Sales of cars and utility vehicles witnessed the biggest monthly decline, as the worst slump in the sector in almost two decades shows no signs of letting up amid a broader slowdown in the Indian economy.
The automobile sector is a key part of Asia’s third-largest economy, employing millions of people directly or indirectly and contributing more than 7 percent to the nation’s gross domestic product, Bloomberg reported citing McKinsey & Co.
Auto sales in India have been declining since the Diwali festival last year. The falling volumes have forced companies to lay off contract workers and dealerships to shut showrooms.
On Aug. 23, the government announced several measures to boost auto sales, including clarity on vehicles to be sold before stricter emission standards kick in, deferral of revision of one-time registration fee till June 2020 and lifting a freeze on government departments, urging them to buy new vehicles. It, however, didn’t outline any major fiscal support or cut in goods and services tax that the auto sector has been calling for.
While these measures will boost sentiment in the near term, automakers said more sops are required to revive sales.
Guenter Butschek, chief executive officer and managing director at Tata Motors Ltd., last week said while some of the government’s incentives have addressed issues such as liquidity, its effectiveness is yet to be felt as consumers have postponed buying hoping for a GST rate cut on cars.
“We need clarity from the government now,” Butschek told BloombergQuint. If the auto slowdown lasts longer, the industry will be forced to compromise on the future growth, he said.
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