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We all know the situation the automobile industry is facing in India. Every day the sales figures are coming down. The YoY and MoM figures are really upsetting. Due to recession, the prospective buyers are shelving their plans for a new car. I even came across a news which says that SIAM has approached the Indian Government to plead/cry for a stimulus for this industry. Whether it will be heeded, is a big question mark. And, if at all it is heeded and the Government comes out with some stimulus, how far it will help the industry is yet again another big question mark.

The industry should also approach the banks and NBFCs for better and easier loan availability to the car buyers. 100% finance and lower EMI with longer loan tenure will definitely help. It will be icing on the cake if they can reduce the interest rate also.

I would love have your views on this.

What's your take?

In case of a depreciating asset like a car, I don't know much increased tenure will help. Anyway, 5 year loans are available, it is unlikely that banks would be willing to go any further.

What can spur demand is interest rate reduction - but that also is unlikely, or, if it happens, only ~25 bp.

Ultimately people need to be confident that if they take on a loan, they would get increments that would improve the serviceability of the loan. Or at least they won't lose their jobs / wages won't reduce.
In the past 2 years, in many industries the real wages have come down or remained stagnant, especially in the junior engineer / officer category who actually power the vehicle market. So I am afraid that there is no sunshine in the horizon yet.

Hi byomjeet,

Note sure if you are aware about this or not, there are already many banks (all Govt.) who provide car loans for a tenure of upto 7 years and the EMI comes to some 1800 rupees approx. I have a friend who has 3 cars in family financed by PNB for a tenure of 7 years. Though it definitely depends on your credit history and your connection with the branch manager :).

I guess we need to look into this issue from different angle. First thing is why this issue has occurred? In last 10 years, Indian Auto industry has grown like anything. So manufacturers became greedy & installed huge plants to make lacs of cars per year. But is there potential for that? Its there but not that much where all car manufacturer will be able to sell large number of cars. Right now also i guess around 2 lacs cars are sold per month. IMO for our country its a very good number. We are 125 crore people country, i agree, but 70-80% people cant afford cars. So they are happy with 2 wheeler. Number of 2 wheeler sold in India per month just shows that. I guess its more than 10 Lacs per month (may be more i guess). I dont think there is no other country in the world where so many 2 wheeler are sold. Every month or year you can't expect market to grow. Other thing i want to say is infrastructure in our country is not improving. Some may argue that we have more highways now, more connectivity, golden quadrangle etc. But do normal people buy car to travel on highways regularly? Do many trips with car on there own? Big NO for this. I know many people who own personal good cars but avoid using it on highways due to bad roads, traffic, bad drivers on road, other issues etc. They prefer public transport like Bus, train, air travel etc. I also do it some times to get piece of mind. Other factor is our city roads are already getting flooded with cars. Traffic has become major headache in our daily routine in all the major cities in India. Parking problem, parking cost adds to it. Last factors are high interest rates & increasing fuel costs. We cant do much about it. Due to all these factors many people are not willing to buy new cars or change there cars. So IMO if manufacturers limit there production to realistic numbers, they will be more happy & profitable. What is the point in making facility of making 1 Lac cars per year & selling only 30-40 thousand??

Lastly i am happy that Industry has slowed down. So less number of cars will come on road, less pollution, less traffic in the city. Already there are problems, i don't want to increase them to a level where it will break the whole system.

PS: These are strictly my own opinions though i am open for debates ;)

There was huge demand last year, which manufacturers could not take on. I remember asking for Swift D and being quoted 1 year waiting, which was an unrealistic expectation. I switched off completely, cancelling my purchase decision. I believe the same is happening with Amaze and EcoSport.
At one time there was no stopping XUV, but talk of glitches/bad word of mouth did it in, so product quality counts.
But I do believe, in the long run, Innovation wins. Finally, products that catch the fancy, offer value & reliability and are up-to-date will survive the decline.

Automobile industry is slowing down, but at the same time we are seeing long waiting periods for new launches. Which means people are no longer going for same old trusty brands and models and want more bang for their buck.

