Okay, moving on now. Today, 22nd September marks exactly the one-year anniversary of India's GST 2.0 reforms launched on this exact day last year. Tax slabs were streamlined from the four-tiered structure of 5, 12, 18 and 28% into two tiers. There was 5% and there was 18% and there was a 40% luxury tax which was imposed. Many electronics and small cars, motorcycles up to 350 cc saw their tax rates slashed from 28 to 18%, spurring consumption, while common products like soaps, shampoos, toothpaste saw their slab rate get dropped to 5%. Automobiles emerged as one of the clearest winners. Rajesh Jejurikar, ED and CEO of Auto and Farm Sector at M&M is now here with us and we'd like to discuss with him the GST cut, can the demand sustain, and commodity cost concerns. Thank you very much, sir, for joining in. This is Reema here. One year in, do you think it's possible to say how much of the increased growth that you had in the last one year is on account of the GST rate cuts?
Reema, high pleasure to be here on this, what you may call, the first-year anniversary of the GST cut. It has been a landmark decision, as we said last year itself, because it did get the economy into momentum and some of the categories that we play in, especially LCVs and tractors, definitely got into a very high momentum post the GST cut. A few numbers: if you were to compare the pre-GST period last year, which is April to August, with the growth and compare the growth with the post-GST, which is September to January, then our UV growth was 26%, LCV growth was 30%, and tractors was 36%. So you could clearly see a base effect. Of course, there was some postponement of sales that had happened during the GST transition and there was a festival sale, but even if you leave that out and just compare the April-August this year versus April-August last year, the growths have been very healthy at 17% for SUVs, at 20% for LCVs, and 17% for tractors. So it has definitely been a big driver in our view, and one of the reasons why we believe this has been a big driver is that it got the overall economy into momentum. So if you kind of think of a usage situation with light commercial vehicles, when goods movement demand is going up because multiple other sectors got into growth as well, then customers tend to be buying a light commercial vehicle. Likewise, there was a logic on both light commercial vehicles and tractors by way of how, because acquisition cost was relatively going down, the customers got a much better return on the cost of ownership. So yes, we believe this has been a landmark policy move and it's really helped get momentum into our sectors.
Mr. Jejurikar, so on account of the GST cut, prices were slashed. Prices came down and that increased affordability. But since then, on account of commodity inflation, most of the auto companies have gone ahead and raised prices. So today, as we speak, is the price advantage to the consumers on account of the GST cut still visible, or has inflation clawed back that entire advantage? What is the difference in price now, if you could explain that?
Yeah, GST cut was in the region of 8-odd%, then maybe 6-7% out of that has been covered because of commodity inflation. But let's think of a scenario, Reema, if GST cut had not happened, then we would be at last year August prices plus that 6-7%, right? So that would have put the economy into a very major negative. So one year later, we still are not at the same prices as we were at last year, but many sectors of the economy still are seeing high demand and actually, at the moment, the constraints are more around the supply chain and the disruption out of that than on the demand side. So yes, prices have gone up, but let's visualize a scenario that if GST cut had not happened, then we would be having that kind of inflation on top of last year's prices.
Got that. Mr. Jejurikar, good morning. Prashant here, and thanks for joining in. What's the outlook? Now we've looked back, let's look ahead for a little bit. For example, tractors, because tractors have seen perhaps the fastest growth, right? And it's not as if growth came on the back of a — I'm talking about, for example, the last 12 months. The prior 12 months were also strong, and then this period has also, post the GST cut, been strong and stronger. Have we seen the highs here in terms of rates of growth? Will we likely see a bit of a tapering off, not just because of the base, but some of the other factors which Reema also mentioned, and interest rates, commodity costs, etc.?
Yeah. So let me first — Prashant, good to be with you. Firstly, just take the question around tractors. Tractors has seen, as you rightly said, a very strong growth momentum, and there will be a base effect as we look into the second half by way of growth percentages, which is why our call-out for this year for tractor growth was 5%. We haven't yet changed that number. That's what we had put out for this full financial year, which was much lower than last year's growth. That was taking into account all the factors that you just mentioned: one, base effect; two, a delayed monsoon; three, reservoir levels a bit under pressure. So all of these combinations were taken into account when we said that the demand for tractors, or the growth of tractors for the industry this year, would be in the range of mid-single digits is what we've called it, so around 5%. We're still staying with that, and let's see how the festival season goes. But clearly, yes, you're right that tractors will see a softening as a percentage of growth on account of the reasons we just spoke about.
Could you give us that same kind of look back and look ahead as far as SUVs is concerned?
Yeah. So on SUVs, beginning of the year we said that we would grow mid-to-high teens, and we stay with that number. We are on track and close to doing that as the first half is coming to an end. On the LCVs, we had said high single digits, which is close to 9-10%. The first half has seen much higher growth than that. We have factored in that there will be a base effect in the second half as well on LCVs, which is why for the full year our guidance was high single digits on LCVs.
Okay, sorry, on SUVs, I think your growth in August was much higher, right? Close to about 50% domestic SUV, is that correct?
Yeah, Reema, that is correct. That is also because last year August and September went through a GST transition, so August last year was on a very low base because we were not dispatching products where the GST rate change was happening. Using August last year is not necessarily a representative number.
But you are increasing production. Your monthly production is also going to go up effective September by nearly 4,000 units, I believe. So is that going to spur up demand, because your products have a long waiting period now? With increased capacity, what is the kind of growth rate we should expect in the festive season cumulatively for the next three months?
Unfortunately, won't give you a specific guidance going into the festival season. All I would say is demand is robust. It's really a question of how well we can manage our supply chain. There are still many disruptions and the volatility in the environment is not going down by any stretch of imagination. I mean, we have some kind of rising tensions again in West Asia which will affect a little bit of the supply chain again. So we've got to watch and track this closely, but all I would say is the demand scenario as we get into the festival season is strong and robust.
Hi Raj, good to see you. What about price increases? I think you'll have taken a few this year, and as you've mentioned, supply issues, some of them do persist. Input costs have gone up, as we know. Should we be bracing for one more?
Nigel, hi, good to see you. Yes, we've taken a few price increases, and I just gave that number to Reema, which has been between January and July about 6 to 7% cumulatively. The last one in July was 2.4%. We are tracking closely the situation and hard to say right now. We haven't made a view on what we will do, but yes, if needed, based on what's happening on commodities — and they're not softening right now with continued tension in West Asia — we will take a view again whether we need to do anything, which may not be very substantial, but we'll take a view.
All right, let's talk about the EV part of the business then. That's been picking up a little bit. I think the production numbers as well have been increasing, demand has been quite good. Give us insights out there, how's demand on that front if you could help us out, and also how do you look at scaling up the monthly production number in the EV vertical?
Yeah. So demand in EVs has been very strong, Nigel, and the reason for that is our belief always has been that any new category will go through a period of early adopters coming in and then an inflection point where you have enough word of mouth which gives customers confidence on the new category. We believe EVs has now reached that stage where customers are not so worried about things which were a barrier for them 12 to 18 months back. That combined with the strong value that our products bring, the high desirability of the brands, design, tech, noise, comfort — all of that is creating a very compelling proposition. We hence have seen a very strong demand. We are now selling about 7,000-8,000 a month of our electric SUVs. That was the kind of supply we had set ourselves up for. As we had said, we will ramp that up by March 2027, which is when we would see the next level of expansion of capacity. But demand has been strong, product acceptance has been very good. We recently did a refresh on the BE 6 Sporttech variant as we called it, and that too is getting a very good feedback. So overall, all three products are doing very well right now on the EV side, and we think the category is set for growth.
