Auto Sector Witnesses The Worst Crisis Since The Last 19 Years

AutomotiveAutomobile sales took a steep downturn in July after numbers took the worst hit in the last 19 years. According to experts, “the worst is yet to come in the auto sector”. This crisis has already resulted in the loss of more than 15000 jobs after 286 dealership outlets were forced to shut down in the last 18 months. There are many reasons for this downfall suggested by industry experts. Some of the reasons include consumer demand and liquidity issues as automakers are pushed to transition to newer technologies which makes their products more expensive. Another major reason being sighted is the crisis in Non Banking Financial Companies and the impending liquidity squeeze resulting in fall in consumer confidence.This is primarily affecting sales of passenger cars.

Two wheeler and three wheeler sales have also shown significant decline in July 2019. Sales are supposed to have dropped 19% according to data released by the Society of Indian Automobile Manufacturers on 13th august 2019.

The last biggest decline in domestic auto sales was recorded in December 2000, when the numbers fell by 22%.

On top of the ongoing crisis, the government has made it mandatory to upgrade all vehicles to meet the Bharat Stage VI emission norms latest by 2020. The cost requirement to upgrade these vehicles has increased manufacturing cost thus companies are also forced to sell at a higher price to the end consumers. It was observed, by a senior employee of one of the vehicle manufacturing companies that a recovery from a cyclical downturn is possible later on a discount push that stems from rising inventories. But this time due to the compulsory upgradation norm, this also won’t be possible.

Two major examples can be seen in car manufacturing giant Maruti Suzuki and two wheeler manufacturer India Yamaha motors. These two companies have launched some vehicles with the BS VI emission upgrade, causing a difference of almost 10- 15 % in price as compared to non upgraded variants. Maruti found out this was especially true for its diesel vehicles, owing to which it has shut down the manufacture of diesel vehicles from April 2020.

Another hurdle awaiting the two and three wheeler industries is the expected compulsion to convert all fuel run vehicles to battery powered engines by 2023.The proposal was called “ill timed” by Bajaj Auto’s Managing Director Rajiv Bajaj.

One more reason stated is the failure of consumer interest to convert into purchase. The latest trends show better numbers in the sales of the used cars industry than the new cars.The sales in used cars industry has overtaken the new cars at 4lakh more sales last year in 2018.

Our feedback is that customers are not coming into the showroom and whoever is coming, is taking a long time to convert to a sale. This downturn is not purely cyclical because cycles don’t last this long and something else also has failed. The costs have gone up and the incentive for a consumer is low and there is a need for external intervention to kickstart the growth cycle,” Vishnu Mathur, SiAM Director General said. 

Even truck sales have suffered due to the new axle load norms issued by the government. After the issue of this norm, sale of commercial vehicle has also gone down.In response to the depression in sales, Ashok Leyland closed its pantnagar unit for a few days hoping it will have a positive effect on production. 

With a prospect of the electric car, India faces a major drawback on the process

Pollution has been long an issue of the Indian population, as well as global. Indian manifestos are largely affected as well as with those of temple building and farmer incomes in recent domains. India e-car market, Electric vehicle market, seems to draw a lot of opportunities from this domain due to the rising threat to the pollution.

Politicians, as well as businessmen, cannot surpass the issue of pollution. The life expectancy is largely reduced in the current century and mostly affected in areas of New Delhi. This has been going on for more than a decade now.

The government plans to address the issue for a three-year subsidy plan involving the electric vehicles. The India e-vehicle market which has been termed to around 1.5 Billion dollars are above 10 times large in market size, as compared to the previous plans. Flaws, when looked into this domain, are minimal but one such has been mostly hampering the commitment in putting the clean vehicle on the roads. The reason! It can largely lead to the theft of electricity on a large scale.

India has been dominantly housing to over a million two-wheelers and rickshaw. This is by far more than that of the number of electric cars been produced in China. With this, the sales of much small electric vehicles to continue to rise according to market research reports.

Largely, in the absence of charging infrastructure, most of the drivers have been shipping powers illegally. As a result, only about 10 percent of the subsidy program has been allocated to the charging stations of these vehicles.

About a quarter of the power that has been generated in India has been either stolen or kept for various purposes in the loss of transmission. This has been purposed mostly by the figures that are cited by the local media by the mid-2018. Due to this the power sector has been losing for about more than 15 Billion dollars a year for the theft. This is largely more than any other country globally.

The power that has been stolen costs more than 20Billion dollar a year. This is taken into account for Delhi alone. Further, there are around more than lakhs of such vehicles which go on Delhi’s roads, although just a quarter has been registered. The state electricity loss has been accounted to more than 70 percent in recent years, starting from 2017.



Is the automotive industry now creating more jobs than IT in India?

Automotive IndustryWhile everybody looking to make a big career move sought the best opportunities in the IT sector in the past, there has been a paradigm shift in the favor of the automotive industry.

The globe has witnessed a fall in the number of unemployed over the past few years in a number of its regions. This has been in part due to the availability of better media for awareness and urbanization of the remotest areas. But a part of it has also been due to the improvement of the various industries themselves. A better developed, expanded and growing industry has more space for both, skilled labor and raw talent.

However, information technology, that once has the best job categories and prospects, has seen a considerable decline. Massive layoffs across the multi-billion-dollar sector make the future possibilities for employees appear bleak.

Why hasn’t the IT sector been able to create more jobs?

  • The existing redundancy
  • Lack of skilled labor
  • The growth of the West

In the past, a number of foreign companies contracted their work to strong Indian IT firms like the Infosys and Wipro. So, every computer engineer who had the necessary skills had a job in hand. But now, automation has taken over all clerical tasks. The job profiles that are now vacant in the IT sector require in-depth knowledge of technologies like cloud-computing, robotics and a lot more. Since most engineers honed here do not taste this in their years of education, they aren’t job-ready.

So, although the IT sector continues to grow, job prospects for the natives are receiving a plummet. It is noteworthy that although technology is being integrated at a matched pace in the automotive market too, job prospects there are continuing to thrive and are, in fact, on the rise.

How the automotive sector has overcome this

While the IT sector is receiving a boost from the west, India is moving on towards becoming the third largest auto market in the world. All this with the new approach of going completely electric by 2030. This means that the automotive sector is heated up with processes of producing conventional engines and EVs going on in parallel.

A pervasive research highlights the need for a large workforce including both, accomplished individuals and fresh graduates who can be trained. This is because the whole industry is gaining a new face where ideas of the new generation are as welcome as the admin power of the existing luminaries.

Will this contribute to the growth potential of the country?

Considering the BRIC economies, it has been observed that countries other than India, in their developing phase, had a majority of people employed in the fastest growing sectors. This had a majority of the workforce being involved in contributing towards a quick rise in the GDP. But, as a worrying trend, India hasn’t been doing so say the chief economists of our country.

Moreover, market research reports claim that, of the total number of businesses in India, most work with an employee strength below 10. This data can be misleading. In our nation, this category is dominated by individual workers and freelancers. These are not as good a contribution as mid-size businesses actually are to a nation.

With growing opportunities in fields growing apace, a greater proportion of the population trying to leverage them will surely be a boost to the nation’s economy.