India's Car Market Just Crashed, Had Its Worst Month In 18 Years

Automobile sales in India are crashing at the steepest pace since December 2000, an auto industry body told Reuters on Tuesday.

The Society of Indian Automobile Manufacturers (SIAM) said domestic passenger vehicle sales in July plunged 30.9% to 200,790. It's the ninth consecutive month of declines and the steepest drop in 18 years.

India has been a significant manufacturing hub for carmakers until 2017, with annual sales of passenger vehicles growing by 33% over the past five years.

The downturn in the automobile industry is a significant obstacle for Prime Minister Narendra Modi's government because autos account for 50% of India's manufacturing output.

Automobile companies, directly and indirectly, employ more than 35 million people.

"If this industry goes down, then everything gets hurt. Manufacturing, jobs, and revenue to the government," Vishnu Mathur, director general, SIAM, told Reuters on Tuesday, adding that car and motorcycle manufacturers have already slashed about 15,000 jobs.

Federation of Automobile Dealers Associations (FADA) warned that the automobile downturn would continue to cycle down through 2H19, leading to more job losses with dealerships and across the entire industry.

"The majority of job cuts have happened in the last three months...It started around May and continued through June and July," FADA President Ashish Harsharaj Kale told Press Trust of India.

Kale said, "Right now most of the cuts which have happened are in front-end sales jobs, but if this (slowdown) continues, then even the technical jobs will be affected because if we are selling less then we will also service less, so it is a cycle."

Already, the auto sector has cut as many as 350,000 jobs; this includes auto manufacturing, auto parts manufacturing, and dealership jobs.

Last month, Bosch Ltd, the largest parts maker in India, published a memo that outlined how it suspended operations at its Gangaikondan plant in Tamil Nadu for a week in late July to "avoid unnecessary build-up of inventory."

Ram Venkataramani, President, Automotive Component Manufacturers Association of India (ACMA), said the 15% to 20% cut in auto production had triggered an auto crisis in India, could lead to at least one million people being laid off.

The auto crisis - regarded by industry executives as a disastrous downturn that could be one of the worst seen in the country's history.

Auto companies have asked the Modi government for tax breaks to offset the slump.

"The data shows an urgent need for a revival package from the government. The industry is doing everything possible to increase sales, but it needs government support to prevent the crisis from worsening," Mathur told reporters in New Delhi.

The current manufacturing slowdown in India is cyclical and isn't expected to trough for the next several years. Autos were the first domino to fall, and next, it could be the Indian consumer. The bust cycle has begun.