There has been a global slowdown and India has been part of the same with the GDP growing at less than 5%, the lowest growth rate seen in a long time.

Auto industry slowdown to continue as demand unlikely to pick up Report
Money Automobiles Tuesday, February 11, 2020 - 07:47

The automotive sector in India may not recover soon from the reverses it has witnessed over the past several quarters. The industry is facing crises from multiple angles. There has been a global slowdown and India has been part of the same with the GDP growing at less than 5%, the lowest growth rate seen in a long time. It took some time for all the stakeholders to realise that it is the demand side that is shrinking despite efforts by the government to improve the situation.

The need to switch to the new pollution norm BSVI had its own ramifications, higher capex to add the appropriate machinery and technology. With the information that the older vehicles may be phased out, a lot of customers postponed their decision to buy new cars.

Now that the BSVI vehicles will start rolling out, some improvement in offtake may be seen. However, it may not match the kind of volumes the auto makers wound want. To add to the problem, the new BSVI cars will have to be priced higher making it even more difficult to sell the cars.

And lastly, a senior official in the government hierarchy has disclosed that the government is pressing ahead with the focus on electric vehicles and that put further pressure on the market. The companies had to rush back to the drawing table to come up with at least some models in electric mobility space. Companies like Tata Motors have already forged ahead with the launch of models while the others will not be found lagging behind. Again, it is not going to be easy for a highly cost conscious market like India to absorb the higher priced electric vehicles though the average cost of running them will be much lower than the cost of petrol and diesel.

All these possibly weighed in with the agency that prepared the report on the immediate future of the Indian automobile industry.

While most of what has been narrated above will be relevant to passenger cars segment, the situation with the commercial vehicles (CVs) is not likely to be any different. In fact, it could be worse.   

Coming back to this report, the projections are that the demand for passenger vehicles will grow by 2% to 4% in 2020-21 over 2019-20. The demand for commercial vehicles, on the other hand, is expected to fall further by 5% to 7%. Even the two-wheelers are likely to show negative growth of up to 5%.

The loss of sales during the three quarters, April to December 2019 in the passenger vehicles category, has been 16% and that of commercial vehicles 35%.

The only silver lining for the companies is that their own credit ratings may not fall since their liquidity position has not been affected.

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