Auto makers need to introspect as well. Agreed taxes are high in india, but then cars are priced pretty high too(Example: Duster sells cheaper in UK where it gets exported form india). Toyota still thinks they can charge a premium for "T badge" and T quality even if they dont give anything else. GM is doing everything to cut costs by giving us chinese products.

So car sales are falling, but there are also examples about waiting periods on new launches. Which gives me hopes that if Auto makers focus on launching more new models and more global launches(and not some 3rd world models) they will surely find customers.

The Indian auto industry's current plight is symptomatic of the macro level situation across the globe.

Quite a while back I had posted on this forum, most likely in a different thread if I am not mistaken , that the current generation of the 30-40 yr olds leave alone the young ones do not know what tight money scenarios are all about. Commencing the decade of the 80s' thanks to the efforts of Paul Volcker and other central bankers of his ilk, with the containment of inflation, there was a downward push to interest rates globally. This saw a cyclic shift in global economic activity towards expansion of economies across the globe.

So what does this have to do with car sales in India? Simple! Rising prosperity meant increase in the number of the affluent, leading to higher demand for hitherto aspirational possessions and their being considered necessities. So all manner of industries flourished be it consumer durables, lifestyle products/services tourism hospitality - the list is endless.

Now the trend has reversed. The excesses of the earlier trend are coming home to roost. While the politicians across the globe and their minions manning the central banks are trying to contain the rising money costs and giving assurances that easy money will not dry up any time soon, the markets are not convinced any more. When the markets are in fear then money becomes expensive. The consequences of such a scenario are quite obvious and do not need to be detailed here.

So once again how does this affect the car sales in India? Simple! As the quantum of affluent folks decreases so shall the demand for what has come to be considered the necessities in the new normal. Demand for such things as cars, premium housing, affluent lifestyle products etc etc will contract.

Does that mean we will go back to the stage of Amby, Premier Padmini and the Standard Herald ? Ofcourse not! A very large part of the progress is irreversible and thankfully so. However the pace of introduction of new products will diminish substantially. There will come a stage when the industry will actively seek consolidation.

Adding fuel to the fire so to speak will be the energy scenario - read global energy demand-supply imbalances. This will be further exacerbated by the impact of currency rates on energy prices.

All of the above will lead towards a downward trend in automobile demand over the years. Some years will be better than the others but overall demand shall show a southward trend.

I am no prophet of doom and gloom predicting armageddon . I am only suggesting we are seeing a cyclic shift in economic activity towards contraction. This ship will turn very slowly but turn it will as cyclic reversals are the cure for excesses of previous cycles.

India has a lot to learn from the developed countries. We are a young nation and trust me, we can avoid all the mistakes done by the developed nations.

If our governance would have had the courage and will to improve public transportation and provide better travel facilities we would not even be staring at this situation.

Where is the place for such rapid growth in the auto sector? Small country with the 2nd highest population in the world! Corrupt system with massive lobbying by the auto sector is responsible for this mess.

Who would not like to take a metro/bus/auto ride anytime of the day without having to worry on driving/parking tensions! Think about it :thumbs up

SIAM ?? Industry slowdown ?? Interest rate cut ?? what are you talking about, its election season,

everybody and his uncle wants to be the first to dish out Rice @ Re1/-:deadhorse

Industry based Reasons:

• Rising cost of fuel
• Government De-Regulating Diesel
• Booming Auto Segments taxed by Govt (Tax on SUV is increased)
• No Clear cut guidelines / rules by the Govt (SX4 / Corolla is an SUV as per Govt)
• No Clear cut price strategy on Petrol / Diesel prices in future
• Indian mindset to buy a "used" car initially to get accustomed and then settling with it instead of upgrading to a new car.

