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.

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Ramesh Sigamani

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