Automotive Industry in 10 Years [Advances & Challenges]

The classic Indian films before the 1980s will give you a glimpse of majorly one car that is the ambassador manufactured by Hindustan Motors. But scenario shifted in the latter years. With Car liberalization in the 1980s and the joint venture between Maruti and Suzuki, Indian automotive industry started gaining new shape, as one can see today. Post Liberalization, the foreign car manufacturers gained access to penetrate the vast Indian user base. According to a study conducted by India Brand Equity Foundation, “India became the fourth largest auto market in 2018 with sales increasing 8.3 per cent year-on-year to 3.99 million units.”

The evolution of the automotive industry does not only indicate the variety of cars on Indian roads, but also the emergence of the overall economic development of the country. With the Motor Vehicles Act of 1988, vehicle insurance became a mandatory affair. Each and every vehicle must have vehicle insurance to function on Indian roads. The more manufacturing companies are entering the Indian market, the more job opportunities are being outsourced. 

Indian users are getting more and more options before buying their vehicles, quite contrary to the one and only option of Hindustan Motors. In 1998, when my father thought of owning a car, Maruti Suzuki 800 was the unanimous decision of the whole family. In 2015, he exchanged it and bought a new one. But, this time reaching a decision was not that easy. The first question was “which car to buy?”. For a family of 4, a hatchback was enough, previously the options were Maruti 800 and Zen. Now, there is Hyundai I20, I10, Datsun Go, Chevrolet Beat, Maruti Suzuki Wagon R, Tata Indica, Volkswagen Beetle, Polo, Ford Figo, and the list will continue. 

Great Recession of 2007-2009 affected the world economy; the automotive sector faced a major setback during this period. In 2008, Tata motors introduced Tata Nano and hoped that the low manufacturing cost would attract more customers. In 2009, India became the second-largest manufacturer of automobiles in the world, with annual sales exceeding 8.5 million, as per the report of Times of India. As per the report of 2010, Maruti Suzuki was the largest manufacturer of automobiles in India, with domestic demand shooting up. But, with the closing of the decade, Tata Motors is topping the chart, while Maruti Suzuki is the first runner up. 

Let us see what other major drifts happened in the automotive sector in this decade! 

 Increasing Demand and Increasing Sales

The decade has seen rising demand of the Indian user base, and consequently, the sales also reached the sky. To maintain harmony between the supply and demand chains, the car manufacturing companies are working hard to bring new and better options for the customers. Previously, our fathers could not think of owning a car after working for two years. Now, after working for a year, people are buying scooters and hatchbacks for the daily commute. Two questions arise here, why and how. Not only personal vehicles but also the emerging ride-sharing services like Ola, Uber and Shuttl boost the increase in sales.

Since the economic liberalization in India, the country has observed relaxed restrictions and increasing competitiveness in the automotive sector. The number of public vehicles, pool cars shoots up the sales as well. In Bangalore, which is the “Silicon Valley of India”, traffic congestions are daily hiccups, and you will find that 7 out of 10 cars are personal vehicles and ride-sharing services. At the break of the decade, the commute of Kolkata was dependant on yellow ambassadors, but now you will find them hard. The market is captured by the ride-sharing services, and the vehicles are Maruti Suzuki Swift Dzire, Hyundai I10, Chevrolet beat, SUV etc. People prefer the air-conditioned cabs over the traditional “yellow taxi”. 

Change In Fuel Prices Impacting Automotive Industry

Fuel inflation has been the cause of distress among the mass. Before 2017, fuel prices were revised fortnightly, but since 2017, it’s revised daily. The graph marking the changes in petrol and diesel prices is always rising higher. In the year 1990, the rate of petrol in Delhi was Rs 9.84, in 2000 it was Rs 26.07, in 2010 it was Rs 47.93, and in 2020 it is Rs 74.82. The fuel prices are noted every minute to check even the slightest variation. There are various reasons which lead to continuous fuel inflation. The change in the price of crude oil in the international market directly affects the rates in the domestic market. Increasing demand and low production rates and any political unrest may be the reason behind it.

The increasing demand, tax rates, rupee to dollar exchange rate and logistics contribute majorly to fuel inflation. Due to the hike in rates, customers are postponing and reconsidering their decision of buying vehicles. According to an auto expert of Pricewaterhouse-Coopers, even a 5-8% industry expansion must be taken positively. The rural economy is hesitant to purchase two-wheelers due to this inflation, and this has adversely affected the sales as well. As per a study conducted by Reserve Bank of India in 2019, “Fuel price movement affects automobile sales negatively whereas credit appears to have no significant impact. Based on our analysis, we find that the recent slowdown can be explained by relatively high fuel prices” 

Technological Innovation in Automotive Industry

In 1998, there was no concept of ac in the car, but now cars without ac do not exist. This decade has seen some major updates in terms of technology. GPS, Bluetooth, Radio, CD/DVD players are installed in cars, the cars not only run in petrol and diesel, but also hydrogen, electricity, and solar powers. Driverless cars have also come to existence. It seems like all the futuristic movies are becoming real. Human imagination knows no bounds, quite similar to the reach of technological advances.

The arrival of this decade added some driver-assist features in the car, like headlamp high beam control, blind-spot warning and cross-traffic alarms, lane departure warnings, remote-controlled features to lock the vehicles, fuel checking apps etc. In 2014, Elon Musk came up with the technology of the Autopilot driver assistance system via which a car can be driven on the lanes and even changing the direction. Google’s self-driving car, Waymo, is released in the market in 2020; it completed a successful ride in Texas in 2015 with a blind man sitting in the driver’s seat. 

Impact of GST and Demonetization

On 7th November 2016, the Government of India announced that 2000 rupees notes and 500 rupees notes would be invalid from midnight i.e 8th November 2016. The mammoth step of overnight banning the two most important notes of Indian currency caused a great set back in the automotive sector. The introduction of Goods and Service Tax (GST) in 2017 had a major impact on the Indian automotive sector. The automotive sector demands the reduction of GST from 28% to 18%.

Due to GST, the prices of car are increasing, thus repelling the customers to a certain extent. In this scenario, the demand for second hand or used cars is increasing. There are several companies, sites and apps where one can get the details about used cars, and car insurance. Demonetization has hit the automotive sector badly. The rural economy was most adversely affected, leading to a sharp decline in the sales of two-wheelers. The user base was not much confident in investing in the automotive sector. But with the closing of the decade, the situation is much more stable. The automotive sector is again pacing up accelerating the growth of the Indian economy. 

Conclusion

The movies like Time Machine: Back to the Future and Transformers show us some futuristic cars, and tempt the gadget obsession of the modern era. The automotive industry is a highly profitable and age-old business. It has created thousands of job opportunities in this decade. The industry is in constant search of expert professionals who have in-depth knowledge in the sector. Tech-enabled and niche skilled employable resources can bear the torch for the future automobile sector. 

The automotive industry, like any other industry, has and is undergoing major drifts in recent years, and the future holds great possibilities as well. The decade has created a historical tapestry on the automotive industry. With the increasing demand and fast technological advances, the automotive industry will not leave the centre stage anytime soon. The growth trajectory of the automotive sector cannot be depicted in one post. 

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