The Indian Auto Industry

News about the negative growth of Indian Auto Industry is making rounds and fuel to fire has been provided by the 81 year veteran Mr. Bajaj too.  The economists as well as media houses are repeatedly covering the topic in the light of the GOI vision of "India being $ 5 trillion economy by 2024". Indeed the trends are negative for the Auto Industry, but did anyone relook at the reasons for this negative trend?

Things with respect to the Auto prices and maintenance have not been making much sense.  On an average if we calculate the per month cost of owning a four wheeler, we would drive at following breakdown:-

Assumptions - Car Cost - Rs. 500,000; Interest Rate - 9%; Loan Term - 5 years; Avg Distance traveled per day - 100kms; Avg Fuel Cost/ltr - Rs. 77

1. Monthly EMI for the Car Loan - Rs. 10,380
2. Avg Monthly Fuel Cost - Rs. 11,550
3. Car insurance premium - Rs. 10,000 (Yearly approximated)
4. Yearly Maintenance - Rs. 25,000 (Considering various conditions of traffic and weather)
5. Total Yearly expenditure to maintain a car - Rs. 298,160
6. Monthly expenditure - Rs. 24,847 or Rs. 833/day

Apart from the major heads mentioned above, many housing societies in many cities charge separate for Covered / Street parking and that certainly adds up to the overall cost of owning a four wheeler. Now, with the availability of Ola's and Uber's in various cities, if the cost of this transit per day is less than Rs. 833/day, why would anyone go ahead and buy a Car or an SUV? It would certainly not make sense to do that specifically if he buyer is NOT getting any value added perks emanating from the "Innovation" by the manufacturer.  This highlights the another GAP that's hitting the Indian Auto Industry - Lack of Innovation!!

If we look around in the Indian Auto Industry, the would find that the Indian Auto Industry has nothing new to offer to its customers.  Except for the change in external look and feel of the vehicles, most of the times we don't find any new feature that would stand out for a Car. Indian Auto Industry basically Fails to work on the Aesthetics of Auto Engineering and most of the models available use legacy technologies rather than anything new.  While we see that the world is moving towards Electric Cars featuring Autonomous Driving or Cognitive Intelligence for Collision Avoidance, we seldom see any such initiative with Indian Auto Industry.  India is Still waiting for TESLA to be launched in India (expected in 2020) while another electric car has been introduced by Kia (reportedly blasted during charging). The first of few models (4) by Tata Motor would laugh in 2021, while the Government is eyeing more Electric Vehicles to be plying on the roads of India to reduce carbon footprint of India as well as reduce the reliance of the country on  Petroleum products.  

So, going by the current aspects of both Economics (Household Budget) as well as Technology (preference of car ownership) I do not see the Auto Industry coming out of this slowdown unless there is a radical innovation pumped in and the average cost of ownership is Brough down drastically.  It is quite visible that the Cost of plying a Car / SUV for meagre 3000 kms/month is higher than the cost of buying that Car/SUV; certainly that is one of the deterrents for the buyer and needs attention and focus of Auto Manufacturer.  Government on the other side must focus on the Development of Infrastructure that would help them increase usage of Electric Vehicles and for that they may go in for Public-Private model; for only Private model would increase "For Profit" charge points for Electric Vehicles and diminish the benefits for the consumer.