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Last Updated : Sep 11, 2019 12:17 PM IST | Source: Moneycontrol.com

Auto sales crash: 13 reasons why fewer people are buying cars

Passenger vehicle sales decline for the tenth straight month in August, here are some reasons why the auto sector is struggling.

Swaraj Baggonkar @swarajsb
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India's domestic passenger vehicle sales fell for the tenth straight month in August, declining 31.57 percent, according to data released by the Society of Indian Automobile Manufacturers. Here are some of the reasons behind the slowdown in the auto sector. (Image: PTI)

Bharat Stage VI, Regulatory policies - Uncertainty over future of BS-IV vehicles after India adopts BS-VI on April 1, 2020 is one of the reasons why demand for these vehicles stagnated. Besides, cost of cars is estimated to have risen 15 percent in past nine months due to mandatory additions like airbag, reverse sensors, ABS and crash conformity standards. (Image: GNCAP)
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Bharat Stage VI, Regulatory policies - Uncertainty over future of BS-IV vehicles after India adopts BS-VI on April 1, 2020 is one of the reasons why demand for these vehicles stagnated. Besides, cost of cars is estimated to have risen 15 percent in past nine months due to mandatory additions like airbag, reverse sensors, ABS and crash conformity standards. (Image: GNCAP)

Fuel prices - Between August 2015 and August 2019 price of petrol has risen by 15 percent as per data provided by the state-run Indian Oil Corporation. Government raised excise duty on petrol and diesel by Re 1 during the 2019 Union Budget. (Image: Reuters)
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Fuel prices - Between August 2015 and August 2019 price of petrol has risen by 15 percent as per data provided by the state-run Indian Oil Corporation. Government raised excise duty on petrol and diesel by Re 1 during the 2019 Union Budget. (Image: Reuters)

India’s Gross Domestic Product slowed down to 5 percent to a 6-year low in the June quarter. Consumption collapsed to an 18-quarter low of 3.1 percent from 10.6 percent in the March quarter. Appreciation of investment in share market has stagnated as the Sensex posted a drop of 3 percent during the last two years (Image: Moneycontrol)
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GDP Slowdown - India’s gross domestic product growth slowed down to 5 percent, a 6-year low in the June quarter. Consumption collapsed to an 18-quarter low of 3.1 percent from 10.6 percent in the March quarter. Appreciation of investment in share market has stagnated as the Sensex posted a drop of 3 percent during the last two years. (Image: Reuters)

An estimated 2 lakh people related to the auto industry have lost their jobs in less than a year. There were 18.6 million Indians without a job in 2018 and this is estimated to go up to 18.9 million by end of this year as per the International Labour Organisation (Image: Moneycontrol)
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Job uncertainty - An estimated 2 lakh people related to the auto industry have lost their jobs in less than a year. There were 18.6 million Indians without a job in 2018 and this is estimated to go up to 18.9 million by end of this year, according to the International Labour Organisation. (Image: PTI)

Heavy traffic congestion, lack parking slot availability, poor quality roads, expensive vehicle ownership cycle and reducing resale value are some of the reasons why more people are preferring ride-hailing platforms like Ola and Uber. In cities people prefer taking taxis for commute rather than owning and driving themselves (Image: Moneycontrol)
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Rise of Ola and Uber - Heavy traffic congestion, lack of parking slot availability, poor quality roads, expensive vehicle ownership cycle and reducing resale value are some of the reasons why more people are preferring ride-hailing platforms like Ola and Uber. In cities, people prefer taking taxis for commute rather than owning and driving themselves. (Image: Reuters)

Aspirational value for cars, especially entry level hatchbacks, have diminished over the past few years. Buyers are keen to make premium hatchbacks such as Maruti Suzuki Baleno or compact SUVs like Tata Nexon as their first buy (Image: Maruti Suzuki)
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Cultural shift - Aspirational value for cars, especially entry-level hatchbacks, have diminished over the past few years. Buyers are keen to make premium hatchbacks such as Maruti Suzuki Baleno or compact SUVs like Tata Nexon as their first buy. (Image: Maruti Suzuki)

