Present Scenario

What is ailing the automobile

industry in India?

1st Sept’2019
 Symptoms What is ailing the automobile industry in India?

 Automobile industry under so tremendous Stress

Automobile industry reeling under intense pressure continuously for six months

 Established Players loosing steam

All manufacturers including the largest one; are feeling the pinch and struggling
to achieve last year figures

 Four wheelers and Two wheelers both are affected

Let’s understand what forces are working against growth.

 Transition Times What is ailing the automobile industry in India?

India Inc. is facing troubled times when economy is struggling with a slowdown
in almost all sectors; sales figures are dwindling; automobile inventory is piled
up; liquidity-crunch is crippling; leading to a sizeable volume decline in
automobile segment.

What could be the possible reasons behind it?

Some of the highly debated or accepted postulates are linking it to:

1/Demonetisation which really took the steam out; and sucked the cash out of
the economy; and gradually preyed on the overall health of the economy
2/ Hurried implementation of Tax Reform – GST and allied cess linked to it
3/ Expensive Insurance and Registration charges

The above factors are contributors to a definite extent yet there are other
important translucent factors too.
 Transition Times What is ailing the automobile industry in India?

We are just eyeing one side of the coin and missing the other side.
Looks like we are failing to recognize a peculiar transition which is gradually
happening right now. There are certain under-current indicators in the
economy which clearly suggest that a shift is under progression.

This shift is happening due to the unique characteristics of tech savvy;

gadget-intrusive; internet friendly and social-media active Millennials and
Generation Z.
Millennials & Gen Z have been instrumental in re-shaping the demand in the
industry.

Let’s examine the following key factors:

1/ Policy Shift in Automobile Industry

2/ Demand Shift for Cars
 Transition Times What is ailing the automobile industry in India?

3/ Preference shift Forces Driving

4/ NBFCs fiasco
Transformation
5/ Rural Stress
6/ Low Sentiments  Policy Change by GoI

 Gen Millennials & Z

The above indicators are very well existing in preferences
the economy but some how, get a shallow
attention or aren’t given the due weightage.  Low Availability of Finance

 Stagnant Rural sector

 Overall Low sentiments

 Policy Shift What is ailing the automobile industry in India?

Factors initiating
1/ Policy Shift in Automobile Industry
Policy change
It has created a two fold challenge for the
 Rising Pollution due to
industry:
emissions
a) Tackle Rising Pollution due to emissions:
 Improvement in Fuel
efficiency of Passenger
GoI is determined to bring local standards at
vehicles
par with global standards, thereby, enabling
India to leapfrog from BS-4 to BS-6 emissions
 Bring Zero-Pollution
by April 2020; eliminating the need for BS-5.
vehicles
This is a revolutionary step for which none of
the manufacturers are ready yet.
 Policy Shift What is ailing the automobile industry in India?

Further, Car Manufacturers must comply with

Corporate Average Fuel Efficiency norms in Road Map to Change
which the manufacturers have to improve their Existing Emission Norms
fuel efficiency by 10 percent between 2017 and
2021 and by 30 percent or more from 2022. • April 2020 being deadline to
implement BS-6 (Euro-VI)
norms
Both the factors require expansion of R&D
facilities; upgrading the existing infrastructure • Improve the existing Fuel
and hence, the need for fresh investments. efficiency of Cars
~ 10% between 2017 ~2021
~ 30% or more by 2022
Complying with BS-6 norms has drastically
increased the cost of diesel engines. That’s why • Capital Intensive action,
MSIL has dropped the diesel engines in future. increasing cost
 Policy Shift
b) Electric Vehicles have started spreading its
awareness and wings in India. It’s just in its fancy
stage and level of adoption to EV will determine
its impact on automobile industry. But, this is the
future ahead.
This is throwing a big challenge as most of the
players don’t have technological know-how.
Batteries are very expensive. On-Road charge
points are not available; rather need to be
developed.
Electric Cars to be available are:
1/ Hyundai Kona Electric 2/ Mahindra e2o
3/ Mahindra e-Verito 4/ Tata Tigor EV 2019
What is ailing the automobile industry in India?
Electric Vehicles:
Challenges
• Major Players don’t have
technological know-how
• Call for fresh investments in new
technology, expensive batteries,
infra(EV-Charging points)etc.
• Gradual acceptance of EVs due
to minuscule share in India vs
China, Europe, US etc.
• Presently, we see E2O Car by
Mahindra Electric Mobility ltd
 Demand Shift What is ailing the automobile industry in India?

While the auto sector is slowing down and posting

negative results (-23.5% Apr-Aug’19 vs Apr-Aug’18); New Emerging Segment
But, a New Pocket is emerging where sales are not
impacted. MG Hector
28000 bookings so far

More Technologically advanced and Internet Production capacity enhanced

from 2K to 3K per month

connected Cars are immune to overall slowdown- Re-opening bookings from

Oct’19

factor and bookings are soaring from the day one.

