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Home Articles Indian Roads To Soon See Fewer Cars

Indian Roads To Soon See Fewer Cars

IndianMoney.com Research Team | Updated On Wednesday, September 11,2019, 12:58 PM

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Indian Roads To Soon See Fewer Cars

 

 

The auto sector in India is going through really bad times. This is the worst auto slump in two decades. Maruti Suzuki has posted a 36% decline in August sales at just 93,173 units. Sales of SUVs and cars in India have declined for the 10th straight month.  Worse, there’s no sign of a recovery on the horizon.

Let’s take a look at the slump in the auto sector. Mahindra & Mahindra has cut production and laid off many workers. Mahindra & Mahindra saw a huge drop of a whopping 31.58% (This is an August to August year on year comparison) at just 13,504 units. Take a look at this shocking statistic, The auto sector may shed 5,00,000 jobs in the next quarter. Something must be done fast.

The Finance Minister Nirmala Sitharaman says that the Millennial mindset of using Ola, Uber is the reason behind the auto slump in India. The youth in India ride in Ola and Uber cabs rather than own a car. The auto sector did have its good times till two years ago she added.

Nitin Gadkari has acknowledged the slowdown in the auto sector. He is taking up a GST cut on Petrol and Diesel vehicles with the Finance Minister. So, what’s the problem? Why people are not buying cars?

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Indian Roads To Soon See Fewer Cars​

1. GDP Slowdown

India’s GDP slowed down to just 5% in the June quarter. This is a 6-year low. The GDP was 8% for the same quarter 2 years ago. The economy is losing steam and your motor car is running on a sputtering engine.

  • The auto sector has seen a large scale job cut.
  • Major automobile companies have declared a production holiday.

Many people say it’s just an auto slump. The other sectors are doing well. The auto sector is a proxy for economic growth. It shows consumption in the economy.

If I am not confident of my job, I will postpone all non-essential purchases. I will not buy a car or postpone the purchase of a motor car.

See Also: How to File a Car Insurance Claim?

2. Job Uncertainty

Zomato has laid off 540 employees in the customer support team. India’s auto parts manufacturers have warned of 1 million job cuts. Samsung plans to lay off 1000 employees in India. BSNL plans to cut the workforce by half on a voluntary basis. There would be 90,000 job cuts in the telecom sector. Nissan Motor to fire 1,700 workers in India. Maruti Suzuki India Ltd. will not renew the contracts of 3,000 temporary employees.

If I am not sure of a job, will I buy a motor car? Definitely Not.

3. People are Not Buying Entry-Level Cars

If you are a millennial earning good salary, you will buy a premium car. Youth in India are buying premium cars as the first buy.  This is a reason why Maruti Suzuki could be failing. Maruti Suzuki used to manufacture the poor man’s car. Maruti Suzuki built a huge market share on the back of the common man.

The common man is not buying cars.

See Also: Motor Insurance For Electric Vehicles

4. People are Scared of Cars

The Motor Vehicles Act 2019 has come into effect from September 1st 2019. There are higher penalties for breaking traffic rules. Racing and speeding mean a jail term of a year. Accident related offenses mean a 6 month jail term.

  • Fine for speeding is Rs 5,000.
  • Drunken driving fines are Rs 10,000
  • Fine for driving without valid license is Rs 5,000.
  • Speed racing means a jail term of 3 months.
  • For motor offences committed by juveniles, the guardian is held responsible and there’s Rs 25,000 fine and 3 year imprisonment.

Motor Vehicles Act 2019  Act says, Be alert. Protect your life and save your pocket.

See Also: Reasons Why Car Insurance is Rejected

5. Cars are Unaffordable

The Government has said it’s compulsory for all cars manufactured after July 2019 to have air bags for drivers, seat-belt reminders, speeding alert systems beyond 80 Kmph, reverse parking sensors to avoid accidents, manual overrides over central locking system.

  • Air bags and ABS have made new cars costly.
  • Hike in road and registration charges by state governments.
  • Higher taxes on petrol and diesel.
  • High GST on cars and SUVs at 28%.

All this makes cars costly. The Supreme Court of India has said that no Bharat Stage IV vehicle will be sold in India from April 1st 2020. This is when Bharat Stage VI emission norms would come into force. All this is going to make cars unaffordable for the common man.

Maruti Chairman RC Bhargava has said that entry-level cars have become unaffordable to buy and maintain for the common man. The guy who buys a two wheeler wants to buy a car, but he can’t afford this.

6. Car Insurance is Costly

More than 60% of vehicles on Indian roads are uninsured. This is in spite of third-party motor insurance plan being compulsory. IRDAI hikes third-party motor insurance premiums for FY 2019-20.

Third-Party Motor Insurance Premium Rates:

Car Description

Car Insurance Premiums (Rs)

Private Cars with engine capacity

 

Not Exceeding 1000cc

Rs 2,072

Exceeding  1000cc but less than 1500cc

Rs 3,221

Exceeding 1500cc

Rs 7,890

This is a double whammy. The motor insurance costs have gone up and after the motor vehicle Act 2019, there are heavy fines and a jail term if you don’t have a valid driving license. Besides, traffic violations can increase motor insurance premiums. You will have to renew lapsed car insurance plan; if you don’t want to land in jail. Insurers are seeing heavy business as car owners renew lapsed car insurance plans.

Car insurance is costly. Not having valid car insurance plan lands you in jail. There are fines if you ride without car insurance plan and driving license.

See Also: Why You Need A Comprehensive Car Insurance Coverage?

Yes, car sales are dropping as more and more youngsters ride in Uber and Ola cars. But, this is not the only reason for the auto slump. The Government has noticed this auto slump and is taking measures to solve it.

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