Sensex Ends 164 Points Lower; Auto And Telecom Stocks Witness Huge Selling

Maruti Suzuki India's Executive Director Shashank Srivastava told news agency that the ownership pattern in India still has not changed and people purchase cars with an "aspirational aspect". The Ola and Uber factor may not be strong to contribute to the current state of slowdown, he said.

The Maruti executive said the auto sector saw one of its best times during the surge of Ola and Uber and other cab aggregators. He said that Ola and Uber came into existence during last 6-7 years and in this period, the auto industry also saw some of its best times.

This comment came in contrast with the comment made by Finance Minister Nirmala Sitharaman yesterday where she said the slowdown in the automobile sector was due to many factors like the change in mindset of millennials, who now prefer taxi aggregators like OLA and UBER instead of committing for monthly installments to own a car.

Srivastava further cited the US market which has seen robust auto sector in spite of Uber which is a big player there. He noted that in India, 46% of the car buyers are first time users. It is an aspirational behaviour. People may use public transport like Ola and Uber to go to offices on weekdays, but still they buy a vehicle for the weekend outings with the family, he said.

Note that the Finance Minister yesterday said that the auto sector had been affected by several things and the government is all seized of the problem and will try to solve it.

On August 23, in a bid to address the slowdown in the auto sector, Sitharaman had announced lifting the ban on purchase of vehicles by government departments and allowed an additional 15% depreciation on vehicles acquired from now till March 2020.

Also, the government clarified that BS-IV vehicles purchased up to March 2020 would remain operational for the entire period of registration, while also considering various measures, including scrappage policy to boost demand.

How these decisions pan out in the coming months remains to be seen. Meanwhile, we will keep you updated on all the developments from this space.

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Disclaimer: Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research ...

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