Automobile sales: The Indian truth and the road ahead
- In Economics
- 07:47 AM, Sep 17, 2019
- Ranabir Bhattacharyya
The automobile sector in India has been at the centre of the debate over the last few months. Call it a cyclical or structural recession, the auto sales data indicate industry slowdown over the last few quarters. There are concerns from several economic and political corners as the auto sales data insights showcase sign of deepening economic slowdown. Very recently, Union Finance Minister Nirmala Sitharaman talked about Ola-Uber preferences among various other reasons for this slump. The reality is, there is indeed a slowdown and it is time to accept that and strategize accordingly. Let us not forget that China, the biggest car market in the world, is also experiencing a downward curve, leading to lesser production and ultimately ‘untimely’ unemployment.
Confusion over April 2020 deadline for BS6 standards
As per government directive, all Indian cars need to abide by Bharat Stage 6 (BS6) standard by April 2020. No doubt, with only 6 months left for the deadline, prospective buyers are taking time and waiting for the product line up of the giants in the automobile sector. At this present juncture of time, it is not appropriate to say that the deadline needs to be postponed. After all, there is no point in making compromises on health standards. But no doubt, the dilemma over BS6 compliant models has created a vacuum in the auto sales market.
The 'over-protective' stance of the banks
Whether you highlight the bad loans or increasing NPAs or high CIBIL scores of individuals, the banks, both public and private are rather sceptical and strict more than ever in giving out or approving loans. Naturally, this has created negative clout in the buyers’ market, putting a blot in the auto sales balance sheet.
Electric cars and the problem of lack of affordable choices in the market
There is no denying the fact that the current Narendra Modi government is looking for a gradual transformation from diesel-petrol run vehicles to electric car era. The last finance budget also witnessed more stress on electric cars. As of now, there are still confusions over electric mobility and other related issues. Presently, electric cars are expensive in India and mass adoption of electric cars still looks little bleak, at least for the next few years. Certainly, those who are planning to buy upon such, are waiting for the 'right' price tags.
Availability of good quality second-hand cars
This is another key aspect which is often avoided or skipped in major discussions. The seamless sales of second-hand cars in India is a reality in India thanks to some virtual platforms. This is necessarily creating a hurdle for the new entrants in the automobile industry.
Beginning of the era of self-driven rental car
5 years back, such an idea was considered to be absurd. But at present, many people prefer such options. There are various digital platforms which cater to self-driven rental cars, are making good profits. This emerging market is indirectly not helping automobile sales situation.
Low economic activity
It is yet again a global trend impacting upon the Indian context. The so-called liquidity crisis has resulted in a very cautious approach from the great Indian middle class. And make no mistake, this is not a case of necessary monetary or human resource themed stimulus packages. The overall curve of the Indian rupee is not steady enough to instil confidence among Indian buyers.
The partial Ola-Uber effect
Well, in the domestic sector, the Ola-Uber makes sense but that too in urban segments. Over the years, barring the metro cities, public transport hasn't been too kind in India. The whole idea of smart vehicles has ushered a new era and common transport has become elitist and that too within an affordable cost. But the same can't be said or termed to be applicable in case of trucks and other heavy vehicles.
Let us accept the simple fact that no industry keeps growing without a slump. Sloppy Automobile sales don't indicate that people will stop buying new cars soon. It may take a year or two for the automobile industry to be back on track. On the other hand, it remains to be seen whether the state-run public transport systems can garner revenue in this context. With stricter Motor Vehicle Act rules, one can expect a complete overhaul of the transport system in India. But let's not forget that using older cars isn't a solution as the countrymen and women are also victims of different types of pollution. Lastly, the millennials are going to decide the fate of this industry. As data days, 46% of car buyers in India are first time buyers. With no visible change in ownership in India, it is too early to say that India is witnessing a structural change in buying pattern in the automobile sector.
Comments