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  HOME | Business & Economy (Click here for more)

India’s Auto Sector in Reverse Gear as Festive Season Fails to Boost Sales

NEW DELHI – India’s automobile sector continues in reverse gear, with the just-concluded festive season of Diwali having failed to crank up the plummeting sales that have logged a double-digit decline in the last six months, with millions of jobs hanging in balance.

The sector recorded its 12th straight month of losses in October, when the most-widely celebrated festival was marked, despite a 27.6 percent increase in sales of passenger vehicles compared to the previous month.

According to data published Monday by the Society of Indian Automobile Manufacturers, the surge was not witnessed in other segments of the sector.

The industry overall registered a 12.76 percent decline in total sales, SIAM said.

The automobile sector, one of the most severely affected by India’s economic slowdown, employs 37 million people and accounts for around 7.5 percent of the country’s GDP.

Some experts anticipate an even more pronounced adjustment that could result in the loss of up to 1 million jobs and possible bankruptcy of some car manufacturers.

10-15 PERCENT LOSSES

Faced with this bleak outlook, manufacturers were hoping to recover some of the losses in October and were confident that the Diwali celebrations would encourage sales.

The month-long holiday period, which falls in October and November, usually sees double the monthly average sales of the year for two and four-wheeler vehicles.

However as the festive season ended this year, the volume of sales did not even touch the figures of previous years and continued with the downturn that first began in July last year.

In fact, sales recorded “this Diwali were around 10 to 15 percent less,” a vendor of India’s largest car maker, Tata Motors, told EFE, requesting anonymity.

The company in the last fiscal year registered a 32 percent drop in sales, according to Tata Motors.

MEASURES HAVE FAILED TO CHECK UNCERTAINTY

Between April and July, automobile sales in India fell by 21.56 percent year-on-year, resulting in some 200,000 people losing their jobs, according Federation of Automobile Dealers Associations data.

The government did announce some measures to boost the demand in the automobile sector that included making auto loans cheaper. But apparently that was not enough to propel the sector and drive its growth.

Several experts are of the opinion that these incentives have not been enough and that the situation is likely to get worse.

The government needs to announce measures that would “boost consumer demand,” economist and professor at Delhi University, Shreekant Gupta, told EFE. “If you improve the overall health of the economy then this sector will also improve.”

Gupta warned that in the long term “almost one million jobs may be lost due to the economic slowdown,” and if the trend carried on like that, some car manufacturers could even go bankrupt.

But Devinder S. Malik, a former spokesperson with the union finance ministry, was more optimistic than others.

He said the government’s measurements “will have a positive impact” on the automobile industry as well as the Indian economy.

The sector, Malik said, was in a transitional phase with high-tech and eco-friendly cars making their way into the Indian markets.

“So, instead of buying new vehicles immediately, people are waiting for the things to stabilize,” he said, adding that it was only a matter of time before car demand picked up pace in the country.

SIAM President Rajan Wadhera shared this optimism, hoping that the sector would perform “better than the last year in November and December” when dealers look to meet year-end sales goals and offer reduced prices for discount seekers.

START OF THE PROBLEM

After several years of formidable growth, last year many factors simultaneously affected the automobile industry, including “a major hike in insurance charges” and “liquidity shortage” in the financial system, FADA President Ashish Kale said.

This coupled with an abrupt economic slowdown has shaken the consumer confidence in India, said Kale, referring to the 5 percent growth rate recorded between April and July. That was a significant decline from around a 7 percent growth rate in recent years.

 

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