There’s a message in skidding car sales
For car manufacturers, April was a bad start to the financial year. The sale of passenger vehicles fell over 17 per cent to 2.48 lakh units compared to 2.99 lakh units in April 2018, while the overall fall for the auto industry nearly touched 16 per cent with sales declining to just over 2 million units, compared to the year-ago figure of 2.4 million. For the first time in the last six-eight years, the sale and production of all auto segments moved into the red. Sale of commercial vehicles, bellwether for the performance of the economy, slipped nearly 6 per cent in April to 68,680 units, while even the mass consumed two-wheeler segment contracted by over 16 per cent to 1.64 million units.
Last month’s performance was not just one of those bad months. All of last year —fiscal 2019—was bad news. Higher ownership costs caused by high fuel prices, stiff interest rates and increased insurance costs ensured passenger vehicles sales, at 3.4 million, grew at just 2.7 per cent, the slowest since FY2014. Seeing the weakening consumer demand, the country’s largest car producer Maruti Suzuki announced a few days ago it had cut production by 10 per cent. This is the third consecutive month the car major has reduced output. These signals, especially the fall in two-wheeler sales, indicate the economy is slowing and consumers either don’t have the cash or are hanging on to it for a rainy day.
After being in the fast lane, consumers have turned nervous about the future. It’s not just cars. They are buying less shampoo and white goods, and going on fewer vacations. The slowdown in the consumer goods sector, which contributes over 60 per cent to the country’s gross domestic product (GDP), has consequently proved to be a drag; and GDP growth for the last quarter of FY2019, likely to be around 6.5 percent, will be the worst performance in two years. The challenge before the incoming government that will soon take charge is clear: to restore consumer confidence, provide jobs and access to cash, and thereby restore healthy spending.