Yamaha

Yamaha

FALL IN AUTO LENDING WILL HIT GOVERNMENT REVENUE

The Nepalese Automotive sector is amongst the top sectors making the largest contribution to the country’s economy. However, the recent regulations imposed by the government have hit this sector hard. In spite of a contribution of almost NRs 100 Billion to the economy in the running fiscal year, the government yet views this sector as ‘unproductive’ and has reduced the loan cap provided by banks and financial institutions to make a higher purchase. However, the dealers claim automotive industry is the real driver of the economic growth of the country. Hence, we sat down with the professionals from the Nepalese Auto Industry to discuss if halting loan disbursements and categorizing the auto industry as an ‘unproductive’ sector is the right move. Excerpts: 

Bibek Bdr. Balami

Incharge- Sales and Marketing

United Traders Syndicate Pvt. Ltd (Toyota)

AL: The current liquidity crisis has discouraged prospective customers from making a hire purchase. How are you handling this?

Definitely the liquidity crunch has baffled and stirred the automobile industry to its core. We faced similar situation with the earthquake and unofficial blockade but we bounced back. However, the current liquidity crunch seems to be the most severe one amongst all those incidents.

The financial crunch has definitely discouraged the potential clients. As the automobile sector major sales is directly dependent on the auto loan facility both goes hand in hand.

We are handling this issue with a) In-depth research on what problem the customers are facing b) Providing our clients a comfortable buying solution c) Personal visits to each clients and providing an overall all round solution d) Tying up with reputed banks to ease the auto loan hassle with a personal touch from the sale force

AL: Instead of helping the industry, the government has termed the auto sector as ‘an unproductive sector’. We are all aware that the auto-industry is being under estimated. How do you see that?

We are bewildered by the term ‘unproductive sector’. Before branding the automobile sector as ‘’unproductive’’, the government should look into these facts:

  • Automobile industry is the major top contributor to the government revenue. In the last fiscal year, the total automobile industry contributed around NRS 80 billion
  • In terms of employment, the automobile industry currently employees an approximate 17 lakh workforce throughout Nepal. This in turn reflects the engagement of automobile market in building the human capital asset of Nepal.

The automobile industry is not a self-sustaining industry; it works closely together with banks and financial institutions. So, once an impact hits the automobile industry, the productiveness of all these industries will suffer a similar fate.

AL: What scares you about the market right now? How tough will 2074 B.S. be for the auto industry?

What scares us the most is the continuation of the financial crunch and the continuation of the discouragement to prospective customers. We believe the industry is growing at a rapid phase. In spite of all the difficulties faced, the Auto Industry has created jobs, fulfilled peoples dream of buying their first vehicles, worked together in the development process by contributing to the taxation structure of Nepal government.

We think 2074 B.S. will be completely opposite to 2073 B.S. for auto industry. The beginning has already become a great hurdle so far. The increasing difficulty on auto loans, the uncertainty of the reduction of financial crunch will definitely affect the smooth operation of this industry.

AL: Finally, how do you plan to keep your sales humming during this time?

We plan to move forward during the current and uncertain future time by: providing best overall customer experience, tie-up with financial institutions to ease the trouble of auto loan to client and adaptive sales pitch to clients on case to case basis. We will move forward with the will and strategy to make through the present condition while providing the best Toyota experience.

 

Sudeep Acharya

Sr. Manager: Sales & Operations

IMS Motors (SsangYong)

AL: The current liquidity crisis has discouraged prospective customers from making a hire purchase. How are you handling this?

The current economic crisis has definitely discouraged the prospective customers from making a hire purchase. And the sales figures have also gone down rigorously. So, in order to tackle this, we have been focusing on the sales of cars in government sector, tender sales and duty free cars. Also, we have been doing regular activation programs at bank by providing them good corporate discounts and maximum exchange facility through exchange bonus. Nepal Rastra Bank has already allowed banks to lend 50% loan on hire purchase, however, due to the ongoing economic crisis, the banks have not been able to provide loan easily to customers. Therefore, we are facilitating our customers with easy auto loan financing facilities from some banks by using our business relationship. This is how we have been attracting new customers and converting them into sales.

AL: Instead of helping the industry, the government has termed the auto sector as ‘an unproductive sector’. We are all aware that the auto-industry is being under estimated. How do you see that?

