While the industry has been stressing on its long-standing demand for a cut in GST rates on automobiles, we take a closer look at the trends that have influenced this slowdown as well as those that will play a larger role over the near term. Auto Tech Review caught up with Rajeev Singh, Partner, Deloitte Touche Tohmatsu India LLP to understand about the downturn that has dented automotive sales in a big way.
TRACING THE SLOWDOWN
The prevailing domestic slowdown is not a result of any recent developments and has been building up over a period of time, triggering the situation the auto industry is currently facing. According to various industry experts, the factors that have been influencing the slowdown have not only been building up over the years but are also multi-dimensional in nature.
One of the dimensions is that of automotive dealers, who are an important stakeholder in the entire ecosystem. Over the last three to four years, the dealer community has been hit every year – it all began with demonetisation that impacted the way dealers dealt with the market. Tax reforms such as GST also impacted the increase in working capital requirements of the dealers. Further, the cash crunch from non-banking financial companies (NBFCs) is also impacting automotive dealers. In fact, the dealer community has been impacted year-on-year. Simultaneously, they have also been striving to make course corrections. As opposed to the previous amount of inventory being held by dealers before the arrival of the slowdown, dealers are now trying to hold lesser stock. This also explains why wholesale numbers have taken a hit, as someone in the value chain is shrinking their inventory holding.
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