Reasons behind India''s Auto Market Shrinkage

India’s acclaimed automobile sector has experienced the worst kind of slowdown since a few months now and its offbeat sales fall has ceased with tremors in all over the country.

Below mentioned are the concerning cumulative sales numbers of major automobile companies in July 2019 -

• Maruti Suzuki India faced 33.5% decline to 1, 09,264 units

• Hyundai Motor India dropped by3.8 per cent to 57,310 units

• Mahindra & Mahindra slumped by 15 %in total sales to 40,142 units.

• Honda Cars India has decreased by 48.67 % to 10,250 units

• TVS Motor Company has deteriorated by 13% to 2, 79,465 units

• Royal Enfield sales went down 22% to 54,185 units in the same month

India’s automobile industry holds 49% of the country’s manufacturing GDP and employs 37 million workers altogether. As reported by the Society of Indian Automobile Manufacturers (SIAM), 3, 50,000 jobs (mostly contractual) have been lost and more than a million are at stake because of plant shutdowns and insolvency of dealers and component manufacturer business.

Amidst of the economic crisis with the nation’s GDP growth is already down to 5% in April-June quarter along with a sink in cars sales is tearing down multiple leading and trailing industries including parts and components, steel, tyre and retailing.

Here’s a look at some of the root causes that have wracked the Indian auto industry:-

Stringent credit provisions

Due to current economic setback, banks across the country have made changes in their policies. These changes include lending loans only to people with a high CIBIL score. This has knocked auto dealers and customers specifically from tier 2 and tier 3 cities.

BS6 Ambiguity

Bharat Stage 6(BS6) standard is emission norm set by the Indian government. This norm is applied to both fuel and the engine. India is all set to plunge into tough BS6 emission guidelines on all the vehicles by 2020 given that BS6 compliant engine is supposed to be less polluting. This is a spoiler alert that has baffled a lot of potential buyers; if they should purchase a vehicle or delay it until there is more clarity regarding BS6-compliant model choices.

With the upcoming BS6 policy, carmakers have gradually started phasing out diesel cars with huge discounts before April 2020. Moreover, there is a heavy cost involved in manufacturing diesel engines compliant to BS6 standards with an anticipated hike of at least a lakh rupees for all diesel-powered car variants.

Ola –Uber factor in overcrowded cities

With the boom of online fare payments, we have convenient cab services from apps like Uber and Ola. Due to the outbreak of several vehicles on the roads today, there is traffic congestion everywhere, especially in tier 1 cities. That is why time and energy utilized in working or resting in the cab at the time of commute is more appreciated than driving.

These ola-uber apps appear to be more satisfying than buying own car with the struggle of driving through extreme traffic, hunting for a suitable parking space and bearing maintenance cost. These factors have challenged the ownership thought since people expenses are curtailed with regular ride-share use.

Electric vehicle urge

The Indian government has proposed an ultra-push for absolute electrification to all vehicles by 2030. Due to this EV plan, people fear that any vehicle they buy could become extinct in the next decade. This fear has led to investment uncertainties for carmakers and has drained down the current sales as well.

The development of electric powertrains, battery tech and charging infrastructure in addition to customer’s affordability is a harder goal to achieve. Even though the Indian government has reduced GST rates for EVs, it will certainly take its sweet time of around eight years for mass-market adoption.

Miscellaneous determinants

It is no accident that there is an uproar of tax cuts. At the same time, there is loads of stuff going on regarding changes in regulations and government policy, particularly higher road tax, rising insurance costs and GST.

It makes sense for people to not act until things have stabilized. Despite that major remedial measures are needed to unplug the industry from this downturn.