|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
From Lockdown To Recovery : The Impact
Of Covid-19 On Growth Trends Of Indian Automobile Industry |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Paper Id :
19177 Submission Date :
2024-08-06 Acceptance Date :
2024-08-17 Publication Date :
2024-08-23
This is an open-access research paper/article distributed under the terms of the Creative Commons Attribution 4.0 International, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. DOI:10.5281/zenodo.13311703 For verification of this paper, please visit on
http://www.socialresearchfoundation.com/remarking.php#8
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Abstract |
The automobile industry, a foundation for other industries, faced a significant disruption due to the sudden outbreak of COVID-19. This study examines the impact of the pandemic on the production and domestic sales trends of the Indian automobile industry from 2017-18 to 2022-23, using data from SIAM. The analysis employs statistical tools like mean, AAGR, CAGR, correlation, and t-test to investigate the effects of COVID-19 on the industry's growth trends. The findings reveal the significant impact of the pandemic on the Indian automobile industry. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Keywords | Automobile Industry, COVID-19, Production, Domestic Sales, CAGR. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Introduction | Automobiles
have been the lifelines of different cultures and traditions in the modern
world and so is the case in India. India with a booming automobile sector is
expanding its horizons not just in domestic economy with vibrant performance,
but also in the international markets with its fuel and performance efficient
vehicles, which are making ripples in the international arenas. However, the
growth in recent years has been marred by advent of the pandemic of COVID-19,
which took whole world by surprise and cast negative impact on almost all the
industries including the automobile industry of India. The automobile industry has transformed the
world, revolutionizing how we live, work, and travel. From design to sales, it
encompasses the entire lifecycle of vehicles, including cars, trucks, buses,
motorcycles, and more. With a history spanning over a century, the industry has
undergone significant transformations, driven by technological breakthroughs,
changing consumer needs, and global economic shifts. Today, it plays a vital
role in the global economy, supporting millions of jobs worldwide and shaping
the future of transportation and mobility. India's automobile industry is a powerful
engine driving economic growth and technological advancement, playing a crucial
role in the country's prosperity. The sector is diverse, encompassing
commercial and passenger vehicles, two-wheelers, trucks, buses, and
three-wheelers, all of which are essential for India's economic development. As
a major contributor to the nation's economic success, the automobile industry
fuels innovation, job creation, and overall economic progress. The industry
comprises a vast network of companies and organizations that work together to
design, develop, manufacture, market, distribute, service, and customize
vehicles, covering the entire spectrum from concept to consumer and beyond. India's rapid growth has propelled its
automobile industry to the forefront, emerging as a key 'sunrise industry' that
is driving economic progress and transformation in the country. Currently, the
industry contributes around 7% to India's GDP and employs approximately four
crores (40 million) people directly or indirectly across the country. As a capital-intensive
and knowledge-intensive industry, it provides critical support in the country’s
socio-economic progress. The automobile industry is a vital component of
India's emerging modern economy, and it is challenging to envision the
country's economic progress without the growth of this industry. In the year 2019, the sudden advent of
COVID-19 in the whole world including India led to unprecedented losses to
industries of India including automobile industry. COVID-19, a vigorous infection activated by
SARS-CoV-2, comes into view in Wuhan,
China in December 2019. Typical indications involves high temperature, cough,
and dyspneic. On March 11, 2020, the World Health Organization (WHO)
declared it a global epidemic. As of
March 12, 2020, the WHO reported over 1,25,048 confirmed cases and 4,613
fatalities across more than 200 countries, indicating a significant mortality
