Indian Auto Industry Continues to Struggle, Continuing On Downward Trend Since April 2019

Indian Auto Industry Continues To Struggle, Continuing On Downward Trend Since April 2019

The volume of sales for domestic automobile retail continued on their downward trajectory since the beginning of 2020 up to the time of this writing, according to India Ratings and Research. This occurs in spite of large discounts, as Ind-Ra says that buyers still prefer to wait for new models to launch before purchasing, as well as for the Bharat Stage VI emission standards to become fully instated in April 2020.

Retail Sale Losses in Percentages

Passenger vehicles have suffered a 5% loss in retail sales, while commercial vehicles went down 7% and two-wheeled vehicles 9% last January. For the original equipment manufacturers, sales volume for all vehicle types went down by 14% in January 2020. Ind-Ra has said that in-stock units at dealerships motivated OEMs to further cut production in that same month, continuing the trend of production cutting that they have been experiencing since mid-2019.

This is after general production in the auto industry went down by 13% from April 2019 to January 2020. This general loss is made up of a 13% downturn in passenger vehicles, 26% for commercial vehicles, and 13% for two-wheelers. However, light CVs suffered only a 1% drop in sales, and utility vehicles continue to grow, with an increase of 3% in January 2020. These sales drops on the dealership level have caused noticeable revenue cuts for the OEMs, coming in at declines of 6% for passenger vehicles, 14% for commercial vehicles, and 16% for two-wheeled vehicles.

Likely Causes For the Declines, and their Impact

Minimal customer appeal, coupled with a decrease in demand, made it so that MHCV sales took a while to reach their target numbers. Another thing that may have been a chief factor in reduced sales was the client base being more informed of vehicle quality and reliability, thanks to comprehensive online resources. Customers thinking it more prudent to wait for Bharat VI-compliant models to arrive is another suspected factor. Despite the sales drops, however, the shifts in market conditions led to the larger companies gaining market share.

For example, the market share for Maruti Suzuki India Ltd rose to 53% in January, up by 3% from their previous share. Similarly, Mahindra and Mahindra Ltd market share rose by 4%. Meanwhile, Tata Motors Ltd, alongside two-wheeler market leader Hero MotoCorp, experienced a stable market share at 41% and 36%, respectively.

OEMs to Change Strategy For Future Markings

According to Ind-Ra, dealership inventories still adhere to the Federation of Automobile Dealers Associations’ recommendations. This is thanks to OEMs proceeding with regulated wholesale billing despite lack of demand. Still, as demand remains in the midst of a slowdown, OEMs are likely to keep cutting down on production in the near future.

While the numbers seem to spell an overall negative for India’s auto industry, it’s important to think one of the largest factors at play are compliance to Bharat Stage VI standards. With new vehicles that comply with the latest emission regulations, a renewal of demand for vehicles of every class. This should lead to a recovery in the auto industry, once the new models have settled into the market.