5 Main Reasons behind Automotive Industry Slowdown

Mark Alfred
4 min readOct 25, 2019

There is no denial in saying that the automotive industry is seeing a decline in its sales, as the production and sales numbers continue to drop month after month. Part of the consequences includes vehicle manufacturers having to cut jobs dealership stores that have been shut as they reduce their output in an attempt to maintain their own fiscal balances. The downward trend continues as a large variety of factors have cumulatively led to this situation and we try to understand those which seem to have played a dominant role in it.

Here are some of the top reasons behind this auto industry slowdown.

Economic Situations

In the current economic environment, banks have become more strict about giving out loans, as strict credit checks and repayment histories are being monitored this data is used to analyze credit rating and approve loans. Some people with low credit ratings will not be approved for a loan, therefore, making new car ownership out of reach in most cases. Banks are also being stringent in lending money to dealers to capitalize on their inventory resulting in fewer orders and units which has led to the slowdown of the industry.

Pre-owned Market Growth

Buying a brand new car is generally the biggest discretionary purchase a household makes. Either you’ll hang onto your current car for a bit longer or, if it really is only fit for the scrapheap, you’ll buy second-hand.

People these days are trying to save money by getting pre-owned vehicles. This trend is on the rise with no slow down in sight making this the people choice for car ownership. This way, they will get the right vehicle with some great features at an affordable price. From students to employees, everyone likes to invest in the pre-owned market rather than investing in the new vehicles and this has impacted the automotive industry in a big way and is a major cause of the slowdown in the automotive industry

  • Uber and Ola Effect

Taxis have been around for many decades. However, they were always quite expensive, hard to find and some companies were infamous for their unreliable services. Today, we can thank the internet and our smartphones for the convenience of ride sharing services from the app like Uber, Lyft, Ola and more. In fact, in the last year or so, these apps have gone beyond just booking a ride they deliver products like fast foods, flowers and offer many other services, with the added convenience of online fare payments. The use of these apps for smaller commutes seems a more favorable prospect than buying your own car and the hassles that come with it, a stark contrast from only a few years ago when people bought their vehicles to avoid public transport.

Traffic and Crowd

The traffic is another big hassle in any large city. A large volume of new car sales are driven by young, upcoming professionals with growing incomes and fewer liabilities. But even if you have the money to buy a car, you will likely spend a lot of your time driving it in congested traffic and/ or looking for a suitable parking space that will cost you an arm and a leg. A regular commute in congested traffic consumes a lot of time and energy as well. Time and energy that could be spent working or resting in the back of an Uber/Ola ride during your commute. The congested traffic has created a significant impact on car buyers.

  • Going Green with EV’s

There is a lot of rhetoric surrounding electric mobility and electric vehicles which leaves many uncertainties for both carmakers and buyers about what to invest in and more critically when to invest. Affordable EVs with sufficient range are a must for the electric mobility shift to become reality. However, this goal is harder than it seems as the current battery technology is not at that stage yet and neither is their charging infrastructure. Promises are made and goals set but is that enough for the breakthrough that is required to make e-mobility a mass market option? The production and development of electric powertrains, battery tech and charging infrastructure is still in its early stages and will likely take another 5 to 8 years before mass EV adoption begins.

How To Improve Productivity And Revenue?

All the factors mentioned above regarding the automobile industry’s slowdown are real and here to stay so we need to understand and embrace them. But there are some other things that the industry can do like focus on technology changes that drive change and innovation through digitalization. Digitalization can improve and increasing productivity in the sector, which will, in turn, help in increasing the revenue too.

5iQ software is one option that the automotive industry can opt for better business management. This software will automate every process and streamline it effectively.

Key Takeaways

The auto sector continues to witness a slowdown, and the one way to handle this effectively is with the enablement of digitalization powered by advanced technology.



Mark Alfred

Mark Alfred is the Founder & CEO of 5iQ, cloud-based automotive software for the auto industry. We at 5iQ, love sharing and discussing mechanical industry news.