The last few years have seen several foreign carmakers, struggling to break into the Indian car market, begin using their facilities in the country as export hubs. While this may have justified investments made initially, the sharp ongoing downturn in exports is spoiling the party. According to data from the Society for Indian Automobile Manufacturers (SIAM), none of the five leading automobile exporters reported year-on-year export growth last month. As for the April-November period of this year, only Hyundai Motor India (HMIL) managed to ship out more passenger vehicles than last year.
Data shows that total exports of passenger vehicles (PV) from India dropped by a whopping 23.69 per cent to 48,652 units in November 2019 compared to last year. In the April-November period, cumulative exports came in at 450,185 units, down 6 per cent. Experts now believe that PV exports will register a fall for the second consecutive year in 2018-19.
PV exports had fallen by 1.5 per cent in 2017-18. PV exports have declined to such an extent that major exporters like Ford, Volkswagen and Nissan are on a verge of closing export operations from India, said Puneet Gupta, associate director at IHS Markit.
“Sales have either come down or stagnated in many top markets such as North America and Western Europe, and the demand is met through local production. Hence they are now not dependent on India to meet their local demand,” he adds.
Ford, for example, is a major exporter, sending substantial numbers of its compact SUV Ford EcoSport to the United States market. However, last month, the company saw a nearly 30 per cent fall in its export. Sugato Sen, deputy director general of SIAM says that while sales have declined in key markets such as US, political instability in Latin America and a change in customer preferences in neighboring markets has decreased Indian exports to these markets.
“Latin American countries such as Mexico and Peru have emerged a big market for Made- in-India cars, but geopolitical tension has decreased demand here. Moreover, Sri Lanka has become a market for second hand Japanese cars and Indonesia has stopped buying cars from India,” Sen points out.
Experts also say that supply constraints faced by some manufacturers have also hit exports. “A few... reduced exports to meet growing local demand. If domestic sales don’t pick up in the near future (which is too early to say), we might see a growth in exports,” Sridhar V, Partner, Grant Thornton India says. However, the tariff war initiated by US President Donald Trump, and a shift towards automation and electric mobility may further impact Indian exports in the future.