In July 2019, auto sales have hit rock bottom recording the biggest Year-on-Year (YoY) sales decline of 30.98 per cent which the auto industry has witnessed in almost two decades. It was in December 2000 that the industry had faced a bigger YoY decline than this. The downturn is a result of the overall economy slowdown which has taken a toll on customer sentiments and the passenger vehicle (PV) segment which was the fastest growing segment in terms of sales has taken the strongest blow. The impact on the technological developments, people working in the industry, ancillary depending on the auto sector and the overall progress of the industry is adverse. The critical situation has been concerning several automakers along with industry bodies like the Society Of Indian Automobile Manufacturers (SIAM), Automobile Component Manufacturing Association (ACMA) and Federation Of Automobile Dealers Association (FADA).
Here are the top 10 takeaways from the massive downturn.
- The sales have been spiralling down for the last nine months and in July the Passenger vehicle (PV) segment has recorded a YoY sales decline of 30.98 per cent selling 200,790 units as compared to 290,391 units which were sold a year ago.
- The auto sector has witnessed a situation even worse that this 19 years back in December 2000 when the YoY decline in the passenger vehicle segment was 35 per cent while the passenger car segment saw a percentage slump of 39.86 per cent.
- The Slowdown has triggered several job losses and according to SIAM an estimated 10 lakh people could be laid off from the entire industry.
- The component industry and OEMs are already feeling the heat of the situation. About 1 lakh people have lost jobs from component manufacturers and 15,000 people have lost their jobs from the car and two-wheeler manufacturing industry.
- India's largest carmaker- Maruti Suzuki had to lay off about 6 per cent of its workforce while Nissan India recently let go 1,710 employees in India.
- The auto sector employees 39 million people and contributes as much as 49 per cent to the manufacturing sector's GDP. The country's GDP grew 5.8 per cent in the quarter ended March 31, 2019 which is the lowest rate of expansion in almost five years.
- The slowdown comes at a time which is even more crucial as the industry is gearing up to meet the upcoming emission and safety norms. Carmakers and component makers have together invested about ₹ 80,000 crore for the BS6 transition and if the sales don't pick up, the industry may find it difficult to recover the invested capital. Therefore, carmakers may end up increasing prices in a bid to sustain required margins to operate.
- That said, the wholesale (dispatched stock) is also low as carmakers are reducing their inventories before the onset of BS6 emission norms which bars the sale of all the BS4 models, April 2020 onwards. The retail PV sales in July 2019 was down by 5.56 per cent YoY selling 259,481 units as compared to 274,770 units sold a year ago.
- Delegations from SIAM along with several automakers have recently had dialogues with the Finance Minister, N Sitharaman demanding to reduce the GST rates on PVs from 28 per cent to 18 per cent.
- The government had assured SIAM of a review and has announced to formulate a revival package for the entire auto industry, the details of which are awaited.