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Old 4th May 2019, 07:16   #46
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Re: Slowdown bites hard: 205 dealers shut down, Rs 2000 crore losses & 3000 jobs lost

Toyota selling rebadged Maruti vehicles, Fiat and GM exiting, Ford tying up with Mahendra....Do these point to major shakeup in Indian auto market like what happened in telecom after the entry of Jio?
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Old 4th May 2019, 08:12   #47
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Re: Slowdown bites hard: 205 dealers shut down, Rs 2000 crore losses & 3000 jobs lost

It's not just the auto industry, guys. There are many other external factors at play here. From the Times of India daily newsletter:

Missing the josh: India's economy slowed down in 2018-19 due to declining growth in private consumption, slow increase in fixed investment and muted exports says the Finance Ministry's latest monthly report. It also says that there is a slowdown of growth in agriculture and industry. That's hardly surprising given the signals that various segments have been sending out in recent times. Among them:

GDP growth is slowing: The Central Statistics Office (CSO) has revised its GDP growth estimate for 2018-19 downwards from 7.2% to 7%, which is the lowest in the past five years.

Unemployment is rising: India's unemployment rate in April rose to 7.6%, the highest since October 2016, and up from 6.71% in March, according to data compiled by the Centre for Monitoring Indian Economy (CMIE). The government recently withheld jobs to 'check its veracity' but a leaked report showed that the unemployment rate had risen to its highest level in at least 45 years in 2017-18.

Tax base has shrunk: The number of people filing income tax returns has declined in 2018-19 indicating a deepening slowdown in the overall economy, says a brokerage report. Citing official data, a report by Kotak Securities says only 66.8 million returns were filed in 2018-19 as against 67.5 million in the previous year, which is down 1%. "This is surprising given that post-demonetisation, it was expected that the tax base would continue to increase," the report says.

New investments are old news: India saw the lowest number of new investment proposals in the last 14 years (since 2004-05) during 2018-19 adding up to "a dismal" Rs 9.5 lakh crore, according to a CMIE report. This would be the fourth consecutive year of decline in new investment proposals which began in 2015-16, the report says.
Indians aren't flying as much: The pace of growth in air traffic (often cited to underline the economic performance of the government) has hit a five-year low at 11.6% in 2018-19. Cargo traffic growth has also moderated to 6%, as against double-digits growth in the past two years.

Or buying enough cars: Passenger vehicle sales crashed 17% last month — the sharpest decline in nearly eight years (since October 2011 when sales had fallen by 19.8%). Last financial year was also the worst for PV production since 2013-14 (when factory output had fallen by 5%). On an average, two vehicle dealerships have shut every week over the past two years.

That means ... All that still leaves India with the 'fastest-growing major economy' tag but it also adds up to a challenge for the new government that will hopefully be in place this month.
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Old 4th May 2019, 08:51   #48
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Re: Slowdown bites hard: 205 dealers shut down, Rs 2000 crore losses & 3000 jobs lost

Let me think aloud -

Its basic Demand vs Supply

Demand Parameters and actors i.e. majorly Customers
Things in favour of
  • Steady disposable income making car as a affordable option
  • Still Cars are a status symbol in many parts of India
  • Car as a basic necessity in towns where public transport doesn't score
  • With latest technology advancements, there is always something innovative in automobile space which engages Customers
  • Options - They are everywhere, with so much to offer Customer never runs out of option.
  • Not the least, approachability, awareness and other attractive offers
Things not in favour of
  • Realisation that car is just a mean of commute
  • Traffic and parking woes at almost every growing city
  • Ride alternates like Ola,Uber,Quickride availability
  • Rising Car and maintenance costs
  • Ridiculous Car prices, with so much of globalisation its a matter of few seconds to compare models sold locally and globally and feel underprivileged.
  • Not to forget fuel prices and taxes

