Car sales in India have slumped to a 18-year low even after deep discounts

• Latest data released by SIAM showed a continuing downward trend for the auto industry in India.
• There was a downfall of 21% in the purchase of passenger vehicles sold in May, from 3 lakh units to 2.39 lakh units in the same month a year before.
• In April, passenger vehicle sales were down by 17%.
• The overall Commercial Vehicles segment registered a decline of 8.05% in April-May 2019.

The sale of passenger vehicles declined by 18.82% in April-May 2019 over the same period last year, the worst in 18 years, according to data by Society of Indian Automobile Manufacturers (SIAM).

Within the Passenger Vehicles (cars, UV’s/SUV’s,and vans), the sales for Passenger Cars, Utility Vehicle & Vans declined by 22.98%, 6.15% and 28.57% respectively in April-May 2019, compared to the same period last year.

The data showed a downfall of 21% in the sale of passenger vehicles in May, 2019 from 300,000 units to 239,000 units in the same month in 2018. As per experts , different factors may be contributing to this lowering trend in car sales. First being the declining health of the Indian economy.

The GDP growth figure for the third quarter of FY19 was merely 6.6% — the lowest in five quarters. This can be a worrying situation for the government as well, because private consumption has been a strong pillar of India’s growth story, which is now slumping.

Amongst other factors, slowdown in urban hubs is being attributed to the popularising shared mobility like Ola and UBER. Rising congestion on roads and improvement in public infrastructure are also important to this phase.

Despite the addition of new models, such as Hyundai’s hatchback Santro, Maruti’s tallboy WagonR, TATA’s Harrier off-roader, and Mahindra’s Marazzo and XUV 300 SUV’s, buyers are not warming up to the new launches.

In rural areas the slowdown in sales is being attributed to the stressed farm loans.

In a statement, Director General of SIAM, Vishnu Mathur, said the “Buyers need affordability. The situation is very serious.”

Mathur added that the industry is saddled with heavy inventory, and despite offering deep discounts and freebies, companies do not see fresh investments and expansion till the situation improves.

The introduction of the new BS6 (Bharat Stage 6) emissions regulations from 1 April 2020, new technology will be needed to keep emissions in check, in particular for new diesel engine vehicles. These new add-ons are said to increase the prices of diesel cars even further and increase the gap between a new petrol car and a new diesel car by nearly ₹250,000.