Automobile Industry Is Riding On A Roller Coaster

by Naresh Sherawat Our group is a seo expert.

The slowdown of Indian economy resulting due to sharp decline in rupee and rising inflation along with other various factors have made the situation worse for almost all sectors. But this adverse situation particular has hit the automobile sector very hard and now this sector is finding it very hard to recoup from this situation. The reasons for their worry are plenty as businesses associated with this sector is linked with a number of things. And some of the most important aspects that are attached to it include demand for vehicles (commercial and private); value of currency; and point of inflation etc.

Demand For Vehicles

whether commercial or private the demand for both categories of vehicles is going down. The direct impact of this downfall has come from rising inflation figures which has been in double digits for more than a year now and the second part of it relates to the fall in the value of rupee which has gone down to Rs. 61 against the 1 US Dollar. And whenever any of the two things go down demand for vehicles also falls. The reason behind this correlation is crystal clear, as when inflation goes up the prices of various commodities also increase and when on the other hand the value of rupee is on decline phase, the purchasing power of a common man sharply decrease which directly affects on its savings. And it is these savings through which people think of buying any vehicle or other commodity of large sum. So, in the situation he gets afraid to invest heavy amount in luxury items like bike, scooter, and car etc. and thus the demand for vehicle decreases. When this situation occurs even people are wary of buying vehicles on loan as they fear that it will be hard to repay monthly installments.

Tax Relief for Auto Sector

Nevertheless, to support automobile sector government of India has done its bit by cutting down the tax up to three percent. And now the tax for automobile sector has come down to 27 percent. It was last fiscal year that our Finance Minister had raised the tax to 30 percent, so in a way to give some respite the government has replaced the tax slab that was prevalent in yesteryears. With this news many in the automobile sector has taken a deep breath, but some others feel that government should cut down some 5% more of tax as they say with sales going down the profit from the volume of sale doesn’t leave enough for Auto Parts Manufacturers, suppliers, and retailers. This move from the government of India has welcomed by most of the manufactures of vehicle including Tata motors, Hyundai, Maruti Suzuki, Honda, Ford and others.

Downgrading Of Automobile Sector

With recent decline in the automobile sector many credit rating agencies have come to down to measure the ground situation of this sector. But these agencies and surveys do not agree with the experts in Industry. The eminent Automobile Exporters India is optimistic that this situation is soon going to get solved and on the other hand, these agencies with their comprehensive studies of the field suggest that this problem will be there for at least six years. And on the basis of these findings credit rating agencies have marked automobile sector in red.

By putting them under the category of red, these agencies have made it clear for investors to be wary of investing in the automobile stocks and other related stocks. However, the conclusion from these agencies is not a gospel truth as with economic reforms these things can be better in coming years.

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