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Recession is defined as negative economic growth for two consecutive quarters. Most unfortunately, Indian passenger car industry is now going through a prolonged recession. Such recession has had happened in past as well. All recessions were due to poor consumer sentiments, arising due to few common factors :
All were triggered by rise in global crude oil price (2008, 2011, 2013 & 2018) & subsequent retail fuel price hike
Mostly in General Election run-up phase (linked to incumbent Government’s Performance)
Economic (GDP) growth slowdown either due to global or internal financial shock
But in most situations, they were contained by government’s fiscal and/or central bank’s monetary action, except 2013 one, which got corrected post formation of new Government in 2014. On a side note, if you look at the line graphs carefully, international crude oil price movement has some sort of inverse relation with India’s GDP growth rate.
This time, despite formation of new government, recession continued, with double digit drop in last three months, much higher than earlier, ever, pointing to far grave situation. Central Bank’s (RBI) monetary easing (reduction in Repo Rate) has not helped much either, as banks saddled with NPA, are passively reluctant to reduce interest rate.
Upcoming festive season was the only hope left for any revival in 2019. For now, hike in tax on petrol and diesel in the budget presented on 5th July 2019, has left the industry highly vulnerable to any global crude price shock, as crude oil price is still in volatile phase.
With slowing economy (GDP growth of 5.8% in latest quarter & unemployment rate at 6.1%, highest in last four decades), clubbed with credit squeeze due to NBFC financial troubles, green shoots looks far too distant in 2019.
And in 2020, post BS6 emission norm implementation (1st April 2020), prices of all cars will go up, thus no hope of double digit growth till 2021. Or is it statistically possible, due to low base effect of 2019?
2019 H1 Analysis
Worse H1 performance since 2013.
Manufacturer-wise Analysis
Some companies still have posted better growth figures than the industry average.
But that is squarely due to the new launches, post H1 2018. Exception is of course – Fiat, and we don’t know how Fiat did this miracle!
If we remove the volume of new launches, result would have been similar to that of other players.
Every product in the market has had taken a hit, with different level of severity. However, there are some products which bucked the trend, and most notable is Tata Nexon.
Sedan : Segment is in free fall
Hatchback : Largely in line with industry trend
MUV : New Generation Maruti Ertiga and Mahindra Marazzo has fueled the growth
SUV : Though SUV seems least vulnerable, but it is not true. If we ignore new launches (XUV 300, Venue & Harrier), since H2 2018, segment would have slumped by 17%, even worse than hatchback