Domestic automobile industry in India got off on the wrong foot in the new decade with sale of passenger vehicles declining 6.2 per cent in January 2020 against the same month last year. This is the third straight month of decline and the steepest rate since September 2019 when sales fell nearly 24 per cent.

A total of 164,793 cars were dispatched to dealerships across the country last month, an 8 per cent decline over 2019 while the sale of vans declined 28 per cent at 12,992. Utility vehicles that are the flavour of the season -- on evidence of large number of SUVs displayed at the biennial Auto Expo 2020 -- continued to buck the trend growing 2.6 per cent at 84,929 units.

The low volumes are on expected lines as the industry braces itself for the transition from BS IV to BS VI emission norms, which means inventory levels have to be brought down to zero by March 31. Industry body Society of Indian Automobile Manufacturers pointed out the rate of decline is significantly lower than the high double digit rate witnessed in the middle of 2019.

Also read: Auto sales show no signs of recovery; two-wheelers decline 16.6%, cars down 8.4% in December

The bigger cause of concern, however, was the continuous decline in sales of commercial vehicles and two-wheeler. Commercial vehicle sales, considered a barometer of the overall overall economy, were down 14 per cent at 75,289 units, while two-wheelers, which represents the trend in rural consumption, were down 16 per cent at 13,41,005 units. This brought the overall sale of automobiles in the month down by 14 per cent at 17,39,975 units.

"The passenger vehicle segment is still in the red but the rate of decline is much lower than what it was in the past. Of-course, it is on a small base but we also have to take into account that manufacturers have to keep a lean inventory for the transition to BS VI emission norms so the dispatches will be muted," said Rajesh Menon, Director General, SIAM. "The bigger cause for concern is the persistent high double digit growth in commercial vehicles and two wheelers. That indicates that the economy is not out of the woods yet."

With the financial year ending March 31 largely a washout, expectations of a strong revival in the next financial year are not high. SIAM said the first half of next fiscal would continue to be sluggish as demand would suffer from the aftermath of BS VI norms, which will see an increase in both vehicle and fuel prices. Manufacturers also say there may be an advancement of purchases prior to March, which means the demand may be significantly affected in the first quarter of financial year 2021. "What we gather from our member is that any revival will only happen from the festive season (October 2020) onwards. There are way too many headwinds till then," Menon said.

The automobile industry has been in the grip of an unprecedented slowdown on account of an intense consumption squeeze in the economy that has kept consumers away from showrooms. Passenger vehicle sales have now declined in 17 of the last 19 months in a trend that started back in July 2018.

Also read: Car sales in 2019 bore the brunt of slowing economy: SIAM