SENTHIL PUBLIC SCHOOL, SALEM.

CRISIS IN AUTOMOBILE INDUSTRY IN

INDIA

UNDER THE GUIDANCE OF

DR.ELANGOVAN.

Submitted by: Dinesh balaji.S,

XII – F,
Senthil Public School,
Salem.

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 ACKNOWLEDGEMENT
I would like to extend my gratitude to
Dr.Manoharan,
Principal, Mrs.Nalani, vice-
principal,Mr.Soundararajan,ACO,Senthil Public
School, Salem for his constant encouragement and
moral support, without which I would have never
been able to give in my best.
I would also like to thank
Dr.Elangovan,Economics,Senthil Public School,
Salem, for his keen intrest in the work and ever
useful practical knowledge and for kind
supervision.
His guidance and supervision was very helpful in
bringing this work to conclusion

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Dinesh Balaji, XII - F

Certificate
This is to certify that the project work
………………………………….. is the
bonafide
work of……………………………………who
carried out the work under my supervision
………………………….

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Introduction

Sale of automobiles in India crashed by 23.5

per cent in August, the worst ever decline in a
month on a year-on-year basis since the time
industry body Society of Indian Automobile
Manufacturers (SIAM) has been collating data
from 1997-98.
In August 2019, overall sales stood at 18,21,490
units against 23,82,436 units in the same
month last year. In absolute volume terms,
sales have also fallen on a month-on-month
basis since May when 20,86,358 units were
sold. Since December 2018, year-on-year
monthly decline in sales has been unabated.

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 4 Reasons Behind Automotive
Industry Slowdown In 2019.

1| Harder To Get Loans

In the current economic environment, banks
have become more strict about giving out
loans, favouring only those individuals with
high CIBIL scores. Transunion CIBIL tracks and
monitors the loan repayment histories of
financial consumers in India and is a trusted
establishment used by banks and financial
institutions to assess a person’s credit
worthiness. Since people with lower CIBIL
scores are not able to get loans as easily, they
are not able to purchase high value assets, such
as cars. Banks are also being stringent in
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lending money to dealers to capitalise their
inventory. Often, the production numbers for
car manufacturers are helped by their
dealerships placing orders to stock up for
potential customers. So, if dealers cannot get
loans as easily, then they too will order fewer
units.

2| Confusion around BS6

emission standards
Bharat Stage 6, more commonly referred to as
BS6, is a standard of emission norms set by the
government of India. These norms apply to
both fuel and the engine. Currently, BS4
emission norms are in effect and all car models
sold today are compliant with it. The BS6
compliant engines would be less polluting in

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terms of the gases and particulate matter
emitted from them.
By April 2020, the BS6 emission norms will
come into effect and all car manufacturers will
have to upgrade their engine offerings
accordingly. Not all carmakers have clarified
their position regarding the upcoming shift and
how it will affect their product lineup that is
offered to customers. As a result, certain
buyers are delaying their new car purchase
until there are more details available regarding
BS6-compliant model choices.
Availability of BS6 fuel across the country is
another uncertainty of the public. However,
BS6 fuel has been on sale in Delhi since 2018
and cars with BS4 compliant engines do not
suffer any additional wear or tear from running
on this higher grade of fuel.
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3| Big Cities Are Too Crowded
Speaking of the hassles of owning a car, the
first one to mind is that of being stuck in traffic.
A large volume of car sales is driven by young,
upcoming professionals with growing incomes
and fewer liabilities. But even if you have the
money to buy a car, you will likely spend a lot
of your time driving it in congested traffic and/
or looking for a suitable parking space.
The stress of having your car scratched by a
careless delivery-rider or auto rickshaw or
cabbie in traffic or in a tight parking spot is no
small matter. A regular commute with plenty of
traffic takes up a lot of time and energy as well.
Time and energy that could be spent working
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or resting in the back of an Uber/Ola cab during
your commute.

4| The Electrification Equation

Even the government’s rhetoric surrounding
electric mobility and electric vehicles leaves
many uncertainties for both carmaker and
buyers about what to invest in and more
critically, when to invest.

