AC sales crash, EV charging puzzle & Trump targets trade | Who said What?S2E7

Summary

In this episode of 'Who Said What', Krishna dives into the impact of unpredictable weather on industries like air conditioning, where early monsoons have led to unsold inventory and lower profits. He also explores the challenges of India's EV infrastructure, highlighting the chicken-and-egg situation of charging stations versus electric vehicle adoption. The show further delves into Scott Bessent's insights on Trump's tariff policies, questioning their long-term effects on global trade and manufacturing. The episode connects climate, technology, and economics, offering a nuanced view of evolving global markets.

Takeaways

• 😀 The unpredictable summer weather in India caused air conditioning companies to face unexpected sales challenges.
• 😀 PG Electroplast experienced significant sales growth in Q4 FI25, but overestimated demand for ACs, leading to a revenue shortfall in Q1 FI26.
• 😀 High inventory costs and increased production capacity became major financial burdens for AC manufacturers like PG Electroplast.
• 😀 India's early monsoon season this year shortened the usual AC buying season, causing a mismatch between supply and demand.
• 😀 Public EV charging infrastructure in India is insufficient, with too many chargers poorly located and underutilized.
• 😀 Maruti Suzuki’s executive highlighted that inadequate charging infrastructure is holding back EV adoption in India.
• 😀 Despite efforts, Tata Power's plan to expand EV chargers is delayed due to low charger utilization and infrastructure issues.
• 😀 India faces a chicken-and-egg dilemma with EVs: more chargers are needed for higher adoption, but more EVs are needed for charger utilization.
• 😀 The Indian government’s initiatives, such as the PME drive scheme, aim to improve EV infrastructure but face practical challenges like grid connections and outdated transformers.
• 😀 Scott Bessent discussed how Trump's tariffs on India might be a negotiation tactic, aiming to revive US manufacturing through foreign direct investment (FDI), not permanent protectionism.

Q & A

What was the main reason behind the disappointing Q1 FI26 results for PG Electroplast?

The main reason for the disappointing Q1 FI26 results was the earlier-than-expected arrival of the monsoon, which compressed the summer selling season for air conditioners. This led to lower sales and higher inventory costs, impacting both revenues and profits.

Why did PG Electroplast's net profits drop by 20% in Q1 FI26?

PG Electroplast's net profits dropped by 20% because of a combination of lower-than-expected sales and fixed costs associated with their expanded production capacity. The company had invested in new factories, hiring, and higher rents, which couldn't be reduced despite the falling sales.

How did the weather impact the AC industry in India this year?

The unusually early arrival of the monsoon caused a shorter-than-expected summer season, which in turn affected the sales of air conditioners. AC companies, including PG Electroplast, were left with high inventory levels and were unable to sell enough units, leading to financial difficulties.

What was the confidence level of PG Electroplast before Q1 FI26, and how did it change after the results?

PG Electroplast was confident about their future prospects before Q1 FI26, with an optimistic revenue growth projection of 30%. However, after the disappointing results, they had to lower their revenue projections for the year due to reduced sales.

What is the core issue with electric vehicle (EV) adoption in India as discussed by Parto Banerji?

The core issue with EV adoption in India is the lack of a sufficient and reliable public charging network. Most customers are hesitant to use electric cars as their primary vehicle due to concerns over charging infrastructure, making EVs a secondary option to traditional fuel vehicles.

How does Maruti Suzuki plan to address the EV charging issue?

Maruti Suzuki plans to install public chargers across the top 100 cities in India to improve the charging infrastructure. However, they acknowledge that without a robust network, electric vehicles will remain a secondary car for most families.

Why is Tata Power pausing its plan to expand the EV charging infrastructure?

Tata Power is pausing its plan to expand to 25,000 public chargers by FI28 due to low utilization rates. Many of the existing chargers are underused, as electric vehicle penetration in India has not reached the expected levels, leading to inefficiency in the infrastructure.

How does the EV infrastructure in India compare to countries like Norway?

While India has about 25,000 public chargers, the ratio of chargers to EVs is still low, with one charger for every 14 EVs. In contrast, Norway has a better ratio of 25 chargers per EV. Additionally, in Norway, chargers are strategically placed and well-utilized, unlike in India where chargers are scattered and often unreliable.

What role does Scott Bessent play in the current global economic paradigm?

Scott Bessent is a figure who bridges conventional Wall Street finance with the new global economic realities, particularly in the context of Trump's trade policies. He provides insight into the economic strategies behind tariffs and the broader implications for global trade.

What is the potential long-term impact of Trump’s trade policies, according to Scott Bessent?

According to Scott Bessent, Trump’s trade policies, including tariffs, are a form of 'shock therapy' aimed at reshaping America's manufacturing sector. While these measures may seem protectionist, Bessent believes they are temporary and will eventually lead to a shift toward more domestic production and long-term foreign direct investment.