Starting with a bang with 108 product launches and unveilings at the biennial Auto Expo, auto industry, was in a position to cruize ahead but major bumps like diesel ban in Delhi NCR region and demonetisation thwarted wish for a third consecutive year of growth. Going ahead in 2017 several challenges like stringent safety norms, GST regime and leapfrogging to BS VI emission norms from 2020 from the current BS IV, will confront auto industry.

“looking at pollution and congestion we will see more regulatory uncertainty and knee- jerk reaction from regulators in 2017 as well. Other clear trend we might see will be promotion of fuel efficient and alternate flue vehicles as well as phasing out of old vehicles to address rising pollutions,” opined Price Waterhouse Partner and auto expert Abdul Majeed

   Ordeal for auto industry satarted with ban on diesel cars and SUVs with big engines of 2,000cc and above in Delhi-NCR for eight long months on envirionmental concerns and carmakers like Mahindra and Mahindra, Tata Motors, Mercedes-Benz, Audi suffering the most. As per SIAM, industry body of auto makers, industry suffered a revenue loss of Rs 4,000 crore due to ban, which was lifted only in August.

While industry was fighting this, it was asked to get ready for leapfrogging to BS VI emission norms from 2020 from the current BS IV, three years earlier than they had been envisaged and then came in Government’s stringent stringent safety norms as per which all the new car models will have to pass a mandatory crash test  from October 1, 2017.

Despite all these issues, overall passenger car segment reflected the healthy growth of around 10 per cent on the back of fantastic utility vehicle segment growth with new launches, and utility segment grew by whooping over 60 per cent in last eight months in this fiscal year. Small car segment  saw some excitement with new launches from other than dominant players.  

On commercial vehicle side medium and commercial vehicle segment grew by about 20 per cent in the month of April and May 2016. From July 2016 onwards baring Oct 2016 the growth has been negative, overall growth from April 2016 to Nov 2016 in this segment is flat.  light commercial vehicle posted a healthy growth in double digit expect Nov 2016 and this segment grew overall by 8 per cent in the last eight months in this fiscal year. 

On the back of good growth in the rural economy, two-wheeler segment grew also well including motorcycle segment except Nov 2016. Scooter segments grew by 20 per cent and motor cycle grew by 8 per cent in the last eight months this fiscal year.

“2016 was a turning point for Indian automotive industry as we saw signs of a sustainable revival in demand for the first time in five years.  The positive sentiment created by the Modi Government’s business like approach to running the Government has been a shot in the arm for the industry,” said  an auto component company Varroc’s Managing Director Tarang Jain.

But sudden announcement of demonetisation of old Rs 500 and Rs 1,000 notes brought auto sales to a screeching halt.  While passenger vehicle sales in the country grew by 1.82 per cent in November, the lowest rate since February this year, sales of two-wheelers fell by almost 6 per cent, and commercial vehicle sales were down close to 12 per cent, as per the data by Society of Indian Automobile Manufacturers (SIAM). The total vehicle sales across categories saw a decline of 5.48 per cent at 15.63 lakh units during the month. It was the steepest decline in 43 months.

“Demonetisation has made customers sentiment slightly negative especially towards vehicle purchases especially two-wheelers, bigger SUV’s, luxury vehicle etc and this trend will continue in the first quarter of 2017. The demand in these segment will take time to normalize. The first quarter in 2017 will be the quite challenging one for Indian automotive industry,” said Majeed 

“If there is some good measures in the upcoming Budget such as lower taxes which will improve customer sentiments, demand will slowly come back to normal in the next fiscal year towards the second half,” Majeed added.

The domestic two wheeler industry reported a growth of 17 per cent during the fiscal year so far. “Projections expect the two-wheeler industry to witness steady growth in 2017. ,” said TVS Motor Company President & Chief Executive Officer KN Radhakrishnan.

“We expect future growth to come from premium segment of motorcycles and commuter segment will be occupied by scooters.  With right policy initiatives, strong consumer sentiment and a conducive manufacturing environment, the Indian automobile sector will continue to contribute significantly to the overall economic success,” opined Radhakrishnan.

There might be short term setback for the auto industry but long term story is intact and experts and stakeholders hope for a better 2017.

“The announcement of various initiatives such as Make in India and Skill India, besides the announcement of GST implementation in April 2017 will continue to boost market sentiments in the medium and long term. It remains to be seen how long the cash crunch due to the demonetization will continue, however the long term outlook continues to be positive,”  opined  Jain.

“Medium and heavy commercial vehicle might do well considering the BS IV norms applicable effective from April 2017 and customer might pre-book to take advantage of the lower cost for BS III which is significant one in the range of Rs 150,000 to Rs 200,000,” Majeed added.