End consumer is showing utmost preference as he is KIA Seltos
32000 bookings within Six

willing to wait for the delivery which will happen in Weeks of its launch
Waiting Period for Top variant

due course of time(maybe after a month or two). Is 4 months

HYUNDAI Venue
New entrants like Hector ; Seltos and 33000 bookings within one

Venue are doing brisk business and are

month of its launch, 50K in 02
Months

coming out unscathed. (Refer Box)

 Demand Shift What is ailing the automobile industry in India?

Consumers are preferring such cars; could be due

Internet Connected Cars
to the model-fatigue for established players.
MG Hector

Newer Car are packed with plethora of 10.4” Touchscreen

Connected App
Connected features like Geo-fencing; emergency Bose Music system
8” HUD
alerts; vehicle tracking; airbags; 360 degree
camera etc.; and swanky Mobile entertainment KIA Seltos

system with 10+” screen (refer box) 10.25” Touchscreen

No wonder newer cars are getting magnanimous Connected App to take

control

response.
HYUNDAI Venue

The flip side: these connected cars don’t offer 8” Touchscreen with
much room for Car After- Channel for Music Hyundai Bluelink
connected car tech;
systems or other upgrades. Such channel needs to equipped with ARKAMYS
soundstage
devise innovative IoT to get into these cars.
 Preference Shift What is ailing the automobile industry in India?

Increase in Shared-Mobility: Shared-Mobility

o Generation Z – well educated, most
Ownership vs User-ship? Internet savvy Gen Z & liberal one and has unprecedented
Millennials are more inclined towards User-ship. access to technology & is reaching up
Gen Z is adopting newer global trends far quicker to 472 m in India in 2018
than present generation. o Ola & Uber offer a lot more variety,
Digital India is quick to adopt shared, App based - comfort and convenience on the
rental services options; rather than not-so hassle move
free ownership of cars.
Further, the smart Generation is prudent enough to
not invest in second car, but adapt to different but
green-means
Shared taxis and Autos or cabs are shuttling
between NCR; Mumbai-Pune etc; are a few
examples. Generations Definition– courtesy TOI
 Preference Shift
Keen on Connected Cars
Recent unprecedented success of Newer Cars
establishes the fact that present Gen is bored of
old designs and features and is experimenting with
feature packed and connected cars (mini –SUVs)
even though the deliveries are staggered over 2 to
3 months.
Hence, we are witnessing an Upgrade in all the
cars – Newer ones; Old ones etc.
These are coming with New Technology; better
looks; contemporary designs and features.
Watch out for soon to be launched cars like New
Creta(ix25);VW T-cross etc.
What is ailing the automobile industry in India?
Connected Cars
Preference
o Choice or no choice, Gen Z goes for
Internet Connected gadgets; lifestyle;
means of transport etc.
o Being Internet friendly, they do
prefer Swanky & Newer cars than
conventional ones
o Gen Z is one of the KEY-INFLUENCER
in Car Purchase Decision or selection
o Magnanimous response to Newer
Connected cars
 NBFC Fiasco What is ailing the automobile industry in India?

The liquidity crunch with Non-Banking Financial

Companies (NBFCs) has hit auto sector in India. It Leading NBFCs
all started with IL&FS default. This has impacted the
1. Power Financial Corpn Ltd
easy availability of finance.
2. Shriram Transport Finance
Company Ltd
Almost, half the vehicles sold in semi-urban and
3. Bajaj Finance Ltd
rural segment are financed by NBFCs. With
4. Mahindra & Mahindra
dropping auto sales, dealers are left with more
Financial services Ltd
inventory. Hence the need for more working
5. Muthoot Finance Ltd
capital from NBFCs. More Funding is either not
6. HDB Financial Services
available or comes with demands for more
7. Cholamandalam
collateral.
8. Tata capital Financial
Services Ltd
 Low Sentiments What is ailing the automobile industry in India?

 General Elections did subdued the consumption; thereby slowing down

the demand

 Higher Cost of Cars is a big roadblock for speedy cars sales. 40%-45%
component of the cost belongs to GST and other allied taxes and
insurance.
This factor is a big dampener.

 Demand for reduction in GST (presently at 28%) is soaring. Customer is

confused what to do. Any reduction in GST rate will be a big saving for the
consumer and will increase affordability. So, customer may be willing to
wait a little more.

 Rural Stress is brewing due to delayed Monsoon and delayed sowing of

crops; decline in rural income due to low wages or low food prices etc.
 Conclusion What is ailing the automobile industry in India?

Given the scenario, a lot will depend upon the kind of

impetus given or any relief package injected by Govt. to
improve Indian economy; create more opportunities by
increased spending in infrastructure sector and other key
sectors in order to augment the demand and supply
cycle.

Our best bet lies in staying positive; being innovative ; and

trying to find out alternative ways to improve the business.

We need to discover our own silver lining in this freak

scenario.

Mann
(a due diligence is carried out in authoring the contents. Any mistake is purely incidental and un-intentional)