The automobile sector of the country is currently going through its worst crisis that it has seen in the last 20 years. The slumping numbers of car sales and bike sales are forcing even the big players in the market to axe off its employees and shut down many of its plants.
According to a data compiled by the Society of Indian Automobile Manufacturers (SIAM), the sales of passenger vehicles to dealers came down by 30.9% and the sale of motorcycle and scooters to customers fell by 16.8% and the same data revealed that the passenger car sales have shot down by 36%.
The kind of catastrophe in the industry has led to massive job cuts with motorcycle and carmakers cutting off at least 15,000 jobs in the last four months. The sector which employs over 35 million people- directly or indirectly, is mostly affecting the temporary or contractual employees. Many big companies are planning further job cuts and production cuts. Despite the luring offers and sky-high discounts, the sector still failed to attract customers and saw an 18% drop in sales.
Contributing at least 7% to our country’s GDP, the downturn in the sector can have serious repercussions for the economic growth.
The inventory pile-up and dip in sales can be subjected to a number of reasons like high-interest rates and an increase in vehicle insurance costs. With the introduction of the new Bharat Stage (BS)-VI emission norms, the situation has worsened as people are now reluctant to buy cars with engines that comply with BS-Iv norms and not BS-VI norms. Moreover, the emergence of electric cars in the scenario has led to uncertainty mounting upon the industry.
The auto industry is demanding tax cuts and easier finance access from the government in order to revive slumping sales. Contributing at least 7% to our country’s GDP, the downturn in the sector can have serious repercussions for the economic growth. If the current situation prevails, the unemployment rate is expected to go higher in the upcoming months, with its effects being felt in all areas of the economy.
In a recent move to boost sales, SBI has extended its credit period for automobile dealers to help them tide over the stress building up in the industry. Major carmakers like Maruti Suzuki have been seeking government intervention on the issue so as to boost the sales and fix the crisis prevailing in the sector.
Analysts and experts have predicted that the situation will only get better in the next financial year and companies should brush themselves up for upcoming months as the sales are expected to be on the negative side.