rate. At a subsequent time, Indian Prime Minister
Narendra Modi declared a 21-day all-embracing lockdown on March 24, 2020, to
restrain the pandemic. In order to
further contain the spread of COVID-19, the lockdown was extended in four
phases, with ending on May 31, 2020. The WHO's initial estimate of a 2% COVID-19
mortality rate was later revised to 3.4% based on reported cases, but the true
rate may vary substantially depending on local conditions and transmission
severity. Moreover, underreporting and incomplete testing hinder accurate
calculations, obscuring the pandemic's true impact. The Indian automobile industry, already facing challenges, has been severely impacted by the COVID-19 pandemic. Lockdowns, social distancing, and economic uncertainty have resulted in a substantial decline in vehicle sales, production, and exports, affecting the entire supply chain. As a vital contributor to India's economy and employment, the industry's resilience and adaptability are being tested. The pandemic has highlighted the need for the industry to address its vulnerabilities and transform its manufacturing and sales processes to navigate this crisis and future challenges. The COVID-19 pandemic and subsequent lockdowns have had far-reaching economic consequences, impacting not only India but also the global economy as a whole. Due to this, every sector had gone to its decline phase and which was not seen even in financial crisis of 2008. This phenomenon has been the major disrupter for the growth trajectory of India. The advent of COVID-19 has not only cast negative impact on growth of automobile industry but also has led to huge losses. This event has pulled back the growth of automobile industry. The losses that have been suffered by the automobile industry of India in terms of declining production, and downfall in domestic sales and exports, it that have been operating in automobile industry of India but has also led to sluggishness in the overall growth of India economy. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Objective of study |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Review of Literature | R. Menaka(2015) in her research paper, the automobile industry
is essential to the country's economic progression. Furthermore, India is projected
to become the global leader in car sales volume, with an estimated 611 million
vehicles on the road by 2050, indicating a significant increase in demand and a
promising future for the industry. Ajinkya Sawant & Prof.
Pooja Darda (2020) in
their research found that, in the
post-COVID era, customers will prioritize safety above all else, and companies
that offer safety-focused features will thrive in the market. This shift in
consumer behavior will drive demand for vehicles with advanced safety features,
and manufacturers that adapt to this new trend will gain a competitive edge. Rachit Agarwal &
Gaurav Sharma (2020) concluded
that the impact of dividend announcements in 2019 was favorable for investors,
as the market responded positively. However, during the COVID-19 pandemic,
dividend announcements have failed to provide a compelling reason for investors
to invest in companies, indicating a significant shift in market sentiment and
investor behavior. Dhall and Singh
(2020) in their study, provided that COVID-19 has been one of the
most powerful phenomenon, which not only affected general life and livelihood of millions of people across the world, but also
led to unprecedented impact on the
industrial performance of nations. In particular it studies the Indian Stock Market and fluctuations it had to go through due to the advent of the
pandemic of COVID-19. Study
of Chauhan (2020) highlighted the far-reaching outcomes of the
COVID-19 epidemic on the Indian automobile industry, particularly the
significant financial losses incurred by Indian automobile companies due to the
sharp decline in sales, which has led to a downward trend in the industry's
overall performance. According
to Singh (2020), the automobile
industry has effectively been at a standstill for twelve and a half years, due
to a combination of significant factors such as the implementation of GST, the
transition from BS4 to BS6 emission standards, liquidity constraints, and
others. The COVID-19 lockdown has exacerbated this situation, with the industry
almost completely shutting down since March 24, resulting in a substantial
decline in automobile manufacturers' revenue and profits, further complicated
by the delayed revival of consumer demand. K.M. Kiran Raj & K.G.
