The Indian automobile industry is the fourth largest in the world with an annual turnover of $100 billion and it employs around 32 million people. The pandemic induced lockdowns since March has had a deep impact on the automobile industry. During which India’s automobile sales have fallen to its lowest on record, declining by 33.6% on the year to 1.44 million vehicles. And passenger vehicle sales fell by 51% on year to 143,014 units and commercial vehicles by 88% on year to 13,027 units.
India’s major automobile producers which include Tata Motors, Maruti Suzuki, Mahindra, Hyundai, and Nissan India have recorded zero domestic sales in the month of April. The production at these automakers came to a halt in April following the announcement of a nationwide lockdown. The reason for the deteriorating sales in passenger automobiles is the crunch in urban income. The economic crisis and the hasty spread of COVID-19 across the country resulted in decreasing the demand in urban markets where most of the passenger vehicles are sold.
Also, many automobile companies had already seen a shortage of spares and components during the past few months due to the Covid-19 crisis, holding back production.
As noted by CRISIL, the sales of tractors and motorcycles are expected to recover faster than any other segment because of their exposure to the rural markets where demand is expected to recover faster than the urban markets.
The automobile sector contributes to around 12% of India’s total steel demand. The automobile output fell by 14.73% on the year to 26.3 million vehicles. This includes more than 34 million passenger vehicles and 752,022 commercial vehicles. The remainder was divided between two-wheelers, three-wheelers, and quadricycles. And total auto sales in the same period dropped by 18% in the year to more than 23.54 million units.
India’s automobile sector has been facing a prolonged crisis and slowdown since November 2018, which was expected to make a recovery by the end of 2020, and that’s when the covid19 pandemic caused further disruption. “The automotive value chain is highly complex, integrated, and interdependent. A vehicle manufacturer cannot commence operations if any one of its suppliers is unable to undertake production,” says a letter addressed to Home Secretary Ajay Bhalla written jointly by the three industry bodies – Society of Indian Automobile Manufacturers (SIAM), Automotive Component Manufacturers Association (ACMA) and Federation of Automobile Dealers Association (FADA).
