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India's automobile sector contributes significantly to the country's gross domestic product (GDP). It is one of the driving forces of the economy, contributing about 49% to the country’s manufacturing GDP(Gross Domestic Product) and 7.5% to its overall GDP in 2020. There has been declining production in the automobile sector caused by various reasons such as a crisis in liquidity position in the NBFC sector, weak consumer demand, people’s preference for electric vehicles, high road tax, etc. The automobile sector, being the employer to a 1.36million people in 2018 has put an adverse impact on the loss of jobs in the sector. Need-based measures should be undertaken by Govt. and monetary authority to set the automobile sector back on right track. The objective of the paper is to explore the factors responsible for the present downward trend in the automobile industry. of India, It tries to find out how the purchasing behavior of consumers is influenced by the changing scenario of the automobile industry . The study is based on secondary sources of data i.e., the Society of Indian Automobile Manufacturers., Indian Economic Survey, and Statista. The paper makes an attempt to give solutions for the revival of the automobile industry.

The objectives of the present study are toanalyze the causes behind the slowdown in Indian automobile industry. The purpose of this study is also to find out the reasons of slowdown and further to discuss about the solutions. 1.To discuss the trend of automobile production across the segments in India 2. To analyze the causes behind the slowdown of automobile sector in India 3. To suggest the need-based policy measures for the revival of the sector

A modest attempt has been made to review some of the literature relating to automobile sector.

Rastogi (2013) has analysed the impact of changing scenario of automobile sector, having influenced the purchasingbehavior of the customers. He has ascribed the reason for slowdown and has highlighted the scope of the automobile sector in future and solutions to cope with the new trends. The reasons for the huge decline in the sales turnover and profitability of automobile sector in 2019 are stated as inadequate loans, confusion around BS6 emissionstandards, UBER-OLA factor, proposal for replacement by electric vehicles by Philips & Jose(2020).However, the relative cost advantage in India has attracted increasing FDI from year to year basis under automobile route.

The factors such as an overall economic slowdown, liquidity issues, weak consumer demand, disruptive entry of new players are the prime factors impacting plant’s non-working days, employee wage cuts, retrenchments, delayed expansion plans and technology adoption which needs a stronger economic push from the government for the revival of the sector.(Kittu& Betsy ,2020). Auto Index as a proxy of automobile sector is passing through turbulent time because of the transition phase created by stringent regulatoryemission norms of Govt of India which has affected  automobile manufacturers cost of production, cost of sales, sales, and the bottom line.( Rama Krishna 2020) Effective Supply chain management will lead to more cost reduction in this segment and thus will lead to more profitability and  increasing competitiveness in global market and thereby leading to economic development of the country.(Sultana & Sinha,2017)

Azhagaiah. &Gounasegaran(2014) recognized India’s per capita real GDP growth as one of the key drivers of growth of Indian automobile industry. The issues relating to taxation, land acquisitions, labour reform and skill development for the automobile industry should be addressed by GOI by setting up Task Forces in future for the growth of automobile sector. Increased economic growth along with increase in income in the Indian economy had contributed towards increase in the trend of production and sales in the past, yet there is untapped potential demand in the sector for further penetration. Jimmy Corton&Gaddam (2017)

Pramod Kumar Patjoshi , 2020, examined the growth of segmentation-wise production and sales trends of the Automobile sector and also analyses the impact of the growth of automobile production on the performance of the Automobile sector in India from 2001-02 to 2018-19. The analysis of automobiles production found that, automobiles production was 5.32 million in 2001-02, which increased to 3.09 million in 2018-19 with an overall growth of 482%. This shows India has an emergent market prospective for automobiles due to an increase in demand in the recent past. The number of productions of Two Wheelers is highest than that of other segments, whereas the production of Commercial Vehicles is lowest for the entire study period. The Sales of Domestic automobiles were 5.25 million in 2001-02. It increased to 26.27 million in 2018-19 with an overall growth of 400.06%. This shows the automobile industry has performed extraordinarily over the span of 18 years. The correlation analysis found that Production of all four segments of automobiles is highly correlated with that of Sales of automobiles.

Conceptual Framework of Auto Industry

The following diagram shows the classification of automobile industry into four categories such as two-wheelers, passenger vehicles, commercial vehicles and three wheelers which are further classified into various categories.

The study period is from 2009 till 2020. The histogram and pie chart are used to analyse the trend as well as market share of different auto segments. Production and Sales data are analyzed to understand the trend and impact on growth. The factors responsible for slowdown are analyzed by taking into consideration on economic, social and political factors.Secondary data sources were used for collecting information necessary for this study. The major sources of data are Indian Economic Survey, Society of Indian Automotive Manufacturers (SIAM).and several journals, research papers, websites, including the official websites of both the companies and other agencies, Annual reports, etc have been referred for various information and data.

