Automotive Industry Growth Dips On Downbeat Customer Sentiment

Indian Automotive Industry Growth Dips Downbeat Customer Sentiment
Automotive Industry Growth Dips On Downbeat Customer Sentiment

The Indian automotive industry has witnessed a year of slow growth in FY2018-19, with overall domestic sales standing at 5.15 % when compared to the previous year. This has been the case even though the total vehicles production across all categories in FY 2018-19 has seen a growth of 6.26 % over the same period last year. The commercial vehicles segment witnessed the largest growth of 17.55 % in domestic sales over the same period, with the passenger vehicles segment reporting the lowest growth to the tune of 2.70 % when compared to FY 2017-18. However, scooters was the only sub-segment to register de-growth of -0.27 % in sales in this fiscal.

In terms of exports, the passenger vehicles segment experienced the most dip, reporting sales of -9.64 % for FY 2018-19 in comparison to FY 2017-18. The three-wheeler segment gained the most, in terms of international sales, posting a 49 % increase when compared to the previous year.

The Indian automotive industry, which comprises passenger cars, commercial vehicles, three-wheelers and two-wheelers, saw sales crossing the 25 million mark for the first time, to end at 26,267,783 vehicles. Despite this milestone, the growth in sales has been sluggish when compared to the previous years. The industry experienced a good sales growth rate of about 10 % in the first half of FY 2018-19, with the second half of the year experiencing a de-growth of about 1 %.

Rajan Wadhera, President, Society of Indian Automobile Manufacturers (SIAM), noted various factors such as the floods in Kerala, commodity price increases, lower lending from NBFCs for vehicle purchase and insurance premium increase have dented customer sentiments across various segments. In addition, Wadhera said historically, the Indian automotive industry has experienced lower growth during years when general elections take place and added that this is subsequently followed by growth. He expects the industry to experience the same this time around.

SIAM said that a positive enabler of growth in sales would come in the form of the industry’s move towards the new BS VI emission standards ,standards, as there are expectations that pre-buying of BS IV vehicles would happen in fiscal 2020 before BS VI implementation comes into place. The industry body also expects the government expenditure on infrastructure and road development as well as new launches to act as growth enablers for the automotive industry.

The Federation of Automobile Dealers Associations (F A D A) had observed that even though vehicle sales for FY 2018-19 ended on a positive note, consumer sentiments still remain weak. Automotive sales in March, 2019, witnessed marginal growth after a sharp dip in the previous month. The tight situation of both consumers and dealers liquidity, along with inadequate working capital availability were seen as major causes for the weak performance of the automotive industry in FY 2018-19. However, the dealers’ body has welcomed the initiative of the RBI towards monetary easing, and appreciated the steps taken by most OEMs towards easing of dealer inventory from the historic high of February 2019.

The association believes that the worst for the automotive industry is now behind, with expectation of plateauing of the declining demand, noted Ashish Harsharaj Kale, President, F A D A. He said F A D A expects sales to stabilise in their current normal range till the country’s general elections conclude, and the monsoons set in. A stable central government, above-average or average monsoon and continued easing of monetary policy by the RBI will once again begin the positive run of Indian automotive retails, F A D A noted.

Overall, a number of factors, both geographic and economic have hurt consumer sentiment, which has in return led to sluggish sales results in the automotive industry. However, the period-post general elections as well as the implementation of BS VI emission standards in April, 2020 are expected to see the Indian automotive industry post a good level of growth thereafter.