Why is India's car industry in breakdown mode?

Pedro_P

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▼ India's second-biggest manufacturer of commercial vehicles, Ashok Leyland, is suspending production at several units from five to 18 days in September, triggering fears that the slump in the automotive sector shows no sign of letting up. The BBC's Nitin Srivastava reports.
Ram Mardi is worried he may lose his job. He works for a company that makes spare parts for cars and heavy vehicles in Jamshedpur, an industrial city in eastern India. But he has worked only 14 days in August.
"We had a comfortable life until recently. Now, it's hard to arrange food or pay for the children's education," Mr Mardi says.
The factory he works at temporarily suspended production for half of the month to reduce inventory in the face of shrinking demand.
Industry heavyweights such as Maruti, Tata Motors and Mahindra & Mahindra have all announced production cuts over the past several months.
India's economy is facing a slowdown. It grew at 5% in the quarter ending June 2019 - its lowest in five years. This - along with a drop in private investment and a banking crisis that has made it hard to access credit - has weakened consumer demand.
The Indian government is also pushing for a transition to electric vehicles over the next decade, which some experts believe, has contributed to falling vehicle sales.
As the automotive industry declined for the 10th month in a row in August, car sales dropped by 41% - the steepest fall in two decades.
The industry is one of India's biggest, considering it employs some 35 million people, directly or indirectly, and contributes more than 7% to the country's GDP.
By some estimates, more than (▪ ▪ ▪)

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asr335704

Yes, slow down is happening. Few reasons are:
Car maintenance cost is becoming higher.
EMI's are going up.
BS-IV vs BS-VI quality standard. April-2020 onward, vehicles with BS-VI standard are allowed on roads. BS-VI increases cost of vehicles. So many city people are in 'wait and watch' mode to see how it turns out.

Coming festival season may give some respite to the companies but will not be able to reverse the slowdown completely.

chanakyakripa

Just remembered a little story about recession which I would like to share here:
Pl Read  *Recession* ??
Banwarilal was a samosa seller in an Indian town. He used to sell 500 samosas everyday on a cart in his locality. People liked his samosas for last 30 years, because he cared for hygiene in preparation and selling, would use good quality oil and other ingredients, provide free chutneys with samosas. He would throw all unsold samosas to poor people, cow, dogs etc and did not sell unsold stale samosas to people next day.

Banwari earned good reputation and enough money from samosa selling and he never faced downfall in his sale in last 30 years. He was able to fund his son's MBA education in a famous private college in Noida out of his earnings.

Recently his son Rohit completed his MBA and came back home as he could not get appropriate placement. Rohit started taking interest in his father's samosa business. He had not been involved in his father's business earlier as he considered that to be an inferior job.

During MBA, Rohit read a lot on recession. He read that it is coming up in global economy and how it will affect job prospects, increase unemployment etc. So he thought that he should advise his father of the risks in the business of samosa selling on account of recession.

He told his father that recession may cause fall in sale of samosas, so he should prepare for cost cutting to maintain the profit.

Banwari was glad that his son knows so much about business and taking interest in his business. He agreed to follow advice of his son.

Next day, Rohit suggested using 20% used cooking oil and 80% fresh. People did not notice the change in the  taste and 500 samosas were sold.

Rohit was motivated by the profit made by this savings. Next day he suggested  increased share of used oil to 30% and reduce the quantity of free chutney.

That day, only 400 samosas were sold and 100 samosas were thrown to poor people and dogs.

Rohit told his father that recession has really set in as predicted by him, so more cost cutting is to be done and they would not throw stale samosas but would fry them again next day and sell them. Quantity of used oil will also be increased to 40% and to make only 400 samosas to avoid wastage.

Next day 400 samosas were sold but customers were not feeling good old taste. But Rohit told his father about savings because of his smart planning. Father told him that he may be knowing better, being educated.

Next day Rohit decided to use 50% used oil, do away with sweet chutney and provided only green chutney, made 400 samosas. That day only 300 samosas could be sold as people started disliking the taste.