Affordable EVs with sufficient range are a must

for the electric mobility shift to become reality.
However, this goal is harder than it seems as
the current battery technology is not at that
stage yet and neither is their charging
infrastructure. For instance, the Maruti

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WagonR-based EV is likely to be priced around
Rs 10 lakh with a realistic range of around
200km.
Promises made and goals set are not enough
for the breakthrough that is required to make
e-mobility a mass market option in India. The
production and development of electric
powertrains, battery tech and charging
infrastructure is still in its early stages and will
likely take another 5 to 8 years before mass EV
adoption begins.

Recently, the government has reduced GST

rates for EVs in India. However, its
effectiveness in the EV-push has not been as
confidence inspiring as some may have hoped,

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largely due to the surrounding factors
mentioned above.

How many jobs have been lost?

The automobile sector is one of the largest
employers in the country, employing about 37
million people, directly and indirectly. The
prolonged demand slowdown has triggered
production as well as job cuts in the sector.
According to the latest figures that are
available, original equipment manufacturers
(OEMs) have removed about 15,000 temporary
workers in the past two to three months. A lack
of working capital amid tepid demand has led
to closure of nearly 300 dealerships across the
country. This has led to over two lakh people
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losing their jobs, according to the Federation of
Automobile Dealers Associations (FADA), the
apex national body of automobile retail
industry engaged in the sale, service and spares
of two- and three-wheelers, passenger cars,
utility vehicles, commercial vehicles (including
buses and trucks) and tractors. Separately, the
Automotive Component Manufacturers
Association of India (ACMA) warned in July that
10 lakh jobs were at risk and urgent action was
needed to bring the industry back on track.

Can GST Reduction Help?

To revive the sector, auto executives have
demanded tax cuts and easier access to
financing for both dealers and consumers from
the finance ministry. The industry's plight was
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highlighted by the Automotive Component
Manufacturers Association of India (ACMA),
with the trade body's director-general, Vinnie
Mehta, saying the sector was experiencing a
"recessionary phase.''
Mahindra Group chairman, Anand Mahindra
said, “The most obvious and welcome first aid
would be some temporary relief on the GST
front, either by modifying the slabs or, if that is
not possible, by removing the cess". He
furthered suggested to re-look at the
registration fees which have gone up very
substantially and a rollback of the hike in road
tax mandated by state governments after the
introduction of GST.
Industry association bodies such as Society of
Indian Automobile Manufacturers (SIAM),
Automotive Component Manufacturers
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Association and Federation of Automobile
Dealers Associations have requested to slash
GST rate from 28 to 18 per cent. However, the
government is unlikely to go for a GST cut as it
fears a fall in revenue collection.

Way Forward
The present slump in the automobile industry
seems to be a temporary phase. Festive season
and good monsoon will provide a much needed
trigger.
At least for some time, there is a need to
reduce GST on entry level cars and that on the
two wheelers. The state governments also
need to reduce the road tax.
Liquidity needs to be converted into
aggressiveness or willingness to finance. The
NBFCs need to be encouraged to provide
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finance to people for buying cars. This would
help in increasing sales of cars at retail level.
The market is large enough to accommodate
both internal combustion engines as well as
Electric Vehicles. The government just needs to
frame its policies accordingly.
Overall, there is a need to provide a boost to
the economy, so that disposable income of
people increases and thus the overall demand.
The government needs to ensure that the auto
industry does not bear the brunt of transition
to more environment-friendly fuels i.e. BS VI
compliant fuels

conclusion
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As suggested by industry experts, vehicle
manufacturers in the country need to focus on
building positive consumer sentiment by
offering lucrative features at a competitive
price. Vehicle manufacturers need to launch
more products under the Rs 12 lakh price
bracket and work with financial institutions to
provide better financing schemes. The Indian
government can help by reducing the GST and
creating acceptance for the leasing model.
Good deals in the festive season will also help
boost vehicle sales in the country as a majority
of buying decisions are driven by auspicious
beliefs. What to expect in the next few
months?
As revealed by the industry analyst, inventory
de-stocking will continue for at least two more
months, after that, there will be a period of six
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to nine months of consolidation. New car
launches in the second half of the financial year
2021 will put the industry on six to eight per
cent growth path.

BIBLIOGRAPHY
www.cardekho.com
www.thehindu.com
www.drishtiias.com

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