You are here: Home » Economy & Policy » News
Business Standard

After a tough year, auto industry hopes for smooth drive from H2 2020

The government incentives to buy vehicles and steps taken to address liquidity crunch, economic growth and infrastructure spending would boost the auto industry's prospects

T E Narasimhan  |  Chennai 

Auto slowdown

The year 2019 has been one of the toughest for the automobile industry, with a 13.8 per cent drop in domestic sales from January to November 2019. Despite challenges, 2019 saw new brands coming in, mergers and partnerships and new model launches as the industry is optimistic about 2020.

On a rough road

Society of Indian Automobile Manufacturers (SIAM) data shows from January to November 2019, total automobile sale was down by 13.8 per cent to 21,667,672 from 25,141,388 units, a year ago.

Commercial vehicle declined by 22.12 % between April-November 2019, followed by passenger vehicles (-17.98%), two-wheelers (-15.74%) and three-wheelers (-4.97%). The slowdown resulted in 13 per cent production cuts and job losses to the tune of over 250,000.

Slowdown in the economy, price increase, regulatory changes, change in ownership model, slowdown in infrastructure spending, change in axle load norms are the key reasons.

Finance Minister Nirmala Sitharaman in September said, several factors including BS-VI emission norms, registration-related matters and a change in the mindset of millennials, who now prefer Ola or Uber rather than committing to monthly installments to own a car, led to the slowdown

"Ola and Uber factor may not be strong to contribute to the current state of slowdown. I think we need to watch and study it more before arriving at such a conclusion," said Shashank Srivastava, India's Executive Director (Marketing and Sales).

They came into existence during the last six-seven years. In this period, the auto industry also saw some of its best times. So, what happened only during the last few months that the downturn became so severe, he questioned.

S S Kim, MD and CEO, said besides consumer sentiments, regulations, cost increase, customer mindset on whether they need to buy now were the other major roadblocks.

Motofumi Shitara, chairman, Yamaha Motor India Group of Companies added, two-wheeler sector was also impacted by poor customer sentiment, regulations change, credit issue, high insurance cost among others.

EVs

Electric vehicle saw good traction in 2019 with FAME-II, at an outlay of Rs 10,000 crore, which came into effect in April 2019, followed by a reduction in GST on EVs from 12 per cent to 5 per cent.

Hyundai Kona was launched and many of the car makers have announced that they would be launching EVs to back the government's ambition of going 30 per cent all-electric by 2030. Currently, EV market penetration is only one per cent of the total vehicle sales in India, and of that, 95 per cent of sales are electric two-wheelers. While only 1,500 electric cars were sold for personal use in the last eight months,

Ministry of Heavy Industries and Public Enterprises (MHIPE) said, till November, close to 285,000 buyers of electric and hybrid vehicles have benefited from the subsidies provided under the FAME-India programme to the tune of Rs 360 crore.

New brands & alliances

British brand Morris Garages (MG), and Kia Motors made inroads separately with SUVs and managed to clock in good numbers.

Mahindra and Ford announced JV to co-develop seven new models, including SUVs and EVs.

PE and corporate investment flows into EV and shared mobility start-ups grew nearly 170 per cent to $397 million (up to November), from $147 million, a year ago. Hyundai, Hero, TVS, Bajaj, Ratan Tata, Mahindra were among the corporate investors. Recently Mahindra acquired 36.63% stake in Meru Travel Solutions (Meru) in the first tranche.

Road ahead

While China’s SAIC-owned British brand Morris Garage had already entered the Indian market, few more Chinese auto majors including Haima Automobiles, Great Wall Motors and Changan Automobiles are expected to make inroads in the coming years. Besides, Citroen is expected to launch its first car by the second half of 2020.

Dozens of new launches are being planned for 2020 by passenger cars, and two-wheeler makers, including EVs. Notables include Hyundai Aura, Tata Nexon EV, SUV Gravitas, hatchback Altroz, Skoda Karoq SUV, Octavia, Land Rover Defender, Audi e-Tron, Nissan Leaf EV and Kia Carnival.

Companies’ hope that from second half of the year, industry would turn around as BS-VI should settle down. The government incentives to buy vehicles and steps taken to address liquidity crunch, economic growth and infrastructure spending would boost the auto industry's prospects.

Kim says, “issues related to BS-VI won't be there from second half, which will lead to growth”. He expects the growth would be in single digits next year since the first half will continue to see pressure.

Vinod Aggarwal, MD & CEO, VE Commercial Vehicles, a Volvo Group and Eicher Motors Joint Venture said the current phase of slowdown is temporary, and that the medium and long-term horizons look good.

First Published: Thu, December 26 2019. 15:02 IST
RECOMMENDED FOR YOU