Crisis, Fuel Prices, And Infrastructure Put The Brakes On The Indian Automotive Industry

After years of constant acceleration, the Indian automobile industry has abruptly hit the brakes. Sales have decreased for the second month in a row; the sharp august decline (-19% with respects to the previous year) has continued into September (-5%). According to the SIAM (Society of Indian Automobile Manufacturers), the predicted sales growth for the 2012-2013 fiscal year of 9-11% will be closer to 1-3%. It is a cry of pain and alarm that serves justice to optimistic and perhaps superficial predictions. The reasons are complex, but the new factor is a combination of negative factors facing a market that is anything but saturated. The automotive industry relies on the health of the economy as a whole, and  India’s growth withered in 2012 and its GDP is set to grow only 4.9% according to recent IMF reports, well below the rates to which India is accustomed. Another factor is the rising cost of fuel, caused by the government’s decisions to reduce public spending by cutting subsidies. Recent union disputes, which saw some fierce moments, have also slowed production. Another consideration is the very slow sales of the Tata Nano – an ultra low cost vehicle that was intended to motorize the country – and the age-old situation of the road infrastructure. Viability of automobile transportation is conditioned by the lack of roads, highways, bridges, and high-speed corridors for passengers and goods. Traffic in the major cities is heavily congested, in part due to the high concentration of motor vehicles. The New Delhi High Court recently upheld the legality of the BRT (Bus Rapid Transit), which reserves special lanes for public transportation. Private automobile ownership in the capital has grown rapidly and haphazardly, more than doubling from 3.3 million in 2000 to 7 million in 2011. The pessimistic predictions likely reflect a growth crisis. India reached a position of excellence in a relatively short time, positioning it among the world’s industrial giants. Its ascent in recent years has been second on to China’s. It is now the world’s 6^th producer of automobiles, with 4 million built per year, and it has surpassed the traditional leaders like France, Italy, Spain, and Brazil. The biggest multinational corporations are present in India, almost always in a joint venture. India exports have increased and the destinations have been extended into the demanding European markets, in addition to Africa and the sub-continent. This achievement has now hit a roadblock in the economic trend. Once again the solution to the problem lies in New Delhi, in an executive that should work to lighten traffic, rather than suffer it.