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Auto sector situation unlikely to improve in next 2 quarters: Nikunj Sanghi, FADA

Any silver lining can be seen post September or the festival season of this year, says Sanghi.

ET Now|
Mar 25, 2019, 12.14 PM IST
ET Bureau
Nikunj Sanghi-FADA-1200
I am not very surprised that two-wheelers are impacted hugely but this is a short- term story. Things are likely to improve but not in the near future, said Nikunj Sanghi, Director, FADA, in an interview with ETNOW.

Edited excerpts:

Some auto companies are saying that their sales have reached a level where they need to cut production. Is this adjustment before the new emission norms kick in or this is a state of the auto market where demand has plummeted and it will remain low for an extended period of time?

This has more to do with very sluggish demand. I am not surprised. Economic Times has talked of de-growth of almost 1% in FMCG. FMCG or fast moving consumer goods are basic necessities and with increasing population, normally you would see the FMCG grow but if FMCG is de-growing, it talks a lot about the demand pattern in the market.

I am not very surprised that two-wheelers are impacted hugely but this is a short- term story. Things are likely to improve but not in the near future.

On one side, there is a drop in demand; on the other side, new BS emission norms have kicked in. There is also uncertainty over elections. Is this bad news, is this very bad news, is this very, very bad news for two-wheelers?

I would say it is very bad news and I do not see things picking in the next two quarters because the July-September quarter in any case is the weakest quarter for the entire automobile industry and not just the two-wheeler industry. If at all I see a silver lining, I can talk about it only post September or the festival season of this year. Before that, we will need to be extremely careful. Dealers will need to moderate their inventories and they can only do that with the support of the manufacturers.

Manufacturers seem to be in favour of correcting the inventories and therefore you are getting news that almost every manufacturer is planning some kind of an inventory correction next month. I do not see too much inventory correction happening this month because financial year ending and I think there is a pressure on meeting if not 100% targets at least 90% plus target for every OEM.

You do not see this situation getting arrested anytime soon, do you?

Definitely not. Not at least in the next two quarters.

Also Read

Centre sensitive to slowdown in auto sector: Maruti Suzuki

Auto sector demand will revive: Industry captains

Slowdown in auto sector temporary: KIA Motors

Auto sector slowdown takes toll on suppliers

Auto sector cuts losses, as govt schemes, discounts attract buyers

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