Even as pent-up demand lifted passenger automobile (PV) gross sales within the third quarter after it received derailed within the first and second quarters following the pandemic and lockdown announcement in March, the auto trade continues to languish on the expansion entrance. Terming the current progress in PV gross sales as a false euphoria, the trade has now requested the federal government to defer the implementation of gasoline effectivity norms and second stage of emission norms to April 2024, in a bid to maintain the price of acquisition secure.
Industry knowledge reveals that whereas the compounded annual progress charge (CAGR) of PV gross sales stood at 12.9 per cent for the five-year interval between March 2005 and March 2010, it fell sharply to a CAGR of 1.3 per cent for the five-year interval between FY15 and FY20. Between FY10 and FY15, the gross sales rose by 5.9 per cent.
In truth, the CAGR for PV gross sales between 2000 and 2010 stood at 10.3 per cent and that between 2010 and 2020 has been 3.6 per cent. So, clearly the expansion charge has slowed down over the past decade and extra so over the past 5 years. Though automobile gross sales are intently associated to GDP progress numbers, trade insiders say that PV gross sales have suffered regardless of an honest GDP progress charge.
ExplainedPandemic disruption: Seeking extra time for transitionShifting to CAFE-2 and BS-VI stage II wouldn’t solely turn out to be harder for the auto trade amid the pandemic-led disruption but additionally increase price of acquisition. In the present gross sales state of affairs, trade insiders say an extra rise in acquisition prices for shoppers may add to the considerations.
“The primary reason for that has been the sharp rise in cost of acquisition of cars in India. Almost 50 per cent of the car buyers in India are first-time buyers and since price elasticity for car purchase is high in India, it is a major factor for slowdown in growth,” stated Shashank Srivastava, ED, gross sales and advertising and marketing, MSIL.
If rising price of uncooked supplies is an element, insiders say that top tax charges and shift from BS-IV to BS-VI in a fast time has lifted the acquisition price. “In European markets, the transition from Euro 4 to Euro 6 took 9 years, but in India the shift happened in just a period of three years and since all the cost is passed on to the consumer, it takes up the acquisition cost significantly. Besides, high tax rates and rising service tax and insurance cost has also taken the acquisition cost higher for customers,” stated Srivastava.
As gross sales undergo, the trade has now made a illustration to the federal government to defer the implementation of Corporate Average Fuel effectivity (CAFE-2) rules and BS-VI stage II norms to April 2024. As of now, the CAFE-2 norms that goal to make automobiles extra gasoline environment friendly are set to return into impact in 2022 and BS-VI stage II norms are set to return into pressure starting April 2023.
“Because of pandemic led disruption, we have requested the government to defer the implementation of both Cafe-2 norms and BS-VI stage II, to April 2024,” stated Srivastava, pointing that adherence to new norms lifts the price of acquisition.
While India has an enormous potential for progress of PV gross sales, consultants level to a slowdown within the tempo of progress of first-time patrons. “If the pace of first-time buyers picks up, it will lead to higher replacement demand and additional purchase,” stated an trade insider.
As of now, whereas first-time patrons account for nearly 50 per cent of complete gross sales, 24 per cent is alternative demand and the remaining 26 per cent is demand for extra automobile buy.
“We are still in the initial phase of economic development and there is huge potential for growth but we need to convert potential into reality and the cost of acquisition has to be taken care of,” stated Srivastava. He additional stated that corporations are doing their bit to scale back the acquisition price by rising localisation and changing into extra environment friendly and productive, nevertheless, “another factor that will lead to cost reduction is economies of scale and that will come in once we see volume growth.”
Many within the trade really feel that moreover decrease price of acquisition, a bigger base of automobile patrons will depend on sustained excessive progress of the economic system as that may convey in additional folks into the job cycle who will generate demand.
