Indian automobile industry in midst of a protracted slowdown

The Indian automobile industry has been in the midst of a protracted slowdown as consumers at large, faced with rising unemployment and an unsure future, have stopped spending.

With no announcement of a vehicle scrappage policy nor any guideline on a potential reduction in GST for cars and two wheelers, the Indian union budget 2020 has ended up disappointing the domestic automobile industry in a big way.

The sector that has grabbed headlines for much of the last year as the benchmark of the slowdown in the economy was expecting concrete steps to either spur a revival on a sectoral basis or boost consumption in the economy at large.

Meanwhile the Indian automobile industry going through an unprecedented slowdown and carmakers set to roll out BS-VI vehicle models, Tata Motors MD and CEO Guenter Karl Butschek is of the view that the first half of the financial year 2020-21 would be more of a “transitional phase”, with subdued demand and the sales would actually gather pace in the second half of the fiscal.

Speaking to IANS at the Auto Expo 2020, Guenter, however, held that the worst is over for the automobile sector.

“I think the first half of the year will still fall in the category of transition, when building comfort and confidence for acceptance of new market reality is the key task which will show some increase but with the... festive season, I am very convinced... and I expect, in the second half of the coming fiscal year we are finally going to see the structural revival,” he said.

He noted that as the company refills its stocks with BS-IV vehicles having been sold off to dealers, wholesale would not surge immediately, as the company would rather increase its system stock initially.

The transition period has started, as Tata Motors has completed BS-IV production and all vehicles have been delivered already to the dealers, and the company is now in “full play” as far as BS-VI is concerned.

“As we replenish the stock in the system from an all time low with BS-IV at the last months, we are not going to compromise on the new paradigm, where retail figures wholesale and wholesale figures production. So don’t expect just because we are replenishing the stock, our wholesale figures will immediately skyrocket high. We will actually increase the system stock.”

The Tata Group company has been reeling under slow demand and offtake along with its peers largely owing to the overall economic slowdown and the liquidity crunch.

In January, overall sales of the company, including exports declined to 47,862 vehicles against 58,185 units sold in the same month of 2019. Its domestic sales fell by 18 per cent to 45,242 vehicles compared with 54,915 units in January 2019.

Commercial vehicles’ sales in January fell by 16 per cent to 33,860 units from 40,175. Similarly, passenger vehicles’ sales declined by 22 per cent to 13,894 units from 17,826 shipped during January 2019.

On the upcoming and concept models of the company, Guenter said that the EV version of Altros is likely to be launched in the second half of the upcoming financial year.

About the concept model of legendary Tata Sierra showcased at the 15th edition of the Auto Expo here, he said that although the company has not yet decided on the commercial rollout of the car, the positive response received at the expo has made the group CEO to rethink over it.

“Launching Sierra has not yet been decided yet, but honestly by the reaction of the audience, when I talked about the characteristic of what the Sierra did to the generations in the past, then I actually called out for the concept, it was very very unique response,” the Tata Motors MD and CEO said.  “Because there was a wow across the audience and an immediate round of applause. I take this as a very clear confirmation that this product needs to get to India and there is a very strong demand and emotional connect to the legacy of the Sierra.”

“We were looking forward to some direct benefits in the budget, which could have helped in reviving demand in the context of the current slowdown and huge investments made by the Industry for transition to BS-6 and from that aspect, the Budget speech was not what we were expecting,” said Rajan Wadhera, President, Society of Indian Automobile Manufacturers (SIAM).

“We had made specific recommendations on steps that could revive demand like an incentive based vehicle scrappage scheme, budget allocation for diesel buses procurement by STUs (state transport undertakings) and zero customs duty for lithium ion batteries. These don’t seem to have been considered.”

The industry has been in the midst of a protracted slowdown as consumers at large, faced with rising unemployment and an unsure future, have stopped spending. Passenger vehicle sales fell 13 per cent in 2019, the worst in over two decades.

Agencies