Vehicle sales are picking up again in India?

Posted on 19th Oct 2020 by rohit kumar

Ashwin Arya, living in Betul, Madhya Pradesh, recently bought a new Toyota Glanza vehicle for his family. 30-year-old Ashwin bought the vehicle in June this year, at a time when there was a lockdown in many areas of the country.

 

Talking to the BBC over the phone, he says, "I had an accident with my father and we were in dire need of a car".

 

Ashwin is from an upper-middle-class family, he says that the family had planned to buy a new car before the onset of the epidemic. After the accident with the father, it became more urgent.

 

Needed at lockdown

He says, "My father has to go to work every day. My mother and sister also use it for daily work. Due to the lack of good public transport facilities in Betul, we need a car to meet our needs." Should have.

 

The month of August was good for the Indian automobile sector due to the purchase of customers like Ashwin and this is a ray of hope for the Indian economy, whose growth rate was negative in the first quarter of the year.

 

According to the rating agency 'Care Ratings', the tractor, two-wheeler, and passenger vehicle segment are showing good signs for the auto sector. This is important because the sector contributes up to 7 percent of India's GDP.

 

But only coronavirus cannot be blamed for the slow growth of the auto sector. Like other sectors of the economy, the automobile sector has been sluggish since 2019 due to reasons such as policy changes in emission standards, an increase in fuel prices, higher interest rates charged by banks, and a slowdown in the entire economy.

 

According to the Federation of Automobile Dealers Association (FATA) President Winkesh Gulati, "The months of July and August were better than our expectations."

 

Experts believe that due to the complete shutdown of public transport, the demand for private vehicles has increased very fast. It is possible that even where public transport has opened, people are hesitant to use them for fear of infection. Hence the demand for private vehicles is increasing.

 

P Kumar Rao, general manager of Narbharam Motors Private Limited in Jamshedpur, says, "We have seen an increase in sales of two-wheelers and low-budget cars. Banks are also helping people by giving loans quickly."

 

Pressure on commercial vehicle dealers

In Mumbai, old vehicle seller Abhishek Jain also believes that demand has increased. He says, "I think everyone is concerned about their safety, that's why they want to buy a car for themselves."

 

A recent survey by rating agency ICRA stated, "There is pressure on commercial vehicle dealers. Private vehicle dealers are seeing some degree of hope."

 

Toyota Kirloskar Motors Vice-Chairman Vikram Kirloskar also agrees. He says, "I don't know whether we have stood back on our feet or not. We are looking at things month after month."

 

Vikram Kirloskar told the BBC in an interview, "Our order book is looking good, but we cannot plan for the coming three months."

 

Some time ago there were also reports that Toyota Kirloskar is stopping its expansion plans in India. However, Vikram Kirloskar has clarified that he is planning to invest Rs 2000 crore in the existing plant to improve the technology.

 

Kia Motors India sales and marketing vice president Manohar Bhatt believes that the growth of the auto sector is directly related to the growth of GDP. If the economy grows, then confidence in people increases and they spend money.

 

According to Bhatt, "If people feel that they have money, they will buy vehicles. It is difficult to comment on the future because we all know that the condition of the economy is not good and will not be good next year."

 

Experts believe that the demand right now is due to those consumers, who were waiting to buy the vehicles and are now coming out and buying the cars according to the old plan.

 

The demand which had fallen at the beginning of this financial year due to the closure of the showroom is expected to come back for the next 6 months. "We are expecting better months ahead because only serious customers are coming out to buy goods," says Vikas Gulati.

 

Expectations from the festive season

 

According to a Care Ratings report, since August 2020, the original equipment manufacturers of automobiles have also increased production keeping in mind weddings and festivals.

 

MG Motor India President Rajiv Chhabra told the BBC, "Consumption patterns have changed for consumers, who have a lot of money, they can spend their money, we are looking forward to the festive season. Usually the festival The season is better for us than the entire year and this time demand has increased, so we are expecting more sales. "

 

The festival season starts from Onam in August in South India and ends in April with Baisakhi in North India.

 

According to industry estimates, typically 35–40 percent of sales for the entire year are in the festival season. Experts and market players believe that after December the real picture of the sector will be cleared.

 

Because of the uncertain times, cruiser bike manufacturer Harley-Davidson recently announced that they are "closing their facilities in the city of Bawal in Haryana and will also reduce their sales office in Gurgaon."

 

Experts believe that this step of Harley Davidson in this area will not change much. Vashistha Unwala, research analyst at Care Ratings, told the BBC "they are in the cruise bike sector and are not a big part of the country".

 

However, the FADA believes that the exit of Harley-Davidson will result in a loss of Rs 130 crore and 2000 people may lose their jobs.

 

The reason for Harley Davidson's exit from the Indian market is the financial burden and expected lower sales. They are also trying to partner with an Indian company.

 

According to CARE Ratings, the automobile sector contributes 7.1% of GDP to the economy and attracts large investments. It employs about 35 million people, so it plays a big role in the Indian economy.

 

Major companies of the region have demanded that the government must take steps to increase the demand among consumers.

 

"Financial instability is a challenge, the government should work towards that and ensure that consumers are more confident in spending money," Wankesh Gulati, president of the Federation of Automobile Dealers Association, told the BBC.

 

The automobile is considered a 'luxury item', hence GST is charged at the highest rate of 28% on most vehicles. Experts believe that the government can work towards rationalizing the tax in this area. Union Minister Prakash Javadekar had recently assured that the government is considering the rate of GST.

 

There is also demand from this sector regarding scrapping policy. The scraping policy will encourage car owners to send vehicles over 15 years old to escape. For this, the government can give financial or tax-based benefits on the purchase of new vehicles.

 

According to the news agencies report, Road Transport and Highways Minister Nitin Gadkari has said that the scrapping policy is in its final stages and can be implemented very quickly. He was speaking on the occasion of the 60th annual session of the Automotive Component Manufacturers Association of India (EXMA). Gadkari also suggested that the industry should reduce its "import dependency".