For a sector that is deep in trouble, the show that the automobile industry put up at the 12th Auto Expo that ended in Delhi last week was a grand one indeed. With 70 new vehicles being unveiled or launched across the spectrum from two-wheelers to cars and heavy vehicles, presence of all the big players in the global auto industry and milling crowds — the final weekend alone attracted more than 2,00,000 visitors according to industry body SIAM — it may be difficult to believe that this is an industry in recession. Yet the truth is that sales of commercial vehicles have been falling for the last two years and were down 20.93 per cent in the first ten months of this fiscal year. Passenger car sales are at their worst in a decade, having fallen 9.34 per cent in the April-January period. And with high costs of financing, falling freight volumes and adverse sentiment, only the brave can predict a quick turnaround for the industry. What the celebration at the biennial industry jamboree underlines though is the potential that auto companies, especially those producing cars, see in the growing Indian market. This is also proved by their launching vehicles specifically designed for local consumers. Some of the big multinationals such as Suzuki, Hyundai and Ford have turned their Indian operations into bases to produce for markets abroad.
In addition to the growth slowdown, the industry is up against a couple of other challenges. The government has notified fuel efficiency norms that will kick in from 2017 based on average fleet weight for passenger cars. While this is good news for buyers, who can look forward to cars with higher mileage than what is available now, for manufacturers this means a re-look at their strategies. They have to push out more high-mileage vehicles to counterbalance the sale of fuel-guzzling SUVs. They will also have to develop more efficient engines and associated technologies, which could mean higher costs. Passing on such costs may not always be possible in a competitive market. Car manufacturers will also have to focus on designing safer vehicles. A recent study by a U.K. agency pointed out how some of the most popular, high-selling models in India failed crash tests. Car buyers are not going to buy the argument that average vehicle speeds in India are much lower than in the West and hence those safety standards are not applicable here. Along with the industry, the government needs to do some soul-searching as the exploding numbers of vehicles is causing chaos on the roads, especially in the cities. At least the metros need to have well-thought-out public transportation policies that will obviate the need for citizens to take their personal vehicles out on a daily basis.
