India's Auto Sector Comes To A Screeching Halt, Sales Crash In August

At the heart of the global manufacturing slowdown, is the slump in the auto industry in China, Europe, and India. More specifically, it's the spectacular crash of the Indian automobile industry in 2019

The Indian automobile industry continued in the slow lane in August with all major manufacturers reporting a plunge in their respective sales.

Hard times at Tata Motors contributed to a 49% drop in its August domestic sales YoY; Maruti Suzuki India reported 32.7% decline in its vehicle sales last month YoY, and Mahindra and Mahindra's (M&M) local sales declined 26% YoY last month.

Nationwide, more than 350,000 workers in the automobile industry have been laid off since 1Q19, in response to collapsing car sales for the 10th straight month. 

"The auto industry continued to be subdued in August due to several external factors," Veejay Ram Nakra, Chief of Sales and Marketing, Automotive Division, M&M.

The high goods and services tax (GST) and a liquidity crunch in the country are some of the reasons behind the faltering automobile sector.

The crisis has spread to small and medium-sized businesses in the towns and villages around Manesar, an industrial hub in Gurugram district of the State of Haryana, where Maruti Suzuki cars are made.

"There are already fewer workers in the village and those who still have jobs are either not getting paid for working overtime or are not spending much out of fear they may lose work and need the money," said grocer Rahul Jain, his shelves stacked with toothpaste and soaps.

Reports of basic items like cooking oil, flour, and rice, have dropped in demand. In services, barbers, restaurants, grocery stores, and entertainment facilities have said they're seeing fewer customers thanks to the auto slowdown. 

Shoe shop owner Subhay Singh, in Manesar's Aliyar village, said there are days when business is dead. 

"My monthly earnings have halved," said Singh, who a year ago made an average Rs 8,000 a day. "I don't know what's happening."

India's automotive industry is ranked the fourth largest in the world, with more than 35 million employed, directly and indirectly, and accounting for at least half of India's manufacturing output.

All of India's major auto manufacturers are hurting, the pain, as shown above, is radiating outwards into consumers. 

The auto crisis is cyclical and isn't expected to turn back up for the next several years. Industrials have been the first domino to fall, and next will be Indian consumers.