Car prices may be 'fairly stable' in short term; demand to rise, says Volkswagen India

Prices of cars are likely to remain "fairly stable" in the short term as the second COVID-19 wave has more or less balanced the demand-supply situation in the past two months, according to a senior official at Volkswagen Passenger Cars India.

Automobile makers witnessed plunging sales in May, reversing the recovery trajectory in the first three months of 2021 that was fuelled by pent-up demand. Various states and authorities resorted to restrictions and lockdowns in April and May to curb rising infections during the second COVID-19 wave.

With the COVID-19 situation improving and curbs easing, overall demand in the economy is expected to pick up in the coming weeks.

Against this backdrop, Volkswagen Passenger Cars India's Brand Director Ashish Gupta said demand is expected to bounce back from June onwards on the back of easing of restrictions, increasing vaccination and a normal monsoon.

In an e-mail interaction, he told PTI that demand actually outstripped supply in the first quarter of this calendar year, in turn, leading to longer waiting periods and upward pricing corrections in the marketplace.

"Even for us at Volkswagen, Q1 of 2021 saw robust demand for all our products and we actually entered the lockdowns with a strong order book of outstanding customer orders," he said.

Major automobile makers such as Maruti Suzuki, Hyundai, Mahindra & Mahindra, Tata Motors and Toyota Kirloskar have reported a decline in domestic passenger vehicle sales in May over April. The second COVID wave has significantly production and dispatches.

"Currently, we are experiencing a decline in demand for the passenger vehicles due to the ongoing lockdown.

"Deliveries to customers in April were affected to the tune of 20 per cent. During May, most of the country was under lockdown and, hence, we saw deliveries being down by close to 70 per cent," Gupta said.

Though the second COVID-19 wave has surely been a dampener as far as deliveries to customers are concerned, he said, "we see that this situation has more or less balanced demand and supply, with both being equally constrained due to the prevailing situation".

This situation should lead to "fairly stable prices" in the short term, and the demand is expected to start picking up again as the restrictions start easing out, he noted.

In May alone, India reported more than 88.82 lakh coronavirus infections.

Gupta said that over the past two months, efforts have been to ensure the safety and wellbeing of employees at its plants and dealer networks.

Volkswagen India is operating its plants with limited capacity.

Sounding optimistic, Gupta said the auto industry will gain momentum once the lockdowns are eased and also when the festive season approaches. "We will continue to see growth in sales due to the need for personal mobility even in the used car segment".

About the situation prior to the second COVID-19 wave, he said recovery trends in the auto industry were quite encouraging from the second half of 2020 onwards, with practically all automotive segments reporting healthy sequential recovery.

The latest March quarter volumes of the passenger car makers were 43 per cent higher on a year-on-year and even 13 per cent above the sales volume of Q1 2019.

Gupta said Volkswagen India's plans remain as per schedule and is gearing up for the launch of the most-awaited C-segment SUV Taigun.

"As per our earlier commitment, the Taigun along with the new 5-seater Tiguan will be launched in the festive season this year," he said adding that rapid vaccination plans and learnings from the current experience would help in bringing back reasonable levels of normalcy.

The company's pre-owned car business has been performing well over the past 18 months, and last year, sales under this channel increased three times as compared to over 10,000 cars.
"We are well on track to double this in the CY 2021," Gupta said.

Stating that electric vehicles are the way forward for the Volkswagen (VW) group globally, he said, "In India, according to our estimates, the EV take-off should come by around 2025-26, both because of the time required to build volumes and the critical charging infrastructure."

Looking at the global trends, "we expect that with the right conditions and an enabling environment, EVs can form up to 20 per cent of the Indian passenger car market by 2030", he emphasised.

As for India, he said, "we are evaluating the market situation and infrastructure development across the country and will introduce the technology at the suitable time".