India's automobile industry seems to be moving from bad to worse. Capping the uninterrupted decline in sales for nearly a year, the latest figures show steady decline in all segments. In the first quarter of the financial year 2019-20, vehicle production fell by 10.53 per cent over the corresponding period in the previous year, and a decline of 12.35 per cent in sales. In number terms, 72 lakh total vehicles were produced in the three-month period this year, compared to 80 lakh last year.
The figures for last month are even more stark. Vehicle sales in the country fell by 12.34 per cent last month over all, while companies cut production by almost 13 per cent. In indicative categories like passenger cars, sales have dropped by a massive 24 per cent. Goods carriers, an indication of economic momentum, fell by 18 per cent while scoooters plunged almost 15 per cent. Sale of motorbikes decreased by almost 10 per cent while that of mopeds fell by almost 22 per cent—an indication of a gigantic slump in economic growth and decline in demand in rural areas.
“I think...this is the worst phase India's auto industry has seen,” remarked Society of Indian Automobile Manufacturers (SIAM) president Rajan Wadhera, who unveiled the data. “There were patches of de-growth in 2009, 2011 and 2012, but the government stepped in, tax incentives were given and situation got better. (But) This is probably the most prolonged de-growth phase we have seen.”
“This is not good for the country, this is not good for jobs,” he added ominously. Estimates are that about 3.7 crore people are employed in the auto industry in India, directly or indirectly.
If the low consumer demand, financing issues and hiked insurance costs that has led to decline in automobile sales wasn't enough, what has further incensed the auto manufacturers has been the government's unsympathetic stance. The industry had asked for a reduction in GST on vehicles to boost growth, as well as relief in the budget in the form of a scrappage policy for old vehicles (so that new vehicles are bought), but nothing happened. If that was not enough, the cess on petrol and diesel, as well as increased duty on auto components was a body blow. Further adding injury to insult, government gave GST cuts and subsidies to the fledgling electric vehicle industry, with deadlines for three-wheelers (2023) and two-wheelers (2025) to go completely electric firmly in place.
The heavy investments in converting to BS-VI emission standards which are to come into effect from coming April 1st are already pinching them, and the industry feels pushed to the corner. “In the short term if we don't address (decline in sales), it will start affecting more people,” Wadhera warned, “more jobs will go down.” He pointed out how once revenues fall to below operating costs, companies will have no option but to cut jobs. Federation of Auto Dealers Association had already announced recently, how around 300 auto dealerships have shut down in the country in recent months. Many auto makers, including industry leader Maruti Suzuki, had cut production consistently in recent months.