The speed of the country’s fastest growing automobile industry has been broken at some point. Due to the decline in domestic demand, sales of vehicles and especially passenger vehicles have reached the lowest level of 19 years. Finance Minister Nirmala Sitharaman recently said that now Ola, Uber services are cheap, especially young people are not wanting to buy cars. However, a research by the Reserve Bank of India (RBI) has revealed that the biggest reason for the decline in sales of cars is the continuous increase in the prices of petrol and diesel.
What RBI says
RBI has said in one of its research papers, ‘We found that at macro level, the change in fuel prices has had a negative impact on automobile sales, and there is no major impact of debt (difficulty in getting loan). Based on our analysis, we found that the recent lethargy can be better understood on the basis of high fuel prices.
Now taxi registrations fall
Well it is true that in the last few years, affordable taxi aggregator services like Ola, Uber have seen tremendous growth in many cities across the country. Due to the expansion of these services, taxi registration increased significantly in the first several years. But from the year 2016, taxi registrations started to fall partially, it could be because of the maturity in these services and the taxi supply has come full.
Since then, taxi registration accounts for about 6 percent of the total four wheeler market and the decline in car sales in the last two years is also partly due to this.
City taxi services have been popular in the metro cities of India even before, but there was a revolution of sorts in the year 2010, when Ola started an app based taxi service. After this, in 2013, the American company Uber also started a similar service in India.
According to data from the Society of Indian Automobile Manufacturers (SIAM), demand for passenger cars has dropped by about one-third in the last two years. The average annual growth in domestic sales of passenger cars in the last five years (FY 2013-14 to FY 2018-19) has been just seven per cent. The year 2017-18 has been an exception in this case, when there was a 14 percent increase in vehicle sales.
In May, 2019, there has been a decline of 26 percent in car sales. Not only this, in August total vehicle sales also fell by 23.55 percent.
Apart from this, following the BS-IV standard, sales of cars have also been hurt. BS-IV is in force from April 1, 2017 in the entire country and taking a big leap in it, BS-VI standard will be implemented from April 2020. To improve the environment in cities and towns of the country, BS i.e. Bharat Stage standard was implemented.