March 1, 2020

Why did the Indian auto industry take a reverse drive!

The auto industry in India is looking to pass the blame for the drop in the industry to someone other than themselves. They say it is the government policy, infrastructure, taxes and the list goes on. This might be far from the actual truth.

Indian auto industry needs to just look at the rear view mirror and they might see that this was expected long time back.

They took the customers for granted. The same mistakes that big global brands like NOKIA, SONY, CASIO etc. made in the past, to not understand the changing trends and customer behavior made them go out of business. While it is true that there are a few other external factors which would have contributed to this decline but primarily, I feel it was their own fault.

Crossover segment has been rapidly growing and customer preference for this kind of vehicle is evident from the fact that the some of the current new launches was over booked. Even the market leader’s crossover variants have done well. It’s the sedan segment which has been badly hit, isn’t that correct? My blog which I published in Feb 2018, talked about this change in customer preference.

How many cars in India have a 5 Star Safety rating from NCAP or any established body? You might be surprised that in spite of really high prices for basic cars, these safety norms have not been secured. The Industry might say that they follow all the government norms, but is that a valid reason for brands to forget about the safety of their customers?

The cost of some of these basic cars are just ridiculous, in spite of these being built locally? How long can brands justify the increase in price which is largely due to their own mistakes and inefficiencies.

The traffic chaos, better public transport options like Metro trains and disruptions like Uber have changed the customers, especially the younger generation to switch to these alternatives, which are cheaper and stress free. Youngsters are saying that they do not want to buy a car anymore. Parking issues at home and at work, long traffic jams, expensive maintenance, high fuel charges, the list goes on as reasons to not buy a car. More and more companies today allow their employees to work from home. This has also contributed to this drop in purchase of vehicles.

Change in policies contributed to this change. Heavy traffic fines, Bharat 3 to Bharat 4 pollution policy, confusion on the EV technology and its implementation.

Lastly, the drop in black money has been also a factor, the details of bigger spends have to be declared to the Government. The parallel economy has shrunk and the car industry was also hit like some other industries like real estate. The financial institutions have also tightened their credit policies with increasing delinquency rates and in a market which has over 90% cars bought on loans, it surely was a contributor.

I think, the Indian auto industry needs to relook at its large capacity production of outdated small sedan cars, offer customers new, smart, safe vehicles that reflect their personality as well as justify the value of their hard earned money. Keep a stab on the changing customer behavior and be ahead of the trends. Its only a matter of time that the auto industry will revive.