India’s auto industry could be “ruining” the country’s economy and the global financial system, analysts say.
Telegraph India’s Jalpaiguri auto market is among the worst hit by the collapse of Indian car sales and could see its value collapse by as much as 25% this year, analysts at J.P. Morgan said.
The firm’s annual report, released on Wednesday, said the country is expected to have around 1.3 million vehicles in the car market by 2020, down from an estimated 1.7 million vehicles a year earlier.
India’s automobile market, dominated by the homegrown Tata group, has suffered a number of bad news over the past year, as consumers have grown wary of the impact of a weak rupee and a prolonged economic crisis on their lives.
While Indian car makers have not been able to produce cars with the quality that customers demand in the country, they have been selling high-end luxury cars, which critics say are too expensive for ordinary Indians.
As India’s economy has slumped in recent years, the car industry has been hit with a rise in car sales as a result.
In the past three months, Indian car maker Tata has lost more than $200 million, while the carmaker Jaguar, which also lost money, has lost almost $200.
“India’s auto market has become an engine of the global economy and, if it falls, it will take a global downturn with it,” said R.K. Gupta, managing director at JPMorgan India.
Indian car maker J.
K Mahindra, which has about 1.5 million vehicles, had a $100 billion market value last year, up from a $58 billion market cap in the previous year, according to a Reuters report.
JPMorgan has estimated that Tata and Mahindras loss will reach more than 40% of the total global auto market by 2025.
A Tata spokesperson said the company will focus on making more affordable luxury cars for the Indian market.
Analysts at JPA Group said that even if Indian car manufacturers are able to make a comeback, they are unlikely to have much impact on the global market.
“We see no reason to believe that the auto industry will be able to recover from the crash in India, and this is especially true in India where the government is spending more money on infrastructure to keep up with demand,” said M.S. Shah, chief executive officer of JPA.