KN GUPTA, Joint Managing Director, Maclite (Super Nova Autolite Pvt Ltd) &
MD, SKNG Business Solutions Pvt Ltd reveals in an interview with Motown India
Editor Roy P. Tharyan, that the auto industry in
India is today witnessing the worst time ever in its history because of the
prevailing pandemic conditions in the country. But despite the tough times, he
feels the industry will survive and so will small players in the tier 2 and 3
Q1). The Indian auto industry has seen the worst during the
recent lockdown as a result of the prevailing COVID-19 pandemic. Do you think
the auto industry, which includes the OEMs, component makers - the tier 1, 2
and 3 players will recover from this fiasco? How long will it take?
I think this is the worst time the Indian auto industry has ever witnessed. It is very difficult to predict when the auto
industry will come out of this fiasco, though I am sure it will come out some
day. It may take two years or maybe more, depending on the segment it is in,
whether it is an OEM, a Tier 1, Tier 2 or any other player. It may take two
years or so to come to pre-COVID stage scenario. I feel the OEMs will take the
longest time to recover, the reason being that they have to sell their products
in the market and customer sentiments are very negative at the moment.
Everybody wants to preserve whatever money they have. People who were used to
having several cars are now not willing to spend on buying a new car,
especially luxury cars. Even when it comes to non-luxury cars, families that
were used to keeping two or three cars in their homes, will now think twice
before buying new cars. During COVID-19 lockdown many of them realised that
having so many cars meant nothing, all they did was to spend money on the
maintenance of their cars.
are the customers for passenger cars? They include individuals, corporate and
those from the travel and tourism industry. A big chunk of cars are sold to the
travel and tourism industry. This
industry has been hit badly because of the pandemic. As for the corporate, many
of them are thinking of reducing cost. And with many corporates encouraging
their employees to work from home, the demand for cars has been curtailed
drastically. I know of companies that have closed their offices completely and
have asked their employees to work only from home.
the auto industry, I feel the segments catering to two-wheelers, agriculture,
infrastructure and defence could see some demand. Those used to travelling by
public transport may now go in for travelling by two-wheelers.
the auto industry, I feel the tier 3 players would be the ones who would be
severely affected during this pandemic time. I know of several tier 3 players
who have shut shop in the country. As for the tier 2 players, they are in a
slightly better position. There is even a possibility of tier 2 and tier 3
players merging. For tier 2 and 3 to survive, they need to adopt alternative
technologies and move into alternative businesses.
to tier 1 players, they will survive because the spare parts sale is
improving. Demand in the aftermarket
segment is improving. But many tier 1 players are not able to the meet the increased
demand from the aftermarket because labour is not available. How come there is
an aftermarket demand? Since the markets were closed for the last few months,
and with the ongoing monsoon playing havoc with vehicles, the demand for
replacement parts has risen. Also one should remember the fact that tier 1
players are a lot more financially stable than other players down the line.
They have a lot of surplus funds. Many of them have already started
diversifying into non-automotive businesses. But having said that, the overall
automotive business will not be like what it was before, at least for the time
being. The biggest challenge today is
manpower. People are scared to go to factories to work.
Q2). Is it a dawn of a new order in the auto industry? Will
digital technology play a very important role in the coming years when it comes
to sales and promotion of products? What about physical meetings with clients
and a touch and feel atmosphere, has it disappeared forever?
technology in sales and marketing is still very far away from being successful
in India. Indians at large are still in the habit of physically visiting
showrooms to see, touch and feel a vehicle before purchasing it. Then there are
things like negotiating with a dealer before buying a product. These are some
things Indians cannot do without. I have yet to come across a person who has
bought a car or a two-wheeler or a tractor online, not at least without once
visiting the showroom. In the rural areas it’s even more difficult for
technology to play a critical role because of the lack of basic
infrastructure. I don’t see a future in
digital marketing immediately when it comes to sale of vehicles.
am not denying that online has a role to play. People are looking at vehicles
online before purchasing a vehicle either on their laptops or computers. But
that is all. But for every car, big or small, the final deal has to be done at
the showroom. Also, the final negotiation, whether one is a CEO or an ordinary
person, is done at the showroom. It could be negotiating for a free floor mat
or some such thing, but this negotiation is done in the real world.
Q3). Since the entire globe is connected through trade and
commerce, do you think the Indian auto industry will bear the consequences of
this in terms of exports, technology transfer, tie-ups, etc?
The Indian auto industry depends a lot on imports of critical components,
tooling, technology, etc. The government
is saying that it is going to ban Chinese products. All that is fine, these are
long drawn projects. Two or three years may be too short a time frame for this.
Earlier, when tools used to get damaged, we used to get technicians from South
Korea, Taiwan, Japan and China, among other places. But today when a tool needs
to be repaired, the technicians from abroad are not willing to come. Every time it does not make sense to connect
on internet and get a solution. People
have to physically come and do the job.
to technology, the Indian auto industry depends a lot on foreign countries for
the design and development of their products. In some cases, we also depend on
critical components too. Many Indian companies have been localizing their
products to a great extent.
because of the pandemic, vehicle exports may be affected, though component
exports may increase a bit. As for tie ups with foreign companies, it is going
to be a very difficult proposition now, with no major physical contact and negotiation. One should not forget there is a fear
psychosis prevailing among people. Today no one is interested to go to any
foreign country to conduct a meeting or anything else. He or she would rather
quit the job rather than travel abroad for a meeting. Even if I were to tell a
person in Delhi to go to Chennai for a company related matter, he is scared.
COVID-19 has put so much fear in the minds of the people. Two years or so would
be too short a time to dispel this fear.