the trade.” Bajaj said.
Bajaj Auto, however, has half the problem that the competition does, according to Rajiv Bajaj. Bajaj Auto exports about 40 percent of the products it manufactures.“This is where our strategy of being a global player helps. There will always be one or more troubled markets in the world. So this problem weighs twice as heavily on our competition. We have half the problem our competition does.”