Tuesday, October 04, 2022

News Destination For The Global Indian Community

News Destination For The Global Indian Community

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Automobile Sector Facing Shrink

Automobile Sector Facing Shrink

Car sales have fallen in recent months. Is this because of consumer demand contraction and a lack of appealing models?

The Indian automotive industry is on the skids — after five years of increasing sales growth, the last couple of quarters have been devastating in terms of sales. In May, sales for the single-biggest driver of the Indian car market Maruti-Suzuki dropped 26 per cent on a year-on-year basis. Most other car manufacturers fared equally badly. While many in the industry had mentioned that there was a historical slowdown in consumer demand across categories, the slowdown this time has not only been steeper than usual but it began earlier and even as the elections concluded, demand remains quite slow. There is some expectation that demand might recover now that a stable Government has been sworn in, but with economic growth figures being depressed, any signs of growth might just be a mirage.

But is it all just about the economy? There are those, who believe improvements in public transport in major metropolitan areas — with Metro construction and the rise of app-based taxi services such as Ola and Uber — have played a role in the decline. That might be the case with a very small, select group of potential car buyers. But it is unlikely to have had a major impact on two-wheeler sales, let alone commercial vehicles, both of which are also suffering, thus hinting that the sales slump is all to do with the economy rather than changing patterns of ownership. And if it were not for the demand boost from private taxi owners, demand might have been even more muted. But in India, last-mile connectivity is still a problem even in cities with tolerable public transport. Commuters in areas such as the National Capital Region (NCR) have such huge distances to traverse that owning personal transport is a necessity for many Indians. So, how can the Government as well as the auto industry boost car sales? One way will be for the auto industry to wean itself off the large net margins it has for years, passing through some of the efficiency benefits. The Government, while promoting public transport, must realise that the automotive industry is vital to the economy and job-creation. It should rationalise some of the excise duty norms for personal transportation. In addition, muted economic growth would mean that interest rates are almost certain to come down but banks have to start issuing more loans. With a stable Government at the helm and economic growth high on Narendra Modi’s agenda, the industry should be able to recover smartly.

Writer: Pioneer

Courtesy: The Pioneer

Automobile Sector Facing Shrink

Automobile Sector Facing Shrink

Car sales have fallen in recent months. Is this because of consumer demand contraction and a lack of appealing models?

The Indian automotive industry is on the skids — after five years of increasing sales growth, the last couple of quarters have been devastating in terms of sales. In May, sales for the single-biggest driver of the Indian car market Maruti-Suzuki dropped 26 per cent on a year-on-year basis. Most other car manufacturers fared equally badly. While many in the industry had mentioned that there was a historical slowdown in consumer demand across categories, the slowdown this time has not only been steeper than usual but it began earlier and even as the elections concluded, demand remains quite slow. There is some expectation that demand might recover now that a stable Government has been sworn in, but with economic growth figures being depressed, any signs of growth might just be a mirage.

But is it all just about the economy? There are those, who believe improvements in public transport in major metropolitan areas — with Metro construction and the rise of app-based taxi services such as Ola and Uber — have played a role in the decline. That might be the case with a very small, select group of potential car buyers. But it is unlikely to have had a major impact on two-wheeler sales, let alone commercial vehicles, both of which are also suffering, thus hinting that the sales slump is all to do with the economy rather than changing patterns of ownership. And if it were not for the demand boost from private taxi owners, demand might have been even more muted. But in India, last-mile connectivity is still a problem even in cities with tolerable public transport. Commuters in areas such as the National Capital Region (NCR) have such huge distances to traverse that owning personal transport is a necessity for many Indians. So, how can the Government as well as the auto industry boost car sales? One way will be for the auto industry to wean itself off the large net margins it has for years, passing through some of the efficiency benefits. The Government, while promoting public transport, must realise that the automotive industry is vital to the economy and job-creation. It should rationalise some of the excise duty norms for personal transportation. In addition, muted economic growth would mean that interest rates are almost certain to come down but banks have to start issuing more loans. With a stable Government at the helm and economic growth high on Narendra Modi’s agenda, the industry should be able to recover smartly.

Writer: Pioneer

Courtesy: The Pioneer

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