This year’s festive season to be brighter for auto sales than the last; stumbling sales may revive

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Published: April 10, 2019 4:03:22 PM

Vehicle demand has remained under pressure on the back of liquidity crunch, uneven monsoon, increased insurance cost, higher fuel costs and growing influence of shared mobility in the country, CARE Ratings said in a report.

This year the festive season is expected to be brighter than the last year for the automobile industry, which is facing heat with continuous downturn in sales. The demand for automobiles is expected to be better in festive season during FY20 compared to the same period in last fiscal, since this time, it will be accompanied with government push and RBI rate cuts, said a report.

The demand for automobiles, which will remain subdued during the first half of FY20 due to general elections, will likely pick up later on the account of various initiatives taken by the government for the agriculture and infrastructure sectors, increased disposable income in the hands of rural people, planned product launches in the passenger vehicle segment and pre-buying to comply with upcoming BS VI emission norms, CARE Ratings said in the report. Any pickup in construction and mining activities and pre-buying of commercial vehicles will also add to the demand, said the report.

Automobile sector is an important sector in the Indian economy as it accounts for 7 per cent of India’s GDP and 45 percent of manufacturing GDP, and employs about 19 million people directly and indirectly.

Vehicle demand has remained under pressure on the back of liquidity crunch, uneven monsoon, increased insurance cost, higher fuel costs and growing influence of shared mobility in the country, CARE Ratings said in a report.

The auto-industry sales fell about 11.6 percent on-year in March 2019, compared to an over 18 percent growth registered a year ago. The fall was on the account of weak demand for two & three wheelers and passenger vehicles, according to the latest data.

A sharp decline of 15 per cent in two wheelers sales led to a decline in the overall segment of two & three wheelers, despite a growth of 10.3 percent in sales of passenger vehicles and three wheelers.

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Further, the overall exports growth on a yearly basis was limited to just about 4 percent in March 2019, owing to slowdown in the global economy, compared with a double-digit growth of over 19.5 percent during the corresponding period of the previous year, the report added.

For the full fiscal year 2018-19, the auto industry experienced slower sales growth of about 6.5 percent compared with 14.5 per cent in FY18.

However, the recent policy revision by the government (increasing the load carrying capacity for heavy vehicles) may weigh on CVs demand and the high growth witnessed in FY19 could slightly moderate going forward, the report noted.

Going forward, higher GDP growth, normal monsoon, lower interest rates and increased infrastructure and industrial activities will be key drivers of the growth of the overall auto industry, said the report.

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