Indian automobile industry

under intense pressure

Tushar Singh
REG NO.19PGPM132
Some Highlights

 Mahindra & Mahindra has registered a fall of 15 per cent in total monthly sales to 40,142
units in July 2019.
 The domestic sales of Honda Cars India have dived 48.67 per cent to 10,250 units in July
2019.
 TVS Motor Company has reported a sales decline of 13 per cent to 2,79,465 units in July
2019.

About the decline

he major automobile companies of India today came out with their monthly sales data for July
2019 and the numbers are not at all encouraging. The prominent carmakers like Maruti Suzuki,
Hyundai, Mahindra & Mahindra and Honda have all suffered a drop in their sales during the
month. The case is similar with companies like TVS and Royal Enfield.

The country's largest carmaker Maruti Suzuki India has been witnessing a decline in sales for the
past six months and reported a 33.5 per cent dip in total sales to 1,09,264 units in July 2019. The
cumulative sales of Hyundai Motor India fell 3.8 per cent to 57,310 units during the month.

Mahindra & Mahindra has registered a fall of 15 per cent in total monthly sales to 40,142 units in
July 2019, while the domestic sales of Honda Cars India have dived 48.67 per cent to 10,250
units in the same month.

TVS Motor Company has reported a sales decline of 13 per cent to 2,79,465 units in July 2019.
Royal Enfield sales fell 22 per cent to 54,185 units during the month.

"Overall economic slowdown coupled with delayed monsoon and higher monsoon deficit in few
regions have impacted rural demand. Moreover, liquidity issue to some extent and inventory
correction for better business viability at dealers' end have resulted into sizable volume decline
across the automobile segment," Reliance Securities Senior Research Analyst Mitul Shah told
India Today. The automobile industry was reeling under intense pressure during the first quarter
of FY20 and this was proven by the data from SIAM (Society of Indian Automobile
Manufacturers). While the domestic sales plunged 15.93 per cent to 20,01,096 units in April
2019, there was a drop of 8.62 per cent to 20,86,358 units in May 2019. A decline of 12.34 per
cent to 19,97,952 units in domestic sales was witnessed in June 2019.

"Currently, the automobile industry is going through an unprecedented downturn as sales of new
vehicles have plummeted significantly over the last several months," SIAM President Rajan
Wadhera said.

Recently, India Ratings and Research published the June 2019 edition of its credit news digest on
the country's auto sector, highlighting the trends in the sub-segments of the auto sector.
"Domestic automobile industry's sales volume fell 12 per cent YoY in June 2019 on weak
consumer sentiments owing to the slowing economy amid delays in the onset of monsoons. With
rising inventory levels at dealer level, most original equipment manufacturers continued to take
production cut in June 2019," India Ratings and Research said.

"Over April-June 2019, the auto industry undertook a production cut of 11 per cent YoY on
account of around 12 per cent YoY, 14 per cent YoY and 10 per cent YoY production cut in PV,
CV and 2W segments, respectively," it added.

According to a PTI report, ACMA (Automotive Component Manufacturers Association of India)

has sought a uniform 18 per cent GST rate across the entire auto and auto component sector for a
revival. The auto component industry employs nearly 5 million people and ACMA has said that
almost 10 lakh jobs could be on the line if the prolonged slowdown in the automobile industry
continues.

Experts Say
Reliance Securities Senior Research Analyst Mitul Shah told India Today "We expect the slowdown to
continue in the second half of FY20. The BS-VI transformation and sharp price increase related to BS-VI
would keep automobile sales under pressure during the first half of FY21, and therefore we expect any
sizable revival only by mid-FY21,”.

Facts and figures released by Federation of Automotive Dealers Associations (FADA)

Mumbai: The slowdown in the auto industry persists as retail sales, as indicated by vehicle
registration data, show a 5.4% decline for the month of June. This was the third straight decline
in monthly vehicle sales this fiscal.

The total sales for the quarter ended June, subsequently, saw a decline of 6% compared to the
same period last year, as per the data released by Federation of Automotive Dealers Associations
(FADA), an industry body.

Passenger vehicles were the rare bright spot with only a 1% decline in sales for the first quarter
to 7,28,785 units. Other categories such as commercial vehicles and two-wheelers saw 14% and
6.4% decline, respectively. Three-wheeler sales were down 6.1%.
Subsequently, the inventory pile-up with passenger vehicles dealers improved and came down to
an average between 30- and 35-days equivalent, down from the highs of 60 days in the previous
months. The inventory with commercial vehicles and two-wheeler dealers remains high between
55 and 60 days and 60 and 65 days, respectively.
The norm is to have 30 days of inventory.

“Despite starting the month with a positive outlook and hope, the monthly sales ended in a de-
growth due to continued liquidity tightness and a much-delayed monsoon,” said Ashish Kale,
president of FADA. “Despite inquiry levels being reasonably strong, retail sales got affected.

Opinion

The automotive retailing itself is changing and so should the dealer partners. Selling cars is no
longer only an art and it’s time for dealers to consider the emerging science of data analytics and
connectivity to get the best out of the market.

“Auto retail should not be viewed as just car sales or service. A customer should be able to get a
bouquet of services like used cars and accessories along with sales and services, which
eventually adds to the business of dealers,”