The Indian automobile industry has been going through a difficult phase for more than a year because of a slowdown in the Indian economy. With the ongoing situation where the manufacturing and sales have been even worse hit for almost a month, the car and motorcycle sales have been extremely poor in the past few weeks. In an important announcement today, PM Narendra Modi today announced that there will be Rs. 20 Lakh Crore worth of economic stimulus provided by the Govt. of India. This stimulus will be targeted towards all the sectors of society including the economically weaker section of society, middle class as well as industry. The details of the package will be revealed by the Finance Minister later on during the coming few days. But in this post, we are going to analyze how this stimulus package impacts the Car and Motorcycle sales in India which have hit a record low in the recent past.
Impact On Car Sales
Since there has been an overall slowdown in the economy with the income of businesses, salaries of the employees in most of the industries going down. Amid these job losses and salary cuts, the impact on the sales of cars is expected to sustain. It is expected that car sales will remain at poor levels at least for the next few months. Those who were already planning to buy a car, are delaying the buying decision under economic uncertainty. The stimulus package is expected to improve the overall sentiment in the economy, but it is unlikely to improve car sales much. We believe that it will take at least 6 months before we see any significant year-on-year sales improvement in car sales.
Impact On Motorcycles/ Scooter Sales
The situation on the two-wheeler sales is expected to slightly better compared to car sales. The reason is that two-wheelers cost roughly a tenth of the cost of a car. Because of the lower cost of two-wheelers, people who belong to the economically weak or lower-level working class, who can not afford a car yet, but are afraid to take public transport to work, will most likely go for a two-wheeler purchase. The number of such buyers is expected to be much higher than car buyers. So we expect that two-wheeler sales including scooters and motorcycles will recover much faster compared to car sales in India. The stimulus package is expected to focus more on masses (lower-income class) who are two-wheeler buyers compared to mid and high-income class (expected to be car buyers), which explains our difference in opinion between the car and two-wheeler sales. What are your views? If you find this post useful, please share this with your friends.
