The expectation of higher sales has led to most automotive OEMs and start-ups line up new vehicle launches and other initiatives for the festive season, which will kick-start with the Ganesh Festival. 

This has also meant that the dealers, as the interface of automotive OEMs, are at the forefront of receiving the bookings of new models their principals have announced, making sure that they don’t fall short of inventory and to make the necessary manpower and capital arrangements for the blip in business. 

The short span of about two or three months, which would also be the third quarter of the current fiscal, would be the time when the auto industry, which witnessed some moderation is sales in the first and second quarter, will make up for the loss or simply create another record for sales on a year-on-year basis. 

While trends are indicative of a considerable shift in two-wheelers – the Honda Shine has become the second-best selling motorcycle by displacing Bajaj Pulsar while Hero Splendor remains the bestselling machine – with ‘premiumisation’ also a factor albeit at the higher end and irrespective of whether it is motorcycles or scooters, the passenger vehicles (PVs) and commercial vehicles (CVs) is where things seem to get a little challenging. 

If the recent news reports in newspapers are to be referred to, the automotive dealers are struggling with a higher-than-normal inventory of over 700,000 units worth INR 730 billion. This is a statistic that has been shared to by Federation of Automobile Dealers Associations (FADA) and is indicative of a slowdown in dealer revenue.  

A recent report ‘The Middle Class Isn't Buying Cars Like It Used to. Here's Why’ in the quint.com has highlighted that the middle-class, bogged down by the lack of confidence in terms of their financial security is not buying cars like it used to and much of those ‘middle-class’ car sales are translating into taxis – radio taxis and of other forms. 

The steep rise in vehicle prices from the time the BS VI emission norms came into force at the height of first Covid-19 pandemic wave has more or less continued through BS VI Stage 2 emission norms. The reason most cited is the rise in input costs. On the other hand, the choice of vehicles in the Indian market is among the least when other automobile markets in the world are looked at. 

As the exorbitant automobile prices led to the postponement in a decision to replace the current aging steed for some more years or to buy the first set of wheels and instead rely on taxis, the sales moderation in categories like PVs has the dealers and manufacturers offering higher discounts over the past few months. 

In a recent statement, the Senior Director of CRISIL Ratings Ltd, mentioned, “The moderation in sales volume growth to six-seven percent in this fiscal (it was eight percent last fiscal) will be led by the PV and CV segments whereas the two-wheeler segments will have a good ride.” 

There are an estimated 34,983 car or PV dealers (FADA represents over 15,000 automobile dealerships having over 30,000 dealership outlets including multiple associations of automobile dealers at the regional, state and city levels representing the entire auto retail industry) in India. 

The slowdown or moderation in automotive sales to the tune of seven to nine percent in the current fiscal is claimed to be substantial in terms of the operating costs, overheads and other factors. 

Last fiscal, the dealer revenue was around 14 percent and accompanied an indication of moderating sales. 

The exorbitant prices of automobiles said to make them ‘unaffordable’ to many middle-class earners (where upon the sales of super luxury cars more than doubled to 1,000 units in 2023 and are expected to increase to 1,200–1,300 units in 2024), PV volume is likely to grow slower at three to five percent on a high base of past three years whereas CV sales would be flattish against a base created by the volume growth in the past two-to-three financial years on the back of demand from the infrastructure sector and e-commerce in particular.  

“Two-wheelers may provide some respite growing by 8-10 percent on a low base backed by recovery in the rural and semi-urban markets following a likely normal monsoon this season,” Makhija articulated. Citing his company’s data, Ravi Bhatia, President and Director, Jato Dynamics said that the rise of products like Honda Shine could be attributed to a savvy product strategy. 

Honda Motorcycles and Scooters India added a 100-cc model to the Shine product portfolio, which earlier contained just one 125 cc motorcycle. The combined sales of the 100-cc version and the 125-cc version turned Shine into a brand that would surpass the Bajaj Pulsar brand in sales performance!

While a large part of the impact would be borne by the OEMs, dealers will also see their operating profitability diminish to a certain extent – down to about three percent or less this year – as against the average of around 3.5 percent seen over the last three years. 