Supply Parameters and actors i.e. majorly Manufacturers and Dealers
Things in favour of
  • Better technology and manufacturing process making them competitive.
  • Localisation and employability not that a challenge in India
  • F-A-T Margins in most of the products and services these days
  • Target Customer usually approaches on their own, with Internet, they don't need to over sell.
  • Knowing their local territory in sense of what Customers want or what will sell ?
Things not in favour of
  • Real estate still is a major investment
  • Taxes make the prices go north. In simple words Overpriced
  • Sub standard products and services
  • Visible Cost cutting and treating India as a dumping ground.
  • Esp for dealers - Treating Services as an opportunity to milk customers
  • Once tasted success, Greed creeps in to make more and more
  • Value proposition often changes

Note - Every business is here with an intention to make money and be profitable. Unfair and unethical practices may give you short run of money, but in the end it is not sustainable. We Indians value intangible assets more than everything else.

Last edited by ajmat : 4th May 2019 at 21:50.
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Old 4th May 2019, 09:27   #49
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Re: Slowdown bites hard: 205 dealers shut down, Rs 2000 crore losses & 3000 jobs lost

Apart from economic reasons, is there an underlying effect of changing consumer behaviour? Pundits have been often heard talking on how the younger generation don't spend much on "things" but on "experiences". Then the fact that our cities are choked, ride hailing penetration has improved and emergence of metro rail.
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Old 4th May 2019, 12:30   #50
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Re: Slowdown bites hard: 205 dealers shut down, Rs 2000 crore losses & 3000 jobs lost

Thanks for this thread. I have been a sub-dealer (lower investment, lower risk, lower returns) for Piaggio Vespa Aprilia scooters and had to shut shop in a little over two years.

a) the numbers just don't add up.
b) We went in under-capitalised.

Not denying that we did some things wrong and looking back, I might have done things differently, but we also did a lot of things right! Would write about in detail in a later thread.

Last edited by khan_sultan : 5th May 2019 at 08:16. Reason: formatting for better readability
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Old 4th May 2019, 12:58   #51
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Re: Slowdown bites hard: 205 dealers shut down, Rs 2000 crore losses & 3000 jobs lost

This correction was pending as cars in the market are over-priced and interest rates are high. The market will be corrected only by tax cuts, reduction in interest rates or margin reductions from OEMs and their suppliers.
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Old 4th May 2019, 13:17   #52
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Re: Slowdown bites hard: 205 dealers shut down, Rs 2000 crore losses & 3000 jobs lost

Talking of consumer behavior, I wish to narrate an observation I have been making over last many years.

With coming of Maruti age a sort of rage caught on in our community. At almost every wedding I attended, giving away a Maruti 800 to the groom became a norm. (Why and how's of this social custom I leave it to your imagination and knowledge) Few years down the line things progressed to an air-conditioned Maruti 800 to Contessa's to Tata Sierra to Ford Escorts and Hyundai Accents and Swifts ultimately moving to Fortuners and Endeavours in early 21 century.

More often than not I felt that the groom ended up getting more than what he could chew on and I heard many stories of cars getting smashed in rashly driven accidents or getting sold off cheap as the new owners realized that they didn't earn enough to even put fuel in the guzzlers. Last I saw about three years ago a decked up Jaguar parked in the portico of a marriage palace where the wedding was taking place and then came the crash. For last three years I have only seen portico's empty of gleaming beauties at the weddings.

Is it due to 'war on corruption' or is it due some Providence enforced sense on the community or just some silly economic factor. It surely gives us another cause for this crisis.

Last edited by khan_sultan : 5th May 2019 at 08:17. Reason: formatted for better readability
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Old 4th May 2019, 13:39   #53
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Re: Slowdown bites hard: 205 dealers shut down, Rs 2000 crore losses & 3000 jobs lost

I think the current young generation (Under 30) don't aspire to become car owners as much as the generation who were 30 years 10 years ago. (currently 40). When I was a kid, the first thing I dreamed of buying on my own money was a car. But the current generation's priority seems to be expensive gadgets, travel experiences etc, not a car. For getting around the city they uses Ola/Uber or a bike at worst case.

