An insight in the Automobile Industry

Engineering Post Report

The automobile sector continues to stand out as one of the best performing  amongst the large-scale  manufacturing sectors in terms of providing jobs, revenues and  bringing in  technological advancements in the country.

Presently, there may be transient deceleration in its growth, but as the Auto Policy 2016-21  is going to bear fruits,  there would be  paradigm  shift in the industry when many new players  would soon be joining  the market  with entirely new models. Besides, the existing  players have already made  huge investments  and a lot more are in waiting, Despite extraneous factors particularly in terms of  tariffs and import and used vehicles, which still hold about 18 per cent of the market share,  huge expansion of  industry  volumes take place to enact much awaited  take off  stage as  envisioned in the Auto Policy 2016-21.

Automobile prices have no doubt witnessed  multiple  upward revisions due to Rupee depreciation, economic slow down due to curtailed   domestic demand and price -sensitive  buyers have somehow refrained  from making their purchases.  Additionally,  certain restrictions  on non-filers  with respect to  purchase of cars have also dampened  the automobile demand to some extent.

There has been  sluggishness  everywhere in the local auto  industry during  the last financial year: except  buses where normal growth of  17 per cent  had taken place during July-March  FY 2019. Indeed, there is  enormous potential  in demand for buses,  waiting to unleash  when   serious measures are taken  regarding formulating and implementing  Urban Transport  Schemes in the cities  by replacing  the old and dilapidated  buses, presently plying  on the roads of most of metropolitan areas in the country.

However, a persistent decline was in evidence in terms of Trucks  which registered  27 per cent loss in production. The  non-filers policy may not have impacted here ; but the  work at certain  government projects had been halted so are the supplies of trucks  and the respective payments , resulting  in the disruption of the chain of events at the trucking industry.

According to the available information,  during July-March  FY 2019, the farm tractor sector  also massively declined by  28.7 per cent as their  production was recorded  at 37457  units against 52661 units  produced  in the corresponding period  of the last year.  This decline was due to  massive slow down  in the agriculture sector growth, water shortages and other issues like  increase in the prices  of agricultural inputs and halting of development projects which added to the woes of the farmers thus badly impacted the bookings of Farm Tractors.

Passenger car sector was somewhat resistant to the general  receding  trend in the industry  with meager growth of 2.4 per cent . The grow was, however, also impacted by  repeated   policy changes with regard to the non-filers like imposition of  ban on purchases , heavy taxation  on registration by the non-filers and the latest 10 per cent levy of federal excise duty. The imposition of 10 per cent  Federal Excise Duty (FED) on exceeding  1700cc engine capacity  cars had also badly impacted  locally produced cars and   jeeps. The LCV / pick-ups being price sensitive also lost their ground with 14 per cent decline in their production.

The two/three wheelers sector has  also failed to show normal growth., it had dropped  off production  by  5.8 per cent  during July-March  FY 2019. These vehicles cater to lower income group people and as such are  extremely price sensitive. Still this  sector continues to  offer  most preferred and economical means  of  transportation and the best alternative  in the absence of public  transport in the cities  and thus holds  a dependable and continued potential  for growth in the coming years.


Category                      Installed Capacity                              No of Units July 2018-March 2019

Car                                     240000                                                          170116

LCV                                    43900                                                             19536

Jeep                                    5000                                                                5745

Bus                                      5000                                                                649

Truck                                 28500                                                               5027

Tractor                             100000                                                             37457

2/3 Wheelers                 2500000                                                          1342185