A recent drop in production and sales of automobiles in India has directed the industry towards a major decline this year. With the decelerating economy, car manufacturers are facing heavy losses as sales are slipping down and production costs are rising. One way in which the companies are dealing with this issue and stabilizing their gross revenue is by cutting jobs and dismissing employees, creating increased unemployment in the country.
Some automobile dealerships even had to shut their shops down!
Car sales are decreasing since it has become hard to get approval for loans from banks due to stricter policies introduced by them. The changing bank policies make it difficult for people with a lower credit score to receive loans for the purchase of any high value asset including vehicles and properties.
Sales in the month of July 2019 were the worst for India holding the world’s fourth largest automobile market. A comparison between the car sales in July 2018 versus July 2019 presented that companies like Tata (TATAMOTORS) and Maruti (MARUTI) witnessed a growth rate below -35%, whereas Honda (TYO: 7267) sales were below -48%. Other big companies like Hyundai (KRX: 005380), Mahindra (M&M) and Toyota (TYO: 7203) also observed a major decline in their sales in 2019.
Maruti Suzuki India Limited sold just 124,708 vehicles in June 2019, including the exports. The April-June quarter of FY 2019-2020 observed a -22% change in the passenger car sales as compared to FY 2018-2019. Tata Motors also witnessed a huge drop in sales in the domestic market, with commercial and passenger vehicles sales dropping down by 14% in the months of April-June 2019.
The impact of this decline has not only been suffered by the automotive industry, but also the small manufacturers of auto parts. Decreasing the production of automobile units this year is also leading to increased unemployment and reduced earnings for not just the big companies, but the small ones as well.