Auto Industry Drives Into 2020 With Hope After A Forgettable 2019
Vehicles wait in line to be refueled with compressed natural gas (CNG) at an Indraprastha Gas Ltd. gas station in New Delhi, India. (Photographer: Prashanth Vishwanathan/Bloomberg)  

Auto Industry Drives Into 2020 With Hope After A Forgettable 2019

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Battered by an unprecedented slowdown, the Indian auto industry is now pinning hopes on the next financial year for a turnaround, banking on a host of new and upgraded models slated for launch in 2020.

The hopes are in line with expectations that the economy too would revive from an over-six-year low, drawing people back to the showrooms. Yet, the challenges of a transition to stricter Bharat Stage-VI emission norms and compliance with new safety norms persist in the sector.

The Auto Expo in February, too, is being seen as a launch pad for revival from the auto slowdown, which began during the festive season in 2018 and continues unabated till date. Such has been the impact of the slump that the industry is expecting to close 2019-20 with 13-17 percent lower wholesale dispatches.

The steep drop in sales has resulted in operational hardships for many companies and production plans had to be re-evaluated throughout the year. As many as 3.5 lakh people employed in the industry—including at dealerships and auto component makers—lost their jobs.

But industry body Society of Indian Automobile Manufacturers expects things to turnaround in 2020-21. "2020 will be an interesting year with BS-VI getting implemented and entirely new platforms being available in the market," SIAM President Rajan Wadhera told Press Trust of India.

"The Indian economy is expected to revive early next year, which along with the low base of last year and availability of newer models, should support growth in the auto sector," Wadhera said.

According to him, the sector is expected to witness an uptick in the second quarter of 2020-21, and the revival will be visible in the third quarter. "Implementation of BS-VI norms will mean clearing of all old inventory, building up new inventory and making available new BS-VI compliant vehicles in the market, which will give some upside to the production and sale," Wadhera said.

The stricter emission and safety norms, however, is expected to make vehicles 8-10 percent more expensive. That, the industry fears, can lead to further volume loss.

"To get respite from this additional cost pressure, SIAM has made subsmissions to the government to lower GST rate for vehicles to 18 percent from 28 percent and also introduce an incentive-based scrappage policy for vehicles," Wadhera said. Both these submissions, if implemented, will surely support quicker recovery for the auto sector, he added.

Wadhera's optimism is shared by Kenishi Ayukawa, managing director and chief executive officer at Maruti Suzuki India Ltd. But while he is "hopeful that 2020 will be a better year for us and industry”, “it is really tough to predict the turnaround". “The long term story for Indian automobile industry continues to be promising," he said.

Expressing similar views, Hyundai Motor India's MD and CEO SS Kim said, "Probably, after the BS-VI implementation, for a few months the customer will need time to understand the new norms and new situations. So, I would say demand will grow gradually from the second half of the next year."

Honda Cars India President and CEO Gaku Nakanishi said that it appears that the industry has already hit its bottom this year. "We are not sure of the speed of recovery yet but the situation will improve next fiscal. After market adjusts to BS-VI regime, we think that industry will gradually start recovering from next festive season," he said.

For Tata Motors, “investments towards BS-VI transition has been the single largest investment", MD and CEO Guenter Butschek said. “We are ready with our BS-VI transition plan and our new BS-VI products will start rolling out from January 2020.”

As for new vehicles set for launch in 2020, the Feb. 5-12 Auto Expo will provide a glimpse on the year ahead.

"The Auto Expo 2020 will be the launch pad for the revival of the auto industry, we feel," Wadhera said, adding the main attractions of the expo would be clean vehicles, keeping in mind the BS-VI norms, besides electric, hybrid and connected vehicles.

Tata Motors’ Nexon EV and MG Motors’ ZS EV are set to hit the roads soon, following the footsteps of Hyundai Kona that has already found takers.

In all, over 60 new launches and unveilings are expected at the expo. China's Great Wall Motor Company and First Automotive Works will make their debut at the biennial event, along with MG Motors India.

Maruti Suzuki, Hyundai India, Mahindra and Mahindra, Tata Motors and Kia Motors, Skoda and Volkswagen are also expected to participate in the event.

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