Auto sector going through long-term structural slowdown: SIAM

A study by SIAM shows that the pandemic is not the only reason for the auto sector slowdown, which is facing deeper structural issues that need attention.

New Delhi: Automobile industry in India is going through a long-term structural slowdown as the compound annual growth rate (CAGR) across all major vehicle segments has witnessed a decline over the last three decades, as per industry body SIAM.

The auto industry has been facing headwinds even before the COVID-19 pandemic derailed the entire sector last year, a research conducted by the Society of Indian Automobile Manufacturers (SIAM) has revealed.

The study clearly shows that the pandemic is not the only reason for the auto sector slowdown, which is facing deeper structural issues that need attention, the industry body noted.

According to the research, which focused on industry growth rates till March 2020, compounded annual growth rates of all segments, including passenger vehicles, commercial vehicles, three-wheelers and two-wheelers have witnessed a continuous drop over the last three decades.

CAGR of the domestic passenger vehicle industry stood at 12.6 per cent between 1989-90 and 1999-2000. It, however, dropped to 10.3 per cent between 1999-2000 and 2009-10 decade, the research data showed.

The growth rate further dropped to 3.6 per cent in the last decade.

The research further pointed out that contraction in the domestic passenger vehicle segment has been much steeper in the last five years.

From a CAGR of 12.9 per cent between 2004-05 and 2009-10, it came down to 5.9 per cent in the 2009-10 to 2014-15 period.

However, in the last five-year period, between 2014-15 and 2019-20, the CAGR of the passenger vehicle segment has dropped to just 1.3 per cent.

"The numbers show a clear long-term structural slowdown in the Indian automobile market across segments even before COVID pandemic began," SIAM Director General Rajesh Menon noted when contacted over the matter.

For instance, the passenger vehicle market's 10-year CAGR over the decade FY2000 to FY2010 stood at 10.3 per cent which dipped to 3.6 per cent in the decade FY2010 to FY2020, he added.

In the two-wheeler segment, the CAGR has dropped from 9.8 per cent in 1999-2000 to 2009-10 period, to 6.4 per cent in 2009-10 to 2019-20, data showed.

Similarly, the research showed a drastic drop in annual growth rate in the commercial vehicle segment. From a CAGR of 12.7 per cent in 1999-2000 to FY 2009-10, it has come down to just 3 per cent in the last decade.

Further, three-wheeler sales have dropped from a CAGR of 9.8 per cent in the 1999-2000 to 2009-10 period, to just 3.8 per cent in the last ten years.

As per the FY20 statistics, passenger vehicle sales at 27.7 lakh units were the lowest in four years, SIAM data revealed.

Similarly, commercial vehicle sales at 7.2 lakh units were the lowest in three years, two-wheeler sales at 1.74 crore units were the lowest in three years and three-wheeler sales were at lowest in two years at 6.4 lakh units.

(PTI)