Mystery of the Dipping Auto Sales

Most of us, who have been born well and belonged to well endowed families often look upon the consumption of stuff by the less endowed as being aspirational. We imagine that they are imitating us when they buy their refrigerators or an automobile. Little that we understand that as more and more people improve their incomes, they get into the same income class as ours they develop similar needs. Hence the automobile was a need of a middle class lifestyle as well as livelihood needs for most people who get into the middle class. This means that it has little to do with aspirations. But an expansion in the middle class means that the cities are more populated, land prices being on the rise, the city limits spread out into suburbs and distances stretch between anywhere to anywhere. With overcrowded buses and heavy traffic, it makes sense to use the car if only for anything then at least to get less sweat and have your clothes crushed by the crowd in public transport. The expansion in affluence intensifies car ownership in the city. Since the development of infrastructure needs huge fixed capital, the rate of growth in investments in infrastructure comes much slowly than the rise in personal incomes. Hence, compared to the investments into the development of roads and housing, the need for these increase much faster causing land prices to increase and roads not to increase faster than the number of cars driving on them. Traffic jams are the measures of the discrepancies between investments into infrastructure and the speed of growth of middle-class incomes. Traffic jam is the sign of rapid economic growth of personal incomes. As incomes grow, one may expect that the ownership of cars will continue to grow; unfortunately, the drop-in car sales has come as an unexpected shock.

It is not only the drop in the sale of cars but the closure of one car factory after the other and millions of retrenched workers on the streets that has created a panic among Indians by which we are to revisit our data; is the Indian economy growing after all? Were the growth percentages a lie? Did not personal incomes increase? Then why is the hunky-dory story not reflected in the sale of cars? Let us not get into the controversy of the growth figures; let us assume that growth happens, and personal incomes keep rising and yet, contrary to all expectations, auto sales drop. Why is this so?

Here we may think of the famous S curve in demand. The S curve signifies that when consumption levels of durable items are low when incomes are low and may take income levels to rise to some respectable threshold for households to accumulate some savings or creditworthiness. At very low levels incomes may have to rise for quite a while before consumption of durables begin. As household incomes reach certain levels in which savings start accumulating to at least a third of total incomes consumption of durables start increasing very fast. In fact, consumption rises ahead of incomes, loans are used to close income and consumption gaps and future incomes are used to calculate creditworthiness for issue of loans. However, in the upper reaches of incomes, incomes rise faster and most stuff which are to be bought have been done and households taper off their needs for consumption. Consumption falls below incomes.

In case of the dropping automobile sales, there are two possibilities. One, personal incomes have risen so much that the desire or even the requirement for owning a car has dropped as households can afford to rent car and driver services. For middle income households, if the promise of future incomes disappears, credit worthiness of households drops as well, and financing of consumption becomes difficult. In case of India’s automobile sector, both forces have played out at the same time. While increase in incomes have shifted the preference towards hired cars, the middle class having lost the certainty of future incomes have settled for the Uber system.

The middle class buys a car for keeps, especially if this is for purposes of aspirations. The usual metaphors of a girlfriend, child, pet and friend or even a family deity is rested upon the automobile. Ritwik Ghatak’s movie, Ajantrik which speaks of a car which is almost human. The attachment of the human to the automobile is so sentimental that Ajantrik takes on the pathos of Saratchandra’s story, Mahesh which depicts the love between a buffalo and his owner. When the government passes the law that no car will be allowed to ply the roads after the 15th year of age it offends the sentiments of car owners. People pride in their first car which they often keep for years and even across generations. Setting a limit to the life of a car is therefore to offend a primary reason for owning a car, namely pride and emotions of the owner to the car. Indians go a lot by sentiments, to impose the impersonality of consumerism on a civilization that basically likes only simple living is to greatly misunderstand and undermine it. Economies do not run counter to civilizations.

