Economic slowdown: Millennials puzzled over Nirmala's finger pointing

Millennials are amused at the blame game currently on, with falling car sales landing on top of myriad other things they are routinely held accountable for. Veena, a millennial who is moving to Chennai as she switches jobs to be in the city where her husband works in an IT company, is bemused by the current debate.

She got married a few months back and together with her husband, she has already begun saving to buy a car. Yes, a small car which costs anywhere up to ₹5 lakh and Veena is confident that the couple would able to buy its dream machine before the end of 2019.

“Yes we aspire to own a car as well as a house. We have begun saving for both these things but the car will come first, perhaps before 2019 comes to an end. It is convenient, it is an aspiration as well as a necessity. I don’t know what the government means when it says millennials do not aspire to a car. Everyone would want to own at least one, I think, even if they use cabs. My husband and I do not want to get into the cycle of paying EMIs so we will save up and try to make a full down payment for our car. Any entry level car, an Alto or something similar, is good enough for us,” Veena says.

Till the car comes home, however, she is planning to use the local train or a bus to commute to work in Chennai; the husband’s office is just across the road from their rented house so usually needs no transport to reach work.

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Rishabh, another millennial who resides in an East Delhi housing society and works as an analyst with a foreign brokerage in Gurgaon, says he aspires to an SUV or a sedan. Rishabh stays in a joint family and the family already owns a premium sedan. He doesn’t drive most days to his office, preferring a cab or taking the metro.

“I bought a Honda Jazz together with my father about two years back. I have been thinking of buying another premium car for sometime but one of the biggest deterrents has been unavailability of a proper parking space in my housing society. I want to own a car because it gives me flexibility and a feeling of security but may not often drive one because of worsening traffic on the roads,” Rishabh says.

As social media gets flooded with memes over Finance Minister Nirmala Sitharaman’s reference to millennials’ aversion to buying cars and this being a factor in slowing automobile sales in India, it is interesting to see how millennials like Veena and Rishabh have shrugged off such a simplistic analysis of a complex economic phenomenon. They still see aspiration in owning a car, though millennials at different levels of the income and social pyramid find value in different ends of the car market.

“The automobile industry is now affected by BSVI and the mindsets of millennial, who now prefer to have Ola or Uber rather than committing to buying an automobile,” ANI quoted Sitharaman as saying.

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The FM was responding to queries on the intense lobbying by India’s automobile companies for a significant tax relief by a cut in GST rates which now stand at 28%. Vehicle sales have been falling continuously for the last 10 months, with August dispatches (from factories to dealers) witnessing the steepest decline in recent memory.  The overall domestic dispatches fell by a record 23.55% to 1,821,490 units in August from 2,382,436 units dispatched in the same month last year.  Passenger vehicle dispatches fell by a third, commercial vehicle dispatches plunged 38.71% and those of scooters and motorcycles by more than a fifth. It is clear that not only cars, people are not buying nearly enough scooters, trucks, even tractors.

Stumbling over frequent references to falling vehicle sales and an alarming increase in job losses from an industry which is a significant contributor to government’s own revenue and a marker of India’s ‘Make-in-India’ initiative, the government has been parroting myriad reasons for the steep decline in sales. Millennials preferring shared mobility over owning cars was the latest reason given out by the FM and this has been widely lampooned.

Maruti Suzuki India, India’s largest car maker which sells almost every second car in the domestic market, has also shrugged off the suggestion that car ownership was losing its sheen.

Executive Director (Marketing and Sales) Shashank Srivastava said in this piece that “The Ola and Uber factor may not be strong to contribute to the current state of slowdown. I think we need to watch and study it more before arriving at such a conclusion. Ola and Uber came into existence during last 6-7 years. In this period, the auto industry also saw some of its best times. So, what happened only during last few months that the downturn became so severe? I do not think it is only because of Ola and Uber.”

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Mayank, another millennial working in the media, continues to use his car daily despite insane traffic on Delhi roads, parking troubles and inordinate amount of time spent commuting. “I use the car daily. Cab aggregators only for either travelling to the airport or when the car has been given for servicing…..I am now keen to buy an electric car, provided I am assured of a proper ecosystem for such a vehicle,” Mayank says.

Vehicle sales are falling due to a variety of well known and obvious reasons, the biggest being the current economic slowdown and the uncertainty due to the advent of the more stringent BS VI emission norms from April 2020. Maruti has seen a significant erosion in sale of its bread and butter model, the Alto, as rural incomes have been significantly impacted over the last several months.

And analysts at brokerage Edelweiss have noted that not just these factors, even the rise in sale of pre-owned cars is denting demand for new ones.

An analysis of the past 20 years’ demand cycles by Edelweiss shows that the current slowdown is different from previous ones on several counts: Driven by domestic factors rather than global events; stiff competition from growing organised pre-owned vehicles market; characterised by significantly higher margin pressure; and led by prohibitive jump in vehicle cost.

Of course, factors like increasing congestion on Indian roads, lack of parking space across major metros and rising cost of ownership of private cars are also deterrents to new car buying. From what analysts have been saying about prospects of India’s automobile industry, there seems to no light at the end of the tunnel anytime soon. If and when sales pick up, they will do so largely because the economy is on the mend.