Global Car Sales: At Crossroads : Customer ‘Spoilt for Choice’ or Courtesy Vague Market Signals ? Automobile Industry is Drifting ?

Often drivers are irritated with the speed limits.

Why you need to limit driving speed ?

“My Car has a capacity to zip past the highway at 200 kmph , so why should I drive at 80 kmph ?”

The Signals in between makes things worse. Feel restless waiting for the Signal to turn Green ?

Space available on the roads, Safety, equal opportunity for all drivers, etc. makes the case strong for having the Speeding limits as well as the stops at Signals.

The scenario with an automobile manufacturer is also very similar.

Every Automobile company wants to increase their sales and in turn the Market Share.

“I have a production capacity of 200 cars per day, so why should I restrict it to 80? Why not utilise my 100% Production capacity ? ”

If every car manufacturer starts to think like this then there will be cars coming out of the automobile plants at a constant rate but are there enough buyers in the market ?

Many a time, there are Signals coming from the market which will indicate the manufacturer that you need to slow down or even stop manufacturing.

But the pressure from Stakeholders make you to keep aiming for higher targets. The annual targets get boiled down to monthly sales numbers & it is almost like a 100m sprint which happens every month end to achieve them.

There is nothing wrong about it. It is only when more cars are sold, the cash flow happens and you make more profits. This will in turn help in giving salaries, incentives, increments to employees, payment to vendors, etc. Definitely it also helps to maintain the Stock market price to a major extent.

The average number of car manufacturing plants in each country will be around 25-50 depending upon the geography.

Except for a revolutionary Automobile brand, all other manufacturers sell their cars through dealership. The number of dealerships has been growing in the last 10 years. There was no looking back after the 2008-09 sub prime crisis / recession. Though there were slight slowdowns in different countries due to respective macroeconomic scenarios, the growth story of automobile manufacturer and associated dealerships had been phenomenal. In fact the number of new dealerships are justified with the amount of sale which happened in the last 3-4 years.

The number of cars which have occupied the roads in the last 10 years have been significant. The global sales from 2000-2015 was at 54.9 million. From 2016 onwards the numbers have grown up drastically.

People closely associated with the Automobile industry know that it is a very cyclical one. With every spurt of economic downturn, the sales numbers start going south. The last 6-8 months have seen a global slowdown of sales. One of the main reasons attributed to this is the US – China trade issues. This has sent the Chinese Automotive market on a downward spiral. There are other economic decisions which has impacted sales in countries like Germany, Argentina, etc. UK and Ireland are also having tough days with the Brexit looming over them.

A newspaper article from Dublin, Ireland:

A person planning to purchase a car 10 years back had limited options compared to today’s offerings. Present scenario gives umpteen number of choices for the customer. Many international brands are also expanding and have started selling their cars in developing markets. Buying a car is always a big decision. It is something that you will be using at least for the next 3 years. So the purchase has to be absolutely spot on. Customer is spoilt for choice and gets confused seeing different dealerships and brands in the offering.

To add to this , the traffic situation doesn’t help the cause. Though the sales have grown up drastically , the infrastructure development has been at a slow pace comparatively. This adds to the woes of purchasing decision.

The customer is looking for a ‘mobility’ solution. With the easy availability of cab aggregators / ride sharing apps like Uber, Lyft, Grab, Didi, Free Now, Ola, etc. it becomes a matter of convenience. There are auto manufacturers moving to a subscriber based model as well.

On top of this , there has been a steady interest seen in the cycle and e-scooter sector, which includes electric segways & hoverboards as well. It helps you skip the traffic, stay fit,save environment, corporate cycle to work tax saving scheme and is also light on your pocket.

This pleasant confusing state is going to get more complex in the next 3-4 years. Autonomous / self-driving cars are under testing and it is just a matter of time before the right technology is established.

So for a customer : the basket of choices is getting bigger and better.

On top of all these, there are lot of other issues that play in a customer’s mind. Oil prices are going up. There is a slow down of economy, which means that the job security is not good. As a customer , you don’t want to spend your savings on purchasing a car , when you are not certain about the near future. Every day you get to read about government’s plans to revise the taxes on cars / come out with temporary measures to revive the economy. So the best option is to wait for their actions.

If this was not enough, there is another challenge of emission norms in countries like India and China. China is in the process of implementing ‘China VI’ & India will see ‘Bharat VI’ by April 2020. The slow growing ‘dont know whats happening type’ electric car segment is also an option for the customers & the ‘budget friendly’ used car market / cost effective imported car as well.

As a customer, even though you may have the budget available to buy a car, but you are at Crossroads.

What will happen if I buy a car now ? Is this the best time to buy a car with all these things happening around?”

With my little knowledge about Automobile industry (I worked with a leading Indian Automotive manufacturer for 7.5 years), I would say that this is a time to do your ‘trade-off’.

Yes, there are lot of macro as well as micro economic changes happening currently. There is no clear signal in regard with the government support/actions to revive auto industry. Plus the emission norm scenario which impacts your resale value makes this a complete catch 22 situation. Though the Auto industry may start reviving in the next 4-5 months, it is going to be a slow and steady one.

If you have a need and have the budget to buy a car (okay with the traffic conditions, don’t want to rely on cab aggregators, etc.) , then this might be the best time to make that decision. The discounts are at all time high, plus you can bargain and get some waivers / discount on insurance, get some free accessories ,etc. The resale value for the car you purchase now vs something you would have purchased post April 2020 will get nullified with the current upfront discount. Also consider the fact that you will be trying to sell this car by 2022-23 & by that time the market situation might have completely changed. So there is no guarantee that a car bought post April 2020 will fetch you a great resale value.

There is going to be a great transition happening in the Automotive industry in the next 5 years. By 2025 the developed markets would have moved to shared cars, electric cars, self driving cars or even flying cars or 3D printed cars & that too with brands like Google and Apple getting into the Automotive sector anything is possible. The technological development would have been completed & it will be just a matter of time before it replicates to other markets. It may take a while for majority of the market to get into that transition but it will happen in every market maybe in 10 / 15 years time.

Change is inevitable. WhatsApp, Google and many other young brand have changed the whole market scenario and the way customer consume their thoughts.

So this might be possibly the last chance to enjoy such huge discounts while buying your ‘own’ car.

It is worth a ‘Trade-Off’ for the respective government bodies to tweak the policies for a certain time frame, for the manufacturers to re look at their strategies and expectations to revive the market, for the dealers to streamline the stocks and for the customer to make that right decision of buying a ‘mobility’ solution.

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