The Hindu Business Line : New SIAM chief hopeful drought will not hit sales

New Delhi, Aug. 28 The new President of the Society of Indian Automobile Manufacturers (SIAM), Dr Pawan Goenka, believes that the drought is not likely to have a significant effect on the automobile industry in terms of sales this fiscal.

“Off hand, the drought may not have a strong, direct influence on vehicle sales but could play around with sentiment. And since sentiment can sometimes play a part in the buying decision, I would tread cautiously with an exact forecast,” he told Business Line.

Despite that, Dr Goenka (who is President of Mahindra & Mahindra’s Automotive Sector) was hopeful the drought would only hit growth marginally to the extent that the 6-7 per cent seen in the first four months could, at best, come down to 5-6 per cent for the whole year.

Global experts still believe that India’s automobile industry has the potential for double-digit growth at a time when most other countries, except China, are seeing a slowdown.

SIAM’s own estimate is $145 billion of business by 2016, which would then translate into a growth rate of 16-17 per cent.

According to Dr Goenka, this is achievable provided “everything happens the way we are hoping and people involved to make it happen believe in it and work towards it”.

This would mean that manufacturers must be aggressive and commit themselves to investments and new products while making their companies competitive. “The Government should also do its bit through incentives for long-term growth and the many ministries involved in the automobile industry must work in tandem to make things happen,” he said.

Concerns

The new SIAM chief spelt out some concerns, though, in this path to growth. One stemmed from the growth side and the other related to the effect of this growth.

“We are investing in the industry to get 10 per plus growth and, hopefully, even 16 per cent if everything goes according to plan. My fear is that if this does not happen, some companies may seek a quicker return on investment and start discounting products. Should that turn out to be the case, nobody will make money,” he said.

Emission norms

The second concern about growth, according to Dr Goenka, was its likely effect on the environment, energy consumption, safety and road congestion. “We cannot look at growth without putting things in place to control and minimise the impact of these issues,” he added.

The way forward, in this case, was to prioritise strict emission and safety norms, cleaner fuels and better road management. “It is in this context that the Government and industry must work together with support from NGOs. The auto sector will do what is right and stretch itself to the extent possible,” Dr Goenka said.

The other challenge for the industry is due on April 1, 2010 when the Bharat Stage 4 emission norms become mandatory in 11 cities with the rest of the country moving to BS 3.

“We will attempt to reason with the Government that if there is any delay outside our control like non-availability of fuel, it will help if we are told about this in advance. We are ready for the new norms but need commercially available fuel by the first week of January 2010 so that we get three months of trying it out in the products,” Dr Goenka said.

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