Sharp decline in the sales of automobiles in Indian economy!

It’s all too gloomy in the automobile sector, at least what it looks like from the figures from the last one year. The sharp decline in the sales of the automobiles could be easily credited to the fact that the Indian economy is not performing to the expected levels.

Sharp decline in the sales of automobiles in Indian economy

As per the recent figures of total sales (exports and domestic sales) the scenario looks highly depressing.

Total sales for Maruti Suzuki declined by 7.89% in February 2013 as seen in the same month in 2012.

118949 units were sold in 2012 against a number of 109567 in 2013. Maruti has been the worst hit among all the major players in the sector.

Tata Motors received a reduction by 33 % from unit sales of 92,119 to 61,998 in the same period.

However, M& M achieved a growth of 10.99%, the maximum, from 43,087 unit sales from February 2012 to 47,284 in the same month 2013.

Hyundai Motors have also managed to remain afloat with an undersized growth of 5.42 % from 51,885 unit sales in the same month of 2012 to 54,665 in February 2013.

Though, the stocks of TATA Motors can still manage the downturn on the performance of Jaguar and Land Rover but for how long, it needs to be seen.

Unfortunately, even the commercial and two-wheeler segment is not experiencing any growth either.

What is the primary reason for this sluggish behavior of the auto sector?

Consumer sentiments in India are to a new low and revival in sales volumes would take at least three more quarters at least.Sharp decline in the sales of automobiles in Indian economy

Apart from the rising costs both in diesel and petrol fuels, the spending behavior of the majority of the consumers have taken a curb. Therefore, fuel price hike is not the only reason for this deceleration in the automobile sector of the country.

Barring M & M, rest of the major players in the industry have not been able to increase their domestic sales as well. It should be maintained here that almost all the major players in the industry earn the maximum part of their revenue from the domestic sales.

Though, Hyundai and M & M have atleast observed some rise in their exports.

In addition, the Budget for 2013-14 has doused any hopes of recovery at least for a while.

Budget of 2013-14 has resulted in the   amplification of the excise duty on SUV’s by 30% from 27% previously and all the other luxury vehicles will attract 100 % import duty.

Therefore, apart from surging fuel prices, input costs, inflation and interest rates the sector has to bear the brunt of rise in excise and import duty as well.

Automobile sector is one of the highest contributors to the economy and its struggle is not a good sermon.

The increase in excise and import duty would add on to the existing pressure on the automobile industry as the manufacturers will surely pass the duty hikes to the consumers that will further dampen any chances of  revival of the sales.

This could also lead to reduction of jobs in the sector in wake of losing profitability for the manufacturers. Atleast, the dealers would surely consider this option.

Considering the importance of the auto sector to the GDP of the country, government should re-visit its policy towards the sector. At least, some soaps should be provided to the sector so that it can compensate the loss on the domestic front through increase in exports.

Ashish Pandey

I am a business journalist who is currently employed at Zee Business. My areas of interest include business and foreign policy. You can reach me on Twitter at @ashuvirgo1984 or @eFundsPlus.

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