Millennials’ preference for pre-paid cab services over purchasing a new car is majorly the reason behind this slowdown according to our Finance Minister.
Finance Minister Nirmala Sitharaman has vocalised her presumption that factors like the upcoming BS6 upcoming norms and preference of millennials for cab aggregators like Ola and Uber over buying cars have affected the Indian automobile industry.
Her statement was further supported by the Union Transport Minister, Nitin Gadkari when the internet backfired with a lot of rebukes. It was said that the millennials didn’t want to engage a part of their income towards a monthly instalment
The domestic sales saw an acute 23.55% decline to 18,21,490 units in August 2019, according to the society of Indian automobile manufacturers. This year certainly hasn’t been lucrative for the automobile industry. Even the sales of passenger vehicles have witnessed a decrease for the 10th consecutive month, 31.57% of the share has now faded away.
Let us take into account the statistics of some of the major players in this industry. Maruti Suzuki sales fell by 36.1%, Hyundai by 16.58%, Honda by a staggering 51.3%, same for the indigenous manufacturer Tata by 51% and 32% for Mahindra, as of August 2019.
The government, to combat this problem, has recently announced some measures. BS4 vehicles which will be purchased till 31st March 2020 are going to remain operational for their entire period of registration. The ban which earlier existed on some of the government departments for a new purchase has been withdrawn. Moreover, the implementation of a one-time registration fee has been adjourned until June 2020. The acquisition of vehicles till 31st March 2020 will have a 30% depreciation. We expect the GST council to bring down the taxation rate by a considerable amount given the uprising demand for this change. Currently, automobiles fall under the 28% bracket.
While this slowdown is definitely harmful to the economy and various industries, it will take employment over the board as well. Almost 3.5 crore people work in this industry. Millennials are merely a small constituent. Stagnant rural income growth and the introduction of electric vehicles too act like parasites. Not only this, the sales of commercial vehicles like trucks and buses have dwindled by 39%.
It is a matter of time whether this trend is going to change or not. The government surely has to take care of its economy and this sector is a big fish in the pond.
Auto Sector Slowdown
– Finance Minister blames millennials for a slowdown in the auto sector
– Domestic sales fall by a record 31.57%
– Tax rates on vehicles may go down