09 November 2013

Abhishek Mishra on: economy

The good thing about a bad economy is that at least the luxury market is largely unaffected. For now

Abhishek Mishra
Car image


So the latest joke, which will probably be stale by the time you read this, says this about the Prime Minister: New Kamasutra position: Manmohan. Description: Get on top and do nothing.

Most analysts agree that this government has its head up its arse when it comes to the economy. It may claim that it has got over its socialism addiction, but as the economy is now showing us, it has relapsed quite hard. Proof? Indian industrial production shrank by 2.2 per cent in July 2013. And that’s no aberration, either. Industrial production has gone negative in nine of the last 16 months.

In the monsoon session of parliament, the finance minister said the government would take “all steps necessary” to boost manufacturing, especially automobile manufacturing in this country. Of course, the market yawned a collective yawn; statements like these are as meaningful as pigeon shit on your windscreen.

Still, as one optimistic economist pointed out, certain carmakers posted double-digit growth figures for the first quarter of this financial year. That must be good news, right? Not necessarily.

Yes, if you compare sales figures in the first quarters of 2012 and 2013, some manufacturers did grow. In double-digits too. But that doesn’t mean much. Honda, for example, is still in the honeymoon period with its first diesel car in India. Undoubtedly, that’s what pushed its growth numbers up. Ford will also post strong growth because of the EcoSport. But what happens once the initial excitement of a new launch wears off.

The high-volume/low-margin manufacturers will have it tough for the next year or so at least.

The government’s almost criminal indecision in something as important as diesel prices and its over-involvement in something as stupid as ground clearance impacts these guys the most. Consider this – a manufacturer like Fiat exists in this country not because of the cars it sells here. It exists because of the diesel engines it supplies to other manufacturers. With the government’s indecisiveness on diesel pricing, Fiat can’t be too happy.

Honda too must be watching how Maruti’s diesel/petrol car ratio has see-sawed over the last year. That will have a bearing on which other models it should plonk its diesel engine into.

If you must look for good news, it’s in the luxury segment. At least some luxury carmakers have it a little easier in this country. Audi is doing decent numbers with the Q3. As I write this, it has launched a sub-Rs 25 lakh Q3 to take on the Mercedes A-Class. Incidentally, and as an aside, of all the cars sold by the big three German car manufacturers in India, the Q3 S Edition is the only manual car you can buy in India today.

Audi is also betting that its A3 will sell in big numbers in India. And we know it will do better here than any of the luxury hatches – because we’re Indian. We loves our sedans. We loves our SUVs. Audi knows that, which is why it didn’t bother with any luxury hatch. The Audi A3, and even the Skoda Octavia for that matter – both based on VW’s MQB platform – show strong potential. If successful, they’ll make a very significant contribution to VW’s bottomline.

Mercedes also knows that its bestseller in India will be the CLA. The A-Class and B-Class may have to do for now, but the CLA is where it’ll strike gold. Oh, and also with the GLA. Mercedes lost out for a couple of years, since it had no small SUV to take on Audi and BMW. But the GLA will change that.

Of course, this can sustain in the long-term only if the economy gets back on track. And most importantly, if industrial production figures improve. I am pessimistic about that though, given that our current government looks as if it just wants to race to the bottom.

Which brings me to another joke. New Kamasutra position: Chidambaram. Description: Stare at the bottom and pretend that you care.

The views expressed in this column are solely those of the author.

Tags: abhishek mishra



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