Auto Stocks Steep Fall …Is it Right Time to Invest ?

Auto Sales !!! A Steepest Fall in Last 18 Years!!! Time to Buy or Wait ?- A Big Question. Many Automobiles companies have forced to shut part of their plant to reduce their current inventories. All the big players are being continuously monitoring current market scenario & adjusting their inventories.

Let us see the main reasons why there is a steep Auto sales decline from the last few months.

• NBFC Crisis & Liquidity crunch played a bigger role, as NBFC were one of the main sources of funding & giving loan to consumers.
• Again due to Election years have been accompanied with a cutback in discretionary spending such as buying cars & Motorbikes.
• A shift to the new BS-VI emissions norms from April 2020, which has meant that manufacturers have held back launching any major upgrade to their products.
• A new rule for Mandatory insurance that effectively increases the final price of a vehicle has also been blamed. 

The Solution to the above problems will take some time. But meanwhile, some immediate action which automobile industry suggesting a strong government intervention to put the industry back on track. Cutting the Goods and Services Tax (GST) on all categories of vehicles to 18% from 28% at present and the introduction of a vehicle scrapping policy that will encourage people to discard their old vehicles and buy a new one.

Well, As you see problems are many but there may light at the end of a dark tunnel. The Government will take a few steps to put some of the above problems in rest. Once demand will pick up Auto cycle will turn. Also during adversity, only one will get good stocks at a good price entry level.

So there may be a pain at short term period but anyone having a long Term view can invest in Auto stocks at current level & fetch a good return.

Happy Investing!!!

CA Tapan Doshi