Last edited by Superleggera : 4th May 2019 at 13:40.
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Old 4th May 2019, 15:21   #54
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Re: Slowdown bites hard: 205 dealers shut down, Rs 2000 crore losses & 3000 jobs lost

A few weeks ago I had a good laugh after reading DNA Money. One page 1 there was an article saying that Carmakers were 'forced' to raise prices due to increasing input costs even though there was a sales slump.
On page 3 there was another article saying that commodity prices had fallen sharply !! Steel, aluminium etc ! So what the hell is going on ?

Though I do agree that taxes have added more than a fair share to the cost of buying a vehicle, I can see to some extent the governments attempts to earn money to run the country with so many people not paying direct tax. But still the above articles show that Carmakers are taking a 'chance pe dance' and increasing prices whenever they can.

Last edited by Mortis : 4th May 2019 at 15:24.
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Old 4th May 2019, 16:05   #55
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Re: Slowdown bites hard: 205 dealers shut down, Rs 2000 crore losses & 3000 jobs lost

Sales will be back up post elections, don't worry. Temporary correction. Global markets are already recovering. Overall car sales in India will see a modest growth this year (FY20) to around 5%.
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Old 4th May 2019, 17:00   #56
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Re: Slowdown bites hard: 205 dealers shut down, Rs 2000 crore losses & 3000 jobs lost

Originally Posted by avishar View Post
Sales will be back up post elections, don't worry. Temporary correction. Global markets are already recovering. Overall car sales in India will see a modest growth this year (FY20) to around 5%.
I believe D-BHPian Hayek mentioned this earlier.

Some of the factors are temporary/cyclic (liquidity, BS-VI implementation etc.) that will correct in the short term and may lead to some recovery and even moderate growth, but there are long-term factors (infrastructure, cost, high taxation etc.) that have been overlooked long enough to become a chronic problem, and will stay until corrected via policy changes.

Last edited by Chetan_Rao : 4th May 2019 at 17:03.
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Old 4th May 2019, 18:45   #57
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Re: Slowdown bites hard: 205 dealers shut down, Rs 2000 crore losses & 3000 jobs lost

Honda is tho only company that has shown an increase in sales in April 2019 compared to the same month last year.
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Old 4th May 2019, 23:18   #58
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Re: Slowdown bites hard: 205 dealers shut down, Rs 2000 crore losses & 3000 jobs lost

I have a feeling this slump will last longer than a typical "fluctuation cycle." Couple of reasons -

1) The BS VI issue as mentioned by others.

2) Uncertainty surrounding diesels.

3) Slow advent of the electric. Many of us are looking forward to it and possibly will hold on to our aging (but still going strong) cars a little longer.

4) Clearly overpriced - with tax proportions anywhere from 30 - 50% or more why would people want to throw away of non-vfm products.

5) Delays/extensions in upgrade lifecycle - with car rentals; car sharing etc. (including uber, ola, quick ride), typically many of us have reduced mile crunching and will most likely push the upgrade by at least an year or two.

Aggregating all such factors and more (like Gen Y & Z losing interest in car ownership), it is quite likely this slump is here to make drastic changes to the plot in trends we will look back to in years to come to try and make better sense of it all.

Those interested in writing history will have a good time, automobile-wise!
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Old 5th May 2019, 03:04   #59
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Re: Slowdown bites hard: 205 dealers shut down, Rs 2000 crore losses & 3000 jobs lost

It is a general reflection of economic situation in the country. You all read everyday about businesses in steel, power, infrastructure, real estate, airlines, private bus operators, etc shutting shop since last few years. We also know majority of MNC automotive OEMs are being subsidized by their overseas business. For those who understand the rural life in India, you would have seen the level of farmers distress due to continuous dry spell and low prices for the produce. India lost a good opportunity to pump up its economy when the oil prices were down for 3-4 years. It is hard to understand where all the money saved in the oil import bill went.

