 WHAT IS “AUTOMOBILE CRISIS-GAP”?

INTRODUCTION

India's second-largest business vehicle manufacturer, Ashok Leyland, is suspending

manufacturing on multiple units from five to 18 days in September, causing concerns
that the slump in the automotive industry shows no sign of recovery.

India's national passenger vehicle sales decreased by 31.57 percent for the 10th consecutive
month of August, according to information published by the Indian Automotive
Manufacturers Society.

Here are some of the reasons for the auto sector slowdown

Bharat Stage VI, Regulatory Policy–Uncertainty over the future of BS-IV cars following
India's adoption of BS-VI on April 1, 2020 is one of the factors for stagnating demand for
these cars. Furthermore, in the previous nine months, the price of vehicles is estimated to
have increased 15 percent owing to compulsory additions such as airbags, inverse sensors,
ABS and crash conformity norms.

Fuel prices – Petrol prices rose by 15 percent in last four years as per information supplied by
the state-run Indian Oil Corporation. In 2019 Union budget, the government lifted-up excise
duty on petrol and diesel by Re 1.

GDP Slowdown – India's GDP growth (June) decreased by up to 5%, a low of 6 years.
Consumption fell to a low of 3.1 percent, an abysmally low of 18-quarters, from 10.6 percent.
Investment appreciation in the share market has stagnated as over the past two years the
Sensex posted a 3 percent decrease.

Employment insecurity -In less than a year, projected, 2 lakhs working mens lost their jobs
in the automotive industry. The International Labour Organization estimates that in 2018
there were 18.6 million Indians without a job which will rise to 18.9 million by the end of
this year.
Rising of Ola and Uber – Heavy congestion, lack of parking space, bad road quality, costly
car ownership cycle, and a decrease in value for money make up the reasons more individuals
like Ola and Uber and prefer ride-hailing platforms. In towns, instead of owning and driving
by themselves, individuals prefer taxis to travel.

Cultural change – Aspirational value for vehicles, particularly entrance-level hatchbacks, has
declined in recent years. Buyers are more eager to get premium hatchbacks like Maruti
Suzuki Baleno or compact SUVs like Tata Nexon as their first purchase.

Motor Vehicles Act–On September 1, 2019, the Motor Vehicle Amendment Act, adopted by
Parliament, came into force. Stricter driving laws and penalties, four to ten times higher than
their prior markings, have served as a deterrent buy. Unjust parking draws a fine of up to Rs
23,000 in Mumbai.

High interest rates, more stringent safety–Despite the RBI's rate cuts over the previous few
months, banks have not carried the advantage to the end customer. Furthermore, because of
the elevated susceptibility to defaults, banks have been additional vigilant towards lending.
Consequently, the growth of car loans stayed poor.

High insurance and registration costs-Mandatory multi-year third-party insurance acquisition

has driven greater car ownership costs. Buyers now have to purchase insurance for three
years instead of a year. The Central Government has hiked the registration charges for cars
up to 13 times. However, this was postponed until June 2020.

Infra woes – Although India's National Highways Authority has added fresh stretches of
highways to the domestic grid over the previous couple of years, the quality of city roads
continues poor. Potholes that claim life have become all-time prevalent, particularly during
monsoons.

Taxation-In anticipation of a reduction in the Goods and Services Tax (GST), current car
buyers retained their purchase as per car manufacturers. The sector sought a cut from 28
percent in GST to 18 percent. However, the government has not shown much positive
attitude.
EV Policy – The ongoing push for electric mobility by the government has developed doubts
for consumers who now compare the price of ownership of a petrol / diesel vehicle with that
of a battery-powered vehicle. In the next 2-3 years, carmakers pledged to launch an
inexpensive variety of electric cars.
Leasing and self-driving module rise-Companies such as Volkswagen, Mahindra, Mercedes
to name a few have joined the car leasing room-space as a means of boosting their inventory's
usability. The rise of self-driving car businesses like Zoomcar and Myles also affected the
sales of new cars.

PROBLEM STATEMENT
To address these tough questions, leading automotive experts from different corners have
addressed the few key challenges facing the automotive market in recent years !

OBJECTIVE OF THE STUDY

The aim of this study is to discuss Indian automotive industry's slowdown. It seeks to study
consumers preferences in automotive. This research also aims to find out the reasons for the
slowdown and explore the alternatives further.

RESEARCH DESIGN
LITERATURE REVIEW
The downturn in the Indian automotive industry continues to subside in August 2019 with the
main carmakers reporting adverse sales figures. Companies such as Hyundai Motor India,
Maruti Suzuki India, Honda Cars India, During the month, Tata Motors and Mahindra &
Mahindra witnessed their sales declining, with all the hopes now pinned on the upcoming
festive season to bring any kind of joy to the industry. The country's biggest carmaker Maruti
Suzuki India's total national passenger car sales fell 36.1 percent to 93,173 units in August
2019. The figure was 1,45,895 units in August 2018. In August 2019, national sales of
Hyundai Motor India fell 16.58 percent from 45,801 units in August 2018 to 38,205 units. In
August 2019, Honda Cars India saw its monthly national sales plummet 51.3% to 8,291 units.
The firm sold 17,020 units last year in the same month. Tata Motors ' national passenger car
sales decreased from 17,351 units in the same month last year by a huge 58 percent to 7,316
units in August 2019.
The automotive sector is one of the country's biggest employers, employing directly and
indirectly about 37 million individuals. The extended slowdown in demand has caused both
manufacturing and job reductions in the industry. Original equipment manufacturers have
removed some 15,000 temporary employees in the previous two to three months, according
to the recent accessible statistics. A lack of working capital amid tepid demand has led to
closure of nearly 300 dealerships across the country.
According to the Federation of Automobile Dealers Associations (FADA), the domestic apex
of the automotive retail industry involved in the sale, service and repair of two-and three-
wheelers, passenger cars, utility vehicles, commercial vehicles (including buses and trucks)
and tractors, this has resulted in more than two lakh individuals losing their employment.
Separately.
What’s in store?

 The Finance Minister announced a stimulus package to assist the sector emerge from
its woes. Some of the movements may assist banks / NBFCs boost disbursements and
reduce borrowing expenses to some extent for consumers / auto dealers.
 Due to the restricted amounts concerned, other movements such as the greater
depreciation rate for vehicles purchased until March 31, 2020 that are not relevant to
the salaried class or private vehicle buyers or the lifting of the vehicle procurement
 ban by the government may not have a important effect. In any case, FADA's pile-up
inventory now seems more of a issue for two-wheelers and CVs than for vehicles.
 The announcement to be permitted to be operational for the entire registration period
on BS IV cars bought until March 31, 2020 is only a clarification. The deadline for
stopping selling cheaper BS IV cars than BS VI cars is still 31 March 2020, making
inventory management more complicated.
 Since 2015, the tax credit has been in the works and the last we heard was that it
would be introduced in 2020 and that it would also apply only to cars over the age of
20 (which limits the amount of scrappage incentives eligible). But alternatives are
cramped by the fiscal situation.

Sales Analysis:
In June 2019, nearly all Indian car companies reported a decrease in sales due to weak
customer feelings across all sections. Rural as well as urban regions are experiencing demand
distress.
The main reason behind low consumer sentiment is the increase in car prices in the midst of
rigid safety legislation, the lingering effect of enhanced axle standards, monsoon delay,
liquidity limitations, and the muted performance of key industries like infrastructure and
mining. In both urban and rural regions, these variables dialled down demand.