As we approach the end of the year 2019, CNBC-TV18 take a look back at the year as the automobile sector saw its worst year in over a decade. What is ailing the sector and is the worst over? CNBC-TV18’s Alisha Sachdev talks with sector big voices to understand what they are doing to cope with the slowdown and their 2020 outlook.
Production cuts, dealership shutdowns, job losses, liquidity crisis, regulatory complications and electrification were the most heard words while discussing the slump in the auto sector this year. The most glaring sign of the slowdown in the economy was the fall in the automobile production every month of this year, making it the worst slowdown that the industry had seen over the last decade.
Industry leaders and the government had differing views on what was ailing the sector. The blame was assigned to reasons as varied as the ripple effect of IL&FS crisis, poor economic growth, policy uncertainty and even the millennials who were now opting for Ola and Uber. However, automakers were divided at the beginning of the year on whether the sector needs government intervention in the form of tax cuts and sops.
Then came a series of 'unconnected cost increases' like a raise in road taxes in several states, mandatory up fronting of insurance expenses and an upgrade of safety standards. All of this, the industry argued, led to the cost of vehicle ownership going higher for new buyers keeping more of them on the fence.
The slowdown was felt more acutely in the commercial vehicle segment. The impact of an overall slowing economy meant less freight had to be moved around the country. To boot, rules which came into effect last year had said that trucks could now carry higher loads. This also contributed to the demand for new trucks falling sharply.
To be sure, a slow 2019 did not discourage existing companies and new entrants from launching new products and technology. Hyundai and MG Motor introduced the country's first long-range electric cars. Auto majors like M&M, Tata Motors and Bajaj Auto put money into electric mobility start-ups and new entrants like Kia and MG spiced up the dull market.
The last couple of months of 2019 did see some pick up in auto sales with companies hoping that the worst is behind for the sector. Although 2020 brings a cleaner emissions regime with a migration to BS-VI, which will meaningfully raise vehicle prices, industry honchos are fervently hoping that a mix of government action on the economy and a favourable budget will bring much-needed cheer.