So why should it be surprising when we see many dealers going down? They went down because of the same reasons like the above: over leveraged business, criminal diversion of borrowed funds, bad business model or mismanagement.
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Old 5th May 2019, 06:39   #60
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Re: Slowdown bites hard: 205 dealers shut down, Rs 2000 crore losses & 3000 jobs lost

Here is my stab on this debate -

1) Politico Impact - To me, be it Rahul or Modi, does not matter an iota, if I have to buy a stead, I shall depending on the discounts and VFM being offered, what shall Rahul or Modi do about it, ironically, I did benefit, GST was rolled out and reverted within a couple of months on big SUV's, when Hexa was lowered to 10.95 ESR, instead of 11.95 launch price. It happened and I benefited, but to me, we haven't slumps in either May of 2014 or 2009. To put it in different words, give me a deep discount and I shall go ahead and buy 1, irrespective of who formulates the Govt.

2) Job Security/Longevity - OK, for people in the 38-45, it has now become of paramount importance that there be Job security/longevity, as this bracket has graduated from being 25 odd some 15 years back, people have gone up the ladder many folds and as you go higher, the scrutiny increases and with the higher CTC's and inception of new technologies, the so-called managers are highly vulnerable and consequentially are not investing in buying new cars. So saving in the mantra, building retirement corpus is of prime importance to this category rather than spending on a depreciating asset (for this group at 25, it was never thought at that time that I shall be a depreciating asset).

3) Minneals Getting Employed - From a private service industry (offers the most white collared jobs) - The starting CTC's have gone up by a mere 70-100K over a span of good 15+ years, this is horrible !! - IT employers have become very smart, the starting package for engineering grads is dismal, I say this from the perspective that, 15 years back essential commodities were way cheaper, so an individual could save to buy a new car, but now, these have sky rocketed, so where does a young industry bloke save for one.

4) Lesser Onsite Options in the IT Industry - This has been waning for a while, expats, were minting money and buying cars left, right and center, with this dwindling, the spends have gone down.

5) Businessmen Spend - With low RoI across all dimensions for making profits, businessmen are holding back their 2nd, 3rd, nth purchases into their garages as their investments are not being as profit making.

6) Lack of New Jobs - Not that this post was meant to be a political one, but again, neither the current nor the previous governments have done anything about creating jobs for the fresh grads/post grads. Heck, 20 and 20+ years back, IT was the biggest employer and even after 2+ decades still the same holds true. When there be limited employment opportunities, buying bread is way more important than buying a car. Sad, really sad, not a single person in the government is thinking what the 18 year old youths shall do in the years to come. I am not talking about the exclusive offers that are made to a few elite individuals. I don't see this happening any which ways.

7) Aah, here comes the Govt - Lowers returns on the fixed income tools - PPF, FD and other instruments being offered by the Govt have steadily lowered the returns over the years, so with lesser returns, the tendency to save more and spend less has crept in. Adding to this, the 40 types now who invested in immovable assets some 10 years back have very minimal returns on what they thought would be their old age corpus.

8) The Commoners - As everyone else has rightly stated, with the advent of Uber/OLA/Metro, parking woes, increasing Insurance expenses, people are actually waking up to the concept of evaluating Annual Ubers spends VS Annual Insurance costs of the vehicle, let alone the fuel spend, maintenance costs and mark here, you are being chauffeured as well.

9) VFM/World Class Offerings - Suzuki has been milking us for ages, global manufacturers have split their skulls against the walls, the essence of Indian buyers is, resale, not pleasure. With the same models costing at least 2-3 lakhs cheaper some a decade back for a hatch and this 2-3 lakhs gets wider as you move up the segments, the 2nd, 3rd time buyers do not see any point in buying the Swift Zdi AMT for holy cow, 1 million + INR, I must add 850 Kg tin can to this. World Class offering are again ironically and thankfully to our Govt, beyond the means of commoners. Govt keep making your pockets heftier.

The underlining part is, whether this trend continues or not, should hold less essence to all of us, we should look at the bigger picture and it looks increasingly to me, we are indeed looking at tougher days ahead for working individuals and irrespective who is at the helm at center, they shall milk us forever. This shall go beyond combustion engines and I would think savings should be of prime importance in the years to come.

Last edited by Torquedo : 5th May 2019 at 06:56.
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