Automobile sector slowdown: what is behind india’s automobile crisis?

Automobile sector slowdown: This article is about india’s automobile sector. In india’s GDP the contribution of automobile sector is 7.5%. And the contribution of automobile sector is 49% in india’s total manufacturing sector. Then you surely understand how much important the automobile sector is for india’s economy. If we see on the basis of employment automobile sector gives about 1 crore jobs to people. So  automobile sector is important for india’s economy and for india’s GDP or employment. 

Automobile sector slowdown

From some past time there was going slowdown in automobile sector in india. Some companies of this sector have face the problem and many of this stopped their function. So this article covers the reason behind slowdown in automobile sector in india and the Finance Minister said that indian uses OLA,UBER most than buying automobiles and for this the crisis of automobile sector is going. Is it really true the reason that she said? And we try to understand the automobile sector fully and also the current condition of automobile sector.

In August 2019 according to data the sales of passenger vehicles was fell 31.57% from last years. It was the bad performance of last 22 years. For this bad time companies fired many employees. And many companies declared production holiday because the selling rate of car was decreased and the cars that already ready to sell was made bound to store in the companies. For this the inventory was growing. So companies declared production holidays.

Main Reason Behind Automobile sector slowdown

Firstly we see the Finance Minister said that youth uses OLA,UBER most than buying cars. Is it the real reason behind the bad performance of automobile sector. Let’s see. In August 2019 domestic cars were sold 115957 units. On the same month of previous year the saling units of domestic cars was 196847 units. So year on year the saling rate was falling 41%. But not only the sales of domestic cars was falling but also thd sales of trucks,tructors etc was decreasing. In india mainly Ashok Leyland,Tata Motors,Volvo Eicher,Mahindra makes medium and heavy duty commercial vehicles.

If we see the data of these companies then the whole matter was understood. In august 2019 this companies sold 12568 units of medium and heavy duty commercial vehicles. In same month of the previous year they sold 31067 units of medium and heavy duty commercial vehicles. So year on year the sales rate of this commercial vehicles was falling about 59%. If Ola,Uber were behind the crisis then here for commercial vehicles the sales rate should not fall. 

Start of Automobile sector slowdown

In automobile sector not only one or two companies performs bad but also the whole sector performs bad. Let’s see reasons one by one why automobile sector performs bad. This slowdown started on the festival season(september,october) of 2018. The automobile companies were too optimistic in 2018,so they manufactured cars heavily in advance. This festival season was not good for them and they did not perform such as they expected. The stock that they made fell in showroom and godown for many days.

Engine Compliances behind Automobile sector slowdown

Gradually the pressure was build up in those companies. Amid this Supreme Court took the decision that the sale of Bharat stage 4 cars would be stopped from 4th april,2020 because of the increasing of air pollution. After this goverment started Bharat Stage 6 or BS6 Norms. BS4 cars release 50 ppm sulfur but the cars with BS6 compliances release 10 ppm sulphur and help to reduce pollution. The sales of cars with BS4 compliances was stopped from 1st april,2020.

So many customers became conservative then and they waited for BS6 cars. For this the manufactured cars with BS4 compliances fell same. The cars with BS6 Ccompliances is obviously more than before. So the increasing of price of automobiles is decreasing the demand of automobiles. 

Now come with Ola,Uber point. Is there ola,uber behind the crisis of automobilea? As it was written before not only the demand of domestic cars but also medium and heavy duty automobiles was reducing. Ola,Uber continued their function or programme in metro and tier 2 cities. It is not started yet in rural and tier 3 cities. Ola,uber was before this crisis of automobiles.

It is not said that there was no impact on this crisis. But it happens slowly. Nowdays many prefers ola,uber than buying personal cars. And if this trend is followed by more then the impact will fall on the crisis but it is slow process. Ola,uber is a factor but it is not the one. And the other one which directly marks on automobile sector is consumption expenditure.

And when consumption expenditure falls then the effects of it are shown in automobile sector. In april to june,2019 private final total consumption expenditure growth was 3.7%. On this same quarter in 2018 private final total consumption expenditure growth was 7.3%. It said that total expenditure growth rate was reduced about half from last year and the effect of it directly fell on automobile sector.

Other Big Reason of Automobile sector slowdown

And the next other thing that you can not denied is the main reason behind the crisis( FMCG companies). The growth rate of GDP was 5% in 2019 but in 2018 the growth rate was 7.5%. The growth rate that was going is running behind about 6 years low. The direct effect of this slowdown of economy is fell on manifacturing sector. And most of these manifacturing sector is automobile sector. This slowdown also fell on FMCG companies.

In automobile sector electric vehicle is coming soon and goverment also create pressure. So many people wait for electric vehicle. This time is the down time of automobile sector. And every sector have face this problems. Tracking the automobile sector will become interesting because this sector will transform fully. Because electric vehicle will come and for this there will change many structural programmes of petroleum companies. It will be interesting to track and observe this transform.

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