Dipping Sales A Concern for OEMs, Suppliers and Dealers: Frost & Sullivan

Dipping Sales A Concern for OEMs, Suppliers and Dealers: Frost & Sullivan
Dipping Sales A Concern for OEMs, Suppliers and Dealers: Frost & Sullivan

The Indian automotive industry is going through a challenging phase with vehicle sales during the festive season of 2018 being noticeably lesser than industry expectations and sales numbers have continued on a downward spiral ever since. According to Kaushik Madhavan, Vice President, Mobility Practice, Frost & Sullivan, a variety of factors have contributed to the below-par performance of the automotive industry.

Madhavan said although the government has announced the implementation of FAME II incentives for electric vehicles, there is an overall uncertainty sentiment. It is important to point out that the country’s largest car-seller Maruti Suzuki India Limited has revised its growth forecasts and reduced targets. Madhavan said this move only accentuates the concern among vehicle manufacturers about their monthly sales during the next three months – April-June 2019.

Significantly, automotive dealers have been left with large volumes of unsold stock over the last six months. Madhavan said such a market scenario is putting pressure on OEMs’ profitability and liquidity so much so that dealers are now reluctant to accept fresh stock from vehicle manufacturers, prompting them to balance volumes by rationalising production. Dealers across passenger vehicles and two-wheelers are expected to focus more on inventory management and liquidation over the next 2-3 months, he noted

Automotive OEMs could be in for a tough time given the fact even as BS VI emission norms kick in by April 2020. Madhavan said the new emission norms is also expected to increase vehicle prices by 10-15 % depending on the segment, thus further squeezing the margins of OEMs. There is a huge possibility that while consumers, especially in the price-sensitive segments, could postpone their vehicle purchase further into 2020 till the price hike settles down, commercial vehicle fleet operators are expected to resort to pre-buying just before the new emission norms kick-in, which effectively means that there could be a temporary spike in sales during the last quarter of the 2019 and in the first quarter of 2020, he observed.

The Frost & Sullivan senior official said the Indian automotive market will attain various milestones with long-lasting effects over the next 12-16 months. The emission and safety regulations are expected to bring India closer to the global standards, but the subsequent impact on vehicle pricing is likely to play spoilsport on sales volumes as consumers are likely to play the wait-and-watch game before opting for any vehicle purchase, he signed off.