As the unlock begins, the auto industry hopes to rebound soon; strong advertising surge likely in the next quarter

Even though auto sales were at a standstill due to nationwide lockdown conditions triggered by the Covid-19 pandemic, automakers are optimistic about the sector’s rebound with the unlocking process starting in several. regions of the country.

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The companies are hoping sales will pick up once the main Delhi and Mumbai metros begin the unlocking process next week and believe the numbers will rise in the second quarter of the current fiscal year.

To ensure that the customer comes back to the showroom, and also to catch up with pent-up demand, companies plan to spend more on advertising compared to last year.

Industry leader Maruti Suzuki plans to significantly increase spending in the current fiscal year compared to spending last year, which stood at Rs 700 crore.

Shashank Srivastava

Shashank Srivastava, executive director of Maruti Suzuki, said that due to the second wave of Covid at least 94% of retail sales have been affected and bookings have dropped significantly. “And what happens next depends on the number of Covid-19 cases and the geography of the spread, because this time it has also impacted rural areas. However, there are fewer negatives this year compared to last year as the industry is not completely closed, the vaccines are there and there is still a trend towards personal mobility.

Auto players are quite optimistic and hope to achieve good growth thanks to a good monsoon and a good vaccination.

Although the impact of the pandemic has been high in rural areas, the monsoon is expected to be normal and demand could still be strong.

Srivastava said that since tactical advertising cannot be shown on television, print media will play an important role for automotive players. There will be an affinity for sports and genres of information while it will be a little weaker for GECs this time around.

“Digital spending will increase by around 30% this year compared to 23% last year. This time around, auto companies are unlikely to cut advertising completely because we have more experience this year. I would expect ad spend to increase this year. For us it was Rs 700 crore last year; I think it should increase considerably, ”he added.

“In the midst of the crisis, car buying naturally took precedence in the backseat. There is definitely going to be a drop in sales across the board. While demand for vehicles remains strong, there will be industrial challenges related to the supply chain, dealer activity and customer movement in the coming months, given localized restrictions in several markets ”, an Audi spokesperson said.

As a brand, it continues to focus heavily on digital and social media platforms and assess the customer engagement offered by various platforms as situations evolve. Printing and distribution remain important communication channels for him.

Srivastava de Maruti said: “The figures for last year were not that low as the year before. During FY19-20, total sales were 27.7 lakh and 27.1 lakh in FY20-21. There was a 2.2% drop in the industry. So when it comes to wholesaling, it wasn’t such a bad number last year. Even last year’s retail numbers were slightly higher than the previous year. In addition, FY 18-19 was the year with the highest sales at 33.3 lakh. There was a sharp drop in fiscal year 19-20, which slowed further last year. So this year an uptrend was expected as there had been a few years without any growth and we are way behind the peak of FY18-19. People weren’t really expecting the second wave to be this strong. The projected growth for FY21-22 before this wave was between 31-32 lakh (similar to FY18-19), a significant growth of over 27.1 lakh last year. This year started off well with good bookings across the industry and inventory levels were also low. However, after the second wave and lockdowns, 2,500 of the 3,140 outlets were affected and closed and bookings plummeted. “

“This time, there is also an impact in rural areas. Although once this period is over and feelings improve, demand will come back as the economy is doing quite well and projects good growth. The negatives are probably less this time around since the vaccines are there too, which brings some certainty. Export demand is better. So this time the ramp-up will be faster since the industry is not really completely closed, ”he added.

Impact on used cars, tire manufacturers

P Madhavan

P Madhavan, EVP, Sales and Marketing, TVS Srichakra, said tire manufacturers are also feeling the effect.

“We hope the current wave of pandemic retreats will soon allow for a recovery in time for the holiday season. This wave is more widespread and involves significant uncertainty. We will have to wait and see how the situation develops in this quarter and the months to come. Factors such as a strong rural economy and the need for personal transportation options in the face of the pandemic indicate a favorable scenario for the growth of the two-wheeler industry, ”he said.

Given the suspension of the IPL and the still uncertain Olympics, he said most brands will backtrack on their media plans and investments. Brands will gravitate to digital with renewed vigor and allocate more resources and money than in the past.

When markets opened after the first wave of last year, the replacement market saw growth driven by pent-up demand. Concerns over the use of public or public transport and the shift to personal mobility have led to the demand for two-wheeled tires. The strongest growth was observed in cities of level II and III.

Amit Tolani

Amit Tolani, CMO, CEAT Tires, said every segment of the industry is experiencing a sharp drop in sales due to the second wave.

All automotive majors are affected and original vehicle (original equipment) production has been disrupted in several locations due to labor absenteeism, supply chain issues and low customer demand.

Tolani believes there is a preference for personal mobility, but says people’s savings also declined in Wave 2 due to sluggish economic activity in FY21 and entries minimal funds from migrant parents and high medical bills.

The pandemic has hit the auto industry hard, with businesses paralyzed, the workforce displaced and the purchasing power of many people curtailed. However, it has turned out to be a silver lining for the used luxury car market. Factors such as depreciation and Bharat Stage VI standards have played an important role in changing perceptions of many clients.

Jatin Ahuja

Big Boy Toyz (BBT) chief executive Jatin Ahuja said the process may have slowed down, but just like last year, it is expected to be another roadblock linked to the pandemic and will be over soon. .

Covid-19 has already had an impact in the used luxury car market, where consumer demand has increased due to social distancing standards and the rise in ambitious values ​​of tier two and three cities. Therefore, the second wave will ultimately help stimulate the market and market conditions.

According to a recent report by the Society of Indian Automobile Manufacturers, the Indian used automobile industry, which accounts for over 18% of the market share, recorded sales of around 4.4 million units during the l Year 20. Last year the industry was valued at 180 crore and is expected to grow at a CAGR of 15.12% during the forecast period 2020-2025. Although progress is slow, Ahuja said it was stable due to recent events.

In addition, the demand of Tier II and III cities for used luxury cars has given the industry a new perspective. As more buyers get ambitious, the demand for used cars is expected to increase further, which will help used car dealers to penetrate deeper into non-metropolitan cities in India. The used luxury car industry is booming with the expansion of sales and online channels, and BBT will spend in areas that showed promising results in the first wave.

“With all the restrictions and social distancing standards in place, people are more active online. It only improves our chances of spending and being seen. Offline marketing or advertising will gradually decrease due to fewer people on the street than in front of a mobile screen, ”he said.

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