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Automobile sales - Shanmugam IAS academy in coimbatore
Automobile sales

AUTOMOBILE SALES WORST HIT

 What’s in news?

            Automobile sales in the country declined by 23.55% in August 2019 – the worst drop in monthly sales since the Society of Indian Automobile Manufacturers (SIAM) started recording wholesale vehicle sales data in 1997-98.

Key data:

  • As per data released by the Society of Indian Automobile Manufacturers (SIAM) year-on-year (YoY) sales dropped for the tenth consecutive month.
  • Additionally, percentage sale of two-wheelers also hit a three-year low, the worst ever.
  • The automobile industry reeling under a prolonged demand slump, mainly due to poor consumer sentiment amid slowing economic growth.
  • As per data released by the industry body, vehicle sales across categories, including passenger vehicles (PVs) and two-wheelers and commercial vehicles (CVs) stood at 18,21,490 units in july month as against 23,82,436 units in August 2018, a fall of 23.55 per cent.
  • With prolonged slump in sales, automobile and component manufacturers have been seeking GST cut on automobiles to 18 per cent from 28 per cent to help the sector come out of a prolonged slump that has resulted in job losses.

Dissecting India’s slowdown:

  • A slowdown in consumption demand
  • The farm sector is still stuck in a low-income trap and 2019’s mercurial monsoon rains, has left some parts flooded and others still facing deficits and engendering a shortfall in kharif sowing, rural demand is unlikely to return
  • Decline in manufacturing
  • The slowdown in the auto sector has worsened, with leading car manufacturers posting up to a 50 per cent drop in sales for August 2019 as against the corresponding month last year. Sales are down across segments — passenger vehicles, commercial vehicles, and two-wheelers.
  • The slowdown in the auto industry is due to a number of factors, such as the liquidity crunch due to continued stress on NBFCs (Non-Banking Financial Companies), the wait for the festive season, the change in axle load norms for trucks, and hopes of a GST cut.
  • Inability of the Insolvency and Bankruptcy Code (IBC) to resolve cases in a time-bound manner, and
  • rising global trade tension and its adverse impact on exports are some of the factors affecting India’s growth
  • The health of real estate is a massive indicator of the state of Indian economy. It has links with about 250 ancillary industries — bricks, cement, steel, furniture, electrical, paints etc — and affects them all if there is a boom or gloom in the sector.
  • Reports are that the volume of unsold houses over the past one year has increased in the top cities of the countries.
  • It is also attributed to two mega policy decisions — demonetisation in November 2016 and the rollout of the Goods and Services Tax (GST) in July 2017 — disrupted the Indian economy.
  • Aimed at greater formalisation of the Indian economy, the twin disruptions struck a big blow to the informal sectors that employ the maximum number of the workforce.
  • The policy disruption hangover still continues and is accentuated by the crisis in banking and non-banking financial sectors.
  • This hit the small and medium scale businesses more adversely than expected in the wake of the collapse of Infrastructure Leasing and Financial Services (ILFS).
  • Money just stopped flowing into the market. The net result was a huge job loss.

 Steps introduced by Govt:

  • The government is cognizant of the gravity of the situation has initiated policy pronouncements including
    • tweaks to investment norms to draw more Foreign Direct Investment,
    • moves to relieve the debilitating sales slump in the auto sector and
    • A sweeping consolidation of public banks.
  • As part of its measures to boost economic growth, the government has lifted the ban on its departments buying new vehicles, announced a tax benefit for automakers, deferred the application of the one-time registration fee till June 2020, and assured that the government would consider a scrappage policy for old vehicles.

 

Links to note:

https://www.iasipstnpsc.in/economy-2/

https://www.thehindu.com/business/Industry/passenger-vehicle-sales-decline-for-10th-straight-month-down-3157-in-august/article29373325.ece

https://www.freepressjournal.in/business/indias-auto-sales-sees-worst-ever-fall-in-august

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