The impact of the current crackdown by the police on road safety violators as mandated by the Motor Vehicles (Amendment) Act, 2019 has rubbed off on the ongoing economic slowdown. Cumulatively, the $119 billion automobile industry in India supports 37 million people directly or indirectly and accounts for 7.1 per cent of the country’s GDP and 49 per cent of its manufacturing GDP. It is not surprising that the current downturn in the automobile sector has contributed in good measure to the economic recession. Sale of automobiles in India crashed by 23.5 per cent in August, the worst ever decline in a month on a year-on-year basis since the time industry body Society of Indian Automobile Manufacturers (SIAM) has been collating data from 1997-98. In August 2019, overall sales stood at 18,21,490 units against 23,82,436 units in the same month last year. In absolute volume terms, sales have also fallen on a month-on-month basis since May when 20,86,358 units were sold. Since December 2018, year-on-year monthly decline in sales has remained unabated. For the fiscal so far, overall sale of automobiles has declined by 15.9 percent at 97,32,040 units. Passenger vehicles are down 23.54 percent at 11,09,930 units, commercial vehicles down by 19 per cent at 317,061 units and two wheelers at 15,14,196 units, 14.85 per cent less than last year. Higher inventories, tight liquidity with banks as a fallout of the NBFC crisis and an overall sluggish economy and low consumer sentiment have combined to take a heavy toll on the automobile sales. Going by the current trend, any uptick in sales ahead of the festive season looks very unlikely now.
A strict enforcement of the amended MV Act that could involve collections of hefty road fines has forced some people to shun personal vehicles in favour of public transport. The law enforcing agencies have collected fines ranging from Rs 1000 to Rs 47,000 from traffic rule breakers on roads. A couple of days back a truck driver from Rajasthan was fined Rs 1.41 lakh in Delhi under the new traffic rules. He was held for overloading by the enforcement wing of the Delhi transport department. Such scary fines on offenders have forced people to think twice before they take out their personal automobiles until they have prepared the whole set of papers required under the law. The current difficulties and the cumbersome process to prepare all documents have discouraged many to turn to public transport rather than risking having to pay hefty penalties. Besides papers, the new Act has prohibitted couples to take their child along on the bike as the new law has made it unlawful to drive more than two people on bikes. People realise the futility of owning a motorcycle if they are not allowed to take their kids along. Roads these days look unusually thin and if this trend continues, the demand for motor cycles and four wheelers may drop further. Union Finance Minister Nirmala Sitharaman Tuesday said introduction of vehicle aggregators such as Ola and Uber has dented the automobile sales that have contributed to the current slump in the automobile sector and eventually the general slump. This is a passing phase and won’t last more than a couple of months. Nevertheless, the amended MV Act, in the short term, will delay the recovery in the automobile industry — a double whammy for the sector.