"Footfalls Down To Half Now": Mumbai Auto Dealers On Slowdown In Sector

Experts are linking the slowdown to demonetisation, GST and the jobs crisis
Experts are linking the slowdown to demonetisation, GST and the jobs crisis

Mumbai's auto dealers are facing the impact of India's automobile sector hitting a speed breaker.

Passenger vehicle growth in the financial year ended March was the slowest since 2014, according to a top industry body. Auto stocks have lost a staggering $42 billion in the last 16 months.

Experts are now linking this to demonetisation, GST and the jobs crisis, thus raising the possibility of an economic slowdown.

"Because of Demonetisation and GST they (consumers) were holding back on purchases... And lastly consumer sentiment has been getting weaker, and now we can interpret that because there has been a slowing down in the economy," Rakesh Batra, partner and national leader-automotive sector, Ernst and Young, told NDTV.

"But if you see why consumer sentiment has been weaker, we can see that there has been little or no job growth particularly in the white collar category. The job growth has been very weak or absent and that has impacted passenger vehicle sales," he added.

Carmakers point to sector-specific hurdles. Insurance costs have shot up after the change in rules, which mandate the consumer to pay a portion of premium upfront for three years. The conversion of engines to tighter emission norms, Bharat Stage 6, from next April are also pushing up costs.

"We used to get 60-70 footfalls every day. It is down to half now," Kasturilal Wassan, owner of Wasan Motors, told NDTV. "May be 20-25 dealers have shut down in Mumbai in last two years," he added.

Sales are also wobbly in the two-wheeler segment. Despite a good monsoon, the rural sector has not really grown and that has led to lower two-wheeler sales.

"Overall, for last one year, there is a slowdown all of the sector. Definitely it is impacting labour. Both in terms of cut down in salaries and layoffs," said Bal Malkit Singh, president, All India Transport Association.

Maruti Suzuki India, the country's biggest auto manufacturer, recorded a slump of almost 20 per cent in passenger vehicle sales last month - the worst in seven years. It has decided to stop making diesel cars because of the tighter pollution norms and rising costs.

While some say that the downslide is temporary, it is still a big jolt to the industry, which contributes about 7.5 per cent to the GDP.

However, the slowdown though has not affected the auto companies' plans for new launches.

Newcomers such as MG, Citroen and Kia are betting big on the Indian market in the SUV segment, which has seen a substantial growth despite the overall slowdown.