[Auto] When will Indian auto sector resume growth story?

[-Apex]

When will Indian auto sector resume growth story?

So, what do the Indian automobile industry feel about the slowing market? Most of the industry leaders, whom I interviewed blamed the fast policy decisions and flip-flops on EVs for the sluggish demand. They held demonetisation, new axle norms and GST as the key reasons for the crisis in Indian auto sector.

The sound of rain is a welcome relief that allays the anxieties of farmers. In the same way, the recent demand spike in retail during Dhanteras seems to have sown the seeds of hope in the Indian automobile industry.

Many have joined the celebrations, at least on public platforms; yet, there are quite a few who are either sceptical or confused about what lies ahead. So, it’s unclear whose side should one take while assessing all the possible aspects and perspectives.

Also, it remains to be seen how fertile these seeds of recovery are, especially when demand during the rest of the festive season, comprising Ganesh Chaturthi, Onam and Navratra, remained subdued.

The most important point to note is that this year, Dhanteras was on October 25, unlike last year when it fell on November 5. So, the growth shown is on a low base because in 2018, September onwards, the slowdown intensified due to the Kerala floods, impact of GST and hiked insurance costs of vehicles.

I have serious reservations about the tenacity of the euphoria as it is most likely ephemeral, and I shall argue the same later in the report.

However, all hope doesn’t seem to have been lost as the passenger vehicles segment looks positive. The largest carmaker Maruti Suzuki India Limited’s (MSIL) domestic sales in October 2019 went up 4.5%. While no other major carmaker posted growth (except for fringe players like Renault and Volkswagen), MSIL’s growth can also be attributed to the low base on account of heavy production cuts it had undertaken in the last few months.

What played spoilsport in the festive season was the confusion over BS-VI norms, the transition to EVs and expectations about GST cuts. All these factors kept people away from the showrooms in the hope of further slashing of prices, over and above the already existing steep discounts.

Edited July 29, 2020 by Dr.Drako
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