The Motor Vehicle Amendment Act, 2019 which was passed by the Parliament was brought into effect on September 1. Stricter rules for driving and steeper penalties which have risen by four to ten times compared to their previous levels have acted as a purchase deterrent. In Mumbai wrongful parking attracts more than Rs 23,000 in fines (Image: PTI)
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Motor Vehicles Act - The Motor Vehicle Amendment Act, 2019 which was passed by the Parliament was brought into effect on September 1. Stricter rules for driving and penalties which have risen by four to ten times compared to their previous levels have acted as a purchase deterrent. In Mumbai, wrongful parking attracts a fine of upto Rs 23,000. (Image: PTI)

Despite reductions in rates by the RBI over the past several months banks have not passed on the benefit to the end consumer. Further, banks have been extra vigilant in lending due to the high susceptibility of a default. Therefore car loan growth has remained poor (Image: Reuters)
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High interest rates, stricter security - Despite reductions in rates by the RBI over the past several months banks have not passed on the benefit to the end consumer. Further, banks have been extra vigilant in lending due to the high susceptibility of a default. Therefore car loan growth has remained poor (Representative Image | Credit: Reuters)

Mandatory multi-year purchase of third party insurance has pushed the cost of ownership of cars higher. Buyers now have to buy three year insurance instead of one year. Registration fees for vehicles was hiked by 13 times by the Centre. This however has not been put off till June 2020 (Image: Pixabay)
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High insurance and registration cost - Mandatory multi-year purchase of third party insurance has pushed the cost of ownership of cars higher. Buyers now have to buy three-year insurance instead of one year. Registration fees for vehicles was hiked by 13 times by the Centre. This however has been put off till June 2020 (Image: Pixabay)

Though the National Highways Authority of India has added new stretches of highways to the national grid in the past few years quality of roads within cities remains poor. Potholes cropping up claiming lives have become a common occurrence especially during monsoons (Image: Moneycontrol)
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Infra woes - Though the National Highways Authority of India has added new stretches of highways to the national grid in the past few years, quality of roads within cities remains poor. Potholes cropping up claiming lives have become a common occurrence especially during monsoons (Image: Reuters)

In anticipation of a cut in the Goods and Services Tax (GST) on existing cars buyers have held back their purchase, as per carmakers. The industry has been seeking a cut in GST to 18 percent from 28 percent. The government, however, has not shown much positivity towards this (Image: Moneycontrol)
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Taxation - In anticipation of a cut in the Goods and Services Tax (GST), existing cars buyers have held back their purchase, as per carmakers. The industry has been seeking a cut in GST to 18 percent from 28 percent. The government, however, has not shown much positivity towards this

The government’s sustained push for electric mobility has created doubts for buyers who are now comparing ownership cost of a petrol/diesel car to that of a battery-powered car. Carmakers have promised to launch affordable range of electric cars in the next 2-3 years (Image: Maruti Suzuki)
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EV Policy - The government’s sustained push for electric mobility has created doubts for buyers who are now comparing ownership cost of a petrol/diesel car to that of a battery-powered car. Carmakers have promised to launch an affordable range of electric cars in the next 2-3 years (Image: Maruti Suzuki)

Companies like Volkswagen, Mahindra, Mercedes to name a few have entered the car leasing space as a means to boost usability of their inventory. Rise of self-drive car companies such as Zoomcar and Myles have also impacted new car sales (Image: Volkswagen)
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Rise of leasing and self-drive module - Companies like Volkswagen, Mahindra, Mercedes to name a few have entered the car leasing space as a means to boost usability of their inventory. Rise of self-drive car companies such as Zoomcar and Myles have also impacted new car sales (Image: Volkswagen)

First Published on Sep 10, 2019 06:12 pm
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