00:00Hello and welcome to yet another episode of the Motown Show, where we not just get you the latest what's happening in the Indian automotive world, but along with that also get you some exclusive interactions.
00:18But before we get going with that, let's also tell you what's the latest that we have gathered in the Indian auto space in the week gone by.
00:25So it was indeed the last week where we have seen a bit of a slowdown in the Indian automotive industry because everybody is just waiting out for that 22nd September to come in with the new rates of the GSTs.
00:37But not just that, it was the leader Maruti Suzuki that did come out with the price cuts announcements, wherein for some of the small cars, the price cuts has been as high as 1.3 lakhs.
00:49And that was interesting to note because they did not just only adjust that GST from 28% to 18% now, but they have actually offered discounts or rather cuts way more than that.
01:01Along with that, Hyundai Motors was also in focus because Hyundai Motor India has come out with the wage adjustment announcement for their employees, where they have adjusted the wages for the next three years to as high as 31,000 per month.
01:15Along with that, Tata Motors' JLR production was hit. It was impacted on the back of the cyber attack.
01:21But this time, because of what's been happening at the JLR plant, the pause in the production has been extended till 24th of September.
01:29And analysts do expect that the volumes and the margins can get impacted.
01:32And lastly, interesting news flow from Aisha Motors' Royal Enfield as they say that they're going to be listing their 350cc bikes on Flipkart.
01:42And that was indeed interesting to note that now the two-wheelers are gearing up and exploring this way of the sales.
01:49So let's get started with more interactions.
01:52So while everybody is talking about the GST recess that had happened for the new cars, what's really in store for the used car market in India?
02:08Because that too is booming. And what's the situation on ground?
02:12Let's try to find out all of that with Mr. Anand Mohan, who is the president of Enterprise Business at Car Trade Tech, joining us on the show right now.
02:20Hi, Anand. Firstly, welcome to ET Now and thank you so much for your time.
02:25Thank you so much for having me on this show. It's indeed a pleasure.
02:28Indeed, Anand. But lots have been happening within your sector.
02:31While everybody is rejoicing the fact that the new cars are going to get cheaper,
02:37why don't you start by helping us understand what's in for the used car segment?
02:43Has there been any adjustment with respect to rates over there as well?
02:47So indeed, it's a great move by the government. Fundamentally, I believe, because there's enough or something for everybody in the taking.
02:55But the new regime, I would say the 18% getting aligned in the used car space, that always existed.
03:02Just that with the new regime, it's actually cleaned up the complex structures and it's made one unified taxidermist structure for the used car space.
03:10But the fundamental change is that the new cars would get cheaper, which means there's going to be an overlap with the pre-owned cars that were procured prior to this regime in the last three to four years.
03:21So there's going to be some sort of corrections in the margin from the dealer's side just to make it more conducive for sales, etc.
03:29So the liquidation would happen because the cost of carrying the inventory, especially considering the real estate prices and metros,
03:37would add to the burden of the trade and commerce.
03:40So there's going to be an influx there.
03:42And when you say that there are more people going to buy new cars, there's also going to be an infusion of supply through the trade-in channel.
03:51So overall, it's going to be a positive sentiment.
03:54But a short-term pain for a longer-term gain is what I would want to believe.
03:58The short-term pain basically for the dealers per se, because the customers are any which way benefiting because the car prices are going to get lower.
04:06Yeah, because car prices will get lower, because the decision-making would kind of lead to a fundamental shift in the buying decision.
04:16But the ones that were procured prior to this period, I don't think so.
04:21They are affected by any chance.
04:23So largely, it's going to be like a status quo.
04:26All right.
04:27But yes, indeed, this particular segment overall, we have seen that is seeing a decent growth in Indian markets.
04:36We can't call it a fantastic growth.
04:38But in a way, the used car market is expanding.
04:41But help us understand that what sort of a trend do you see is shaping up in India?
04:47Because it's a bit fragmented, the tier one, tier two, tier three cities.
04:51What's of attraction that you are getting to see from these markets?
04:55So more than the tiers, the geographical distribution, I would want to look at the segments that are driving the growth in these tiers, right?
05:07Because these are markets that are relatively more sensitive to pricing.
05:11So the smaller cars, of course, they fall in the 5% to 8% bracket as per the new regime.
05:15And also the entry-level trims of the mid-segment cars that drive the entire sales in these markets.
05:21So overall, I would believe this would catalyze the growth, not just the tier one, tier two, tier three, but markets beyond that, especially the upcountry markets.
05:30So that's something that we are quite bullish about.
05:34All right.
05:35But along with that, Anand, let's just talk about the diversifications in terms of the GST cuts has been announced.
05:41Because the small cars are going to be more affordable now, while the SUVs, which any which ways was getting a lot of traction.
05:50And even government believe that that buyer is not getting that impact right now.
05:55And though there were some relaxations on that front.
05:58But from the used car market, what's your sense that how small cars are expected to perform?
06:04Because I believe that in this slowdown of late, wherein some of the OEMs were talking about, even small cars, you were also experiencing, you must be also experiencing, that wasn't the preferred destination of a buyer, or was it?
06:19Exactly.
06:20Because the buying preferences have changed, right?
06:22Because the preferences moving towards utility vehicles, SUV driving the growth, etc.
06:28So we do see a paradigm shift in buying preferences and the sales mix, all of that.
06:35And the smaller cars, as I mentioned earlier, right, it's about the 5% to 8% bracket.
06:40This is the price-sensitive market.
06:41It's a very frugal segment of consumers.