Data Analysis & Interpretation:
Table-1
Trends in automobile Production ( No of units)

Source: Society of Indian Automotive Manufacture
It is revealed from the above table-1 that the growth of production has been highly fluctuating on a year-to-year basis since 2009. However, production declined in the year 2018-19 due to sluggish demand. Further, in just before Covid-19 and in the year of Covid i.e., 2020-21, the Indian Economy experienced high negative growth.
Among the various segments of the automobile industry, the maximum compound annual growth rate i.e., 5.71% has been observed in the two-wheeler segment. The obvious cause is the presence of middle-income groups in Indian society. The maximum growth was observed in the Year in 2017-18. The compound annual growth of passengers vehicle has been second highest at 2.7% followed by three-wheelers (2.24%) and commercial vehicles (1.1%)respectively.
The present decline in automobile sector has been a major issue of concern as the workers engaged in the automobile sector will be out of employment and there will be cascading effects on other sectors.

Trends of sales
Table-2
Growth and trends of sales in automobile sector in Domestic market

The above table 2.1 indicates the trend of yearly growth of sales is in consonance with production as demand is the propeller of production. Fall in sales in automobile sector is more in 2018-19.19-20 and 20-21. It is more compared to production because of the shrinking of income of the people. The compound growth rate of sales in two wheelers is 5.16% followed by passenger vehicles and commercial vehicles respectively.
The sale of Passenger Vehicles has experienced a decline in 2021 by 2.24% compared to 2020. . Within Passenger Vehicles, the sales of utility vehicles have increased by 12.13 percent whereas sales of passenger Passenger Cars and Vans have shown a declining trend.
The declining trend has also been observed in the overall Commercial Vehicles segment registering a de-growth of (-) 20.78 percent in April- March 2021 as compared to the same period last year. Medium & Heavy Commercial Vehicles (M&HCVs) and Light Commercial Vehicles (LCVs) have declined at a greater rate out of all the categories of vehicles maximum decline in sales is within the three-wheeler segment with a fall of 70.6 %..Within the three-wheeler segment, passenger cars sale has a maximum degrowth of 74.49% in April-march 2021 compared to last year. Two Wheelers sales registered a similar trend-, out of this segment scatters, motorcycles and mopeds have declined maximum by 19.51.
Automobile Exports
Table-3
Trends of Automobile Exports

In April-March 2021, overall automobile exports declined by (-) 13.36 percent.  Passenger Vehicles, Commercial Vehicles, Three Wheelers, and Two Wheelers exports also declined by (-) 40.29 percent, (-) 17.1 percent, (-) 21.75 percent, and (-) 6.89 percent respectively. The two-wheeler segment has experienced the highest compound annual growth rate of exports at 9.07 % followed by three-wheelers with 6.5 % compound growth. The growth rate of exports of commercial vehicles is only 0.75% during the study period.
In April-March 2020, overall automobile exports registered a growth of 2.95 percent. While Commercial Vehicles and Three Wheelers exports declined by (-) 39.25 percent and (-) 11.54 percent, respectively. However, Passenger vehicle exports marginally increased by 0.17 percent and two-wheelers exports registered a growth of 7.30 percent in April-March 2020 over the same period last year. Status of India in the Global Market of the Automobile Industry India is the 5th largest car manufacturer, 7th largest commercial vehicle manufacturer and largest manufacturer of two-wheelers in the world. 
Table-4
Concentration of Global Sales
2/3rd of World’s Global Sales was Concentrated in top 7 Countries in 2019

source:
The above table shows that the rank of India is fifth in terms of total units sold and also in terms of units of passenger cars and commercial vehicle sold.

Analysis of Domestic Market Share for 2019-20:

Analysis of Domestic Market Share for 2019-20. The above pie chart shows the domestic market share of different segments of the automobile industry. From the above, it is found that the majority of the market share of 81% has occupied by the Two Wheelers Vehicles segment. The Passenger Vehicles, Commercial Vehicles and Three Wheelers Vehicles segment have occupied 13%, 3%, and 3% respectively.

Regression Analysis: Total Sales as the dependent variable and production of different segments i.e Passenger Vehicles, Commercial Vehicles, Three Wheelers and Two wheelers are independent variables.

 

The R2value indicates that the predictors explain 100% of the variance in Sales. The adjusted R2 indicates that 100% of the variation in Sales of automobiles is clarified by the different segments of productions included in the model.

The F-statistics value of 8106.63 (P<0.05) shows that the different segments of productions are jointly statistically significant at 5% level. Therefore, the null hypothesis is rejected. The regression result indicates that the model discloses the statistically significant association among Sales and Production of Passenger Vehicles (p value- 0.005), commercial vehicles (p value- 0.045), three wheelers (p value- 0.013) and Two Wheelers (p value- 0.00)(Sig. < 0.05). However, the Sales are statistically insignificant association with Production of Commercial Vehicles and Three Wheelers (Sig. > 0.01).

Automobiles Sales and GDP Growth Rate:

The GDP growth rate is influenced by automobile sales in India. The recession and pandemic Covid-19 affect the automobile business from 2018-19 in India which ultimately impacts the GDP growth rate.

GDP Contribution by Automobile Industry

The below table explains the contribution of automobile sector towards India’s gross domestic product for last six years.

