Automobile Industry India

Why Automobile Industry in India is suffering from Slowdown?

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The Automobile industry in India is going through a tough time for the past 2 years. According to a report from The Society of Indian Automobile Manufacturers (SIAM), the Automobile Industry India is going through a long-term structural slowdown as the compound annual growth rate (CAGR) across all major vehicles has witnessed a decline over the past 3 decades.

Automobile Industry India slowdown, is it Coronavirus effect?

As per the study conducted by The Society of Indian Automobile Manufacturers (SIAM) the pandemic is one prime reason that has played a vital role leading to this slowdown but is not the only reason. The compound annual growth rate (CAGR) of the domestic passenger vehicle industry was 12.9% between 1989-1990 & 1999-2000. It dropped to 10.3% between 1999-2000 and 2009-2010, in the last decade it further dropped to 3.6%. 

The data above clearly shows a long-term impact & structural slowdown on the Indian Automobile industry in various segments before the pandemic came into existence. People in India are now shifting towards the various modern and economical modes of transportation due to which they are avoiding owning a vehicle.  

In the Two-wheeler segment, the compound annual growth rate has dropped from 9.8% in 1999-2000 to 2009-2010, to just 3.8% in the last decade. A data from SIAM reveals the following statistics from FY20 across segments:-

  • Passenger vehicle: With the sales figure of 27.7 lakh units were the lowest in past 4 years.
  • Commercial vehicle: The 7.2 lakh unit sale figures were the lowest in the past 3 years.
  • Two-wheeler:  Stood at 1.74 crore units sale figures were the lowest in the past 3 years.

Automobile Industry India

How slowdown in the Auto industry can impact other businesses & industries?

There are numerous small and mid-scale industries that depend on automobile industries either directly or indirectly. Some people might not be aware of the fact that most components of a vehicle are outsourced by the prime manufacturer, for example, lights, electronics, music systems, sensors, tyres & most of the small fabrication units. Now with the slowdown in the auto industry, these small-scale industries will not have enough orders from their clients. 

On the other hand, the dealerships will also start to shut down gradually and will lead many to unemployed. Local accessories shop owners and mechanics will also suffer from the loss.

Also read, Why BMW 3 Series Gran Limousine is way above its Rivals?



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