Slowdown in the Automobile Industry- An Impending Recession

The automotive industry is among the largest revenue contributing sectors and is
highly looked upon in terms of growth, employment, development and technology.
According to CMEI data, in the last quarter of the last year, this industry came to a
halt attaining its maximum of 2,90,931 units, before it started to decline drastically
from the first quarter of the current year.
This decline can be attributed to various reasons which are discussed in detail in the
articles. Starting with the most impactful of them all, Continuous changes in the
government stipulated design models. The government of India prescribes certain
design related regulations to be followed by the automobile companies, which
include models to be manufactured comprising of specific necessary features,
without the incorporation of which, it is prohibited to be sold. These model types
that have been recently announced in the recent past two consecutive years have
been BSV and BSVI. These sudden and unannounced changes may have been the
need of the hour as per the government, but resulted in huge losses for not only the
manufacturing companies but also, the dealers. Shutdowns had to be announced in
various manufacturing units to match the new product requirement.
Since, the companies had already maintained the inventories for the current year,
judging by their sales of the last year, they got a major hit with these reforms and
hence had extreme trouble coping up. This resulted in huge amendment costs to
such an extent that even the dealers had to bear the same. For well established
brands, the dealership may have the sustained the blow, but for the new entrants, a
closure awaited.
Another important factor is the Cost and Affordability. It is no secret that the Indian
economy’s growth has slowed down to the lowest of paces since 2014 and that the
RBI had to cut down the anticipated growth rate because of the same. With the
increased cost and the reduced purchasing power owing to the economic
slowdown, the sales fell dramatically.
Other relevant factors include Natural calamities, slow recovery, faster implementation
of electric vehicles, which will render resale value of petroleum vehicles as negligible,
the ever-increasing petrol and diesel charges, etc.
The automobile industry supports the steel, chemicals, textiles and other sectors as
well, and any slowdown will impact the broader economy. Hence, it is truly said that
automobile is the industry of all industries and a decline in the same points to an
impending recession.