July auto slump worst in 20 years
At current monthly sales, FY20 passenger vehicle sales may fall to around FY15 levels
Between April-July this year, 913,410 passenger vehicles have been sold, with monthly average sale of around 228,352 vehicles. The same monthly average sales will result in around 2.74 million passenger vehicles being sold in 2019-20, a figure close to annual sales of 2.6 million in 2014-15 and 2.78 million in 2015-16.
Industry observers say auto sales will need to bump up substantially to avoid output falling to levels seen five years ago. But many aren’t very hopeful about next two quarters at least. “The slowdown seems deepening…low consumer sentiments with dim demand outlook over the next two quarters remain a cause of concern for the industry,” said Saket Mehra, Partner, Grant Thornton India.
SIAM D-G Vishnu Mathur said, “Even during the last two downturns in 2008-09 and 2013-14, vehicles sales had not fallen across all categories. Some segments were still growing. We have not seen such a severe slump in nearly two decades.”
3.5L Jobs Affected
Given the fall in demand, automakers slashed production affecting 350,000 jobs across vehicle manufacturing, component making and distribution segments in the past three months. These include 230,000 personnel employed by dealers, 100,000 employees in the auto component industry and 15,000 casual and temporary workers engaged by vehicle manufacturers. Around 300 dealerships across the country have downed shutter in this period.
According to industry estimates, a million additional jobs stand to get affected in the auto component manufacturing sector if the slowdown persists. The automotive industry employs 37 million people, directly and indirectly.
It contributed 49% to the manufacturing GDP, according to government estimates for FY16.
Rajesh Goel, director, Honda Cars India, said, “…the feedback we are getting from the market is that tighter lending norms and overall uncertain consumer sentiment are impacting spending decisions and postponement of purchases.”
Sales of commercial vehicles and two-wheelers in the period under consideration dipped by 25.71% (to 56,866 units) and by 16.82% (to 1,511,692 units) respectively. It was in December 2000 that passenger vehicle sales had dropped the sharpest by 35.22%. The industry body has been urging the government to bring down tax rate on vehicles to 18% from the current 28%. Apart from a reduction in producer tax rates, SIAM has also recommended that the government come out with a scrappage scheme to take off old polluting vehicles to trigger sales of new ones, and that the implementation of the proposed hike in registration fee of new vehicles be delayed.