Rohit told Banwari "Look , I had predicted great recession is arriving and sales would fall. Now this is happening. We will not throw away these 100 stale samosas but would fry and sell them tomorrow." Father agreed to his MBA son.

Next day, 200 fresh samosas were made with 50% used oil, 100 stale fried samosa were offered for sale but only 200 could be sold as people sensed the drastic fall in quality.

Rohit said that recession has really set in and now people have no money left to spend so they should make only 100 samosas and recycle 100 stale samosas and stop giving paper napkins .

After this only 50 samosas could be sold .

Rohit told his father " Now recession has taken people in its grip. People have lost income. So, this business will be in loss and they should stop selling samosas and do something else."

Now his father started shouting, "I did not know that they teach cheating in the name of MBA. I lost my money in getting your MBA education. In last 30 years of samosa selling, I never had recession but your greed for profit brought recession in my business and caused closure. Get out of my business and I will get it back to earlier level. If you want, *I can hire you for washing dishes as that is the only thing you can do despite being MBA educated*."

Thereafter , Banwari started following his age old wisdom and fair practices in business. Within a month his sale reached to 600 samosas.

1:*Recession is nothing but convergence of greed of government to extract more taxes*.
2: *Greed of big businesses to be more profitable by reducing quality and using unfair practices and also of careless arrogant employees giving pathetic service as long as profits are coming*. 3:*Recession is the punishment given to businesses and government by people by restricting their spending.*

Rhett_Bassard

If India's auto industry is down 10 consecutive months and sales are off 41%...
make the committment to electric at lot sooner than a 'decade'.
Be a world leader.

Rhett_Bassard

asr335704 11-9-2019 03:13 AM
Yes, slow down is happening. Few reasons are:
Car maintenance cost is becoming higher.
EMI's are goi ...

Your lead pushed me to Google for definition, i.e.
"Bharat Stage VI (BS VI) is an emission standard that will bring much-needed changes in the Indian automobile industry in terms of pollutant emissions. With this emission norm coming into effect, India will come at par with the US, European countries and other advanced automotive markets across the globe."

Knowing that, I was then reminded of my driving experience in the blue hazes of India:
- is there still no mandated annual testing of all vehicle emmissions?
- do 'tinkerers' still abound that will change the emmission settings on a vehicle?
- do petrol 'bunks' (gas pumps) remain unsealed, i.e. 'spurious' or tampered petrol?
- are infractions still paid off with Rs. 50?

jackoftrades

i think buying of vehicles have come to a saturation level, also there are other factors like cost increase, income from family has decreased, no job, increase in fuel, increase in car loans, pressure from banks on people.

asr335704

Rhett Bassard 12-9-2019 12:39 AM
Your lead pushed me to Google for definition, i.e.
"Bharat Stage VI (BS VI) is an emission standa ...

BS VI is more efficient emission standard in terms of pollution control. But this makes cars more costlier. Given that India is a price sensitive market with low per capital income in compariosn to China, US or european countries; even an increase of 40-50 thousand rupees per car can make the dfference. Additionally high maintenance cost, rise in insurance rate and increasing EMIs are other factors to count.

Coming to your questions:
- Yes, mandated testing is required every 6 months (PUC - Pollution under control certificate) but the rule is being flouted frequently.
- tinkerers related cases are there but less.
- many patrol bunks still tamper with patrol and fuel capacity especially in rural areas where frequent checks are not possible.
- infractions depend upon the rate of the area now a days as inflation is high so maby be more than 50 rupees.

Rhett_Bassard

asr335704 12-9-2019 02:49 AM
BS VI is more efficient emission standard in terms of pollution control. But this makes cars more c ...

I found interesting research implying that emission controls don't necessarily increase the consumer's auto cost.
Source.

Yes, the data timeframe is years ago in the US, but that's 40 years of innovation, learning curve and cost reductions that US-working desi could send back to India.

That reminds me of Chandrayaan-2. With all the NASA-wala, why is the ISRO space craft not on the Moon? 50 years of US research, testing, and application is readily available.

parivijesh100

Simply , because of bad planning at manufacturer end, impact of cyclical annual variation & market correction being forced by Government which is must for country. It will take 2 years in this process correction.