Auto Sales Down

Declining auto sales, media crying that Auto sector is the biggest contributor for the country’s GDP and slowdown there would mean big job losses and hit to the economy. It is unfortunate that, these days the media in order to prove themselves right, has always been on the wrong foot.

Sales down because people are not buying cars. Was it that, in the past we were guzzling vehicles? No, our country moved to a better standard of living and people afforded to own a car. That population which is getting transformed from poor to affordable has slowed down. Then one basic requirement for growth is hurger for it.

That population which was hungry for growth moved to the next level, rather a part of them. They are now wanting a better car, not the same old entry level variants. The reason why entry level cars sales have dropped 56%.

Our manufacturer’s have built huge capacities for entry level variants, copying all that is possible from higher level products. Now there is over production which is piling up more on the inventories.

True that the economic cycle has slowed down. People have now started to postpone purchases due to various reasons. One of it is availability of money. The other reasons are, no good compelling design or product experience that is forcing people to change. Manufacturer’s are now coming up with creative design changes, they are only tinkering a little bit here and there and making the new variants look different.

In the era of disruption, there is poor creativity here.

Then, there is this hiring and rentals. Today with cost of owning a car getting higher along with the challenges of traffic and parking. The peaceful lot of the population prefer to do away with nuisances. OLA, Uber kind of disruptions have put down the need to own a car these days. For a person who is busy, a chauffer driven car will help him or her do some work on the way as the drive consumes huge amount of time due to traffic.

Elder people prefer to be driven than to drive on their own. In all these levels, hiring a car is a better choice. Even if 1 out of 5 users prefer to hire, car sales will drop 20%. Then, rentals is one more option, you need not own the car. Rent it when you need for some long drives. So, for short distance, hire, for long distance rent. Relief from the thought that, I should have one in case of a need to travel a little longer than in and around the city.

No creativity, over productions, options to hire and rent and then the buzz of the change to electric. Those who are planning a purchase in a year or two will prefer to wait for the new developments because if there is a chance to get the new technology why miss it, kind of thought.

Manufacturers need to find a better way out to improve sales rather than blaming on the government in the name of GST and Demonetization. Both of these transformations which our country saw was to kill black money generation. Welcome the change, your next generation will have a better living standards in this country.

Car Sales Slow down effects the Indian Economy

Luxury car segment has registered 25% decline in sales, which is a big surprise to the industry. Luxury car sales have lost more than the rest of the industry, which was not the norm. Financing issues that are significant for the regular market is not a requirement for the luxury market. They generally tend to outperform.

So far it was assumed that due to elections people were postponing purchases. Whereas the trend now states something different. Looks like there is a shift in the buying decision itself.

Now that the taxes on the super rich has increased substantially, they will continue to postpone their decisions or some may even drop their plans of changing their cars.

On the general market side, OLA’s & Uber’s along with troubles in parking, increase in fuel costs have made users think of not owning cars. It can be even a few percentage. The resultant impact on the economy – all the major manufactures have reported double digit negative growth, have announced plant shut downs.

Auto sector has been a major contributor on employment. Now, it will have serious impact. With a considerable number of employees getting displaced from jobs, it will create a circle of events, triggering further slowdown of the economy and bringing challenges to some of the connected industries.

FMCG sector has slowed down since the last 3 quarters,  which is due to part reactions from the Auto slowdown.

Contraction even luxury segment is worrisome to the industry. So far about 245 auto dealerships have shut shop. Thereby creating further pressure on employment. How are we going to accommodate these labour force that is getting out?

There is a big challenge the government has at it’s hands.