One of the hottest topics of 2019 was the downfall of the Indian Automobile Industry. The automobile industry has never faced such a slump in over two decades. Sales were going down in double digits in a mere month. Over 2.30 lakh people losing their jobs in July 2019. It was a big problem. Big enough for the government to step in and introduce some major changes to the years budget to help jump-start the economy and as we all know it didn’t do much.
Read: Union Budget 2019 | Impact On The Automobile Sector
Sales were still going down and companies started shutting down plants to compensate for the loss. The OEM and OES spare part suppliers were hit the hardest. Most of the people being small-time businessmen couldn’t recuperate from the losses and had to shut down.
Recommended For You: The Indian Automobile Crisis Explained
Will the Indian automobile industry be back on track in 2020 or there is something worse to see.
Indian Automobile Industry 2019 | The Fall
The snowflake that started an avalanche
During July 2018 a change was asked of the automobile sector. A regulatory change in axle load norms. This was just a small change but even a small drop can cause a huge way (the butterfly effect) and it happened in this case. The idea was to use it to restrict the vehicle population in India and reduce emissions. Maybe it was the reason maybe it wasn’t but from this point, the downfall of the industry had started and nobody knew what’s gonna happen in the coming year.
SIAM sounds the alarm
The Society of Indian Automobile Manufacturers (SIAM) in the month of may declared that there is a decline in the automobile industry which was the slowest ever in 8 years. Data provided by SIAM stated that the decline began from July 2018 (throwback to Axle change) and the decline was just increasing. The axel change was only for commercial vehicles and their sale was not as affected as the passenger ones. So what could be the reason for passenger sales downfall?
See Also: The Indian Automobile Sector | The Crisis Continues
This is called a business cycle
A business cycle is something that is common to every sector. It begins with an Expansion (more products developed), Peak (the highest glass ceiling a sector can reach), Recession (sector stops expanding and falls to negative for at least 2 quarters) sometimes the cycle resets here or goes to Depression (sustained recession causing major downfall around the entire sector) Trough (the sector starts picking itself up again) and finally Recovery (back to the beginning and everything starts anew).
In the case of the Indian Automobile Industry, it had its peak period for over two decades. Now I know it’s just a saying but The bigger they are, the harder they fall.
Recession and Depression
As discussed earlier if recession stays for a long time it becomes depression. The sales slump almost made it appear that the depression was inevitable. However, that didn’t happen. One of the companies that were hit the hardest were Maruti. They reported an increase in profits during the month of October on the occasion of Dhanteras, selling over 45,000 cars in a day. So if there is a slump going on why did they sell so much in a single day?
Most Viewed: Indian Automobile Crisis | The Ones Who Survived
It wasn’t recession but over-saturation
Imagine something you like to eat. You go to a restaurant that says they make that same thing but they change it every time. Then you go to the place and realize the change is not in flavour just in its presentation. You let it slide for a day, a week, a month, a year, two decades ( now where have I seen the same number). It’s boring but you don’t have a choice. What can you do anyway? Then a new restaurant opens up and it gives you something new, a breath of fresh air. You go there and find out that it’s way better.
What was the point of the analogy you ask? Well, I won’t tarry any longer.
Kia and MG came in the market during the time it was at its lowest. They opened the bookings and Kia had over 50,000 Bookings till October while hector receiving over 21,000 bookings in a month which forced them to close the bookings as they couldn’t manufacture so much.
So could be that those companies were new and just reached the second step of the business cycle or that they brought something in which people hadn’t seen. New technologies which were common in the International market were new here. People wanted an alternative and they got it.
Latest News: Indian Automobile Sector Breathes A Sigh Of Relief | September 2019
Maruti Suzuki had a monopoly over the market since the beginning of operations in India. They made a car that was affordable for the general public and not to the creme de la creme. Cars were a luxury back in those days and Maruti Suzuki made it a common item. This gave them a stranglehold over the sector which was not shaken till 2018.
Will the Indian automobile return to its glory?
Will the automobile industry go back to its former glory of double-digit percentage profit every month or will the recession continue and become depression?
In my honest opinion, there was no recession but oversaturation. The giants of the sector made a lot of cars expecting a lot of sales but it didn’t happen. So to prevent losses they stopped the production of new cars till they sell the old ones. Which in turn caused the OEM to fail and fall as they couldn’t keep themselves afloat while the economy was going down.
To prevent further losses large scale lay-offs began. This was due to the fact the services of such people were no longer needed as the company already had more cars in the inventory.
Latest News: Huge Relief For Automobile Sector | From BS6 to Electric Vehicles!
So yes, the Indian automobile will come back in 2020 with new Electric vehicle launches on the horizon and different addition to old classic to truly make them different and not just look wise is also a positive point. I know most of this post was just talking about what actually happened rather than what will happen but we need to understand what happened in order to figure out what will happen next. That’s why we have history subject too so that we learn from the mistakes of others and don’t let it happen again.
