1 min read.Updated: 05 Feb 2019, 10:26 AM ISTLivemint
Cyclical headwinds are particularly strong in passenger cars, heavy commercial vehicles and tractors, where the base is also very high
Technological changes and liquidity issues among non-banking financial companies that were active channels of auto financing were additional headwinds
Hopes that January could see a revival in auto sales have crashed. The chart alongside shows that the trend of weak sales has continued in January, on the back of a dull festive season. FY19 year-to-date volume growth is in double-digits and looks decent, but the pace of growth is decelerating. A Jefferies India Pvt. Ltd report says that the upcycle seen in FY18 is showing signs of fatigue.
While budgetary sops to increase disposable income in rural and mid-income segments could drive demand for some segments such as two-wheelers, other factors need to ease, too. For instance, cost of ownership has risen with a higher insurance burden, and the income boost alone may not be sufficient to offset this. Technological changes and liquidity issues among non-banking financial companies that were active channels of auto financing were additional headwinds. Consequently, consumers have been deferring purchases.