India is a country with different beliefs, emotions, and festivals to celebrate. India has the highest number of festivals across the globe. Every festival has its own importance but one thing is common across India i.e. buying something new in the festive season. India witnesses a lot of festive offers every year, especially during Diwali time. In this time of the year, companies are lined up with their product to achieve the highest sales and profit for the complete year. Few months near to Diwali are seen as an opportunity for Indian automotive industry. Approximately 30% of the total car sales happens during festive season in India. In 2018, India witnessed a drop in vehicle sales during festive season, the trend continued after festive season as well. Increase in cost of insurance, rise in interest rate and fuel prices have collectively impacted the sales of vehicles during same time. These factors in total increases the total vehicle ownership cost which made the end user reluctant in making a purchase during the festive season. . Thus the consumer has now shifted their vehicle ownership dream to 2019 or 2020 festive season. The cost of insurance with respect to confusion over tenure and coverage amount has made a significant impact on vehicle sales.
The Government of India has recently announced the incentive on purchase of electric vehicle under the Fame (Fater Adoption and manufacturing of electric vehicle) 2 program. This initiative has taken the precedence on vehicle sales. The automakers have been forced to negate their targets and forecast for vehicle sales. This further showcases that the automakers are worried about the monthly sales for the next few months i.e. from April 2019 to June 2019. The automakers realize the sales once the vehicle has been procured by the dealer. Furthermore, less sales left dealers with unsold stock which hampers their liquidity and profitability. So now the dealers are not ready to accept new stock from the automakers, this further put pressure on the automaker to balance their production. For next few months, realization of liquidation is the major goal for passenger vehicle dealers.
By mid of 2020, the Government of India will impose BS6 emission norm, this will further increase the price of vehicle by approximately 12 to 15% and reduce the profit margin for automakers. Thus, customers under a conservative price segment will delay the purchase and wait for prices to settle down. On the other hand, commercial vehicle sales are expected to increase before the new emission norm is applied in the market, so the commercial vehicle market will witness the spark by the end of 2019 by early 2020.
Indian automotive industry is expected to witness various effects in next two years. On contrary, implying new safety regulation and emissions laws will bring industry a step closer to global standards. The prices will play a crucial role in achieving vehicle sales target. Thus, automakers should come with a new strategy to offer their vehicle with best deal. Leasing strategy can proves to be a positive option to increase passenger vehicle sales and subdue the effect of other factors which contribute to total vehicle ownership.