Global auto sales have experienced a sharp dip in recent months due to lower consumer demand apart from many other factors. For the automobile industry, stress and low revenue define the overall experience of their sector in the financial year 2019-20. While the big shots in the automobile industry chalk the reason of low growth up to the decline in consumer demand, we set out to find the deeper reason behind the low growth rate of the automobile industry. In this article, we will find out the answer to the major question in everybody’s mind, “Is the car industry dying?”
In December 2019, the automobile sales dipped to the 15-year low of 13 per cent. This dip was evident in commodities like two-wheelers, commercial and passenger vehicles. The ramifications of this recession hit industry was faced by the billions of global employees in the automobile industry. Let’s go back to November 2019.
The production sector of the automobile industry delivered a competitive edge of 4.04 per cent over the previous month. However, the worldwide auto sales did not generate the numbers these people gave their eye teeth for. Due to the decline of national and international consumer demand, the newly produced and the old manufactured automobiles cannot see the light of the day.
But why is there an overall reduced demand for automobiles? Experts assert the contribution of various factors to the global decline in sales. These reasons are listed below.
Reasons for Decline in Global Auto Sales
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Economic Slowdown
India, Brazil, and China are the worst affected counties when questioned about an economic slowdown. Not just these three countries, but mature markets like Japan have also faced a minor setback in their economic growth rate. As predicted by the International Monetary Fund (IMF), 2019 and 2020 will be the year of economic slowdown in as many as 90 per cent of the countries in the world. With such financial crunches, is it feasible to expect an increase in global car sales?
When the masses in the country are tied down by their necessities, how can they afford to spend hundreds of thousands over automobile? It’s only genuine to expect that the government provides substantial relief for the taxpayers, so that, they comfortable purchase products as required.
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Brexit
One of the major geopolitical reasons that affected global auto sales in 2019 was Brexit. It still continues to do so after Britain left the European Union on 31st January 2020. The changing dynamics of the continent have affected the production cycles of automobiles. A significant amount of distress is caused by workers in the automobile industry around Europe. Multiple investors took their hands down when asked to invest in the European region. This affected the worldwide production and distribution cycle, ultimately reducing global auto sales.
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Growing environmental problems
Keeping aside the technicalities of the production and supply chains, the environment is the major issue that affects the automobile industries. The carbon and diesel emission rates have soared to a dangerous margin. Consumers are aware of the complications that our planet faces because of these man-made chemicals. This is why a large portion of consumers refrain from purchasing the products that are substantial harm to the environment.
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Convenience of cabs
Who doesn’t enjoy the convenience of cab giant companies like Ola and Uber? Everybody has their name on the tip of their tongue and its demand is completely justified. No extra parking time, you would never have to worry about checking the gas left in your car, and the major profit – drivers. Imagine getting an opportunity to reach your workplace conveniently without worrying about these trivialities. Therefore, people prefer comfort over luxury, thus, affecting the global auto sales.
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Traffic
Don’t tell us that you’ve never been frustrated with the morning headache of traffic on your usual commute. Now the office timings won’t change, but you have the convenience of public transports. Many governments urge people living in the areas with a high rate of pollution and traffic, to use public transport. In addition to being cheap and cost-effective, they reduce the burden on the roads. People have started choosing environmental wellbeing over their selfish needs. This is the final reason that affected the sales of automobiles across the globe.
The trajectory of global auto sales over the years
Studies have shown that the expected number of global auto sales was 80 million units for 2019. However, the number has barely reached 70 million units by the end of 2019.
Starting from 1990, around 39.2 million units saw the light of the day with their owners for the first 10 years. This number rose up by an approximate of 25 million units when the global market sold around 55 million units by the end of 2015. Graphically, a wave can accurately describe the sale in the following years. The survey reads that in the year 2016 alone, the industry sold around 77.3 million automobile units to the consumers around the Globe. It was only in 2018 when this number plummeted by a short margin of 0.4 million units. In 2018, the global market sold 78.6 million units.
As seen in the above sections of the articles, 2019 was the worst year for the automobile industry. The vivid figures are not out yet. However, we are certain that the numbers have reached a substantial low, as compared to the previous three years, due to the factors affecting the market.
So, answering the major question – Is the car industry dying? We can only estimate the situation by looking at the current statistics. For now, there is a definite slowdown in global auto sales. Even then, commenting on the permanent status of the industry is not possible for anybody. If substantial measures are taken by the governments of worst-hit countries like China and India, the current statistics will see some improvements. As these countries have a potentially large consumer base, they are the best bet of investors overseas.
