The declining sales of passenger vehicles has been around for an year and the automobile industry might face a severe crisis with the emission and safety norms kicking in soon.
With June, 2019, it marks one full year that the automobile industry in India has been continuously seeing a decline in sales. The passenger vehicle (PV) segment has recorded a sales decline of 17.54% in June 2019, selling 225,732 units of vehicles against 273,748 units which were sold in the same month a year ago.
Sales of passenger cars saw a decline of 24.07% at 139,628 units of cars against 183,885 units which were sold in June last year. Vans also saw a de-growth of 18.70% at 13,187 units against 16,220 units which were sold a year ago. The Utility Vehicle (UV) segment has remained almost flat with a slight decline of 0.99%, selling 72,917 units against 73,643 units which were sold in the same month last year.
In the whole of Q1 (April-June) of FY2020, the PV segment saw a decline of 18.42%, selling 712,620 units as compared to 873,490 units sold in the same duration last year. Passenger Cars sales went down by 23.32%, selling 447,453 units against 583,547 units sold a year ago. Vans segment saw a decline of 25.66% at 40,943 units as compared to 55,078 units sold in the same period last year. Sales in the UV segment declined by 4.53%, selling 224,224 units against 234,865 units which were sold the previous year.
The situation is actually a little more critical than what meets the eye. With the new emission norms and safety norms kicking in next year, the entire automobile industry has invested about Rs. 80,000 crores for this transition, according to SIAM. This major transformation has become a major concern for the industry because if sales continue to decline, there is a risk of capital blockage and it would be difficult for manufacturers to recover the investment along with sustaining margins.
Even the new budget that was released a few days ago did not help the situation. All carmakers were really looking up to the new budget for reduced GST rates but that too did not happen. Rajan Wadhera, President- SIAM said, “We still want the government to reduce GST rates as if the de-growth in the industry will increase further, GST collection will also fall.”
The auto industry mainly has been on a decline since the past one year because of poor customer sentiments and inadequate credit facilities. Prices of cars have also increased over the years because the rise in input cost and one time payment of insurance premium. And prices will further increase with the BS-VI norms coming into effect. That said, SIAM is expecting the sales to marginally increase due to pre-buying before the emission norms kick in.