TruthTheOnlyDefense
BANNED
- Joined
- Sep 12, 2017
- Messages
- 3,056
- Reaction score
- -4
- Country
- Location
Precipitous monthly drop highlights broader economic slowdown
Indian vehicle sales fell more than 30 per cent in July as an intensifying economic slowdown drags what was considered among the world’s most promising car markets through one of its worst slumps on record.
In the largest fall since the turn of the millennium, passenger vehicle sales fell 31 per cent last month from the same time a year earlier, according to the
Society of Indian Automobile Manufacturers. It was the worst month in a dismal spell that has seen sales fall 20 per cent or more for four consecutive months, while sales have failed to rise for more than a year. “This is the first such kind of a decline,” said Basudeb Banerjee, a motor analyst at Mumbai-based financial group Ambit. “Cars have never faced such bad days in the last 20 years.”
As recently as last year, India’s motor market was thought to be on course to overtake Germany and Japan and become the world’s third-largest. But nearly every vehicle maker in India, from local heavyweights such as Tata and Mahindra to Toyota and Honda, registered declining sales in the last month.
As a result, many have turned to production cuts. The severity of the automotive market’s downturn has led some analysts to question whether weak demand is cyclical or represents a broader shift, both in India and abroad, with consumers opting for alternatives to buying personal vehicles.
In India the government is also pushing an aggressive strategy to accelerate electric vehicle production and adoption, adding to carmakers’ list of worries. Their troubles are being mirrored elsewhere, with car sales in China falling 14 per cent in the first half of this year compared with 2018.
The Indian industry’s precipitous drop has become the most alarming symptom of a broader economic slowdown, with gross domestic product growth falling to a five-year low of 5.8 per cent in the first quarter of 2019, and a liquidity squeeze caused by a crisis in its shadow banking sector choking off consumer demand and business expansion.
About 40 per cent of new car loans came from these shadow banks, according to Capital Economics, meaning that carmakers’ pain has been particularly severe. The motor industry’s slowdown would have further repercussions for India’s economy, said Vishnu Mathur, SIAM’s director-general, saying that the sector contributed almost half of manufacturing gross domestic product and employed 37m.
Mr Mathur called on the government to introduce urgent stimulus measures such as tax cuts. The government levies a 28 per cent goods and services tax on cars, with the effective rate including other duties rising as high as 48 per cent for some vehicles, according to Abhishek Jain, a tax partner at EY.
Mr Jain said he did not think the government was willing to take the sizeable hit to its revenues that would come with cutting taxes from 28 to 18 per cent, while he emphasised that the industry’s problems ran deeper.
“The government has very little elbow room to give any immediate rate reduction. In the next few months it’s unlikely.”
https://www.ft.com/content/859023b0-bd9f-11e9-89e2-41e555e96722
Indian vehicle sales fell more than 30 per cent in July as an intensifying economic slowdown drags what was considered among the world’s most promising car markets through one of its worst slumps on record.
In the largest fall since the turn of the millennium, passenger vehicle sales fell 31 per cent last month from the same time a year earlier, according to the
Society of Indian Automobile Manufacturers. It was the worst month in a dismal spell that has seen sales fall 20 per cent or more for four consecutive months, while sales have failed to rise for more than a year. “This is the first such kind of a decline,” said Basudeb Banerjee, a motor analyst at Mumbai-based financial group Ambit. “Cars have never faced such bad days in the last 20 years.”
As recently as last year, India’s motor market was thought to be on course to overtake Germany and Japan and become the world’s third-largest. But nearly every vehicle maker in India, from local heavyweights such as Tata and Mahindra to Toyota and Honda, registered declining sales in the last month.
As a result, many have turned to production cuts. The severity of the automotive market’s downturn has led some analysts to question whether weak demand is cyclical or represents a broader shift, both in India and abroad, with consumers opting for alternatives to buying personal vehicles.
In India the government is also pushing an aggressive strategy to accelerate electric vehicle production and adoption, adding to carmakers’ list of worries. Their troubles are being mirrored elsewhere, with car sales in China falling 14 per cent in the first half of this year compared with 2018.
The Indian industry’s precipitous drop has become the most alarming symptom of a broader economic slowdown, with gross domestic product growth falling to a five-year low of 5.8 per cent in the first quarter of 2019, and a liquidity squeeze caused by a crisis in its shadow banking sector choking off consumer demand and business expansion.
About 40 per cent of new car loans came from these shadow banks, according to Capital Economics, meaning that carmakers’ pain has been particularly severe. The motor industry’s slowdown would have further repercussions for India’s economy, said Vishnu Mathur, SIAM’s director-general, saying that the sector contributed almost half of manufacturing gross domestic product and employed 37m.
Mr Mathur called on the government to introduce urgent stimulus measures such as tax cuts. The government levies a 28 per cent goods and services tax on cars, with the effective rate including other duties rising as high as 48 per cent for some vehicles, according to Abhishek Jain, a tax partner at EY.
Mr Jain said he did not think the government was willing to take the sizeable hit to its revenues that would come with cutting taxes from 28 to 18 per cent, while he emphasised that the industry’s problems ran deeper.
“The government has very little elbow room to give any immediate rate reduction. In the next few months it’s unlikely.”
https://www.ft.com/content/859023b0-bd9f-11e9-89e2-41e555e96722