Nandha Kumar (2021) suggests
that automobile manufacturers should focus on regions with relatively less
decline in GDP growth. Additionally, leveraging technologies like image
processing and deep learning can enable the development of smart and autonomous
vehicles, potentially boosting the industry's growth and competitiveness. Gaddipati & Abhishek
(2021) states
that the effects of COVID-19 have a direct correlation with the mindset of
individuals regarding their spending power during difficult times. In other
words, the pandemic's impact is closely tied to how people think about and
manage their finances during periods of economic uncertainty and hardship. According
to the Society of Indian Automobile
Manufacturers, In FY21, the industry
had a fall in sales across each one of the automotive classes (passenger car sales fell
by 2.24%, two-wheel drive sales by 13.19%, commercial vehicles sales by 20.77%,
and three-wheeled vehicle sales by 66.06%). Adhiti S.K. (2022) in her research paper suggests that, given the
current circumstances, it is improbable that India's automobile sector will
revert to its pre-COVID-19 state in the near future. Instead, the industry can
expect profound shifts in consumer preferences and buying behavior. The
post-pandemic era will present numerous challenges, but also offer various
opportunities for growth and transformation, necessitating adaptability and
innovation from stakeholders in the automobile sector. Aditya Pratap Singh and
Raj Bihari (2022) in their study reveals that the COVID-19
epidemic has had far-ranging wide upshot, impacting not only health of peoples
but also their standard of life and savings. The initial phases of the pandemic
in India, which involved four lockdowns, resulted in the loss of over twelve
crore jobs, shattering the dreams of many for the next two decades. Since the
automobile sector is a significant contributor to India's economic growth, the
Indian Government should implement
various strategies to boost the industry's output and encourage its recovery. Smriti Suman, Vaibhav
Jaiswal & Dr. Ravi (2022) in their study analyzed
that while companies have made significant progress in improving their financials, they are still struggling to achieve the same
level of growth as before the COVID-19
pandemic. Despite some improvement, their financial
growth has remained stagnant, failing to reach pre-pandemic levels, indicating
a lasting impact of the pandemic on their financial stability. Geeta Gupta (2022) in her research project
highlights the devastating effects of the COVID-19 pandemic on the Indian
automotive industry, with far-reaching consequences for all stakeholders from
dealerships to ancillary suppliers. The pandemic has led to large-scale factory
closures, resulting in significant disruptions in the workforce and an urgent
need for financial support to help employees sustain their families during difficult
times. To address the economic and social impacts of the pandemic, it is
important to formulate a comprehensive government policy roadmap. Moreover, the
pandemic is likely to lead to significant shifts in consumer preferences and
buying behaviour, which will alter the market landscape and require
adaptability from industry players. The study undertaken by, Himanshu Bharti & Dr. Ramrcha Kumar (2022) discusses the impact on economy, particularly on automative sector due to the pandemic which leads to lockdown in our country. The effects of the coronavirus pandemic are far-reaching and detrimental, with long-term consequences that are likely to be felt for an extended period, causing sustained damage to various aspects of society, including the economy, healthcare, and overall well-being. Akriti Dhiman & Dr. Preeti Garg (2022) concluded that the automobile industry holds the largest share in the Indian market and making a notable contribution to the nation's GDP. However, the COVID-19 epidemic not only severely impacted the automobile sector but also profoundly affected the daily lives of individuals, causing a substantial disruption to the nation's economic and social landscape. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Methodology | This
study is analytical in nature. This research aims to investigate the impact of the COVID-19 pandemic on the growth trends
of the automobile industry in India. To assess the industry's growth trends,
this study focuses on two key indicators: production and domestic sales. By
analyzing these parameters, the study seeks to understand the pandemic's impact
on the industry's performance and growth. This study is made with secondary data. The data
is collected from the report of Society
of Indian Automobile Manufacturers. The period of study is from 2017-18 to
2022-23. Data can be analyzed with the help of statistical tools like Average,
Percentage, MD, AAGR and CAGR & Correlation trend analysis. The t-test is
used for hypothesis testing. Apart from this, tables are used to present and
analyzed data. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tools Used | T-test was done for this study. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Analysis | This section delves into a detailed analysis of the data, which is categorically divided into four distinct segments: passenger vehicles, commercial vehicles, three-wheelers, and two-wheelers. Each of these segments provides valuable insights into the industry's performance and trends.
