Automobile sales grew at 8 percent in the month of March given the discounts companies offered to destock the inventory. However, overall the automobile sector’s performance weakened in the fiscal year 2018-19 compared to record sales in the previous four years of Modi government. This is in line with the performance of the sector in the general election year when the sale of cars (passenger vehicles) declines. In the last year of UPA government, car sales registered a negative growth of 6.06 percent. But under the Modi government it has been at a healthy 2.7 percent.
Car Sales:
The performance of other non-passenger vehicles was much better compared to passenger vehicles. The highest growth was registered in the segment of commercial vehicles with 17.5 percent followed by three wheelers at 10.2 percent. The growth is demand of commercial vehicles suggest increased industrial activity in the previous year. The sale of two wheelers registered 4.8 percent given the subdued rural demand. Overall the sales in automobile sector grew at 5.15 percent compared to 7.01 percent compound annual growth between 2013-18.
The demand for cars was much better in rural areas compared to urban constituencies. The expansion of public transport in urban areas may be the reason behind weakening of demand in urban areas. The rise of shared mobility is also being considered another reason behind this. “Demand for vehicles have been better in rural compared to urban markets and many original equipment manufacturers had cut production in March and reduced the billing of vehicles. Also, in the urban areas, shared mobility like cab services have resulted in the slowdown in demand,” said Siam president Rajan Wadhera.
The automotive industry in India is one of the largest in the world accounting for 7.1 percent of country’s GDP. It is one main industry along with information technology which contributes handsomely to exports of the country. The automobile sector is dominated by two wheelers which account for 81 percent of market share, the largest in the world. Passenger four wheeler vehicles were second largest contributor with 13 percent market share. The commercial vehicles and three wheelers contributed 3 percent each.
The automobile sector under the Modi government has grown very fast, especially in domestic sales due to growth in economy. The rising disposable income due to the cut down in the prices of basic goods and services has allowed the people to enjoy the vehicle rides. The overall domestic automobiles sales increased at 7.01 per cent combined annual growth rate (CAGR) between FY13-18 with 24.97 million vehicles getting sold in FY18. The overall automobile exports from India grew at 6.86 per cent CAGR between FY13-18.
The Indian automotive industry has become the fourth largest in the world with 9.5 percent increase in 2017. The country is also the seventh largest manufacturer of commercial vehicles in the world. The export of commercial vehicles brings lot of foreign exchange in the country and the automobile exports is being seen as the next big thing in the country because export to other developing countries like Mexico, South Africa whom requirements are similar to that of India are importing in large numbers. In 2014, the largest importers were:-
The overall performance of automobile sector has been satisfactory under this government. The reason behind initial lag up was the slowdown in global economy which affected exports heavily, which constitute significant proportion of commercial vehicle sales. The domestic market showed positive response in first two years of Modi government but later slowed down due to twin shocks of demonetization and GST. The best performance by the automobile sector under the Modi government was in last fiscal year when the domestic sales as well as exports increased exponentially. This was due to pickup in the global economy and domestic economy coming out of shocks of demonetization and GST. Seeing the rapid growth in the sector last year and positive forecast of economic growth in the upcoming years, the automobile industry is expected to grow with accelerated pace in the next few years.