Auto industry eyes double digit sales growth in 2014-15

Auto sales are now back on track thanks to positive sentiment generated after Modi government took over, excise duty cuts and some other factors. “Auto industry had challenging times in the last two years with falling sales and economic slowdown. However, car sales registered double digit growth in the past three months on account of positive sentiment backed by strong economic fundamentals. We expect the industry to clock 10 to 15 per cent sales growth this fiscal,” T Sarangarajan, Vice President (Production), Hyundai Motor India, tells
P Madhusudhan Reddy in an exclusive interview

What kind of sales growth you expect auto industry to clock this year?
Automobile industry passed through challenging times in last two years. But after new government assumed charge in the country, positive sentiment returned to the market. It was clearly visible in the past three months as industry-wide sales registered double digit growth during that period.

So, we expect the industry to clock 10 to 15 per cent sales growth in the current fiscal year. Apart from the regime change, the last fiscal’s low base will also help the sector to log in decent growth as compared with sales contraction last year.

Many analysts say the sales growth in the past three months was merely because of positive sentiment and there was no real economic growth. What is your take on it?
We are of the firm opinion that the positive sentiment is also backed by strong fundamentals. India’s CAD (current account deficit) narrowed significantly, currency is stable, exports are on the rise, forex reserves have crossed $300 billion and investments are pouring in. So, it is obvious from these facts that fundamentals are strong. For an economy to grow, both fundamentals and sentiment should be in good stead. So, we can easily expect double digit growth in automobile sector during the current fiscal year. For the country’s GDP to grow in double digits, we may have to wait for some more time.

Then, how many units Hyundai targets to sell this year?
Hyundai India has sold over 3.95 lakh vehicles last year. With positive sentiment back in the market, the company expects total sales to be over and above 4.1 lakh units this year. Given the overwhelming response for Hyundai Elite i20 hatchback, we may exceed even our expectations in total sales. Besides, our exports are likely to be around 2 lakh units as compared with 2.3 lakh units. We intend to reduce the exports in order to meet the increasing demand from the domestic market.

How much the rural markets are contributing to your overall sales?
We are getting good response from rural areas in the recent times. About 10 per cent of our sales came from rural markets last year and we are aiming fifteen per cent this year. We already touched 15 per cent so far this year and will maintain the momentum till the end. The increase in rural sales can be attributed to our unique concept of Rural Sales Outlets (RSOs). Till date, Hyundai India has opened over 300 RSOs across India, taking the total number of touch points to around 1,000. Hyundai allowed the existing dealers to open RSOs in their areas to tap demand from the Tier III and IV locations.

In Andhra Pradesh and Telangana too, we have 25 RSOs in addition to 25 full-fledged dealerships. That’s the reason why we have touch points even in the places like Siddipet and Sangareddy. RSOs are set up on a space measuring around 800 sft. So, it is a cost-effective way to be within the reach of our customers.

How are the sales of petrol and diesel models now?
Unlike a few months ago, there is a visible shift towards petrol models now. This is so because central government has made it clear that it will gradually withdraw subsidy on diesel. Last year, diesel and petrol versions had equal share in the market across the country. Now, petrol models account for 55 to 60 per cent of the sales while the diesel models make up the rest. Similarly, diesel models had accounted for 65 per cent sales in AP and Tamil Nadu last year. However, their contribution came down to 50 per cent now.

At present, Hyundai is not present in compact SUV segment which is doing pretty well in the country. Do you have any plans to launch one?
We are already present in premium SUV segment through Hyundai Santa Fe which is doing extremely well. The Santa Fe is the leader in the segment and has a waiting period of nearly three months.

Hyundai is committed to India and always tries to present in every segment. Our company has already announced its plans to launch two new models every year. We will definitely launch a compact SUV, but we don’t know when that will
happen.

What does your R&D centre in Hyderabad do?
Most of our Indian models are developed there. It also contributes to Hyundai’s global research & development (R&D) activity. Our centre is first such facility outside South Korea.

Hyundai has set up the facility in India because it has strong network and market share in the country. Though China is the biggest market for Hyundai outside Korea, India makes a significant contribution of over 15 per cent to the company’s global sales.