Why Indian Automobile Industry Is Falling: What's Really Causing It?

If you ask anyone at a local car dealership right now, they'll say things just aren’t moving like they used to. Showrooms have gotten quieter over the past few years, with rows of unsold cars gathering dust. In 2019, over 3.4 million cars were sold in India. Fast-forward to 2024, and the number hasn't even touched pre-pandemic figures. That's not just a bad month—it’s a real, ongoing slump.

What’s behind this slowdown? It’s a mix of higher prices, more restrictive loans, and a younger crowd that’s less interested in big purchases like cars. They don’t want to be saddled with debt, and ride sharing is tempting when traffic in cities is brutal. Add in rising fuel prices—petrol shot up by nearly 30% in four years—and even those who want to upgrade are thinking twice about pulling the trigger on a new vehicle.

• Big Sales Drop: What Do the Numbers Say?
• Why Are People Buying Fewer Cars?
• Government Rules: Help or Hindrance?
• The EV Puzzle and Local Slowdown
• Impact on Jobs and Manufacturing
• What the Industry Can Do Next

Big Sales Drop: What Do the Numbers Say?

The numbers tell the story better than any headline. If you look at car sales in India, things started sliding from mid-2019. Before the pandemic, Indian carmakers were selling over 300,000 cars each month, but that momentum slowed to a crawl. The Society of Indian Automobile Manufacturers (SIAM) pulled together data, and the dip is hard to miss.

You’ll see there was a quick bounce after the pandemic dip, but in 2023-24, the industry lost steam again. Dealers have reported up to 30% more unsold cars piling up compared to last year. Small car sales—which used to make up the backbone for the Indian automobile industry—fell the hardest. Many folks either held onto old vehicles, switched to used cars, or skipped owning a car altogether.

It’s not just about personal vehicles either—commercial vehicles took a hit, too. In early 2024, Tata Motors and Mahindra both reported double-digit drops in domestic truck sales. Altogether, it’s clear this isn’t just a random blip. Thousands of showrooms, spare parts suppliers, and even ride-sharing companies are feeling the pinch.

• Fewer new buyers means more discounts and price cuts—yet stocks haven’t moved much.
• Nearly half of car dealerships in smaller cities are reportedly operating at a loss.
• Large automakers like Maruti Suzuki and Hyundai have slowed production, causing ripple effects in supply chains.

The numbers make it obvious: something big has shifted. It's more than just consumer mood swings—real, measurable market changes are underway.

Why Are People Buying Fewer Cars?

The slowdown in the Indian auto market isn’t hanging on one big reason—it’s a combination of things hitting buyers from all sides. Back in 2018, feeling the thrill of a new car was more common, but now the scenario has changed for many middle-class families.

First, check out this bit: personal vehicles have become a lot more expensive in just a few short years. New safety rules like airbags, stricter emission standards, and upgraded tech have all added up. Here's a look at how much more people are expected to pay for a standard hatchback:

So, cars are pricier. Financing is another hurdle—banks have tightened their loan criteria. If your credit isn’t spotless or you’re self-employed, getting a good loan is far tougher than it was a few years back.

Then there’s the new mindset, especially with people in their 20s and 30s. They prefer flexibility over owning stuff. Why bother dealing with a car’s monthly EMI, insurance, maintenance, and parking headaches when cab-hailing apps or subscription models are everywhere? In cities like Bangalore and Delhi, ride-sharing and car rental apps have exploded in popularity. You only pay when you use, so there’s no long-term stress.

Another big reason: Indian automobile industry jobs have shifted, and incomes for many families haven’t kept pace with inflation. That’s made even small car upgrades a tough sell, especially as salaries haven’t jumped up to match the jump in prices for essentials.

• High upfront cost due to upgrades and taxes
• More loan rejections and higher interest rates
• Convenience of ride-sharing as an alternative
• Worries about maintaining another vehicle at home

There's also uncertainty around new rules (like emission bans) and the future of petrol and diesel vehicles. People don’t want to end up with a car that’s suddenly out of favor or too expensive to run. All together, this has totally changed how buyers approach the car market today.

Government Rules: Help or Hindrance?

When you look at the Indian automobile industry’s roadblocks, it’s impossible to ignore the role government rules play. Over the last few years, manufacturers have had to deal with a wave of new regulations. Some have helped drive innovation, but many have made things harder—especially for small and mid-size companies already struggling to stay afloat.

Take the big jump to BS6 (Bharat Stage 6) emission norms in 2020. These rules were supposed to cut pollution, and that’s good for everyone. But the switch was sudden. Car makers couldn’t sell their old BS4 stock after the deadline. Millions worth of unsold inventory had to be scrapped or heavily discounted. On top of that, the technology upgrade drove car prices up by 10-15%. For a middle-class family in India, that increase put a new car further out of reach.

Let’s see some real numbers:

This table shows how each rule change meant higher prices, and often a dip in sales. And it’s not just about emissions. The recent push for mandatory six-airbags in all passenger cars was meant to make cars safer. While that makes sense, it made smaller cars even more expensive to produce, and some buyers simply backed off.

Taxes are another pain point. The GST on cars stands at 28%, with an additional cess bringing total tax on a regular sedan to as high as 43%. That’s almost half the sticker price eaten up by tax before the car even leaves the showroom!

