Illustration by Binay Sinha
The magnitude of slowdown in automobiles sales is worrying. Never since the turn of the millennium have things gone awry to this extent for the industry, though there have been sustained periods of lull before (Chart 1). Contraction of 19 per cent in auto sales in July 2019 was the worst since April 2001.
While the gloom in passenger vehicles started early, commercial vehicles sales, an important indicator of economic activity have now followed (Chart 2). Overall recovery is not in sight if we look at vehicle registration at the user end. But two and three-wheelers seem to be doing better of late, as growth in their registrations in June was better than that in the April-June quarter (Chart 3).
Corporates sales data is also reflecting the problem. However, auto ancillaries are still in a better shape, courtesy a bigger share of exports in their sales matrix (Chart 4). However, the same cannot be said for profits.
Auto exports are doing way better than domestic sales (Chart 5). The former grew at 4 per cent in July, according to manufacturers’ data. However, overall auto exports earnings declined by 5 per cent in April-June 2019 over the same period of the previous year (Chart 6).
In terms of contribution, while auto parts exports have remained unchanged, car and two-wheeler exports have shrunk, suggesting that the demand for completed vehicles is a bigger worry in global markets for Indian auto players (Chart 7).
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Compiled by BS Research Bureau