The auto industry's growth is likely to mirror the GDP growth projected in the Union Budget for the next financial year, said Shashank Srivastava, Executive Director, Marketing and Sales, Maruti Suzuki India.
Srivastava said the Budget presented by Finance Minister Nirmala Sitharaman has the potential to fuel the overall economic growth along with that of the auto industry.
The Union Budget says around 10.5% GDP growth is likely in FY22.
"The fortunes and the well-being of the auto industry are primarily closely correlated with the GDP growth and consumer sentiment. On both counts, the Budget should be positive for the industry. The projected nominal growth is around 15% and with no new taxation and a good outlay in Covid-related health projects, the sentiments should also be better. Moreover in her Budget speech, the FM said that she is committed to a double-digit growth for manufacturing, which is really a positive intent," he said.
Srivastava said the Budget has several positives for the auto industry.
"The government investment in infrastructure, which is an income and employment multiplier, should not only spur growth but also make logistics more efficient and competitive and that is a huge plus for the auto industry," he said.
Talking about how the voluntary vehicle scrappage policy will increase auto sales, he said the overall impact was yet to be studied but it was a very positive step.
"It is a very positive step though it is difficult to assess its impact until the actual details of the policy are known," he said.
Auto industry to pick up growth
Srivastava said the auto industry will start getting back on the growth trajectory after almost two years.
He said there has been a fall of 33% in terms of volumes since the high of FY-19.
"The auto industry was down almost 18% last year (FY20 over FY19) and further this year so far, it is about 16% less than FY20. So effectively, the industry is down almost 33% over the high volumes of FY19. The general consensus in the industry is that this financial year, the Passenger Vehicle category would end around 2.68 million or so in volume terms," he said.
Srivastava said it's difficult to give predictions for the next fiscal as a lot will also depend on the Covid-19 trajectory.
"Predictions for next year are tough given the current supply issues and the uncertainty regarding Covid. But recently, I attended a discussion of industry analysts and their consensus seems to be of volumes around 3.1 million next year. This will look like a good growth over FY21 but we should remember that the base for this year is definitely smaller," he said.
Auto industry's adex to go up by 15%
Srivastava said the government's spending push, along with the positive customer sentiment, will drive advertising by auto manufacturers.
"The Budget with its general thrust towards digitalisation and the pandemic-accelerated consumer behaviour will obviously speed the process of larger spends on digital platforms. The increased penetration of internet, the greater usage of smart devices and also media consumption habits towards digital platforms such as OTT will alter the spend patterns going forward," he said.
He said the overall auto adex will increase by 15% and one-third of the total adex will go towards digital, from the current share of one-fourth of the total advertising expenditure.
"The auto industry spends are generally in the range of 7% to 8% of the total ad spends, with digital spends around 25% and print being the largest contributor. Overall, I would expect the auto industry advertising spends to grow around 15%. The digital spends, which are around 25% for the auto industry, should jump to around 33% of the total spends," Srivastava said.
Talking about the overall adex growth for India, he said it may go up by 12%.
"I think with the projected overall growth in the economy, we can expect a similar growth in the overall advertising spends as well. If we take the advertising spend overall (for all sectors) in TV, print and digital, it should grow by about 12% from the 2019 levels of Rs 56,500 crore to about Rs 62,500 crore. Of this, the digital ad spends are projected at Rs 19,000 crore, which is almost 30% of the total spends," he said.