Slowdown in Automobile Sector by Proloy Bagchi SignUp
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Analysis Share This Page
Slowdown in Automobile Sector
by Proloy Bagchi Bookmark and Share

A newspaper reported the other day that automobile sales did pick up before the festive season only to fall in the following month. The car sales registered a negative growth in November, one of the reasons assigned for the slide being the impending imposition of BS 6 emission standards from 2020. Likewise two wheeler sales too dipped after picking up in October helped by the festivals. The upshot is that the sales refuse to pick up.


Many reasons have been assigned for the ever-enlarging inventories of the automobile manufacturers. Despite various inducements, including hefty discounts and freebies, footfalls in showrooms refuse to pick up. The slowdown is for real and the economy has hit a bump. Automobile sector hitting a rough is something that cannot be expected in an aspirational society like ours. New hordes are joining the middleclasses frequently and yet the sales do not pick up. People are, apparently, just not loosening their purse strings. Obviously there is something serious that is holding them back and keeping them away from automobile show rooms.

While in couple of respects it is a good thing – the slump in automobile sales – it is indeed bad for the economy. Lesser numbers of vehicles on our urban roads are likely to offer relief from traffic jams. Our roads are not built for heavy traffic and that too of mostly SUVs and frequently there is a lockdown on the grid either for reasons of breach of traffic rules or absence of management of the traffic. Inadequacy of road space and incompetently engineered roads  present their own problems. The fact, therefore, is that too many passenger vehicles of small as well as unduly large varieties are competing for the ever-shrinking overly encroached-upon road space.

The other reason why a slump in automobile sales is to be commended relates to our environment. It is a straightforward fact that lesser the number of vehicles plying on the roads the lesser is the emission of greenhouse gases (GHGs). At around only 25 vehicles per thousand of the population, as against over 800 in advanced countries, our vehicles emit GHGs at an unconscionably high rate. There are reasons for it. Improperly maintained engines with inefficient combustion emit GHGs at a high rate. Many of our vehicles are not attended to as per the requirements prescribed in their manuals and hence become inefficient over a period of time burning more fuel than necessary and emitting more GHGs than warranted. Then, of course, our traffic management in urban India leaves much to be desired. While even flow of traffic is good for the vehicle’s performance in so far as its oil consumption is concerned it also allows the vehicle to pump lesser amount of toxic gases and carcinogens in the air. 

Be that as it may, the government too has not been lending a helping hand to the car buyers. The automobile sector has been treated as a cash cow by the central and the state governments. We in India pay one of the highest tariffs for a litre of gasoline. Even the road tax has not been spared. Over the years road tax collected from car buyers has soared although condition of the roads has not improved. Indian road conditions are well known and the manufacturers design their vehicles keeping that in view. This has been the practice ever since independence when during the early years of the nation’s life foreign car manufacturers used to advertise their product with the assurance that their products were built to meet the challenges of “Indian road conditions”. Many of those manufacturers have since moved to this country and now are, hopefully, more aware of these conditions.

Even car insurance premia have moved northwards. With a regulatory mechanism in place, the insurers are merrily raising them virtually every year. In explanation it is being said that the amounts involved in insurance pay-offs have increased manifold – the amounts it seems go beyond a crore with so many high-end cars plying on the newly-built expressways that are virtually death traps. This year I received hardly any benefit for my “No claim Bonus” as the annual premium had gone up. The insurance agent told me that it has been estimated that these days a car costs Rs. 4000/- a month even if it stands on its four wheels. He may be wrong but he wouldn’t have been far from the real figure.

While a slowdown in the automobile sector can be welcomed for a while it is not a happy augury for this country. It was riding on the automobile industry that the country clocked a growth of around 10%. While it is true that one cannot really expect the industry to remain in a state of perpetual growth yet the growth needs to continue till the country gets fully developed. Growth in it fosters many technically oriented jobs and now that we are close to the era of electric traction for automobiles many new kinds of jobs would be in the offing. Hence, a turnaround in the economy including in the automobile sector needs to commence soon for the economy to start growing as soon as possible. 

There seems to be a ray of light visible as the latest reports say that Maruti Suzuki has raised its production by about 4 percentage points vis-à-vis its production in October 2019. Apparently, things are picking up as the reports on the economy in newspapers are sanguine about a revival soon. 

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14-Dec-2019
More by :  Proloy Bagchi
 
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