The automobile industry is the real driver of economic growth of the country. The contribution of transportation sector to the annual revenue of the government is more than 25 % and the sector has already contributed almost NRS 80-90 billion to the government coffers in the running fiscal year.  Also, this industry is a major 24 AUTOLIFE APRIL 2017 employment contributor of the economy.

Automobile and transportation sector is the base for development of other sectors as it is directly related to mobility of people and goods. Halting loan disbursement will not only make this fiscal’s economic growth target of 6.5 % unachievable but also adversely affect the overall economy. We keep on hearing about government initiatives to make the transportation service efficient. However, nothing much has been done yet. The amount is utilized in other sectors but the development of infrastructure is poor. The road network in city areas has increased by just 10-15 % in the past two decades. Therefore, instead of terming the top revenue contributor as ‘unproductive’ sector, the government must be able to utilize the revenue fully in a systematic manner.

AL: What scares you about the market right now? How tough will 2074 B.S. be for the auto industry?

If this ongoing trend to lend only 50% of the total value will continue, then there’s a less possibility to see growth in the automobile sector. Also, the interest on higher purchase is higher than ever, so people are far more interested in depositing money in fixed deposit. If this continues on a longer run, we are afraid that the sales figure will go down to the lowest.

If the government doesn’t change this policy in the upcoming days, the automobile sector will continue to suffer. It will be very difficult to achieve the sales target and also regain the sales figure which was present before the government decision to halt auto loan. Even the government will bear a huge loss in terms of revenue generation affecting the entire economy of Nepal.

AL: Finally, how do you plan to keep your sales humming during this time?

We will continue our activation programs at banks, cement factories, housings & other targeted areas with attractive discount offers with loyalty bonus. We will also continue to help our customers through easy financing schemes. Since, our new facelifted Korando has arrived, we will launch the SUV soon with attractive schemes. With the increment in the market size, competition has surged too compelling us to offer more facilities and services to our customers.

Karan Chaudhary

Executive Director

Chaudhary Group

AL: The current liquidity crisis has discouraged prospective customers from making a hire purchase. How are you handling this?

We have had a fantastic start to the year which was promising to the automobile industry as a whole. Yes, the recent development in terms of liquidity crisis and harsh parameters on auto loan has had a denting impact on the industry. To ensure that customers can easily purchase their favorite Suzuki Cars, we have come up with a hassle free financing facility. We are also providing New Year scheme in form of free insurance and cash discounts. We are also continuously working with our local dealership in providing personalize solution to our customers.

AL: Instead of helping the industry, the government has termed the auto sector as ‘an unproductive sector’. We are all aware that the auto-industry is being under estimated. How do you see that?

Firstly, the term ‘unproductive Sector’ for auto industry is highly ‘debatable’. The automobile industry (both private and commercial) is the backbone for economic development of this country. Try halting automobile movement for a day across the whole country and the point will be validated. Other fact is that the automobile contributes large volume of much needed tax income to the government. There are many more arguments to the term ‘an unproductive sector’.

AL: What scares you about the market right now? How tough will 2074 B.S. be for the auto industry?

The volatile situation right now raises few eyebrows in terms of liquidity and government stance on the same. However, we are optimistic that the situation will be resolved soon. Till now, I don’t see any negativity going on to 2074 B.S. as this current crisis is going to bring out the best from us and our competitors while tackling the situation. This in turn will be good for the industry as a whole.

AL: Finally, how do you plan to keep your sales humming during this time?

As I mentioned earlier, we will be working closely with our local dealerships to provide the best possible solution. We will participate using various mediums to promote our brand and make our presence felt in the industry. Apart from this, we do have some exciting new product launches this year, in particularly the Suzuki Ignis. We will further strengthen our after sales service commitment this year making the ownership of Suzuki Brand a wonderful experience to our valued customers.

 

Arjun Karki

AGM – Sales & Marketing

Sipradi Trading Private Limited (Tata Motors)

AL: The current liquidity crisis has discouraged prospective customers from making a hire purchase. How are you handling this?

There is an overall slump in the industry itself as we are in a very tricky situation. As per our data, only about 40% of the total potential customers will make the final purchase. The tough task is to identify those 40% and target all the communications towards them. Since we have a small market, we have intensified the prospecting activities throughout Nepal where we ensure that anyone willing to purchase a car is at least exposed to our sales team. Apart from that, we have customized promotional schemes which are communicated to the prospects in person.

