Challenges of the Indian Automotive sector..

At a function organised by Travancore Management Association (TRAMA) felicitating my friend Saji Varghese on his new assignment as Sr. GM of MRF in Gujarat, I found his talk to the TRAMA audience in Kottayam on the challenges faced by the Indian Automotive sector very informative. .. 

It was very well researched and insightful, educative too 👌👌 He touched on five main aspects, 

1. Impact of BS VI norms - the strict BS VI (Bharat Standards) norms by-passing the BS V, straightaway from BS IV, to be made compulsory on all vehicles sold in India from 1st of April 2020, has made quite a few heads turn, causing great uneasiness with auto manufacturers who are on a run to see that their inventory of BS IV vehicles is done away with before the cut-off date. This has resulted in automobile and heavy vehicle manufacturers cutting off their production and getting ready to bring in new environmentally superior variants.

2. Impact of auto aggregators like Uber and Ola in India - It is for sure, no doubt, Uber and Ola has changed the personal travel landscape efficiently and cost effectively for ever in the country. Even though in India, Ola presently caters only to the population in 110 cities with ten lakh ( a million) driver partners and Uber to forty cities, the cost effective value addition it has brought to the passenger experience is something beyond explanation. Particularly in big cities like Mumbai, New Delhi and Bangalore, it has made a big difference to the way people commute daily to their work and back and plan inter city visits and so on.

3. Rapid introduction of Electric vehicles - complying with India's adherence to the 2015 Paris Treaty on Climate Change, it is required that by 2030, we transition to EV range of vehicles to reduce the Carbon footprint of our vehicles and try level best to limit climate change. People like me, have taken decision to postpone our new vehicle buying decision till more efficient and cost effective EV models come to the market.  By 2020, Indian market will have Tata with their INR 10-12 lakh EV, Mahindra with their 10 lakh EV, Hyundai with their INR 25 lakh Kona and so on. Toyota is also planning to enter the market later in 2020, while Suzuki is trying with it's Wagon R EV model anytime early 2020.

4. Market uncertainty forcing prospective buyers to postpone their purchase decisions- most of the buyers who were planing to buy their cars after studying the market have decided to postpone the buying decision till the air is cleared regarding governmental support and pricing structures of the automotive companies. Also setting up of the necessary support infrastructure across the country will also consume some time.

5. Poor economic growth of Indian economy over the past six years - With change of government in 2014, the country's economic progress has been low, resulting in slow automobile industry growth in general.

6. Trend among new-age youngsters to avoid hassles of car ownership with rise of Uber and Ola - Who wants to invite trouble and headache in the cities driving cars, when the whole driving experience can be outsourced to startups with enterprising individuals ready to connect the people with the driver and owner of cars at very low and effective rates. In the bargain the passengers avoid the expenses and hassles of insurance, fluctuating fuel prices, frequent maintenance and replacement of spare parts, headache of going behind police cases, courts etc in the case of an accident etc ? I do not own a car in Bangalore for the past two and half years, how peaceful it has been ??

7. The second hand vehicle market facing a glut of old vehicles - with few buyers and high supply has had an impact and raised doubts on the resale value of cars on the second hand vehicles market,

My former MRF tyres boss felt the main reason was mishandling of economy by the new government over the past six years. He was of the opinion be it Ola or Uber, they also need cars, it also results in sale of cars. India car population is one tenth that of China. So there is great scope for sale and growth.

As BS VI introduction is mainly on fuel, the automobile should be able use cleaner fuels. Though automobile changes are much less , mostly tighter piston clearances etc. why should automobile sales plummet ? Nobody prevents selling BS VI cars before April 2020. 

Good planning will make cars available, so that you need worry about inventory of old cars, it will be sold out. Major reason for lower sale of commercial vehicles is low growth. That is the main reason for other vehicles too.

The concern made about the Electric vehicles is the same arguments people made when computers were introduced. There are also allegations that EVs being blocked by Petroleum industry bigwigs and auto industry captains, But will that strategy work when India has already committed to the international community at the 2015 Paris Treaty on Climate Change to bring in radical changes in the automobile vehicle pollution to help achieve UN goals of limiting global temperature change to within 1.5 deg Celsius to slow down climate change.

The difficult automobile industry changes have made families limit their spends on dress, eating and socialising, this has got cascading effects on other sectors of the economy too.

Overall the illness in the automobile sector is not only pulling back the auto ancilliary industries sector, it is also impacting other areas of the economy, pulling them back.

Hope our leaders take sensible economic actions that can help revitalise the economy and get the automobile industry back on track.

George.