Development has cut off points; actually, much of Indian politics is against development and not in favour of it. Narendra Modi has not come on a mandate for development; he has come on a mandate for not developing. Development means changing landscapes and cityscapes and apart from the annoyance caused by dug up roads and piled up gravel and concrete, development is a health hazard with broken thoroughfare, water logging, epidemic of dengue, choking due to pollution and others. Development changes the contours of the spaces and it is not merely the skyline

Development changes the demographics of spaces, the more successful migrant pushing out the native from the land. Along with spaces, time changes too as commuting takes more time. For a while, people adapt to changes in spaces and time through aspirations like buying apartments and cars; later then somehow give up being on the bus by reverting to rental properties and hired cars. Indeed, a downward slide in the expectations of future earnings have a lot to do with it and perhaps this diminishing prospect of earning well right into the future takes the mind off aspirations, settling down for minimalism instead in the form of occupation and use rather than ownership. In other words, if the economy does not own its people, people will also start not owning the economy and the present-day economic recession is nothing but the mutual disowning by the economy and its people of each other. The dip in automobile sales is a manifestation of this mistrust.

There is traffic on the roads and the surface is not in the best of conditions. Driving is more pain than pleasure. Besides, the time consumed in commuting is too long to be away from the WhatsApp and messengers. Drivers mean enormous expenses, drivers also mean having to carry a passenger in your life, salaries, wellbeing, anxiety over absence from duties and other human resources related problems do not augur well for the employers, the car owners in this case. Hired cars address and resolve the problem of time consumed in commuting far better than hiring a driver.

The rise of the police as a draconian force on the streets works as a deterrent in wanting to drive a car. It is much worse if it is a two-wheeler. Driving your own vehicle exposes you to an oppressive state and blood sucking rules. Who wants to have a car when you have an Uber? Then there are ever changing rules around the vehicles, pollution rules, rules of checking the CNG tanks, rules around insurance and driving licenses and so on. Then rules change around emission norms making it necessary for you to buy a new car every five years. Fuel prices are a concern as well, not so much the prices but the constant change in the prices towards a limitless sky is too unsettling for the users. Hence the Uber.

Have we realised that with changing income patterns, our time and space use has changed too? There are very few of us who need to attend regular office and for the one-off day that we go for a meeting in different locations, we don’t really need to invest in a car and a driver.

City spaces are cramped up and with vehicles jamming up the streets, parking is an issue. Parking is stressful, eventful and conflict ridden and no sooner do these invoke the most terrible killer instincts pertaining to the riot. If you have a car, you are at risk of entering a zone of social conflict. If you don’t, you are mentally freer. There is anxiety associated with owning a car; until and unless the rest of the anxieties like the prospects of income are settled in, one does not really have the mind space or the mood to take in more anxieties.

The discourses around the electric vehicle have played their role in the dipping auto sales as well. We arrive at Joseph Schumpeter now where all the principles of Alfred Marshall which assume technology as the given T begins to vary with a variance in technology. As technology stagnates, Schumpeter says that both profits as well as prices of products drop and not until the new technology rises again on the horizon do returns on investments and willingness of consumers to pay rise again. The present-day cars run on fossil fuels may well signify the ultimate stagnation of technology and it is possible that consumers are waiting for the electric vehicles to come and are shelving their purchases.

There should be a shift towards the hired car and now more people would buy hired cars. But hired cars which can serve about twenty passengers a day will represent only a twentieth of the passenger cars and will not constitute the whole volume of purchases. Besides, as people do not go to work everyday these days, the use of car by individuals is likely to go down even further.

The drop in the sales of automobiles is therefore a coming together of various forces, primary among these being the growing income inequality where growth of income in some segments and the non-growth of money to the commensurate level in the others have both contributed to the deceleration of auto purchases. The story of dipping sales is also a story of human annoyance with what we call as development, the irritation with too much population a la, the attitude of the police, the over enthusiasm of end of life declarations around cars and far too many rules over the use of cars for owners to follow. The fiasco in the auto sector is one of the paradox of development, a sign that the human does not always respond well to the purported limitless growth.

About secondsaturn

Independent Scholar. Polymath.
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