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Friday, Sep 20, 2019

India’s auto sales dip at fastest pace in nearly 2 decades

According to the data released by the Society of Indian Automobile Manufacturers (SIAM), sales of passenger vehicles to car dealers plunged 30.9% to 200,790 in July, the ninth straight month of declines.

business Updated: Aug 14, 2019 01:50 IST
HT Correspondent and Agencies
HT Correspondent and Agencies
New Delhi
The latest auto sales figures imply that India’s GDP growth that has already slid to a near five-year low, is likely to show signs of further erosion .
The latest auto sales figures imply that India’s GDP growth that has already slid to a near five-year low, is likely to show signs of further erosion .(Reuters Photo )

Passenger vehicles sales in India declined by 30.98% in July compared to the same month last year, logging the steepest fall in 19 years as the industry continued a nine-month long streak of falling sales that now threatens hundreds of thousands jobs.

The release of the data by the Society of Indian Automobile Manufacturers (SIAM) on Tuesday triggered a slump in the stock market, which was also dragged lower by global cues such as fears about a drawn out US-China trade war, protests in Hong Kong and a crash in Argentina’s peso currency that drove investors to safe harbours.

The BSE Sensex ended 623.75 points, or 1.66%, lower than its opening – its biggest fall in a month. The BSE Auto index fell by 3.88%.

“If this industry goes down, then everything gets hurt. Manufacturing, jobs and revenue to the government,” news agency Reuters quoted Vishnu Mathur, the director general of SIAM, as saying. Mathur added that car and motorcycle manufacturers have already slashed about 15,000 jobs.

HT had on August 2 reported that the three biggest auto manufacturers had recorded their worst decline in sales in nearly 20 years.

According to SIAM data of sales by manufacturers to dealerships, domestic car sales were hit the hardest. There were 69,000 fewer cars sold to dealers in July this year compared to July 2018, a 36% slump. Such a dip has not been seen since 2000, when the industry was roughly a fifth of the size of what it is now, according to Reuters.

Overall, passenger vehicle sales fell by around 31%. Sale of two wheelers, which are often seen as reflective of consumption patterns in semi-urban markets, declined by 16.82%.

The data also showed that domestic passenger vehicle production was down nearly 17% in the month.

The pace of decline has accelerated in recent months due to a liquidity crunch in India’s shadow banking sector, which has dried up lines of credit to both auto dealers and potential car buyers.

Reuters reported last week that companies in the sector -- manufacturers, auto parts makers and dealerships -- have so far cut as many as 350,000 jobs.

Industry representatives have been urging the government for a stimulus package. “The data shows an urgent need for a revival package from the government. The industry is doing everything possible to increase sales, but it needs government support to prevent the crisis from worsening,” Mathur told reporters in New Delhi.

“We are hopeful of a revival package soon,” Mathur added.

The auto industry’s problems have been reflected in several other sectors and economic indicators as the country struggles with a slowdown.

The Reserve Bank of India (RBI) cut key interest rates for the fourth time this year last week in an attempt to boost corporate investment and consumer spending to accelerate growth, which it expected to not exceed 6.9% in the current financial year -- a forecast that was lower than before.

The central bank also reported a drop in consumer confidence in July as Indian households remained pessimistic about jobs and the general economic situation. The current situation index dropped to 95.7 last month from 97.3 in May and 104.6 in March. The future expectations index (FEI) fell by four points to 124.8 in July.

India’s household-sector savings, the biggest source of investment for the economy, have also dipped to a decadal low.

First Published: Aug 13, 2019 15:35 IST