The world of automobiles is one of the most enthralling industries across the globe. It leaves an impact on the economy of the world.
It is known to all that the Indian automotive industry is currently in a bad spot. The industry has been going through a lot of disruptions and this can be credited to various factors, such as the implementation of demonetization, GST, the NBFC crisis and various others. All of such incidents had a major impact on the sector. As a result, the production and sales numbers have gone down tremendously and continue to drop every month.
The automobile sector has faced a greater downfall over the past one year. While the industry was predicting an upward trend during the festive season, the sales started to reflect tension at the beginning of September last year.
The sudden downfall caught the industry off-guard. As a result, massive inventory pile-up began pressurizing OEMs (Original equipment manufacturers) to reduce inventory by introducing discounts. The demand remains subdued as the slowdown continues into the FY19-20.
One of the major reasons for the slowdown has been the newly set standard emission norm known as the BS6 (Bharat Stage 6). These set norms apply to fuel as well as the engine. The BS4 emission norms are currently in effect. The BS6 compliant engines are bound to produce less pollution as they will emit fewer gases and particulate matter into the environment. The BS6 emission norm will come into effect y April 2020. It will be necessary for all car manufacturers to upgrade their engines accordingly. Due to this, several buyers are delaying their new car purchase until there are more details available regarding BS6-compliant model choices.
The commercial vehicle segment (passenger vehicles) has been severely affected by the ongoing slowdown. For instance, the demand for trucks has been going down since the last two quarters because of overcapacity in the market and low freight availability.
There have been numerous changes following the new regulations with many more changes yet to be seen. Be it the introduction of safety features mandatory for all new cars (or) increase in the road tax and insurance costs (or) even upcoming emission norms, each of these kinds of changes can definitely lead to an increase in prices. Therefore, new buyers are discouraged to enter the mass market.
The government has come up with various other different types of measures to revive demand. Simplifying and relaxing the tax structure, easing the liquidity in the banking system, etc. In an attempt to incentivize different sectors for improving the overall economy, the commercial vehicle sector is going hand in hand with the economic activities of the country. In other words, if the economic scenario is showing a downward trend, it will indicate adverse sales, especially, in the case of the medium and heavy commercial vehicles.
After seeing the worst ever slowdown in decades, the commercial vehicle industry of India has been badgered. Though one can not comment about the short-run position of the commercial vehicle segment, the long term growth can be talked about with confidence due to the increasing need for transportation.
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