Collapsing Car Sales Show PM Modi's Growth Challenge: 10 Points

Total production fell 9.31% in the first two months of the financial year, according to SIAM data

Sales of passenger vehicles, including cars, SUVs and vans, declined 20.55 per cent in May, according to SIAM's data. A total of 1,47,546 cars were sold in the segment during the month.
The latest data also highlights a liquidity crisis and higher cost of credit in the aftermath of a default by IL&FS last year, which led to a contagion effect on the country's non-banking finance companies sector.
Total sales of the country's automobile sector declined 8.62 per cent to 20,86,358 vehicles across segments and categories last month, the SIAM data showed. In the utility vehicles segment, the sales fell 5.64 per cent to 77,453 in May 2019. Van sales declined 27.07 per cent to 14,348 vehicles.
The sector has been moving towards inventory correction even as it invests in R&D for upcoming safety norms and electric vehicles, news agency IANS quoted Vishnu Mathur, director general, SIAM, as saying.
Domestic sales in the commercial vehicles segment fell to 68,847 units in May 2019, as against 76,517 units in May 2018 - marking a drop of 10.02 per cent. This includes light, medium and heavy commercial vehicles, and passenger and goods carriers.
Overall two-wheeler sales - including scooters, motorcycles and mopeds - decreased 6.73 per cent, while three-wheeler sales - passenger as well as goods carriers - dropped 5.76 per cent.
The slowdown in auto sales has forced auto companies to trim production over the past few months.
Maruti Suzuki earlier this year lowered its sales growth forecast for financial year 2019-20 citing an industry-wide weakening of demand. The country's largest carmaker has also cut production by over 18 per cent in May, which follows a 9.6 per cent reduction the previous month.
According to SIAM, production in the auto sector declined 7.97 per cent in May. Passenger vehicles production fell 12.23 per cent. Exports in the commercial vehicles segment plunged 55.54 per cent to 3,581 last month. However, total exports - across segments and categories - were down 0.49 per cent.
As of Tuesday's closing prices, the Nifty Auto index - a gauge comprising of auto stocks - has declined 10.78 per cent so far in 2019, sharply underperforming the Nifty 50 index which has risen 10.15 per cent.