Despite headwinds, demand for automobiles is expected to grow in the next few months owing to enhanced economic activities, including spending on infrastructure and rural development, said the Society of Indian Automobile Manufacturers (SIAM) on the outlook for the sector.

“As we have an election next year, the Union Budget is also expected to have measures to ensure flow funds in the hands of people which should help with additional demand generation,” said Sugato Sen, deputy director general, SIAM.

He said since the financial sector had been a dampener in the last few months, the authorities must “take measures to ensure flow of funds in the financial system is restored so that the sector can play its role to support the growth of the industry and economy.”

Regulatory issues

He said the Indian automobile industry will move to Bharat Stage VI from April 2020 and several other regulatory compliance issues would have to be fulfilled in the next one year.

“The industry has met and overcome all the challenges in the past and will do so in future also,” he added.

As per SIAM data, commercial vehicle, three-wheeler and two-wheeler segments in the period between April and November 2018 reported double digit growth at 32%, 25% and 11% respectively. But the passenger vehicle industry grew moderately at 5% during that period.

“Demand in the passenger vehicles segment has been subdued since past few months, especially the festive session was not very positive and retail sales dipped significantly,” Mr. Sen said.

He said the first setback was due to the Kerala floods and subsequently, several factors influenced the decline in demand, including rise in interest rates and fuel prices, insurance cost hike and NBFC crisis leading to liquidity tightening.

“In commercial vehicles segment, legalising 25% overloading has impacted demand negatively both in the number of vehicles and tonnage, witnessed a sharp decline in last month’s sales,” he said.