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India’s Automobile Industry Slowdown Continues

India's Auto Industry Slowdown

Despite improvement in economic and business activities, the country’s automobile industry is still going through a recession. This region will take a long time to gain momentum.

A research by the Society of Indian Automobile Manufacturers (SIAM) states that the automobile industry in India is going through a long-term structural slowdown as all major vehicle categories saw a decline in the compound annual growth rate (CAGR) during the last three decades.

The automobile industry was going through a difficult situation even before the Covid-19 crisis and last year the epidemic derailed the entire region. Therefore, the epidemic is not the only reason for the slowdown of the automobile sector but it is facing deep structural issues. A total of 27.7 lakh passenger vehicles were sold during 2019-20, a four-year low.

According to the research, during the last three decades, all categories including passenger vehicles, commercial vehicles, three-wheelers and two-wheelers recorded a steady decline in annual growth rate. The compound annual growth rate of the domestic passenger vehicle industry was 12.6 per cent during 1989–90 and 1999–2000.

However, the figure fell to 10.3 per cent between the decade 1999–2000 and 2009–10. In the last decade, the growth rate further reduced to 3.6 per cent.

At the same time, the situation has worsened during the last five years. The CAGR of the domestic passenger vehicle industry was 12.9 per cent during 2004-05 to 2009-10, which declined to 5.9 per cent between 2009-10 and 2014-15. Between 2014-15 and 2019-20, it further reduced to just 1.3 per cent.

SIAM Director-General Rajesh Menon says the decline in figures is a sign of a long-term structural slowdown in the domestic automobile industry. He said that along with passenger vehicles, the CAGR of two-wheelers has also come down.

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