The double-digit negative growth in automobile sales in August and September 2019 resulted in new lows for the sector, which was already reeling under policy shocks. Due to the demand slump several non-production days have been announced in recent months, which have affected factory output and workers’ pay.
Going downhill Automobile sales, which had already declined in the first quarter of 2019-20, further slumped in Q2 due to the worst-ever monthly drop recorded in August and a continued decline in September.
Policy shocks While not as pronounced as in 2019-20, the previous three years recorded many short-term slumps in automobile sales mostly due to policy changes: demonetisation, BS-IV implementation & a new insurance announcement (Mandatory years of third party insurance for new automobile registrations).
The much-debated GST’s immediate impact was marginal, however.
Shutters down Due to the demand slowdown, major auto manufacturers and their ancillaries have been declaring non-production days over the last three months. Such days continue this month too.
India not alone Such a slowdown was also observed across major economies. Stricter emission norms in China and Europe, mandatory sale of electric vehicles in Europe, and U.S.-China trade tensions were a few contributors.
Source: SIAM, RBI Monetary Policy Report and Mint Street Memo series
