May has been a turnaround month for the auto sector. Even though passenger vehicle sales have seen some pressure, utility vehicles and commercial vehicles have seen strong growth. Speaking to Bloomberg TV India , Society of Indian Automobile Manufactures (SIAM) Director General Vishnu Mathur says the possibilities of a good monsoon, passage of GST and improvement in macroeconomic parameters have brightened the outlook for the automotive industry. However, the government has to clear the regulatory haze that has clouded the outlook of some segments of the industry, he said.

Since January, passenger vehicles have grown only in April. What do you think is dragging down the sales?

The new fiscal year has started out quite well for the industry. Since April, we have been seeing strong growth, which is actually a spill-over of what we saw earlier in the year. In May, we have seen an overall growth of about 10 per cent in the auto sector. In the passenger vehicle segment, we witnessed a growth of about 6.5 per cent. But the passenger car industry has shown a slight dip. And I think that is more or less made up by the utility vehicles’ strong growth of about 36 per cent.

But I think the best part of this growth is that there has been consistence and strong growth in the commercial vehicle segment over the last many months. In May, commercial vehicles grew by 17 per cent, which basically means that the industry and the economy are coming back on track. I think the outlook for this year is far better than what we had last year. We are seeing an improvement in the sentiment. We are seeing an improvement in the economic growth — in mining and infrastructure. We are seeing the freight demand go up, which augurs quite well for the commercial vehicle segment as a whole.

With the possibilities of a good monsoon this time, the possibility of GST coming in very soon and a number of other major macroeconomic improvement, we expect the outlook to be pretty good for the automotive industry.

On the expectation of the 7th Pay Commission, OROP and greater personal disposable income, hopes of higher demand are inching up for the passenger car segment. Certain regulatory overhangs are impacting the segment and the SUV over 2,000 cc and diesel engines. Some companies such as Mahindra & Mahindra has started tweaking their SUV models. What’s your perception?

I think the 7th Pay Commission and the other factors will certainly give a fillip to the industry in the coming months. The Pay Commission would give a boost to entry-level sedans and small cars and to some extent, even two-wheelers.

But I think the regulatory overhang is very important. Because of that, we are seeing a shift from diesel to petrol. During FY16, the share of diesel cars has been about 34 per cent. But in April, it shrunk to about 28 per cent.

More importantly, I think the policy environment is creating a lot of ambiguity and concern in the industry. If the vehicle industry is fully compliant with the government policies, then to say that something like a 2000-cc or a diesel vehicle, which meets all the regulations, cannot be sold in the country, really creates a huge amount of concern in the minds of any investors, foreign or Indian.

So while the outlook for the industry is quite bright, there are areas of concern, especially issues such as the diesel vehicle ban, which needs to be clarified by the government if the industry has to sustain a robust growth in long term and also fresh impetus coming into the sector.

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