Bleeding Of Automobile Industry in India
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The automobile sector is absolutely big part of the Indian Economy. It contributes around 7.5% of the GDP of India. It also contributes
49% in the Indian manufacturing Sector. Automobile Sector also plays large role in
employment as it produces millions of jobs each year, this sector has currently given employment to almost 10 million people
in India.
From last year the Automobile sector is
facing huge challenges. For almost 12 months in the last 13 months sales of vehicles
falling drastically up to 50%compared to privious months. There is almost a 31.5% decline in sales of passenger
vehicles, a 16.6% decline in sales of commercial vehicles and an 11.7% decline in
sales of the two-wheeler. There is an overall 18.2% decline in automobile sales which
is lowest in the last 17 years. The biggest automaker in India Maruti-Suzuki has
reported a 36.2 % decline in sales compared to Previous Months.
Main cause of this slowdown in the Automobile
industry is the decline of consumer demand in India. There are many factors behind
this decline as High prices of vehicles, slower growth of the economy, and lack of
confidence in personal growth. Let’s look at different factors in detail.
The main reason behind this slowdown is the high prices of vehicles due to which people
are not purchasing vehicles. There are various factors behind high prices in all
of the high GST on the automobile is the main one.
The Indian government has done awesome job by
implementing one tax system for the whole nation. In the GST tax system, we have four
slabs 28%, 18%, 12%, and 5%. Automobiles are fall in the highest slab in India i.e.
28% due to which prices of automobile are touching to the sky.
To cure this slowdown our government has
taken a very bold step by reducing corporate tax from 30% to 25%. Also, governments
have reduced GST on electronic vehicles. But this slowdown is mainly due to
consumption slowdown and that affected directly by indirect tax. The direct tax cut
could reduce slowdown but it will take time, but we don’t have time as a situation is already worse.
The corporate tax cut will be give relief to
companies and it will benefit at the time of tax filing. It is also dough full that
how many companies will surpass this benefit to employees.
2) NBFC crisis
in India:-
After
failure of IL&FS in India NBFC companies (Non-Banking Finance
Companies) facing huge challenges. Due to these crises, these companies are not
in a condition to finance of Automobile properly. In the purchase of vehicles, NBFC
companies play a significant role as 1/3rd sales of India’s largest
automobile producer (Maruti) financed by NBFC companies. Particularly in a rural
area, people prefer NBFC companies to perches Vehicles and agriculture
equipment.
3) Emission
norms and Arrival of E-vehicles:-
All
countries in the world are trying to reduce emissions from various sources due to
global warming. There are different laws and regulations that have made for this purpose. In India supreme court indicated transmission to BS-VI norms from BS-IV norms. Also, the government intended to convert all engine vehicles to E-vehicle
by 2030
4) High Inventory of Automobile Companies:-
In
last year’s festive season ( Diwali) many automobile companies had forecasted
high sales targets and hence they had produced a large number of vehicles, but in the last festive season, automobile companies could not generate sales that they
had forecasted. Now, these companies are seating on a high inventory of vehicles
that are according to BS-IV norms. So many people are waiting for big
discounts by this norm shifting; many people are waiting for the arrival of E-vehicle.
5) Third-party Driving:-
As online markets are growing day by day, in
traveling also many automobile companies have made a significant impact. There
are many companies like ola and uber providing cab facilities at a discount rate.
Also, there are many companies like Redbus which have made booking travels
tickets so easy. Today there are many analyses available that show how renting ola/uber is beneficial than buying a car, look at maintenance and other stuff.
Although these facts are true that
these companies impacted the slowdown of automobile sales. But we cannot ignore that
only sales of cars are not declined other kinds of vehicle sales are also declined. And basically, these
companies are operated in few metro cities of India not all over.
From all the above points, it is clear
that slowdown in the automobile industry is not due to Ola/Uber companies as our finance
minister said. It is due to all the above reasons. And we have to take immediate action
on it because already many automobile companies and auto ancillary companies
have stopped their production, many have shut down their plants at various
locations. Up to date, there are 350000 people who have lost jobs due to this scenario
and if these continue then more people will lose their jobs. These will lead
to a further decline in consumption slowdown and it will lead to a vicious circle. An only direct tax cut will not sufficient to improve things, the government should think
to reduce GST on the Automobile. If GST on automobile reduced to 18% from 28% then
also it will big relief and there is a chance to improve consumption demand in the upcoming festive season.
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