The Hindu Business Line : ‘Combat skid the smart way’

“Although fuel economy is still the biggest factor in car buying, the buyer is moving from the earlier criterion of fuel efficiency to more style, bigger size and higher brand.”

Sanjay Nigam

D. Murali
C. Ramesh

Auto majors must switch to computer modelling to increase sales and provide better customer service, especially in the context of the current slowdown in the Indian car market, says Sanjay Nigam, Director (Automotive Business), Trilogy India.

Speaking to eWorldon the challenges facing the sector in India, and Trilogy’s solutions and plans for it, he says the indications are that it will be a tough year for auto companies trying to achieve double-digit growth rate during the current fiscal.

“The passenger car market grew by 22 per cent last fiscal and there has been continuous growth for the last five years. Not surprisingly, this year is showing all signs of a slowdown, thanks to the spiralling interest rate.”

According to him, the impact of such a sudden slowdown has huge financial implications at three levels: dealers, OEM/auto manufacturers and vendors/suppliers to OEMs.

“At the manufacturer’s level, annual and quarterly production and sales plans are made much in advance to align vendors, who require at least two-three months of notice for planning. As a result, it is tough for an auto major to revise projections quickly, given the huge push-back from suppliers. The result has an even more negative impact.”

Production goes on as per initial plan, but inventory builds up at the factory level, which gets pushed to the dealers. “The dealers have limited working capital and therefore, limited holding capacities.”

Stating that dealers have the tendency to panic with high stock, he says this is a driving force behind the high discounts given, some of which are “supported by manufacturers themselves.”

Warning that such discounts may impact the profitability of dealers and the companies, he points out that even after luring the customer with high discounts and freebies, sales may not take place, “as the customer keeps waiting for interest rates to come down.”

In such a scenario, the only way forward is to give customers what they want by replacing the traditional method of understanding the market with a scientific and analytical one.

Elaborating with a medical analogy, Nigam says the 64-slice CT angiography, which has replaced the traditional one, is quicker, more accurate and helps in faster decision making.

“It would be a boon if auto companies have a technology-driven, high-powered service that provides slices of market demand at regional and local levels, as on date and with future projections.”

Pointing out that this trend has already gained ground in the West, he says Trilogy, which works in the domain of predictive technology, brings the experience of 40 models across 10 brands in the US over the last couple of years.

The company has over 25 patented technologies that quickly gauge demand and align auto manufacturers on the market profile at regional and local levels. It uses technology to gauge, at any given point of time, the demand for variants of the model, accessories, colour and even customer demographics.

“Computer modelling has also been a huge success for new launches in the US, where neither the dealer nor the auto major have any clue beforehand on the market response to a new model. The Web-based market profiling accurately builds up the requirement for an auto major to align production and vendors much in advance.”

According to Nigam, use of such technology would go a long way in improving dealer viability and sales performance of auto companies. On fuel efficiency of cars in India, he says it is unfortunate that the country still does not have an official certification system.

“Carmakers advertise the fuel efficiencies of their models quoting different automobile magazines, whichever is to their advantage,” he quips. .

“We have seen that smaller cars are more fuel-efficient and they have been capturing sales in India based on high fuel efficiency figures,” he adds, citing the successes of the Maruti 800 and the Alto.

“But this trend is changing in India. The share of small cars of 800 cc has dropped from 21 per cent in 2001 to around 10 per cent now. On the other hand, sales of mid-size cars has moved to 20 per cent from 12 per cent in 2001.”

Nigam sees the change in trend as a clear sign of the Indian consumer becoming more discerning and more mature in choice of vehicle.

“Although fuel economy is still the biggest factor in car buying, the buyer is moving from the earlier criterion of fuel efficiency to more style, bigger size and higher brand.”

But the rising sales of less fuel-efficient cars is leading to greater pollution. “The flip side of success of diesel cars is higher emissions of suspended particulate matter and nitrogen oxides.”

Suggesting the adoption of ethanol-blended fuels as a first step towards meeting this challenge, Nigam says, “The challenge lies in developing engines at a lower cost for these types of fuels. The consumer would naturally welcome it — it’s cheaper and less polluting. The question is how fast can Indian automakers get their R&D act together and bring out the new engine.”

dmurali@thehindu.co.in

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