06:43So it's going to catalyze the overall scenario of growth, right, across markets.
06:48And also the mid-segment cars with the entry-level trims.
06:52So there are discounts being already announced by the OEMs to sort of catalyze bookings, etc.
06:58So we should see a better festive going forward.
07:02They will, but everybody is excited about it.
07:06And we also keep talking to a lot of OEMs.
07:08But the discounts are offered there.
07:10But I just wanted to get a sense there that in the used car platforms, have the dealers also starting giving more discounts?
07:16So the corrections would happen, right, because on the margins front, because the dealers would want to capitalize on this, the wave that is riding right now.
07:26So they would want to sort of capitalize on that, which means there would be marginal cuts on the dealer margins.
07:33So I think it's, again, a corrective measure because you need to take these corrections.
07:38You don't need to see it as margin cuts.
07:40But from a trade commerce point of view, in the long run, just to get realigned to what the structures imply on us.
07:47So these corrections are necessary to get immune to whatever trade cyclicality is over longer term.
07:55No, because for you guys, there could be some adjustment with respect to price.
07:59But even auto OEMs are still puzzling their heads around that what will happen to the compensation says, right?
08:05So compensation says, I think, would be taken care of.
08:09They would sort of figure out a way because from an OEM point of view, what is more important is to get the units off the shelf.
08:17They would be thinking of the consumers first, the last mile delivery, etc.
08:22And then probably look at the economics at an internal level.
08:26No, no, the companies are also excited and some have actually announced before 22nd September as well.
08:33But coming back to the used car market, Anand, you have been in this industry for, I believe, more than a decade now.
08:41You have so much of hands-on experience to that.
08:44Help us understand, how have you witnessed India as a market growing with respect to used car market?
08:50Because there's always a debate that there's a long headroom of growth in terms of the time and in terms of how we compare ourselves with the global peers.
09:01One needs to understand we are an exceptionally growing market.
09:05We are already the third largest auto market in the world in terms of sales.
09:10In 2022 is when we overtook Japan, right?
09:13Having said that, we are quite underpenetrated, not just in the used car space, also in the new car space.
09:19With a country like, say, 1.5 billion population, right, we only sell about 3.5 lakh new cars every month, right?
09:27So even if you look at the ratios of new to pre-owned cars, it's about 1 to 1.4, which was probably 1 to 1, say, five years ago.
09:36This has been a growth which is fundamentally fueled by growing consumer confidence, better financing options, digital adoption, all of that.
09:45But if you look at, if you compare yourselves with the highly developed markets, this ratio is about 1 to 4.
09:51In the UK, there are about 4 pre-owned cars sold for every new car sold.
09:55Indeed.
09:55Right.
09:56And in the US and Germany, it's about 2.5, 2.6.
10:00So we have a lot of headroom for growth.
10:03That's what I would want to fundamentally believe.
10:05And the government is also working towards making the infra better.
10:08So I think overall ecosystem will jam together better for a growth conducive environment.
10:15But being a used car market player, because whenever you go and buy a car, it's not just that the car that you are buying.
10:22It's involved financing, warranties.
10:25And we have seen the OEMs don't give you just the car.
10:30They cater to all your needs.
10:31But with respect to the used car market player, because in this market as well, we still have that bifurcation of organized versus unorganized.
10:39But as an organized player, what are your thoughts that which can be the other avenues for growing and monetizing in terms of the used car?
10:48Can it be warranties?
10:50Can it be some more financing options?
10:53Fortunately, it will be all for a simple reason that we have not done a good job in any of these fronts over the years.
10:59Even today, people are very apprehensive before buying a used car.
11:04They are not still getting that assurance that they need to get.
11:07What will happen to my car?
11:08Who is going to stand by me?
11:10Which is not the case with a new car, because there's a dealer, there's an OEM, there's a warranty, there's a service package, all of that.
11:18So all of these needs to get consolidated, needs to get institutionalized in a larger way.
11:23But having said that, we've done, we've come a long way.
11:26Because when you transact on the used car space, the buyer, the seller, the dealer, and the other middleman, it's all a rough patch.
11:34There's a lot of ambiguity, with the RC limit being a challenge, all of that.
11:38So I believe with time, there's a lot of headroom for growth, and all these avenues will help monetize.
11:45Monetization is just an eventual outcome.
11:46What really needs to be done is to make all of this conducive for more people stacking up in the market to buy pre-owned cars.
11:54Once you crack that, then everything else will fall in place, is what I believe.
11:59Indeed, interesting.
12:00But Anand, let's talk about your business.
12:03And we just wanted to get a sense that, because post-JST, and everybody is waiting out for 22nd September to hit in.
12:10But during this time, how has the traction been?
12:14Because we keep talking to OEMs, and they're saying that people are in a little bit of a wait-and-watch mode.
12:20But they are also excited about 22nd September.
12:23What about you guys?
12:25How has the traction been?
12:26Proof of the pudding lies in eating it, right?
12:28So you'll have to wait for 22nd to see how the market really jams up, right?
12:33But we see a lot of pent-up demand across dealers, even across financials.
12:39There are a lot of logins, but disbursements are being held because they're just waiting for the D-day to sort of open up.
12:46But on account of just the announcement of the GST, right, we've seen a surge of about 25% and upwards in terms of traffic across all our consumer platforms.
12:57So that should be like a strong indication, considering the fact that we slice across a significant population of this country.
13:05So, yeah.
13:05No, that's really interesting to note that.
13:08But, Anand, so good having you on the channel today, I must say.
13:12Pleasure.
13:12Thank you so much, and we look forward to more indeed.
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