Will Auto Gloom End In 2020?
Businessworld|23 November 2019
Will Auto Gloom End In 2020?
A lot is riding on the early recovery of Indian automobile sector which is launching diverse models at catchy price points to fight declining sales By Ashish Sinha & Siddharth Shankar
Ashish Sinha & Siddharth Shankar

As November drew to a close, India’s worst fears came startlingly true. Government data showed the economy had slipped further, with the July-September gross domestic product (GDP) growth slumping to 4.5 per cent, the seventh straight quarter of fall. And nowhere was this deceleration more apparent than in the country’s automobile industry. And justifiably so. After all, the auto sector contributes more than 6.5 per cent to the country’s GDP, and has strong backward linkages with supporting industries like rubber, plastic, auto-components and, of course, steel.

Beginning late last year, all segments including cars, two-wheelers or commercial vehicles have been consistently reporting dipping sales figures month after month. A fallout of this has been job losses at ancillary units and dealerships — 15,000 or more are out of work. There is a visible decline in passenger car sales every month (exception being October). Experts say the sector has virtually been set back by three-four years. Can it recover in 2020? Or will it take longer?

For the seven-month period ended October this fiscal, the car makers collectively have managed to sell 1.54 million units (15,48,486 units). In 2018-19, the car segment clocked total sales of 3.37 million units, the highest ever till date. Experts say if the average monthly sales for the remaining five months (till March 31, 2020) is around 200,000 units, then for FY 20, we will be staring at an estimated total sales of less than 2.6 million units, something the industry achieved in FY15.

To make matters worse, the next four to five months are also expected to be very difficult due to the transition from BS IV to BS VI emission norms. What can the car makers do to reverse the decline? What can the consumers expect in 2020?

Incidentally, India is not alone in witnessing a slowdown in car sales. Auto sales in the Asia-Pacific, estimated at around 44 million units in the previous year, could contract by up to 3.5 per cent this year. Even in Germany, automobile production has reportedly declined by over 10 per cent in the first half of 2019. Why? Due to declining sales in North America.

October Cheer?

The festive month of October did bring a small cheer when around a dozen carmakers reported a 1.5 per cent growth over the same period last year. In number terms, the carmakers sold a mere 4,020 units more than in October 2018. Also, barring three carmakers who together reported a Y-o-Y growth in October, the rest reported declining sales numbers. These performers — Maruti, Renault India and Volkswagon — have brought back a faint smile on the faces of industry experts. The worry is that it may be an exception than any sign of recovery. Agrees R.C. Bhargava, Chairman of Maruti Suzuki India. “Both in retail and wholesale, October looks okay but that does not mean we are out of the woods yet. It is still too early to tell if it is a turnaround,” he says.

Market leader Maruti clocked a 2.3 per cent growth in dispatches of its passenger vehicles to dealers in October. Since March, this was the best figures Maruti had clocked selling 1.39 lakh units. Renault posted a 63 per cent jump in sales selling over 11,500 units on the back of its recently launched sub4-metre, 7-seater, Triber.

Volkswagen managed to sell a few cars more than what it had sold in October 2018. It reported a sale of 3,213 units against 3,191 units in October 2018. New entrants like Kia Motors and MG Motors between themselves sold over 16,000 units thereby helping the industry post an overall growth.

Continuous Pain

S.S. Kim, Managing Director and CEO of Hyundai Motor India, terms the current slowdown in the market as a “cyclical phenomenon” which, he says, will phase out as the socio-economic situation improves. But the big worry for carmakers in general is the sluggish credit market as nearly 40 per cent of Indian car and two-wheeler buyers depend on loans. Poor economic sentiments have deterred new buyers, a big contributor to declining car sales.

articleRead

You can read up to 3 premium stories before you subscribe to Magzter GOLD

Log in, if you are already a subscriber

GoldLogo

Get unlimited access to thousands of curated premium stories, newspapers and 5,000+ magazines

READ THE ENTIRE ISSUE

23 November 2019