On Monday, May 13, a report found that new motor vehicle sales in India have declined in all segments—passenger and commercial cars, two-wheelers, and three-wheelers. However, electric vehicle mobility is on a steady uptick as is the used car sales. In fact, growth in the latter could possibly be the cause for declining air quality in cities across the country.
What the SIAM report says
The Society of Indian Automobile Manufacturers (SIAM) report says that India saw a 10.69% decline in car sales since 2018, including a 17% reduction in passenger car sales. Auto exports also declined by 0.05%. These figures are the lowest they have ever been in the past eight years.
In the past year, SIAM says that the sale of passenger vehicles decreased by 17.07% overall, of which car sales were down by 19.93%, utility vehicles were down by 6.67%, and vans were down by 30.11%.
The report says that commercial vehicles showed a 5.98% decline overall. In this category, heavy commercial vehicles declined the most at 13.56% and light commercial ones declined at 1.10%.
Two and three-wheeler purchases also slowed between April 2018 and 2019. SIAM found that three-wheeler sales decreased by 7.44%., of which goods carriers accounted for 0.17%, and passenger carriers for 9.24%.
Two-wheeler sales declined at a steeper rate of 16.36%, including sale of scooters, motorcycles, and mopeds, that reduced by 25.89%, 11.81%, and 5.88% respectively.
In contrast, export of passenger vehicles showed a 11.6% increase. However, because exports of commercial automobiles declined 54.32% and two-wheelers by 7.53%, and three-wheelers by 0.04%, the overall export figure also presented as a 0.05% decline.
NDTV reports that air traffic has also been growing at a declining pace in India, which is the world’s fastest-growing aviation market. Recently, India’s largest airline, Jet Airways, temporarily retired operations after amassing an unsustainable debt burden.
Why are car sales declining in India?
Indian car sales have been declining since October 2011. Explaining this trend, SIAM director general Vishnu Mathur said, “The not-so-happy news continues… The sentiment in the market is not very good.”
Like with the aviation industry, experts suggest that the declining car sales in India are related to fluctuating fuel prices. Rising insurance prices are also a cause for concern for the ordinary car buyer, says News18.
Another unique reason is that India is currently in the midst of a general elections. This means that citizens are uncertain about which party will form the government and whether or not the economic climate will be sound to make large investments like buying a car.
Mathur said that once the election results are declared, car purchasing trends should signal some recovery, including in rural areas where the sale of two-wheelers has also dipped.
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People are also awaiting the monsoon to see whether the Indian economy will get a boost or at least be stable post-elections, if rainfall levels are normal, as the Meteorological Department has predicted.
SBI Capital Securities said that the rise of rideshare apps like Uber and Ola has also influenced the decline in car sales by almost one-third. People tend to prefer rideshare facilities because of time-consuming traffic and lack of parking spaces.
The future of India’s automobile industry
Hero Motocorp and Honda, major two-wheeler manufacturers, also cut production by 15% in April this year. Major brands and manufacturers have also been offering discounts to get rid of their slowly mounting inventory.
The shift towards cleaner fuel and efficient technology
India has also seen a push towards vehicles powered by clean fuel such as CNG. By 2028, one-third of all cars in India are predicted to be fuelled by CNG, if the Natural Gas Infrastructure Development Plan is implemented.
Although Maruti cut its production, the move towards CNG will benefit it and Hyundai Motor, because they are both major producers of CNG cars in the industry.
In October 2018, the Supreme Court barred the sale of non-Bharat Stage VI (BS VI) vehicles by March 2020 in a move to control air pollution. BS VI is a set of strict norms relating to car fuels and technology that regulate emissions and pollutants like carbon monoxide, sulphur oxide, nitrogen oxide, and particulate matter.
Oil suppliers have already begun adhering to the law and are working to supply BS-VI compliant fuels to 13 Indian cities beyond Delhi by 2019.
To ensure compliance, automobile makers must discontinue production of older models or upgrade them. They also need to invest in technology to build cleaner cars, meaning vehicles will become more expensive for consumers.
The surge in Electric Vehicles
However, India is seeing a huge surge of electric vehicles (EV). In FY2019, India bought 7,50,000 units of EVs, including two-wheelers, three-wheelers, and passenger cars. Mahindra, is a giant in the Indian electric cars sector.
The government also announced the Faster Adoption and Manufacturing of Electric Vehicles (FAME II) scheme that allows EVs to be used be passengers and commercially as of 2019. The scheme is funded by Rs 10,000 crore over three years and is expected to be beneficial in terms of security and eco-friendliness.
The scheme also offers incentives for buying EVs and seeks to install more charging infrastructure under the ‘Make in India’ programme to encourage people to buy more EVs.
The Tata Group has also invested in Ola’s EV initiative, Ola Electric, that is testing charging stations and two and three-wheeler electric cars.
Shouldn’t pollution levels be declining too, then?
Pollution control has become a serious concern in India, so much so that both major parties addressed it in their manifestos.
A study by the Centre for Science and Environment showed that the use of second-hand and older vehicles is contributing to high levels of pollution in India.
The study found that instead of older automobiles being scrapped like they’re supposed to be, they are being reused by middle and low-income countries like India and China that do not have strict enough laws on emissions.
In fact, this correlation might be true for India, whose used cars sales have risen considerably in recent times, and is predicted to grow in the coming years. According to Financial Express, the stricter emission norms have facilitated this trend, as people are hesitant to invest in newer models because of this very reason. In the past year, used car sales in India surpassed new car sales by a count of 4,00,000!
Hence, while new car sales in the country might be declining, increasing pollution levels may be a result of the used car market, which are now seen as more lucrative as a result of regular price hikes announced by car manufacturers. Moreover, these older car models do not have upgraded, more efficient technology, therefore being likelier to emit harmful fumes.
Rhea Arora is a Staff Writer at Qrius.