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Indian Automobile Industry: Registrations fall by 27% in August 2020

Indian Automobile Industry risen due to the present global pandemic. The Federation of Automobile Dealers Associations (FADA) released its monthly report on the vehicle registration data for August 2020, yesterday. According to the data presented by the FADA the previous month, the total number of vehicle registrations that took place in India was 11,88,087. The number was concluded to be 27% lesser when compared to last year’s data. In August 2019, the number of vehicle registrations that took place was 16,23,218.

Impact on the Automobile industry in 2020

India is the second-biggest manufacturer of commercial vehicles globally. As the economy faces a major slowdown this year, the economic positions of other countries are not doing very well wither. But even in 2019, India’s economy faced a slowdown with a rate of 5% in the previous year, India reached it’s lowest in the past five years.

A huge drop in private investment and the ongoing banking crisis made it very hard for buyers to access credit which directly led to a decline in customer demand.

In March 2020, the Society of Indian Automotive Manufacturers (SIAM) in India announced, that the domestic sales for passengers were concluded to be -51%, which meant that the new car sales were slashed in half.

The Society of Indian Automobiles (SIAM) confirmed that the Indian automobile industry was the worst hit in March 2020, when the lockdown because of COVID-19 put the whole country on hold, stopping the production of automobiles entirely.

The Director-General of SIAM, Rajesh Menon stated in a press meet that, “Automobile industry witnessed one of its sharpest declines in Domestic Sales in March 2020 due to subdued demand and consumer sentiments which were further aggravated by the COVID-19 outbreak in the country.”

In March 2020, multiple automobile companies put forward their sales numbers and all of the reports by each of them came out as red. According to the Honda company, the car sales dropped 78% while the automobile sales of the Mahindra and Mahindra group declined by 87%. Maruti Suzuki, which usually leads in Indian Automobile Market, reported a decline of 47% sales and Hyundai India came forward with a similar data report as a rival, Maruti Suzuki.

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Rajan Wadhera, President of SIAM, while addressing a press meet stated, “The industry was already reeling under severe degrowth and the pressure of disrupted supply chain, which was followed by a majority of the auto companies announcing a shutdown of their manufacturing units in the last week of March 2020, due to concerns over ensuring workplace safety and health of their employees. As per our estimates at SIAM, the auto industry is losing Rs 2,300 crore in production turnover for every day of closure.”

He also said, “The Auto Industry is engaged in a dialogue with the Government of India on policy measures which could minimize the impact of COVID on the Indian Economy and especially the Indian Automobile Industry.”

Fiscal Advances and Dropouts in the automobile industry in the year 2019-2020

According to SIAM’s fiscal reports, the Indian domestic market faced a drop of at least 18% sales between April 2019 and March 2020. The sales of passenger vehicles also faced a notable reduction of around 17.8%. Apart from these, the sale percentage of the two-wheeler industry dropped by 17.76% and the sales of the medium and heavy wheeler industry faced a reduction of around 42% in the same year.

The total number of domestic sales in the fiscal year 2019-20 was 21,548, 494, much less when compared to the 26,266,179 units sold in the fiscal year 2018-19.

Despite a major decline in the sales of automobiles in the domestic market, a slight profit in the export numbers came with a promise of betterment in the future for the manufacturers. The export market experienced a trivial growth of around 2.9%, according to the reports. While the two-wheeler export industry experienced a growth of 7.3%, the passenger vehicle industry experienced a growth of a mere 0.17%.

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The total number of exports in the fiscal year 2019-20 were recorded to be 47,65,754 units, as compared to the 46,29,049 units in the previous year.

Current Scenario; Industry Takes a Sigh of Relief?

As of August 2020, the total sum of passenger vehicle registration concluded to be at 1,78,513 units, a fall down of 7.12%, in comparison to the 1,92,189 vehicles which were registered during August of last year. But if the registration data of July 2020; 1,53,373, is compared to the data of July 2019, the passenger vehicle segment of the Indian automobile industry experienced a growth of over 13%.

The two-wheeler segment declined 29% in total, the documented registrations being 3, 61,947 less than the registrations recorded at the same time in 2019. But, if compared to July 2020, there has been an increase of 3% registrations in August 2020.

Among all, the wholesale documentation were the ones that showed most growth in the monthly sales section of August 2020. According to Jato Dynamics India, August 2020 saw passenger car registrations increase by 20% when compared to August 2019.

Vinkesh Gulati, President of FADA, commented on the reports, stating, “While OEM’s are dispatching vehicles to dealers with a purpose of stocking-up inventory for the upcoming festival season, retail sales are still at 70-75 percent levels despite the low base of last year. FADA advises extreme caution to all OEMs and our Dealer fraternity to avoid excessive inventory build-up thus leading to unmanageable interest costs which could further result in dealership closures.”

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