What is the future of India's auto sector? Ask Maruti, Hyundai & Benz

With retail diesel prices turning costlier than petrol for the first time in history in places like Delhi, India’s top automobile manufacturers believe that demand for diesel models in the small, entry-level segment is likely to contract. The observations were made during a panel discussion organised as part of The New Indian Express’ Expressions: a series of live web casts with people who matter. Wednesday’s session on the Future of the Auto Sector saw the participation of Martin Schwenk, MD & CEO, Mercedes-Benz India; Shashank Srivastava, Sales and Marketing Head, Maruti Suzuki; and Puneet Anand, Group Head (Corporate Affairs), Hyundai Motor India. The session was moderated by Prabhu Chawla, Editorial Director, TNIE, and author and senior journalist Kaveree Bamzai. Diesel has been a popular choice for many customers seeking SUVs and larger cars that are “fun to drive”, as noted by Anand. But, the consensus among the panelists was that demand for small diesel models will surely see a contraction. Among key reasons for this trend is the steady rise in retail diesel rates and a high price gap between BS-VI diesel and petrol models, even though diesel engines are more fuel efficient currently. “Going forward, I don’t see the economic logic for anybody to buy a small diesel car... when the BS-VI diesel model is a lakh-and-a-half rupees more than the petrol model. You would have to drive two-and-a-half lakh kilometers to recover the extra costs even if you assume an additional 20% fuel efficiency,” noted Srivastava. Schwenk concurred, but pointed out that there was a “strong customer base who like the characteristics of a diesel engine, especially in SUVs”. “Of course, if petrol prices are cheaper, you would see more customers in price sensitive segments asking for petrol.But, I wouldn’t see a big swing,” he added. For an already battered sector which has seen sales steadily falling since before the pandemic, the Covid-19 lockdown has wiped out nearly three months worth of business. But, with demand starting to return in June, overall performance will depend on how quickly the general economy recovers, they said. “We are looking at a positive scenario, wherein, if we arrest the spread of the pandemic, we’ll see some demand resurgence in the festive season,” Anand added. A major part of reviving auto demand would also lie in restoring confidence in customers. “We have to look at how to make consumers more confident about coming to dealerships..,” noted Srivastava, adding that going digital could be an option. “The consumers have indicated that they want more digital interfaces and we are accelerating that process,” he said. Anand agreed. “Customers expect more digital support from the manufacturers now, and these are measures which all manufacturers have already started to take… this can also really reduce the costs of operations where dealerships are concerned.” Aftersales service is also taking on substantial importance at a time when costs are rising and incomes are falling. Schwenk noted that keeping the total cost of ownership down is a key strategy to deal with the impact of the pandemic. This was being done in two ways, he pointed out: “On the one hand are service packages. On the other, it’s based on improving the efficiency in workshops, which enables the dealers to offer better prices.”