Firmly In The Grip Of A Slowdown

Stable long-term policies, strong economic push needed to revive the industry

- Nandana James

The year 2019 was one of the worst years for the automobile industry with falling sales and piling inventory.

The overall slowdown in the economy, liquidity crunch, the crisis in the non-banking finance companies (NBFC) sector, the increase in third party insurance and road tax, and the consequent hike in the cost of acquisition, uncertainty arising out of inventory liquidation prior to the BS-VI transition and expectations of a possible GST reduction were the primary reasons for the prolonged slowdown this year, according to experts.

Passenger vehicle sales declined by 17.98 per cent in April-November 2019 over the same period last year, according to the Society of Indian Automobile Manufacturers (SIAM). The industry is expected to close the year with a drop in wholesale dispatches of 13-17 per cent vis-à-vis 2018, Sugato Sen, Deputy Director-General, SIAM, told BusinessLine. While passenger vehicles and two-wheelers will decline by 13-17 per cent, commercial vehicles will go down by 22-27 per cent overall, with heavy vehicles falling by more than 40 per cent, he added.

Stable policy

Despite the slowdown, SIAM feels that the worst is behind the automobile industry. “However, it is important that no sudden policy change happens that derails industry growth. Auto industry requires a long-term stable policy environment to grow sustainably and the government should provide such a policy environment,” he added.