Fact Check

Is Modi Government Responsible for a Global Slowdown in Automobile Industry?

slowdown in the automobile industry

There is no denying of the fact that there has been a slowdown in the automobile sector. But the way in which Congress and a section of opinion makers are showcasing it as Modi government’s failure certainly needs a fact check. Look at the statements given in recent weeks. Citing the slowdown in the automobile sector, Abhishek Manu Singhvi said the country is facing financial emergency-like situation! Digvijaya Singh of Congress has linked the slowdown to ‘tax terrorism’ of the government. Congress party also gleefully shared Raghuram Rajan’s comment on the Indian economy in which the decline of the auto industry is mentioned among other things.

Here are some key points to consider:

  • While India may have a reason or two of its own for the decline in the automobile industry, the slowdown in the automobile sector is a worldwide reality.
  • The trend suggests that both manufacturers and consumers are at a transition point to shift towards electric vehicles, with a degree of uncertainty which apparently fuelling this slowdown.
  • There is also a behavioural shift among people who are increasingly wary of vehicle ownership.
  • Rajiv Bajaj, MD at Bajaj auto and not necessarily an ardent supporter of this government has said “most of the slowdown is automobile industry’s own making”.
Worldwide Slowdown of the Automobile Industry

These are the headlines emerging from the world’s largest automobile manufacturing nation China this year.

 

While analysing the trend, Nikkei Asian Review wrote:

“The weakening of the Chinese car market is sending tremors through Germany’s auto parts industry, adding to its concerns about the global shift to electric and other alternative-fuel vehicles.”

Well, as far as United States of America is concerned, the evident frustration expressed in this particular tweet of its President says all about the state of automobile industry.

A report in the BBC in June 2019, acknowledges that UK is witnessing a struggling car industry and goes on to offer reasons for the slowdown. It lists falling demand, emission woes and electric vehicle challenge etc.

The situation in other European market is no different.

 

What did the Honda company say when it announced to close-down Swindon car plant may offer some reason for the present churning that is happening in the automobile industry worldwide. It said:

“We’re seeing unprecedented change in the industry on a global scale. We have to move very swiftly to electrification of our vehicles because of demand of our customers and legislation.”

Conclusion

There has been an effort to claim that Modi government will lead this country to economic failure. It has been argued that even a slowdown in the sales of Parle-G is a reflection of Modi government’s failure. We have busted this claim in our article Parle-G Slowdown Began in the Era of Rahul G Not Modiji. Now, the company itself has clarified that the much-quoted “10,000 job loss” is just an eventuality and not a single job is lost as of now. All the naysayers refuse to acknowledge the progress that this government has made through behavioural economics which we have explained in our article Economy Is Not Just Numbers, It Is People – Modi Govt Gets This Right. Blaming the Modi government for a global phenomenon in the automobile sector is also another example of a misleading narrative. Going by the recent response of Rahul Bajaj, a certain level of scaremongering also appears to be mixed in this development. Rahul Bajaj who himself leads a big automobile company has said, “companies shouldn’t be resorting to fear-mongering by talking of job cuts as employee salaries account for just 4 percent of sales.”

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