Price hike on luxury cars and SUVs may not dent sales : CEO of Roland Berger

This is what Dr. Wilfried Aulbur, Managing Partner & CEO at Roland Berger, India had to say on Budget 2016.

AUTO (Passenger Vehicle Demand)

The budget overall has been muted as far as passenger vehicles are concerned. The charges on luxury vehicles and high capacity SUVs may not dent sales, but clearly, these charges don’t support demand either. The same holds true for the pollution cess on various car models.

Macro Economy

Increased expenditure for rural areas is likely to increase rural demand and hence drive consumption. This would overall be positive for the industry, increase capacity utilization and in the long run drive private capital expenditure. Together with the 7th pay commission and OROP this hopefully puts enough money into the pockets of Indian consumers to support domestic growth. Global economies are not doing very well. Exports into many markets with low or negative GDP growth are falling and indicate the weakness in the global environment. Hence, India will have to generate her own success story focusing on domestic fundamentals.

Infrastructure investment impacting commercial vehicle demand

“Investments in roadways are positive for the commercial vehicle sector. Increased expenditure on infrastructure will lead to increased demand and will be beneficial for job creation. In particular, a greater investment in and leverage of India’s coast line holds potential both for shipments within India as well as for exports. Cost competiveness of this option vs alternative transport options (e.g., road transport via trucks) needs to be ensured.”

Recaptitalization of PSU

In this context, the proposed re-capitalization of public sector banks is positive as it will help clean up some of the challenges in the banking system. Going forward this is positive for investments which in turn will drive growth and employment generation.

Entrepreneurship

An overall focus on entrepreneurship is laudable. Here care needs to be taken that everyday hurdles regarding opening, operating and closing businesses are eliminated. Some progress in this direction has been made, e.g., during the recent Startup India initiative, however, more can be done to really drive employment generation via the startup and entrepreneurial route.

Skill Development

The aim to make 10 private and 10 public educational institutions world class is laudable. However, an overall increase in educational effectiveness would be more beneficial for industry to shorten time to talent when hiring new employees. Skilling of youth is also positive. The key will be to ensure close co-operation between government and industry to ensure the right skill sets are being imparted.