Pent-up demand for cars not one-time phenomenon, its here to stay: Auto experts
Auto industry experts from FADA, Ford India, ACKO Insurance & OLX Autos opine that pent-up demand for cars is not a one-time festive phenomenon and is here to stay.
At a recently held industry discussion by OLX Autos India called OLX Auto Talk 2.0, which brings together prominent voices in the automobile industry to discuss pertinent issues in the ecosystem, experts from FADA (Federation of Automobile Dealers Associations), ACKO & Ford India said that new car, used car and dealer ecosystem witnessed green shoots of recovery this festive season and the trend is here to stay for a few more months in 2021.
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The second edition of the virtual industry roundtable saw the participation of Manish Raj Singhania, VP FADA, Anuj Tyagi, National Sales Head Ford India, Sagar Das, VP, ACKO Insurance and Amit Kumar, CEO, OLX Autos India. The experts discussed the current state of the new and used car automobile industry and predicted the way ahead for a post-vaccine recovery of the automotive industry which contributes to 49% of India's manufacturing GDP.
(Also read | Auto parts industry revenue to grow 16-18% in FY22: ICRA)
While the initial months of the lockdown definitely dealt a jolt to the automotive industry, the recovery post the unlock was faster than expected. This was led largely by massive demand from consumers who were seeking their own means of transportation. However, owing to the Covid related disruptions in the supply chain, automotive manufacturers and industry at large found it challenging to meet the massive surge in demand.
Experts were also buoyant about the rural economy leading this recovery owing to a reduced impact of Covid in rural areas. Across the industry from OEMs, dealers, after-sales services are witnessing a rising trend in the rural markets which is outpacing the urban areas owing to a resilient agricultural economy which witnessed a good monsoon cycle and a record food grain production.
Stressing on the importance of technology powering the recovery, the industry at large is undergoing a transformation as per the experts. Customers are gravitating towards home inspections, usage of artificial intelligence-led tech for better car valuations, digital-first insurance platforms and virtual sessions with dealers prior to buying, selling or exchanging their cars.
For the used car ecosystem, experts pointed out that dealers in the ecosystem benefitted from the massive surge in demand and were able to sell their inventory faster. Not only has the demand for pre-owned cars outpaced that of the industry at large but the shelf life of the same at dealers has declined from 45 days to only 10-12 days.
The panel also shed light on the fact that not only entry-level cars but in cars across segments demand has outpaced supply. This is visible especially in the SUV range which is seeing a higher demand in conjunction with the entry-level segment which saw a lot of demand from first-time car buyers.
The dealer and retail community which forms the backbone of the Indian automotive industry will move to a hybrid phygital model where consumers will begin their purchase journeys online and conclude it offline. The dealer community has adapted to the same quickly via technology and customer-first services catering to the same.
Representing the dealer ecosystem, Mr. Manish Raj Singhania, VP, FADA, said, "Auto industry has seen one of the fastest V-shaped recovery post unlocking began during Covid. Dealers saw positive signs of recovery month on month and the festive season was better than expectation. The hardest-hit sectors were 3-Wheelers and Commercial Vehicles while Tractors, Passenger Vehicles and 2-Wheelers performed well. The margins for used car dealers have gone up in conjunction with the new car sales. There exists a substantial demand-supply gap at the OEM's end which needs to be addressed with urgency in order to cater to higher demand in new car sales across urban and rural markets which is expected once Covid vaccine is introduced in the market."
Anuj Tyagi National Sales Head Ford India said, "The pent-up demand witnessed during the festive season has showed signs of revival and not a one-off trend. We expect for it to continue well into 2021 and beyond. The pace might be slow but will surely get stead as we move ahead. At Ford, we strongly believe that technology will remain pivotal to sustaining the revival. As a leading OEM, our tech-enabled innovations in new as well as used car space are helping us address customer needs and spur an increase in the number of Ford cars on the Indian roads. We are also happy to witness our dealer ecosystem keep the momentum during the pandemic and now getting back on track to make profits in what has been a challenging year."
Commenting on the growth of the automobile insurance industry, Sagar Das, VP ACKO, said, "Insurance is a compliance product and a must-have either for new or used car owners. At ACKO, we saw a surge on the platform instead of a dip during the pandemic and there exists a massive opportunity for the industry to tap into since customer behaviour towards a touchless ecosystem is irreversible now. Unlike cars which are well penetrated by the insurance industry, much more growth is expected to come from the two-wheeler market in months to come. Even if we reach a critical level of vaccination in India, the automotive insurance industry is well poised to grow rapidly."
Talking about the future of the used car ecosystem, Amit Kumar, CEO, OLX Autos India, commented, "The fundamentals of the economy are strong but with cautious optimism, we need to approach 2021 especially in the light of the new vaccine announcement. Demand and supply for used cars have grown by 133% and 120% respectively vs pre Covid on OLX and the festive season has also augured well with a 33% increase in demand in Sept-Oct 2020 vs Sept-Oct 2019. The used car industry has always been larger than the overall ecosystem of new cars but its growth is extrinsically linked to the sales of new cars. I expect that as the economy gradually opens up both the industries will benefit from the growth in demand led by tech-enabled solutions."