Global trade may come under pressure from increasing protectionism, says the MD of M&M
India’s GDP growth rate of 7.1, 7.2% may have put the country in a bright spot among all major economies as we have even gone past China, but there is still room for improvement, says Pawan Goenka, MD, M&M. Excerpts from an interview:
Why is growth sluggish in the auto sector?
If you look at all the macro economic parameters, there is very little that one can be concerned about. GDP growth, interest rate, right now, the oil prices, commodity prices are also slowing down. So, all of that is in a reasonably positive situation. Yet, somehow the market sentiments for the auto and tractor industry are not very strong.
And the last three, four months, the performance of the industry has been slower than what most of us had planned for and frankly, we cannot put a finger on why that is happening and there is no specific cause for the slow offtake of auto and tractors.
And one would think that it is more something psychological, or sentiment, which will pass away.
Whether it will happen in one month, three months, five months, I cannot say but I do not think that there is anything wrong with the economy. Anything that will lead or [is] leading to a slow down.
There are many concerns about the global economy…
There are many concerns on the global side. Concern in terms of overall economic growth and every time there is a reassessment, there is a little bit of lowering of the prediction for the next year but the bigger concern is the trade barriers that are being created, by almost all countries now; there is a lot more protectionism that is coming in and therefore, the global trade may come under pressure.
It is already under pressure, but that pressure may keep increasing because no country is backing off from that.
It is almost becoming like if you do 1, then I am going to do 1.5, then I will do 2 and then you do 2.5.
So, that probably will lead to major change of dynamics of global trade which can create opportunities for India also because India is not on the wrong side of any bilateral tension. And, therefore, if certain bilateral tensions become stronger, then maybe India can step in and take advantage of that and be the third party and that perhaps connects the bilateral.
There is a possible upside for India but then we will have to do a lot of things right to take advantage of the upside.
How will the outcome of 2019 general elections impact the economy?
Well, I obviously don’t want to comment on the election and the possible outcome since it won’t be right for me. But one thing I would say is that independent of who wins, there are certain things which will not take a U turn in the wrong direction and that is clear. No matter who wins, the focus on farmers, rural economy and infrastructure development will continue. So, these are three to four things that will happen for sure, no matter who wins.
Where the difference might come in is where the focus gets fixed into specific programmes like Make In India, how much emphasis gets put on investment, growing industry, these are the things which might change.So, there are some programmes that will move in one direction.
Will this help Mahindra?
The three things that I said will definitely move in the positive direction, no matter who the government is. Farmers, rural and infra, all three are positive for Mahindra. Infra means higher automobile sales, infra also means higher tractor sales, farmers also mean obviously higher tractor and higher agriculture equipment sales. What probably has to revive a little more is urban demand which is under pressure.
See Mahindra cannot win if the industry is not doing well. I may increase market share but market on a smaller is still a small volume. So, first we have to have both the industry growth and as well as Mahindra growth within the industry. Both are important.
Tractor industry will grow and every player will try to increase the market share and Mahindra will. I think we are well placed, but then again everybody thinks that they are well placed. And as far as automobile is concerned, I think it will depend to some extent on policies of new government.
With BS VI approaching, what are the challenges for Mahindra?
Right now, the biggest challenge for the whole of auto industry is BS VI. So, the challenge maybe more for one player than for the other but everybody will have that.
Beyond that, it is always about the products, investments for the success of new products. Mahindra has launched three new products in the last four months, so we are relatively fresh in our portfolio and will do the next set of launches post BS VI and again then, we will update our portfolio but the important thing is that now we have plugged all the sub segments of UV.
So, after launching Marazzo, Alturas G4 and SUV300, everything is done and we don’t need to come into a new segment.
Tata Motors and others have also scaled up in the EV space…
The biggest difference is we know the business and everybody else is coming in. We have recently announced that we have completed a million kilometres on electric vehicles. We have a fleet of more than 7,000 cars on road. I don’t think anybody is close to that.
So that experience should give us an edge over others. Technology is available to all players. It is how you integrate it and what kind of product planning that you do, what range, what cost, all that we will look at…
In the ’90s, you left General Motors in the U.S. and joined Mahindra. You are called the father of Scorpio. Has the journey been satisfying?
Obviously it is, I wouldn’t be here otherwise. I had worked at GM for 14 years; and as we moved home I found a very old T-shirt that was given to me at my farewell function of GM.
The T-shirt said “Father of Flare”. Because that was the work that I did at GM; my 14 years of work was in one software programme that I developed called “Flare”, which is being used in GM even today, I am told.
It is about CA analysis of engine components, of bearings, of connecting a lot of pistons… And I wore that T-shirt and surprisingly still fit into it.
I am a father of two kids I guess — the Flare and the Scorpio.