Individual / City based reasons:

• High inflation rate for vegetables and other basic necessities and increasing cost of living
• Newer and increased taxes YoY
• Lack of parking space for private vehicles
• Exhorbitant parking rates at malls / movies etc
• Traffic jams and lack of infrastructure
• Affordable and cheaper "taxi" / "auto-rickshaw" options
• Poor Traffic law enforcement
• Poor Hikes and incentives
• Vandalism & Jealousy

Market based reasons:

• No job security for private / high pay sector
• Recession in the West, affects Asia
• Property prices have shot through the roof. (people buy houses first then a car)

What Govt can do:

• Demarcate a clear cut strategy for CNG / LPG / Petrol / Diesel price for at least 5 years
• Bring in policies like "no tax" for a Hybrid vehicle(Reva / prius types)
• Remove additional SUV Tax and likes thereof.
• Bring some laws & policies for middle/upper middle class also (not only for agriculture class). IT joe cannot take a tractor to work.
• Reduce the interest rate on auto loans & offer 95% funding
• Tax benefit of at least 50,000 per annum on auto emi
• Tax exemption for fuel bills at least 10,000 per annum (similar to medical)
• Reduce charges on "permit" and also reduce bottlenecks at check nakas
• Prescribe a "toll chart" for X paise / km across the country for toll roads.
• Allow one state vehicle to be driven in another state without hassles
• Accept "Road tax only" for other state vehicles, if person is ready to pay (For people who are temporarily relocating). Do not force registration / NOC etc for temporary workers in a particular state.

Cheers. I completely agree with this part irrespective of anything else you may say! :-)

I should say you must be making some really educated punts given your orientation for such analysis! :-) This makes a lot of sense!

Very level headed and reasonable analysis, but in our country anything reasonable is never seen logical or conceavible it's always extremes :deadhorse extreme confidence when high and EVEN more show of confidence when in dumps, some saying nothing wrong but when you lift up skirts you will see cancer. All show and no go? This recession will perhaps make us more reasonable and REAL and less bullshitters and gullible as a people

The Indian tax structuring for vehicles is something that should really be examined (by some clear-headed folks). I keep mentioning (on this forum and elsewhere too) that cars in India are priced much higher than anywhere else in the world. This contributes to people using their existing cars for longer periods and not replacing them often. This is a good thing, it avoids wastage and saves the environment, but is bad for the economy and the auto industry.
Also it is bad for the people - their standard of living takes a hit. A person who would be able to afford a good sedan abroad would only be able to afford an entry-level hatch here with the same pay.

As a developing country with a large population and improving per capita income, ideally yes, there is a lot of potential and the market can definitely grow every month and year. The problem is with affordability - view my statement above. Car prices are sky high and people don't want to buy cars often.
If cars here were priced comparably to other places of the world, I for one would upgrade my car every 2 years at least.

Agree with you completely. I feel this is also one of the main reasons for car sales to decline. And it's totally the government's fault. Lack of infrastructure, and a lackadaisical attitude towards the development of it can cause even the most ardent car lover to defer a car purchase.

In the case of Mumbai, I personally know a whole bunch of people who do not want to buy cars because of the traffic situation and because the roads are so bad.


Yes, agree with you.

IMO this is the wrong approach. We should be looking at how we can sustain the nation with an increased number of cars rather than to reduce the number of cars sold, thereby reducing the living standards of people in India. Development in infrastructure and reduction in taxes by curbing corruption is the way to go.


You make some valid points. Our market was so ignorant and underdeveloped at one point, that, for example, we happily lapped up the Toyota Qualis when it was already 10 years old in the international market and towards the fag end of its product life cycle!!

However now that the trends are changing and due to the fact that people are more educated and aware of the international automotive happenings than ever before, the market has also started demanding more from car manufacturers.

Most of the car manufacturers (Tata comes foremost to mind), are still pushing the same old unwanted junk onto the shelves expecting people to still buy them.


Having said all this, I would like to quote the famous words of the Mayor of Bagota:

stupid:

Insurance costs, payment for residential parking space, near zero possibility to find a covered parking space for the 2nd car, etc. can also be included under this.

Ownership costs of car is also going up steadily. For example, DDiS engines are now using synthetic oil only, while the diesel filters of crdi engines that used to cost Rs.1000 has nearly doubled.

I am apprehensive about the falling sales because, automobile industry will depend more on the service section.

This is already witnessed in the past few months with significant increase of spare part/labour charge across all the brands, Tata included.