Cars: What slowing car sales reveal about Indian economy?
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What slowing car sales reveal about
Indian economy?
More cautious spending on everything from shampoo to cars and travel threaten to weaken
what’s been the backbone of the economy.
Bloomberg | May 15, 2019, 13:22 IST
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BY-
Anirban
Nag
and
Dhwani
Pandya
India’s
That demand slowdown has spilled over into the steel
industry, which has ramped production up to record levels
and depends on the automotive sector for about 10%-12% of
demand.
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Cars: What slowing car sales reveal about Indian economy?, Auto News, ET Auto
consumers are being tested after helping drive the
fastest-growing major economy.
More cautious spending on everything from shampoo to
cars and travel threaten to weaken what’s been the
backbone of the economy, contributing about three-fifths
of gross domestic product. The pullback has acted as a
drag on growth, which is predicted to have slowed for a
fourth consecutive quarter to 6.5% in the three months
to March, the weakest pace since mid-2017 and almost
on par with China.
While official GDP numbers for the March quarter are
due May 31, high-frequency data for services and
manufacturing point to activity slowing with industrial
production contracting in March for the first time in
nearly two years. Economic sluggishness may persist
for a year, according to Credit Suisse Group AG, given
high interest rates and stress among India’s state-run
and shadow banks. A prolonged slowdown would pose
a significant challenge to the next government, which is
likely to be in place by late May. Most Read This Week This Month
“The slowdown in consumer goods has been sharper Vehicle registration has not stopped,
than we had earlier expected,” said Suvodeep Rakshit, MoRTH clarifies
a Mumbai-based economist at Kotak Institutional On the account of recent
media reports stating that
Equities Ltd. “Weak monsoons, sustained high interest new vehicle registrations
rates, weak rural demand and reduced space for have been stopped across
government expenditure will continue to weigh on GDP country, Ministry of Road
growth prospects.”
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Kotak Institutional this month lowered its forecast for
This Week This Month
economic growth for the year through March 2020 to
6.8% from 7.1%, compared with the average estimate of
Vehicle registration has not
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Cars: What slowing car sales reveal about Indian economy?, Auto News, ET Auto
7.2% in a Bloomberg survey in April. A poll from stopped, MoRTH clarifies
September, when the credit crunch among shadow
banks first emerged, had predicted a 7.5% expansion.
Dealership inventory pile up
despite production cut: FADA
The slowing in demand comes at a time when
companies too are holding back investments awaiting
the outcome of a general election, posing a double-
April 2019 Auto Sales: All
whammy. segments production, sales
skid to negative
Below is a snapshot of key sectors:
Diesel to be preferred fuel for
Consumer Goods SUVs, MUVs even post BS-VI:
Experts
The bellwether consumer goods sector has been hard
hit, especially given distress in rural India where
incomes have been subdued. That’s translated into an
abrupt slowdown for makers of corner-store staples from Popular Searches
toothpaste to shampoo.
Best Cars under 5 Lakh
After betting big on a push into India’s vast agricultural Top 10 Bikes
hinterland, players from Unilever NV’s local unit to
Auto Expo 2018
homegrown firms like Dabur India Ltd. and Godrej
Consumer Products Ltd. are reporting slowing growth. BS III Vehicles List
Depressed crop prices, a financing squeeze and Top 10 Cars
prospects of weak rainfall have combined to make
India’s farmers warier of shelling out extra rupees.
From almost 16% in the last three months of 2018,
growth in the market for fast moving consumer goods
has slowed to 13.6% in the first three months of this
year, with sales of essential items in rural areas slowing
the most, according to Nielsen.
In the year to March 2019, production of consumer non-
durables grew at about a third of the 10.5% pace seen
in the previous fiscal.
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Cars: What slowing car sales reveal about Indian economy?, Auto News, ET Auto
Autos & Steel
The automobile sector too is passing through a rough
phase with passenger vehicle sales dropping in April by
the most in seven-and-a-half years. Sumedha
Dasgupta, an analyst at ICICI Bank Ltd., says a host of
disruptions have roiled the sector including the recent
cash crunch among shadow banks, patchy monsoons,
high fuel costs and tightening insurance norms.
That demand slowdown has spilled over into the steel
industry, which has ramped production up to record
levels and depends on the automotive sector for about
10%-12% of demand. Steel consumption rose 6.4% in
April from a year ago, slowing from 9% in the
comparable prior period, due to weakness in automotive
sales and a possible slowdown in construction, SBICAP
Securities Ltd. said in a recent note.
Real Estate
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Cars: What slowing car sales reveal about Indian economy?, Auto News, ET Auto
The sector has suffered through two turbulent years,
during which policy shifts cut into sales and prices. The
March quarter brought good news with a 12% uptick in
purchases across India’s top seven cities, though prices
remained stagnant and unsold inventory declined just
1%, according to Anarock Property Consultants.
As buyers return, developers are struggling to finance
projects and repay loans amid a funding crunch. “The
problem is becoming worse with lenders taking
possession of the collateral from the developers,” said
Ashutosh Limaye, head of research and advisory
services at Anarock. “These banks are finding the
collateral sub-optimal to get their capital back and the
projects are getting stuck.”
Oil Sector
India’s oil demand growth in the 12 months through
March was the slowest in five years. In April, the first
month of the new financial year, oil product consumption
remained little changed. Weaker industrial activity has
hit diesel demand growth, while falling passenger
vehicle sales impacted gasoline consumption. Going
forward, a more than 30% surge in oil prices so far this
year is likely to crimp fuel consumption and flow through
into consumer spending as well.
Gig Economy
E-commerce provided a silver lining.
“Transactions continue to grow at 15% rates annually
https://auto.economictimes.indiatimes.com/news/industry/cars-and-shampoo-tell-a-tale-of-indias-slowing-consumption/69339582[15-05-2019 23:01:05]
Cars: What slowing car sales reveal about Indian economy?, Auto News, ET Auto
and online consumption is actually increasing quarter on
quarter,” said Abhishek Chauhan, a Bengaluru-based
senior director at researcher RedSeer Consulting.
“Transacting users will double from the current 200
million in five years.”
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Cars: What slowing car sales reveal about Indian economy?, Auto News, ET Auto
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