The slump in the auto industry has hit a record low in July, worst in 19 years, due to slowing economy, higher ownership costs and floods in some states. The sale of automobiles in India has dropped by 18.71 per cent, auto industry body SIAM reported. According to the data released by the Society of Indian Automobile Manufacturers (SIAM), vehicle sales across categories, including passenger vehicles (PVs) and two-wheelers, stood at 18,25,148 units in July against 22,45,223 units in the same month last year. Previously, the biggest slump of 21.81% was seen nearly two decades back in December 2000.
The bleak situation rendered almost 15,000 workers jobless over the past two-three months. The companies are terming it as “worst slowdown in the domestic automobile industry’s history”. Even though automakers offered attractive freebies and discounts to lure buyers, while also introducing newer models, many of them with the stricter BS6 versions, the situation has continued without any respite.
A big crash in the demand for passenger vehicles (cars and SUVs), as well as the volume-laden two-wheelers, is among the reasons that are keeping the volumes under stress. As the slowdown intensified, automakers announced shutdowns of their factories to adjust inventory. Tata Motors, India’s largest commercial vehicle maker, closed its Jamshedpur and Pune plants for up to 12 days. Ashok Leyland, the third-largest commercial vehicle maker by volume, closed its Pantnagar facility for nine days last month due to weak demand. SIAM chief Rajan Wadhera, who is also the president of Mahindra & Mahindra’s Automotive division, said that fresh investments will not happen anytime soon in the auto sector.
Industry officials met finance minister Nirmala Sitharaman and senior officials from the ministry of road transport, heavy industries and Niti Aayog on August 7 to apprise government functionaries about the slowdown. Sitharaman had given the industry representatives a patient hearing, but did not promise any immediate relief.
Companies want cut in GST rate
The industry officials have sought a reduction in the GST rate on automobiles from the existing 28% to 18%, saying that higher affordability may prompt people to make purchases. But sentiments remain weak, say industry officials, as the stress faced by the economy has been rising. The top metro markets have been plagued by slower growth and subsequent job losses in key industry segments such as telecom, IT, real estate, and auto and components. The rural distress has only made matters worse, something seen in the reversal in demand for two-wheelers which fetch 50% of their volumes from the smaller towns and villages.
“This is an unprecedented crunch, especially as all the automobile categories have gone down. The pain is palpable, and we have seen layoffs, mostly contractual, across auto factories, dealerships and parts makers,” said Vishnu Mathur, director general of SIAM.