India auto sales downturn tests foreign automakers

X Scalper

It has been an unprecedented decline for one of the world’s most dynamic markets. India is on track to supplant Japan as the world’s third largest, after China and the U.S. For years, light-vehicle sales seemed to be in a relentless ascent, surging nearly 50 percent to 4.0 million units in 2018, from 2.7 million in 2010, according to IHS Markit.

Nissan Motor Co. was among the global players eyeing a piece of the expanding pie. It was so bullish on India that it revived the defunct Datsun brand partly as an entry point to country.

But Datsun sales have fared worse than the market this year, plunging 61 percent to a paltry 1,132 vehicles in June. Now, as part of a wider worldwide restructuring at the Japanese carmaker, Nissan plans to cut 1,710 jobs in India by the end of March.

From April-July, passenger vehicle sales in India tumbled 22 percent, prompting the manufacturers association’s president, Rajan Wadhera, to call last month for a government-backed cash-for-clunkers program.

Without such incentives, IHS forecasts India sales will fall 10.5 percent this year. But even with the help, Gupta sees volume declining as much as 7.5 percent.

“There is a cocktail of reasons contributing to this drastic fall,” he said.

One factor is the government’s crackdown on nonbank financial companies, informal lenders that cater to risky borrowers. This has created a liquidity crunch that pinches demand.

Meanwhile, stepped-up safety and emissions regulations have made cars more expensive, further curbing consumer sentiment. Vehicle prices have climbed 10 to 13 percent in the past year, reckons Ammar Master, senior manager of India forecasting at LMC Automotive.

Exacerbating the situation is a lackluster Indian economy. Economic growth slowed to a seven-year low of 5 percent from April through June, the government announced last month.

Layoffs have mostly targeted contract workers, analysts say. They can be let go and rehired more easily than regular workers, in sync with the ebb and flow of demand. Bellsonica Auto Component India, an auto supplier part-owned by Maruti Suzuki, shed 350 jobs, Reuters said.

Be the first to comment

Leave a Reply

Your email address will not be published.