Vehicle Sales Plunge amid India’s Shadow-Bank Debt Crisis & Contagion Fears

Vehicle Sales Plunge amid India’s Shadow-Bank Debt Crisis & Contagion Fears by Wolf Richter for Wolf Street

Shadow banks provided 40% of new loans for vehicle purchases.

Car sales in India, the fifth-largest auto market in the world, plunged 24% in June, compared to June last year, after they’d already plunged 26% in May, the Society of Indian Automobile Manufacturers reported. Year-over-year declines have been dragging on for nearly a year.

Sales of “goods carriers,” which are seen as an indication of economic momentum, dropped 18% from a year ago. Goods carriers include vehicles such as these:

Scooter sales dropped 15% year-over-year. Sales of motorbikes dropped 10%. Sales of mopeds plunged 22% — “an indication of a gigantic slump in economic growth and decline in demand in rural areas,” The Week explained.

In India’s first fiscal quarter, ended June 30, sales of all two-wheel motorized vehicles combined, by far the largest category of vehicles sold in India, fell 12% to 5 million units. Passenger vehicle sales fell 18% to 712,620 units. Within this group, cars fell 23%, utility vehicles 4.5%, and vans 25.7%, according to the  Society of Indian Automobile Manufacturers (SIAM).

“Probably the most prolonged de-growth phase we have seen.”

“I think…this is the worst phase India’s auto industry has seen,” said Rajan Wadhera, president of SIAM and head of Mahindra & Mahindra’s automotive group, when he unveiled the data. Even the once booming ride-share demand has taken a hit. And weak farm income hurt sales of two-wheelers.

“There were patches of de-growth in 2009, 2011 and 2012, but the government stepped in, tax incentives were given and situation got better. This is probably the most prolonged de-growth phase we have seen,” Wadhera said.

He warned of ripple effects throughout the economy, such as more job losses and closings of dealerships. And he clamored for the government to step in and do something, which is what you’d expect an executive of one of India’s largest vehicle makers to say.

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Wolf Richter

In his cynical, tongue-in-cheek manner, he muses on WOLF STREET about economic, business, and financial issues, Wall Street shenanigans, complex entanglements, and other things, debacles, and opportunities that catch his eye in the US, Europe, Japan, and occasionally China. WOLF STREET is the successor to his first platform… TP-Title-7-small-200px …whose ghastly name he finally abandoned in July 2014. Here’s the story on that. Wolf lives in San Francisco. He has over twenty years of C-level operations experience, including turnarounds and a VC-funded startup. He earned his BA and MBA in Texas and his MA in Oklahoma, worked in both states for years, including a decade as General Manager and COO of a large Ford dealership and its subsidiaries. But one day, he quit and went to France for seven weeks to open himself up to new possibilities, which degenerated into a life-altering three-year journey across 100 countries on all continents, much of it overland. And it almost swallowed him up.