Pointing at the inventory of PV dealers rising above the normal levels to reach 50-55 days’ worth at the ned of last fiscal, Makhija expressed that the sales volume growing at a slower pace of around four percent in the first four months of the current fiscal has led to a rise in dealer inventory by another 15 days. Observing that the inventory is expected to ease a bit in the second half as sales picks up in the festive season amid higher discounts and offers, he added, “Price increases will likely be muted at one to two percent this fiscal, compared with four-five percent last fiscal as dealers offer generous discounts to prevent further pile-up in inventory.”

With the PV inventory expected to be above normal even post the festive season, the increasing demand for premium vehicles in the PV and two-wheeler segments is expected to improve blend realisations, partly supporting overall revenue growth of the dealers. 

While trends like the rising demand for sports utility vehicles and premium motorcycles and scooters augur well for the auto industry, the upcoming regulations such as BS 7 could pose a bigger challenge in terms of costs, the ability to pass them to the buyer and in terms of the after-sales lifecycle costs of the vehicle against high insurance costs and regularly rising toll costs. 

Snehil Shukla, Associate Director, CRISIL Ratings Ltd, said, “Given the rising inventory and the marginal reduction in operating margin led by discounts, credit metrics of dealers are expected to moderate this fiscal. Their interest coverage ratio is expected to moderate to 2.7-2.8 times, compared with 3.0-3.1 times over the past two fiscals, while TOL/TNW is seen at 1.9-2.0 times this fiscal, similar to the past two fiscals.”

Image for representative purpose only

The European Union voted in favour of imposing extra tariffs on China-made EVs by up to 45 percent on 4 October 2024. Threatening a broader trade conflict with a country that has already vowed to protect its companies and is considered as the factory of the world, the move has been criticised by the auto industry and various EU member states.

With growing demand for EU and China resolving their differences through dialogue, the China Council for the Promotion of International Trade is known to express that it is opposed to be the move.

With the technical teams from China and the EU set to resume talks on 7 October 2024, the situation in EU as far as the auto OEMs like Volkswagen Group, Stellantis and BMW Group are concerned, there have been instances of profit warnings.  

Weak demand, rising costs, global competition, trade wars, geopolitical situations, subsidies and company-specific factors are among the reasons being underlined for the profit warnings by European automakers.

Receiving necessary support with 10 members backing the tariffs, 12 abstaining and five members – including Germany – voting against, the European Union, claim sources aware of the development, has been urged by the auto industry to negotiate with China for better terms and conditions rather than to reach the level were a trader war looks eminent.

Present in the China market for a decade or more, many European automakers seem to fear if the tariffs imposed on Chinese EVs will lead to negative consequences in that market for them.

Volkswagen is known to have said that the tariffs are ‘the wrong approach’. There is a need for the two sides to negotiate and find the middle way, mentioned an industry source in Germany in response to the tariffs by EU.

Image courtesy: EmDee (Wikipedia)

The Association of Indian Forging Industry (AIFI), the apex body representing the forging industry in the country has announced its new officer bearers for 2024-26. 

The committee has elected Yash Munot as the new President of AIFI, while S.  Ravishankar was elected as the Vice-President.

Munot, who succeeds Vikas Bajaj, had previously served as Vice-President of AIFI from 2020 to 2024, is now also the youngest to be appointed as the President in the organisation's history. 

He currently serves as the CEO at Varsha Forgings and the Managing Director at KCTR Varsha Automotive. Munot begun his journey in the forging industry in 2005 joining his family business - Varsha Forgings. He was also instrumental in organising major industry events like IFC 2011, Forgetech  India 2016, Asia Forge 2019 and ForgeTech India 2023. He has served as the Western Region Chairman from 2018 to 2020. 

“The forging sector in India is at a pivotal juncture, with tremendous opportunities for innovation and growth. Our focus will be on fostering collaboration within the industry, driving technological advancements and promoting sustainable practices. I am committed to working closely with all stakeholders to ensure that our industry not only thrives domestically but also strengthens and enhances its global footprint. Together, we will build on the strong foundation laid by my predecessors and strive for excellence in every aspect of our work," said Munot.

S Ravishankar added, “I will strive for advancing our industry’s progress and tackling the challenges presented by a rapidly changing global landscape. Our priorities will include boosting competitiveness, driving innovation and equipping our members for future opportunities. I look forward to embracing the exciting prospects ahead and contributing to AIFI’s continued success during this transformative era”

He (Ravishankar) currently serves as the MD at Super Auto Forge and has over 25 years of experience in the auto component manufacturing industry. He is a Manufacturing Engineer with Bachelors degree from Annamalai University and Masters degree from The Ohio State University.

