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India is a land of automobile industry, variety of domestic and international giants are packed under perfect competition, you will be able to find all sorts of vehicle depending on your preference, the market has considered all different types of consumer pattern and have launched different sorts of products, starting from small sized that is compact cars, to full size passenger vehicles. The giants are not only anticipating in private sorts of vehicles but also in public vehicles .
In such an intense sector, there are lots of factors affecting. And the biggest one can think of is "COVID" crisis, where consumers are looking propensity to purchase is less than propensity to save. And also with new budget coming into action, new norms the industry is deeply affected with some highs and lows.
HOW "COVID" IS AFFECTING THE INDUSTRY ?
"COVID-19" is one of the event where industry is totally dependent on forecasting it's really difficult to understand their business environment and make decisions, but apart from forecasts there are several other reasons which is pushing industry in a "dark corner" .
Dividing the effect of crisis into sub heads you will see:
Failure of Forecasts:-
By the failure we mean planning of giants to yield surplus through their sales, a company will earn good sales only if it's market share is good, in the case of new company one must really launch product lines which attracts customers and acquire market share, for this all the giants plans to launch new product atleast in a financial quarter , this product is meant to specifically attract target audience. But in times of crisis there are lack of new options. None of the companies are looking to launch their new products soon as people will look to save over spending and due to such situation companies don't want to spend their budget for new launches when they are expecting less sales. For making this understand we will explain through example, let's consider "C1" is a company which is a direct competitor of "C2" in the example we are assuming both the companies are new to market. Let's say both launched their products in previous financial year, for "C1" it was a success and for "C2" it was not so good. "C1" sales were low, for earning surplus to stay in competition they decided to launch new product line in the year 2020 and then whole world is suffering from crisis and people are looking to save over spending, hence "C1" couldn't launch their new product and forcefully they need to continue with their old product which are not in public demand. This is how a company can get effected by crisis.
Depreciation of foreign exchange
Indian rupee value have fallen considerably in pandemic due to push back in economy, hence making imports more expensive. All the companies directly importing their finished products from overseas may not see demand for their products as price will automatically rise up, and with increase in custom duties by 15% the cost will increase significantly .
Budget 2021
The budget 2021 stated the increase in custom duties, and also increase in few parts, there are certain types of parts which are not available in domestic region which has to be imported, therefore custom duty will be charged and increase in tax will automatically effect all the companies manufacturing their products in domestic region, with new government norms(BS- VI) the makers have increased their prices upto
rupees 30000 per product.
INCREASE IN FUEL PRICES
There is a significant increase in prices of fuel. Petrol now costs of over rupees 100 per litre which increases average running cost of consumer.
Which sub sector will see growth ?
2 wheeler sector
There may be increase in sales of dual wheel vehicles as it's price is much more convenient and during pandemic where out of town travel has seen a fall, two wheelers are best option for intra city travel, people do prefer them as they can adjust in worst traffic conditions .
Startups
There are many start-ups who have stepped forward to develop their products within domestic territory, with high government funding we can see growth of many automobile startups.
"EV" sector
Although there are not many options available under this sector, but there are all types of options available, from low priced to high priced depending upon customer preference. We might not see increase in sales of electric cars but electric 2 - wheelers will see a growth, as they offer much higher range and speed, with futuristic designs. These are best for people travelling within their city.
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