NEW DELHI - The red and white balloons taped onto the ceiling at this Renault showroom in Delhi belie the subdued mood that has set in here since the last few months. Sales of new cars at this showroom have fallen by around a quarter.
Fresh data released last week by the Society of Indian Automobile Manufacturers show the sale of passenger vehicles declined by 18.42 per cent in the April to June quarter this year, compared to the corresponding period last year. It was the sharpest decline since a 23.1 per cent drop in the third quarter of 2000-01.
India's GDP growth rate fell from 7.2 per cent for 2017-18 to 6.8 per cent in 2018-19. On the other hand, rising bad loans in the automobile sector, particularly from dealers forced to shut shop, have made banks unwilling to fund new businesses in the sector . Ms Hetal Gandhi, the director of Crisil Research, an analytics firm, said:"The average cost of owning a car went up by 7 per cent in the 2018-19 financial year compared to the preceding one. For two-wheelers, this figure went up by as much as 13 per cent in the same period."The Economic Times newspaper reported in May this year that an estimated 300 automobile retail outlets had shut down in the preceding two years, which led to around 3,000 people losing their jobs.
In an effort to revive the market, the industry has been asking for a reduction in the goods and services tax on vehicles from 28 to 18 per cent and a"cash for clunkers" policy that incentivises voluntary scrapping of old vehicles. But these did not figure in the government's Budget announced on July 5.