Auto industry growth stalls

Auto Industry in 2018 has gone through a bumpy ride due to various reasons such as higher ownership cost of vehicle owing to an increase in insurance cost and higher fuel prices. Also, on the demand front, the industry witnessed a setback and even in festive seasons, auto sales were muted as automakers failed to lure customers with heavy discounts.

In the case of the market leader Maruti, the average discount for a vehicle was at around Rs. 24,500 which was last experienced in 2013. In December, two-wheeler market leader Hero Moto Corp reported dismal performance with 4 per cent yoy decline in its volume. But on other hand, Bajaj Auto reported strong volume growth of nearly 31 per cent 

It seems that the liquidity issue faced by NBFCs have also hit the auto sector as major buyers are dependent on finance for buying a vehicle. But at the start of 2019, inventory levels for passenger and commercial vehicle have normalised as inventory days were at around 35-40 days. However, two-wheeler segment is still struggling with high inventory levels of around 55-60.

Below are the stock performance of major auto stocks during the calendar year 2018.


Presently, the oil prices have corrected and the government and the central bank is seriously looking to normalising the liquidity issue. Going forward, reducing ownership cost pressure would also likely help in easing demand pressure. The government’s emphasis on increasing rural income should also aid in boosting demand for tractors and two-wheelers.