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On the slow track: Here are 13 reasons for the slump in automobile sales

Updated : 2019-09-11 16:02:10

Here are some of the major factors that have led to the fall in the sale of cars in the country. Source: Moneycontrol.com

India's domestic passenger vehicle sales fell for the tenth straight month in August, declining 31.57 percent, according to data released by the Society of Indian Automobile Manufacturers. Here are some of the reasons behind the slowdown in the auto sector. (Image: PTI)
India's domestic passenger vehicle sales fell for the tenth straight month in August, declining 31.57 percent, according to data released by the Society of Indian Automobile Manufacturers. Here are some of the reasons behind the slowdown in the auto sector. (Image: PTI)
<strong>1. Bharat Stage VI, regulatory Policies:</strong> Uncertainty over the future of BS-IV vehicles after India adopts BS-VI on April 1, 2020 is one of the reasons why demand for these vehicles stagnated. Besides, the cost of cars is estimated to have risen 15 percent in the past nine months due to mandatory additions like an airbag, reverse sensors, ABS and crash conformity standards. (Image: GNCAP)
1. Bharat Stage VI, regulatory Policies: Uncertainty over the future of BS-IV vehicles after India adopts BS-VI on April 1, 2020 is one of the reasons why demand for these vehicles stagnated. Besides, the cost of cars is estimated to have risen 15 percent in the past nine months due to mandatory additions like an airbag, reverse sensors, ABS and crash conformity standards. (Image: GNCAP)
<strong>2. Fuel prices:</strong> Between August 2015 and August 2019 price of petrol has risen by 15 percent as per data provided by the state-run Indian Oil Corporation. The government raised excise duty on petrol and diesel by Re 1 in the 2019 Union Budget. (Image: Reuters)
2. Fuel prices: Between August 2015 and August 2019 price of petrol has risen by 15 percent as per data provided by the state-run Indian Oil Corporation. The government raised excise duty on petrol and diesel by Re 1 in the 2019 Union Budget. (Image: Reuters)
<strong>3. GDP Slowdown:</strong> India’s gross domestic product growth slowed down to 5 percent, a 6-year low in the June quarter. Consumption collapsed to an 18-quarter low of 3.1 percent from 10.6 percent in the March quarter. Appreciation of investment in share market has stagnated as the Sensex posted a drop of 3 percent during the last two years. (Image: Reuters)
3. GDP Slowdown: India’s gross domestic product growth slowed down to 5 percent, a 6-year low in the June quarter. Consumption collapsed to an 18-quarter low of 3.1 percent from 10.6 percent in the March quarter. Appreciation of investment in share market has stagnated as the Sensex posted a drop of 3 percent during the last two years. (Image: Reuters)
<strong>4. Job uncertainty</strong>: An estimated 2 lakh people related to the auto industry have lost their jobs in less than a year. There were 18.6 million Indians without a job in 2018 and this is estimated to go up to 18.9 million by end of this year, according to the International Labour Organisation. (Image: PTI)
4. Job uncertainty: An estimated 2 lakh people related to the auto industry have lost their jobs in less than a year. There were 18.6 million Indians without a job in 2018 and this is estimated to go up to 18.9 million by end of this year, according to the International Labour Organisation. (Image: PTI)
<strong>5. Rise of Ola and Uber:</strong> Heavy traffic congestion, lack of parking slot availability, poor quality roads, expensive vehicle ownership cycle and reducing resale value are some of the reasons why more people are preferring ride-hailing platforms like Ola and Uber. In cities, people prefer taking taxis for commute rather than owning a car and driving themselves. (Image: Reuters)
5. Rise of Ola and Uber: Heavy traffic congestion, lack of parking slot availability, poor quality roads, expensive vehicle ownership cycle and reducing resale value are some of the reasons why more people are preferring ride-hailing platforms like Ola and Uber. In cities, people prefer taking taxis for commute rather than owning a car and driving themselves. (Image: Reuters)
<strong>6. Cultural shift</strong>: Aspirational value for cars, especially entry-level hatchbacks, has diminished over the past few years. Buyers are keen to make premium hatchbacks such as Maruti Suzuki Baleno or compact SUVs like Tata Nexon as their first buy. (Image: Maruti Suzuki)
6. Cultural shift: Aspirational value for cars, especially entry-level hatchbacks, has diminished over the past few years. Buyers are keen to make premium hatchbacks such as Maruti Suzuki Baleno or compact SUVs like Tata Nexon as their first buy. (Image: Maruti Suzuki)