It was in 1997, after working in Detroit for two years, Ravishankar returned to India and joined his family business at Super Auto Forge. He has been instrumental in developing the international business of SAF and led the initiative to establish marketing offices in Detroit in 2001, followed by Belgium in 2011. He has been the Chairman of Indo American Chamber of Commerce for the period 2008 – 2009 – Tamil Nadu Branch and currently serves on the Southern Regional Committee of ACMA since 2021.

Automechanika Frankfurt has cemented its position as the leading international trade fair for the automotive industry with the successful conclusion of Automechanika Frankfurt 2024. 

The slogan of this year’s Automechanika was ‘Driving Transformation’, with topics such as electrification, vehicle connectivity, driver assistance systems and digitalisation taking the centre stage. The fair was held from 10 to 14 September 2024 and saw 4,200 companies from 80 countries displaying their products and solutions for retail, workshops and industry. Spread over an area of 320,000 square metres and 26 hall levels, the event witnessed a total of 108,000 visitors from 172 countries.

Visitors had the chance to see cars with alternative drive systems up close, such as electric, hydrogen, and hybrid models, and even take a ride in the Future Mobility Park and the related expert forum Innovation4Mobility. For even more highlights, there were brand-new event types available, such as an exhilarating rally. Ninety-four percent of attendees, 70 percent of whom were foreign visitors, expressed satisfaction with the event, not just with the trade fair's offerings but also with their aims being met.

An emphasis on sustainable technologies, products and solutions was highlighted at Automechanika this year. Several talks on remanufacturing and circular economy tactics were held on the stage in the new Sustainability Court in Hall 5.0. This year also saw the opening of ‘Ambition’, a dedicated Gen Z section in Hall 3.1 with live acts, panel discussions and succinct, fascinating presentations to pique the interest of young people in the automotive professions. This action was taken as a result of the well-known lack of qualified workers in the automobile sector.

Detlef Braun, Member of the Executive Board of Messe Frankfurt, commented, “Even in the midst of the digital transformation, the industry once again demonstrated its wealth of innovation, providing countless highlights over the course of the five-day event. Together with our exhibitors, we were able to find the right players to present the most important topics – including alternative drive systems, sustainability and the use of AI and robotics in the automotive aftermarket – on the stages and in the exhibition halls. We are also delighted by growing demand from both German and international visitors.”

Michael Johannes, Vice President Mobility & Logistics, Messe Frankfurt, said “Never before has Automechanika in Frankfurt had a supporting programme and range of events like this. Our roster of presentations and practical workshops covered a wide range of topics, including bodywork and paintwork, electric vehicles, commercial vehicles, caravan repair, 3D printing, detailing and much else besides. These were very well received by the professionals, and students and pupils took advantage of the opportunities on offer to find out for themselves what some of the automotive trades and professions are like. One of this year’s new additions was a programme and area devoted especially to Generation Z. We wanted to draw their attention to the professional opportunities that are available in the fascinating world of the automotive industry – and we were very successful.”

Castrol India, a leading lubricant manufacturer, has announced that it has achieved a significant sustainability milestone by increasing recycled content in its high-density polyethylene (HDPE) plastic bottles to 50 percent. 

With this, the company aims to achieve 2,600 metric tonnes of annual recycled plastic usage in its packaging portfolio by 2024.

The step builds upon its previous actions to help make its packaging more sustainable, including the commercialisation of 100 percent recycled bottles for POWER1 range in 2022 and the incorporation of 30 percent recycled content across its entire bottle packaging in 2023.

This latest change aligns seamlessly with Castrol’s global PATH360 strategy, which aims to reduce its plastic footprint by half by 2030.

Sandeep Sangwan, MD, Castrol India said, “We are proud to announce this milestone in our journey towards more sustainable packaging. This achievement is a testament to the hard work and dedication of our team, who have overcome challenges to develop packaging solutions that meet our high standards for quality and aesthetics.”

In addition to packaging, Castrol India aims to have more sustainable manufacturing practices. The company’s production facilities utilise energy-efficient technologies and renewable energy sources to seek to reduce its operational greenhouse gas emissions.