Bumper on the Road or an Unsurmountable Wall?

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Summarizing the country’s autocrisis, a SIAM Report said, “The automakers are in a situation where their cost is more than revenue and in short term, de-growth may intensify further.” The loss of 3.50 lakh jobs in the industry and the sharp fall in the sales of passenger cars in July 2019 by almost 35% YoY, speaks volumes about the dire state that the sector is in.

A lot of factors are responsible for this including low demand due to lack of credit, introduction of BS-VI norms, reduction in rental costs of vehicles, overproduction of inventory by the automakers, being some prominent causes among others.

“They (Automakers) roll the dice sans any logic,” said Rajiv Bajaj in an interview. “The result is a matter of luck-by-chance. We don’t waste time or money on forecasts. We simply expand capacity once we’re close to full.”

Government initiatives have proven to help historically, and a similar intervention is expected of the current administration as well in the form of a GST rate cut and other measures to spur demand.

It remains to be seen if such a cut will materialize and if the auto sector will be able to shed their weights and emerge leaner from the crisis.

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