<strong>7. Motor Vehicles Act</strong>: The Motor Vehicles (Amendment) Act, 2019 came into effect on September 1. Stricter rules for driving and penalties, which have risen by four to ten times compared to their previous levels, have acted as a purchase deterrent. In Mumbai, wrongful parking attracts a fine of up to Rs 23,000. (Image: PTI)
7. Motor Vehicles Act: The Motor Vehicles (Amendment) Act, 2019 came into effect on September 1. Stricter rules for driving and penalties, which have risen by four to ten times compared to their previous levels, have acted as a purchase deterrent. In Mumbai, wrongful parking attracts a fine of up to Rs 23,000. (Image: PTI)
<strong>8. High interest rates, stricter security</strong>: Despite reductions in rates by the RBI over the past several months, banks have not passed on the benefit to the end consumer. Further, banks have been extra vigilant in lending due to the high susceptibility of a default. Therefore car loan growth has remained poor. (Representative Image | Credit: Reuters)
8. High interest rates, stricter security: Despite reductions in rates by the RBI over the past several months, banks have not passed on the benefit to the end consumer. Further, banks have been extra vigilant in lending due to the high susceptibility of a default. Therefore car loan growth has remained poor. (Representative Image | Credit: Reuters)
<strong>9. High insurance and registration cost</strong>: Mandatory multi-year purchase of third party insurance has pushed the cost of ownership of cars higher. Buyers now have to buy three-year insurance instead of one year. Registration fees for vehicles was hiked by 13 times by the Centre. This however has been put off till June 2020. (Image: Pixabay)
9. High insurance and registration cost: Mandatory multi-year purchase of third party insurance has pushed the cost of ownership of cars higher. Buyers now have to buy three-year insurance instead of one year. Registration fees for vehicles was hiked by 13 times by the Centre. This however has been put off till June 2020. (Image: Pixabay)
<strong>10. Infra woes:</strong> Though the National Highways Authority of India has added new stretches of highways to the national grid in the past few years, quality of roads within cities remains poor. Potholes cropping up claiming lives have become a common occurrence especially during monsoon. (Image: Reuters)
10. Infra woes: Though the National Highways Authority of India has added new stretches of highways to the national grid in the past few years, quality of roads within cities remains poor. Potholes cropping up claiming lives have become a common occurrence especially during monsoon. (Image: Reuters)
<strong>11. Taxation:</strong> In anticipation of a cut in the Goods and Services Tax (GST), potential cars buyers are holding back their purchase, carmakers say. The industry has been seeking a cut in GST to 18 percent from 28 percent. The government, however, has not given a positive response so far.
11. Taxation: In anticipation of a cut in the Goods and Services Tax (GST), potential cars buyers are holding back their purchase, carmakers say. The industry has been seeking a cut in GST to 18 percent from 28 percent. The government, however, has not given a positive response so far.
<strong>12. EV Policy:</strong> The government’s sustained push for electric mobility has created doubts for buyers who are now comparing the ownership cost of a petrol/diesel car to that of a battery-powered car. Carmakers have promised to launch an affordable range of electric cars in the next 2-3 years. (Image: Maruti Suzuki)
12. EV Policy: The government’s sustained push for electric mobility has created doubts for buyers who are now comparing the ownership cost of a petrol/diesel car to that of a battery-powered car. Carmakers have promised to launch an affordable range of electric cars in the next 2-3 years. (Image: Maruti Suzuki)
<strong>13. Rise of leasing and self-drive module:</strong> Companies like Volkswagen, Mahindra and Mercedes, to name a few have entered the car-leasing space as a means to boost the usability of their inventory. Rise of self-drive car companies such as Zoomcar and Myles has also impacted new car sales. (Image: Volkswagen).
13. Rise of leasing and self-drive module: Companies like Volkswagen, Mahindra and Mercedes, to name a few have entered the car-leasing space as a means to boost the usability of their inventory. Rise of self-drive car companies such as Zoomcar and Myles has also impacted new car sales. (Image: Volkswagen).
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