Source: Press Information Bureau, Government of India, Ministry of Heavy Industries & Public Enterprises / SIAM

Reasons behind the Slow-down of Automobile Sector in India

The automotive industry in 2019 was in one of the most horrible situations with a decline in sales and a piling of inventory.One of the reasons for the reduced growth sector is the crisis in liquidity of non-banking financial companies’ sector, which restricted the demand for automobiles. NBFC makes credit outside conventional dealers by means such as collective investment vehicles, broker-dealers or funds that invests in bonds and money markets. The decision of the IRDA to increase the premium of third party insurance in 2020 and rising road tax have affected the demand for two wheelers significantly as it affected the customer’s sentiment. Another reason is rise in the price due to high insurance cost along with rise in GST, thereby increasing the acquisition cost by 2-5% which has resulted in reduced demand.

The demand for a commodity depends on expectations of future environment. Customers are also postponing their purchase decisions due to various considerations, including an expected fall in Goods and Service Tax (GST) rates, and the liquidation of BS-IV stock and building of new inventory with BS-VI norms will give some advantage for production and sales. Expectation of customers regarding discount in the festive season has also been responsible for the postponement of demand these factors are other reasons behind the auto slowdown.Government of different States have declared incentive for switching to electric vehicles from prsent petro and diesel vehicles by 2030 is also responsible for declining demand on the ground of reducing pollution.In upcoming year, Indian auto Industry is set to major changes in the form of electric vehicles and intelligent transport system with aims to avoid traffic congestion, fuel dependency, air & noise pollution etc. Govt of India puts a target of 100% electric vehicles fleet on road by 2030.

Lack of a clear migration policy towards Electric Vehicles (EV) creates confusion among buyers, deficit monsoon and liquidity crunch in the economy are also contributing towards a reduction in auto sales.

Nowadays, the fees of gasoline were increasing rudely, making it tough for consumers to preserve their use of vehicle car. The clients are continuously trying to find substitutes for fuels, which has increased the demand for CNG and LPG automobiles. Various reasons such as the Pandemic Covid-19, Industrial slow down and loosing of employment, Govt norms etchave reduced the earnings of the middle class, thereby creating difficulties to pay for fuel price to maintain a Vehicle.

The increased availability of automobile rentals, tech-led disruptions like shared mobility from firms such as OLA and UBER, promotes consumers to rent vehicles instead of buying them. Periodical changes of Govt rules and regulations also play an important factor in the auto industry.

Suggestions for the future

A strong economic impulsion is also needed from Govt to bring positive response back to environment, help the banking sector to improve liquidity situation and set up a clear and sustainable long term policies. Auto industry is a demand-driven industry, and therefore the government should take steps to boost the demand by reducing the costs of automobile as well as by carving out a clear and transparent policy for introducing the new technology and for replacement of electric cars. It includes: revising the GST, either by modifying the slabs (from 28% to 18% on vehicles), or, if that is not possible, by removing the cess.

There should be a cut in rates in interest rate by RBI, following cheap monetary policy so as to boost demand in the market. The industry also needs to stress the need for a stable overall roadmap towards the transition to Evs which has made the auto industry nervous, especially after taking part in thorough discussions with the Department of Heavy Industries for framing FAME (Faster Adoption and Manufacturing of Electric Vehicles).

Further changes in targets for the introduction of Electric Vehicles (EVs) would increase the country's import bill and damage the current components manufacturing ecosystem. This will also result in significant job losses. The need of the hour is to ensure a smooth transition and the creation of a strong local supply base.

It can be concluded from the above study that the demand for vehicles is also reliant upon various elements such as convenience and cost of finance, fuel price, vehicle density, the demographic shape of the marketplace, and earning capability. Thus, there is a huge potential market for automobiles that is yet to be tapped through the developments with the use of new technology. Any industry always passes through phases of ups and down. But the down phase can be reduced and be revived by introducing innovations through research and customizing the new products to the taste of the new generation buyers..As pointed out by Schumpeter , innovation is the key to trigger development.It may lead to satisfaction of the customers and an increase in sales. Govt policy should be flexible so that it will attract the customer and vehicle-making producers to produce and selling of more vehicles. Automobile Industry Contributes 5.7% to 7.5% of the Indian economy's GDP from 2014 to 2020. As per the analysis there is declined growth rate on vehicle manufacturing sector comparing the year 2017 to 2020. There is a massive decline in sales and profitability in the automobile sector in the year 2019 and 2020. The Decline was due to less profitability, Pandemic Covid-19, difficulty getting loan, transition of vehicle from BS-IV to BS VI emission standards and high inventory care and the introduction of electric vehicles. The Automotive Mission Plan 2026 of the government is aimed at bringing the Indian Automotive Industry among the top three of the world in engineering, manufacture and exports of vehicles & components; growing in value to over 12% of India's GDP during the next era. Hence in the future, there is large scope in Indian Automotive Industry. Investment in the research and development in developing sustainable fuel will not disturb the existing model as well.

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