Auto Sector: How long before the tyre puncture is fixed?
India has witnessed the worst slowdown in its automobile industry in the last 4 quarters. The sales and production have plunged dramatically during this period, leading to job losses, halting productions and shutting down factories. Non-Banking financial companies (NBFC) crisis, increased regulatory requirements and slowing income growth are primary reasons for the slowdown. The downturn in the sector is also reflective of the overall slowdown in the economy.
Festivities light up the October Sales!
October showed some signs of relief as sales were recorded to be the best in the ongoing fiscal year. Government schemes, heavy discounts, and the festive spirit resulted in higher dispatches from the automakers primarily in passenger vehicles and the two-wheelers segment.
Can the October numbers be extrapolated?
The next couple of quarters are expected to be difficult due to the transition from BS-IV to BS-VI norms and it remains to be seen how the increased cost of ownership is absorbed by the market after heavy discounts are taken off. Industry experts and management commentaries suggest that the normalcy in the growth rates across the segments will only be restored from the start of the year 2021.
Government’s push to fix the tyre puncture
The government has been taking various measures for the revival of the sector such as the GST rate cut, revision in registration fee till June 2020, allowing additional 15% depreciation on all vehicles purchased till March next year, lifting a ban on purchase of new vehicles by government departments, and clarifying on newly registered BS-IV vehicle conflicts with BS-VI norms.
The automotive industry is at the edge of forming the ‘S’ curve in its evolutionary journey. And considering the center stage of the sector in the overall economy, the then full might of the government and industry leaders is expected to push for the upward inflection in the trajectory.