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Automakers stare at a rough drive as car sales fast run out of fuel

Loan taps are drying up, rains are playing hide and seek, and a technological disruption is looming. Not exactly the best of times for automobile companies.

May 11, 2020 / 01:47 PM IST
Representative image

Representative image

The sales engine of the Indian automobile industry has been stuttering for quite some time now, fuelling doubts about when and how carmakers will be able to reverse the trend and get back on the growth track.

According to data of industry body Society of Indian Automobile Manufacturers (SIAM), domestic sales in June across passenger, commercial vehicles as well as two- and three-wheelers have fallen 12 per cent year-on-year. This is the third straight month when passenger vehicle sales have shrunk by double digits. Vehicle sales had fallen 17 per cent in April and 20.5 per cent in May. For the record, automobile companies in India count deliveries to dealers as sales.

While the double-digit de-growth over the past three months has caught the attention of many, carmakers have been actually trundling along a wobbly path from the second half of 2018-19. After a comfortable ride in the first half of FY19, passenger vehicle sales started going downhill from the September quarter when it slipped 3.6 per cent. Thereafter, the slide has continued with the drop in the first quarter of the current financial year (2019-20), one of the sharpest in nearly two decades.

The reasons for the deceleration in passenger vehicle sales are perhaps both short term and long term. As a short-term example, we can recall the Kerala floods in August last year that slammed immediate brakes on passenger vehicle sales. An uneven monsoon last year further added to the woes. These events led to one of the worst festive seasons and huge inventory backlog at dealerships across the country. The worrying point is this year also rains have been truant so far and a deficient monsoon can dry up discretionary spending of consumers.