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Why even a four-fold growth in sales is not happy news for India's auto industry

Sales figures are nowhere near the high of mid-2018 when the decline started

Indian-auto-automotive-sector-industry-cars-traffic-representational-shutterstock Representational image | Shutterstock

Passenger vehicle (including cars, SUVs and vans) sales rose last month to 2.5 lakh from less than a lakh back in May 2021. Two-wheeler sales sound even more impressive, rising to 12.5 lakh from just 3.5 lakh.

Then why is India’s auto industry still feeling glum?

Even rising sales is not good news when you are a sector that has been whipped by one bad news after the other. Yes, sales are improving and order books are filled up. But it will take a lot more for ‘business-as-usual’, not to forget new woes like inflation and rising interest rates.

That’s the takeaway as the auto manufacturers body SIAM released the domestic sales figures for May on Friday afternoon. Sales figures are nowhere near the high of mid-2018 when the decline started, spurred by a slowdown in the economy that soon started getting progressively worse for the country.

The steady stream of bad news is yet to subside. Even as the auto industry braced itself for the impact of BS 6 implementation from April 1st, 2020, and the ensuing price increase factor, Covid stole in silently, virtually crippling it.

Since then, despite all the cycles of pent-up demand, revenge buying and renewed demand for personal mobility for hygiene reasons, the mood has not shifted. And now, a global mismatch in supply chain, and of not just semiconductors, has left production schedules at auto factories in disarray.

SIAM director general Rajesh Menon pointed out how sales figures are even below what it was 9 years and 14 years ago, not to forget the present slide which started in mid-2018. “Recent government interventions would help in easing the supply side challenges,” he hoped, but added a caveat, “(The) second hike in repo-rates by RBI and increase in 3rd party insurance rates could become more challenging for the customers, thereby impacting demand.”

Total sales last month was over 15 lakh, nearly four times that of May last year, which was at about 4.5 lakh. But the worry lines stay intact, for now. How the monsoon progresses will also matter greatly, as the rural economy’s status largely depends on it, which has a direct correlation to, particularly, two-wheeler sales.

SIAM officials also informed that sales figures of Tata Motors, one of the major players in the domestic market, as well as luxury segment brands Mercedes, BMW and Volvo were not available this time around.

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