The Indian automobile industry is facing a severe condition triggered by a number of factors having an either a direct or indirect impact on the automobile industry.

According to the statistics published by the automobile industries, the production and sales in the automobile sector have been declined by a high percentage due to various economic and non-economic reasons.

Causes of slowdown:

There are several factors as a consequence of which the production and sale of automobiles in India are declining every month. Thereby, manufacturers of vehicles tend to cut jobs in order to maintain their fiscal balances and sound position of their company. Some of the factors that are playing a dominant role for such a situation are described below:

  • Stringent bank policies:

Currently, bank and other financial institutions are becoming very strict as far giving out loans is considered. They are willing to give loans only to such individuals who are having a good CIBIL score. As a result, people who are not having a good CIBIL score could not get loans easily and purchase assets of high value.

This is also a problem to dealers as they are facing problem in capitalizing their inventory and are therefore ordering fewer units only.

  • Confusion around BS6 emission standards:

Bharat Stage 6 (BS6) are emission standards set up by the Government of India. BS6 norms are applicable to the fuel as well as the engines. Engines that are compliant with the BS6 norms are less polluting. It is expected that BS6 norms will come into effect by April 2020, so the engines of existing cars will be required to be upgraded accordingly. But since all the manufacturers have not provided details regarding the upcoming shift, thus, certain buyers are delaying their decision of buying a new car.

  • Uncertainty in the minds of consumers:

Customers are uncertain about the availability of BS 6 fuel in the country. Even it is being available for sale in some of the cities in India, still, consumers are in a doubt and waiting for detailed knowledge to be uploaded about the new fuel. Uncertainty exists in the mind of carmakers also as to upgrade the existing engines as per BS 6 norms or to make new engines as it will require a huge investment. The extra cost will certainly affect the price of the car that will have to be indirectly borne by the customers.

  • The facility of OLA and UBER:

The online facility to book taxis from apps like OLA and UBER has been a boon for the society. Not only taxis, the apps are assisting the users to book auto rickshaw and bikes also for shorter distances. Also, the benefit of booking rental cabs, share cabs, and online fare payment are providing the customers with a better option than buying a car and hassles that come with it.

  • Availability of public transports:

As the big cities are already too crowded, so to avoid being stuck in traffic and control pollution, people are using public transport like Metro and local trains to travel. This will also help the population to get rid of the problem of finding a suitable parking space and documents to be carried for a hassle-free driving. This will also save a lot of time and energy.

  • Too many changes in the industry:

As there are a lot of back-to-back changes going on in the rules, regulations and government policies related to the sector, so the car industries are in a position to wait for the things to settle down. This can take a lot of time so neither the customers are willing to buy nor the manufacturers want a situation of overproduction of vehicles.

Apart from above-mentioned factors, numerous other factors are also responsible for such a decline in the automobile sector. To control the situation, all the key stakeholders related to automobile sector like suppliers, dealers, banks, customers have to support and work together to come out of the slowdown.

Government, on its part, is also making decisions and introducing measures to improve the situation. According to a recent announcement made by the Ministry of Finance, automobiles that are purchased before 31st March 2020 are eligible for the benefit of additional depreciation of 15%. Hence, total depreciation up to 30% can be claimed on such automobiles. Currently, buyers and dealers are waiting for BS6 deadline that will bring the best possible deals and attractive discount for the buyers too.

 
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An MBA in finance, I like to cover the wide range of topics related to Taxation, SEBI, Finance and anything that is Public Helpful. The motive is always to make it simpler for the taxpayers understand the system better and take informed decisions.

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