This table reveals that the Indian Automobile Industry produced around 2.90 cr. Vehicles in FY 2017-18 and 2.59 cr. Vehicles in FY 2022-23. The industry shows overall a negative AAGR of -1.66% and a CAGR of -2.28%. Due to COVID-19 the production trends of two-wheelers segment was mostly affected, representing a AAGR of -2.96% and a CAGR of -3.42% between FY 2017-18 to FY 2022-23. Other than this, Commercial vehicles segment was the fastest growing segment, representing a CAGR of 2.95% followed by Passenger vehicles segment with a CAGR of 2.63% between FY 2017-18 to FY 2022-23. The lockdown triggered by the pandemic caused a halt in production at Original Equipment Manufacturers (OEM), which had a ripple effect on the whole supply chain of pivotal industries in India. This, in turn, adversely impacted the making of spares in mom-and-pop business. Furthermore, the decline in consumer demand for passenger vehicles resulted in a significant revenue loss. Further this table shows that after the lockdown there was a good growth in production of Passenger vehicles, Commercial Vehicles, Three-wheeler segment other than the Two-wheeler segment in FY 2022-23. Hypothesis
Testing for Null Hypothesis 1 (H01)
:
The p-value (0.043) is less than the significance level (0.05), hence we reject the null hypothesis 1 and conclude that the COVID-19 pandemic had a significant negative impact on the production of the Indian automobile industry. To further support this conclusion, we can observe that:
This table shows that the domestic sale of Automobile Industry was around 2.49 cr. Vehicles in FY 2017-18 and around 2.12 cr. Vehicles in FY 2022-23. Overall the domestic sales trend shows a negative growth with AAGR of -2.286% and a CAGR of -3.22% between FY 2017-23. Due to COVID-19 the domestic sales of Two-wheeler segment was affected for consecutive three financial years from 2019-20 to 2021-22. According to the Society of Indian Automobile Industry, the industry noticed a downturn in sales of each category of vehicles in the financial year 2021-22, with passenger vehicles seeing a 2.24% drop, two-wheelers a 13.19% decrease, commercial vehicles a 20.77% decline, and three-wheelers a significant 65.55% fall. However, following strategic interventions, the industry witnessed a remarkable turnaround in the financial year 2022-23, with domestic sales registering positive growth across all segments: passenger vehicles saw a 26.73% increase, commercial vehicles a 34.31% rise, three-wheelers an impressive 86.99% surge, and two-wheelers a 16.89% growth. Hypothesis Testing for Null Hypothesis 2 (H02)
:
The p-value (0.044) is less than the significance level (0.05), hence we reject the null hypothesis and conclude that the COVID-19 pandemic had a significant negative impact on domestic sales in the Indian automobile industry. To further support this conclusion, we can observe that:
Table 3: Correlation analysis between Domestic Sales and Production of automobiles
This table reveals correlation analysis between domestic sales and total production of Automobiles. Here, domestic Sales is taken as ‘X’ and total production is taken as ‘Y’ during 2017-18 to 2022-23, ‘r’ is the correlation coefficient between ‘X’ and ‘Y’, which is +0.99. This shows a strong direct relationship between the domestic sales and total production of automobiles. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Conclusion |
In today's world, automobiles have become an
integral part of many cultures and societies, including india, where they have
become a symbol of status, freedom, and progress, deeply embedded in the
country's modern culture and traditions.. With a booming automobile sector,
India is not only enhancing its domestic economy through vibrant performance
but also making a significant impact in international markets. India's automotive sector is a significant economic driver,
experiencing rapid growth and expansion. Its contributions to the national
economy are substantial, supporting the livelihoods of millions through direct
and indirect employment. The industry's diverse range of segments, including
passenger cars, commercial vehicles, two-wheelers, three-wheelers, and
tractors, solidifies its position as a vital component of India's economic
growth story. The automobile industry serves as the
backbone of India's economy, providing a base for the advancement of other
major industries in the country. It is one such industry, which supports the
development initiatives of all the other small and large industries, which are
in the nook and corner of India, and support their development in direct and
indirect manner by providing them assets and mobility. The automobile industry
in this regard has always acted as a harbinger and trailblazer for all the
other industries by providing sound economic base to the economy of India as a
whole. The pandemic's sudden and intense onset wreaked havoc on a global scale, causing widespread disruption and economic devastation. Its impact was felt across all sectors, with this particular industry experiencing unprecedented losses due to the lockdowns and related restrictions. As the situation gradually improved, the sector began to exhibit a slow but steady recovery, ultimately stabilizing its operations and paving the way for future growth. The unprecedented impact of the pandemic of COVID-19 has led to several impacts, besides downfall in sales, which were not good for the economy of India and chief among them was the disruption of economy that was majorly suffered by the industries and carried all the industries, big and small under its realm. It has not only supported other industries but has led to creation of base for the development of other industries and infrastructural development of Indian economy as a whole |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| References |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
