The biggest headline for the day is some bit of a relaxation and relief coming in on the auto tariffs back in US. Firstly, break it down for us that how meaningful is this relief for the OEMs and the suppliers and what does it mean for the industry.
Jay Kale: Yes, definitely, some bit of relief has come in yesterday and you will have some bit of cloud over the demand side getting some bit of eased off and you will have the cost pressures that the OEMs were expected to face ease off.
But nonetheless, it is still early days and the devils in the details to see the exact contours of what exactly, where the relaxation has come in.
Overall, from a medium-term perspective, not only for auto tariffs but overall because of the other tariffs across sectors, you will see inflationary pressures in the US and mind you that couple of months back it was only the US that was expected to give a strong growth in terms of the guidance for many of the OEMs whereas other regions were expected to be weak.
Now, even US is expected to falter and yesterday we saw Porsche further cutting their guidance. They had cut their guidance once in Feb and now again they have cut their guidance in April. So, tumultuous times for global autos definitely, but some bit of reliefs here and there is always welcome,
The fact that Porsche has cut its guidance. There has been a withdrawal from Tesla. What is this signalling right now? We are headed in for a prolonged demand slump or do you think it is more to do with uncertainty?
Jay Kale: It is more to do with uncertainty which will eventually lead to demand slump at least in the coming months. There has been some bit of a pre-buying in the US as well in the last one or two months. So, obviously with the expected price increases, you will see demand slump in the coming months. And mind it was not as if that the other regions like Europe and China were doing well and it is just one region that has kind of hit the bump. It is actually the other way around that it was US which was doing well and supporting the global growth whereas Europe and China by any which way were weak. So, it was important for us to support the global growth which now also could take a back seat. Now that we are hearing that Donald Trump has signed an order to avoid levy stacking. How much pressure will this ease off or rather add to supply chain costs and weak consumer sentiment in the first half of calendar year 25? Are you seeing any easing on the back of this new order that has been signed?
Jay Kale: Yes, it is early days. We need to see the details and how that it will be different for different companies based on their supply chain as well as their production facilities in the US.
But like I mentioned there is no going back on slowness or slowdown in demand in the coming months because you will be still having some bit of cost pressures, supply chain pressures, disruptions in that and the suppliers effectively will get hit more by demand slowdown than individual company because it differs from supplier to supplier, component to component and OEM to OEM based on their localisation effort.
But as overall if I have to look at, definitely we are headed for much more pressures in the US market in terms of demand slowdown.
Now, let us focus back home because we have the numbers also coming in from the auto majors. We have the numbers from Maruti who is talking about a jump in the exports looking forward to a 25% YoY growth. Help us understand what has been your reading and the key takeaway from the auto numbers so far and which segments do you prefer the most?
Jay Kale: Yes, Maruti, TVS among the large players who reported in the auto space. One clear thing is that in last four months, there was a demand slow down and both the players Maruti and TVS did acknowledge that. There was an upbeat commentary from TVS for the two-wheeler industry going forward.
They guided for a similar kind of growth rate in FY26 that was seen in FY25, so that is around close to 8 odd percent.
But from Maruti’s side, passenger vehicle demand for the industry, they did mention about 1% to 2% growth. So, there was some bit of a relatively muted commentary on the passenger vehicle side and more of an optimistic commentary on the two-wheeler side. Our preference, of course, lies in terms of growth rate projections, two wheelers, followed by PVs, and then CVs.
