What's going on with India's automobile sector?

The Indian automobile industry, the world’s fourth-largest, has finally embraced a slowdown after a near-decade of high growth. On May 13, the Society of Indian Automobile Manufacturers (SIAM) announced a 17 percent decline in passenger vehicle sales for April, the lowest in nearly eight years.

According to the data from SIAM, car sales are down for the tenth consecutive month since July 2018. Overall, the auto industry sold 2,001,096 units during April. In the same period last year, it had sold 2,380,294 units.

“There are two reasons for the sharp fall in numbers,” explained Deepesh Rathore, co-founder of Gurugram-based automotive consultancy Emerging Markets Automotive Advisors. “A long term correction had been pending for some time in the sector. Dealers have now put a break on the inventory, primarily due to the slowdown in sales. Secondly, the on-going elections and the uncertainty over the results have also added to the slowdown,” he added.

Rathore now expects the demand to remain subdued for the next few months but doesn’t reckon that the car sales decline will see a sharp fall again as was the case in April.

Passenger vehicle sales in April fell to 247,541 units from 2,98,504 units in the year-ago period. Domestic car sales meanwhile fell to 1,60,279 units compared to 2,00,183 in April 2018, while two-wheeler sales in April declined 16.36 percent to 16,38,388 units compared to 19,58,761 units in the year-ago month.

Even in the commercial vehicle segment, sales saw a 6 percent decline in April as against the same period a year ago. This was primarily due to a 13.5 percent decline in medium and heavy commercial vehicles while light commercial vehicles declined by 1.10 percent. 

Declining automotive sales are primarily an indicator of how the Indian economy is performing, particularly the purchasing power of people while a slowdown in commercial vehicle sales indicates an investment cycle slowdown.

In April, Maruti Suzuki and Hyundai sales volumes fell 19% and 10% respectively with Maruti announcing a 10% cut in production in April.