To sum up, government interventions have kept the Indian automobile industry on its toes. Some rules, like electrification incentives, are forward-looking. But sudden changes, steep taxes, and costly upgrades have also made cars less affordable and slowed growth across the board. The trick now is for both the government and automakers to find better balance—protecting jobs, the climate, and buyers’ wallets at the same time.

The EV Puzzle and Local Slowdown

Everyone’s talking about electric vehicles (EVs) as the future, but in India, making that jump is more complicated than it sounds. Most big auto companies had to invest a ton to start building EVs, and while the hype is huge, the actual sales are crawling. In 2024, EVs made up just about 2.5% of all car sales in the country. Compare that with China, where it’s rolling past 25%. That’s a massive gap.

Why isn’t the shift happening faster here? For starters, EVs are expensive. An average electric car in India costs nearly double what a simple petrol hatchback goes for. Charging infrastructure is spotty—go to a small city or a remote town, and you’ll be lucky if you even see a public charging point. Plus, a lot of folks are nervous about battery costs and what happens when it’s time for a replacement.

“Our surveys show that 7 out of 10 Indian drivers are worried about range anxiety and charging, not just the sticker price,” says Rajesh Menon, Director General of SIAM (Society of Indian Automobile Manufacturers).

This messes with local manufacturing too. Many suppliers are set up for traditional petrol and diesel. Shifting to EV components means re-training staff and ordering new equipment. Smaller companies just can’t afford that sort of switch-over right away.

If you’re in the auto sector, you’re probably seeing these issues up close. Here’s a snapshot of how the numbers looked last year:

Notice that the Indian automobile industry is seeing fast EV growth in percentage, but actual numbers are still tiny. Hybrid models are picking up a bit, but not enough to cover for falling sales in petrol and diesel vehicles. It all adds up to a complicated transition—one with more bumps than anyone expected.

If you’re thinking about getting into EVs or manufacturing for them, keep your eyes peeled for government incentives. Still, don’t expect an overnight turnaround; the wheels are turning slower than the headlines make it seem.

Impact on Jobs and Manufacturing

The slowdown in the Indian automobile industry has hit workers and manufacturing plants right where it hurts most—in job security and day-to-day factory operations. It’s estimated that between 2019 and 2024, over 350,000 workers directly linked to the auto sector lost their jobs. That’s not counting the thousands more in related fields like car parts suppliers, dealerships, and logistics.

You’d expect big names like Maruti Suzuki, Tata Motors, and Mahindra to be safe, but even they’ve trimmed their workforce or put hiring freezes in place. Some suppliers, especially those making traditional engine and gear parts, have had to shut shop because demand for older tech cars melted away much faster than expected. If you visit the manufacturing clusters in places like Gurugram, Pune, or Chennai, you’ll see entire industrial areas running at way below their best capacity.

The struggle also means more contract workers are getting the short end of the stick. Companies let go of temporary staff first, leaving many families wondering where their next meal will come from. For those with fixed positions, pay hikes and promotions have been delayed, or just scrapped altogether.

This has a domino effect. Slower production means suppliers get fewer orders, and raw materials like steel or plastics don’t move as fast out of the factories. Truck drivers, small vendor workshops, and even restaurants around these giant plants feel the pinch. The result? Entire local economies can slow down when just one major auto plant cuts back.

For those working in the industry or eyeing a job here, it’s a smart move to pick up skills in areas like electric vehicles, battery tech, or digital tools used in modern cars. Many companies now look for people who can multitask and adapt to changing tech, which helps when the ground keeps shifting under your feet.

What the Industry Can Do Next

It’s not all doom and gloom—there’s room for a turnaround if the right moves are made. The Indian automobile industry needs to do a few things fast to shake off this slump and stay relevant against tough global competition and changing local preferences.

Let’s break down some practical steps that can actually make a dent:

• More Affordable Models: Indians are price-conscious. Carmakers have to design cheaper, small-sized vehicles or offer stripped-back versions so first-time buyers feel comfortable making that jump.
• Flexible Financing: Banks and finance companies need to relax loan terms, at least a bit. Lower down payments and longer repayment options can bring buyers back.
• EV Infrastructure Push: Right now, charging stations are a rare sight outside top cities. Industry giants could partner with energy firms and state governments to build those up quickly. That would boost confidence for anyone thinking of buying an electric car.
• Digital Showrooms & Quick Service: Selling cars online with home delivery is catching on fast. Brands like Maruti and Hyundai have already started. Real-time chatbot help and doorstep service visits can seal the deal for tech-savvy buyers.
• Local Sourcing: Import duties hit hard. Making everything from engines to infotainment units in India could cut costs and create jobs. Tata Motors, for example, now sources almost 92% of parts for its bestselling models right here in-country.

Just to give you a clearer picture, here’s how a few big players are trying to fix things, based on their most recent annual reports:

The industry can’t bank on a magic solution, but focusing on cost, accessibility, and digital innovation will drive buyers back—slowly, but surely. For suppliers and car dealerships, staying agile and ready to try new models or sales channels is pretty much a survival rule now. No easy answers, but there’s a way forward if everyone adapts fast.