Delhi Auto Expo hopes to spur revival but launches alone won't do the trick

Indian vehicle makers are pinning all their hopes on the Auto Expo beginning early next month for revival. Never mind that the Expo itself has been divided for the first time in two shows miles away from each other, footfalls are expected to be much lower than in the previous Expo in 2012 and number of participants from the component makers’ side has dropped significantly.

The vehicle and component shows will be held at two separate venues this time due to space constraints, total expected footfalls at both venues are 5.4 lakh versus over 7 lakh in 2012 and only 1100 component makers are participating compared to 1500 last time. The number of vehicle makers is up though, from 45 to 55.

[caption id=“attachment_52707” align=“alignnone” width=“380”] Representational Image[/caption]

Expo organisers say lack of space at Pragati Maidan (the usual Expo venue) forced them to shift the vehicle exhibition to Greater Noida this time and that ideally, they would have liked to put up a combined show as always. Touted as one of the world’s largest and also one of the most expensive auto shows, the Delhi Auto Expo should be the ideal launch pad for all new launches and global unveilings. But perhaps new vehicles alone may be insufficient to revive sentiment in a moribund market.

Though $4.4 billion investment has been made in the last two years in adding vehicle manufacturing capacities in India, the world’s sixth biggest automobile market, industry veterans sheepishly admit that at least a third of vehicle manufacturing facilities are currently lying idle. Ditto for component makers.

So will an auto show actually revive sales? President of the Society of Indian Automotive Manufacturers Vikram Kirloskar said today that there are 26 global vehicle launches lined up at the Expo, which begins from February 7. “We hope the Expo will help revive sentiment and industry growth,” he said. But there is no show stopper, a la the Tata Nano some years back. No one single four wheeler which is the obvious crow puller.

Idling manufacturing plants, forced holidays for shopfloor workers, mounting inventories - Indian car makers have not seen worse times than this in a long, long time. Over the last 18 months, there were only five months when even car production increased; for 13 of these 18 months production also had to be curtailed as sales declined. The earlier euphoria over two wheeler sales spurt is also subsiding. Now, as rural demand tapers, sales growth of bikes and scooters is already down to low single digits and unless buying in the hinterland picks up in the next few months after the harvest season, even two wheelers will be in a sorry state. Big trucks and buses are already down in the dumps as industrial activity has been diminishing for many months now.

All in all, 2013 has been a forgettable year for the Indian automobile industry. Exports have not been kind either with most European markets in a slump. According to SIAM data, car dispatches (which means factory to dealers) declined for the first time in 11 years in 2013 by almost 10% to 18,07,011 units (19,98,703 units). SIAM says as many as 22 new cars were launched between April and Decmber 2013, during which time another 40 new variants of existing cars and another 10 model refreshes were also unleashed. Now, the Expo is their last hope.

Lets look at the global pecking order. China is the largest automobile market, with vehicle sales topping 15.49 million in 2012 against India’s 2.77 million. So we are roughly a sixth of China in market size. The industry turnover for India is $59 billion and we exported only about one in seven vehicles, raking in just $8 billion in FY13. Passenger vehicles comprise about half the industry by sales which means every second vehicle sold in India is either a car or a utility vehicle.

Though sales have stagnated in 2012 because of overall economic slowdown and other mitigating factors, here’s the silver lining: only 16 in a 1000 Indians own a car today versus more than half the German population and close to half the Japanese population. And only 85 Indians in a 1000 own a two wheeler - more than Germans but way behind Indonesians and some way behind the Japanese.

So there is obviously a huge market for cars, two wheeler makers out there. The only issue is economic revival putting more cash in the hands of buyers and favourable vehicle loan rates.