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MOSL: EXPERT SPEAK (Automobiles)-Worst Navratri/Dussehra festive demand in last five years; PV and 2W retail declined 15-25%,

EXPERT SPEAK (Automobiles): Worst Navratri/Dussehra festive demand in last five years; PV and 2W retail declined 15-25%, CV demand too muted in Oct-18

 

Mr Ashish Kale - President, Federation of Automobile Dealers Association (FADA)

Mr. Ashish H Kale is the newly appointed President of the Federation of Automobile Dealers Associations (FADA) and also the Managing Director of the Nagpur-based Provincial Automobile, which is into the auto dealership business since 1930. Provincial is one of the oldest dealer partners of Mahindra & Mahindra, both for its auto and farm equipment division. Additionally, Mr. Kale is also the President of the Vidarbha Automobile Dealer Association since 2012.

We hosted a conference call with Mr. Ashish Kale (President, FADA) to gauge the on-ground festive demand sentiment in light of the increasing ownership costs due to rising insurance, fuel inflation and interest rates. Key highlights are (a) retail demand during Navaratri/Dussehra festival declined 20-35% in 2Ws and 15-25% in PVs, although customer interest is still intact as represented by healthy inquiries, (b) factors such as fuel inflation, increase in insurance cost and interest, and erratic rains have impacted buying sentiments, (c) demand badly impacted in western and eastern India, while demand in the northern and southern markets were relatively better, (d) expect demand recovery by Diwali festival (60% of festive season volumes) across segments and regions, (e) finance availability across segments to remain normal, except for bottom 5-10% customers where financiers have become risk averse, and (f) healthy demand momentum in CVs has weakened for the first time in Oct’18 across major regions, led by liquidity issues in the system.

 2W and PVs witness worst Navratri festive demand in last five years

• Retail demand during Navratri/Dussehra festival (~40% of festive demand volume) has been the worst in the last five years led by factors such as increase in insurance cost and rising fuel inflation.
• Demand in western regions such as Maharashtra, Gujarat and eastern markets witnessed retail decline of 15-25% in PVs and 20-35% in 2Ws.
• On the other hand, demand from northern and southern markets was better. Demand in rural markets was better than their urban counterparts across regions. PV demand was more impacted in the urban areas compared to rural.
• Tractor demand too remained weak with regions like West India witnessing greater decline.
• Finance availability across segments remains normal, except for bottom 5-10% customer where financiers have become risk-averse.