The auto industry is blaming the government for not being able to fix the issues facing India’s economy, which has tarnished the country’s image as an investment destination, and has hit the sector very badly.
"The current scenario does not inspire confidence for a company to invest," said Arvind Saxena, MD, Volkswagen Group Sales India Ltd. "There is a great deal of uncertainty and unless some major decisions are taken, it is not likely to improve."
The passenger car industry grew by a robust 30% in 2010-11 but could not touch that peak in the following years. In 2011-12, sales grew a little over 2% and in 2012-13 it declined by nearly 7%. In this financial year so far, the decline has been nearly 10%.
"Three years ago, India was the talk of the town. It was discussed at board rooms and coffee tables," said a senior official with a leading German car maker. "Today, it has become a no-go area. People are looking at Indonesia more closely. India ranks very low in ease of doing business and corruption and lack of leadership is rampant."
Investments have already begun to dry up and job losses are beginning to mount. India’s largest carmaker Maruti Suzuki India (MSIL) said last month it will miss its target of setting up its new factory in Gujarat by 2016 due to the slowdown in the industry.
"It is unlikely that we would be able to commission the Gujarat plant even by the end of financial year 2016," said R C Bhargava, chairman, MSIL. "The slowdown in the auto sector is very acute. We are trying to access the sales projections and would accordingly decide on when to set up the factory."