AL: Instead of helping the industry, the government has termed the auto sector as ‘an unproductive sector’. We are all aware that the auto-industry is being under estimated. How do you see that?

We are in no position to question the government. However, the decline in automobiles sales will ultimately hit the revenue source of the government. We hope that the financial cap on automobiles is only for a limited time period.

AL: What scares you about the market right now? How tough will 2074 B.S. be for the auto industry?

Behavioral change is very difficult especially in a growing economy like ours. What scares us the most is that the current decline in sales may not see immediate growth even if the financial cap is uplifted.The trust in the government policy is minimal and this will only further extend the regression in the automobile industry. 2074 B.S. is tough already. We are really hoping to hear something positive in the upcoming Budget announcement from the government.

AL: Finally, how do you plan to keep your sales humming during this time?

Reaching out to the prospects is the only way. As the good old saying goes “the show must go on”, we are very motivated to take on all the challenges. In recent years, we did overcome the earthquake and economic blockade. Hence, we will definitely move on accepting what the government has imposed upon the industry.

 

Rupesh Sharma Bhatta

DGM-Sales & Marketing

Laxmi Intercontinental Pvt. Ltd (Hyundai Nepal)

AL: The current liquidity crisis has discouraged prospective customers from making a hire purchase. How are you handling this?

It is said that the second biggest investment a person makes is buying a car, first being a house of course. Talking about the current situation, the banking system now allows only 50% financing. Looking at the past trend, almost 90% of the customers purchased vehicle through financing. But after the implementation of this rule and given the fluctuation interest rates in the banking world, customers have gone into a ‘wait and see’ mode rather than making a decision.

However for us, we have to sustain the business and keep going on, so we have come up with schemes that will favor the customers in this situation. The scheme is to pay the interest for a year through the company on customer’s behalf.

We are trying to advocate against the rule or make it more feasible through NADA to the ministry and Nepal Rasta Bank. Most of our target group buys vehicles as a need and not a luxury and we think the government must understand that fact and make rules accordingly.

AL: Instead of helping the industry, the government has termed the auto sector as ‘an unproductive sector’. We are all aware that the auto-industry is being under estimated. How do you see that?

When the government says ‘unproductive’, in our opinion, it is completely false because the auto industry provides mobility, it is not just for travelling, it is also for getting a lot of work done. Without a vehicle, the working system of any enterprise would take a lot more time energy and money.

It is not only sales, it is aftersales, and the spare parts business which will all be hampered in a lot of ways. Also, talking about the revenue contribution, almost 40% of revenue is generated from the automobile sector. We think the government is unclear about the prospects of the industry.

One reason why the government thinks that way can be because of the increasing population of the vehicles on the road but there are a lot of other ways this can be sorted out. We all see the condition of the public vehicles and how hectic it is for people to travel by it, so it is a necessity that people have a motorcycle at least.

Nepal is a small country, and if the public transportation was managed properly we would not have this problem in the first place, so rather than labeling the auto industry as unproductive, the government should plan more efficiently on that aspect while consulting the automobile industry as well.

We would say it was a hasty decision that needed more consultation.

AL: What scares you about the market right now? How tough will 2074 B.S. be for the auto industry?

Talking about the fears of the industry we think, all the rules of the 50% financing and dubbing the auto sector ‘unproductive’ came all of a sudden and we didn’t have a lot of time to assess the situation. The uncertainty of what the government is going to do next regarding our industry is what scares us the most. But looking at this year, we are hopeful that this situation will get better in the upcoming months and there will be a little stability. For now whatever we try to do from our side, the customers are reluctant because they also fear the uncertainty.

AL: Finally, how do you plan to keep your sales humming during this time?

Like we said before we are coming up with amazing schemes, our latest one was “Naya barsa hyundai ko saath ma” where it has improved the situation. The customers are still confused, they are not sure if the interest rates will stay stable or fluctuate again. Probably they have a plan on their personal budgeting and if that doesn’t match up it will be very hard for them.

We are trying our best through schemes; we are also trying to make our customers understand that 50% down payment is actually better for them in the long run. That is how we are going forward with this because as a business we have to cope with the regulations. We also have a warranty for four years instead of three which all helps the customers in this situation.

We are trying our level best to meet our beloved customer’s halfway and hoping that we go through this current financial situation together.

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