The Indian automotive industry received a much-needed push from the government to get the ball rolling and have the cash counters ringing once again as Finance Minister Nirmala Sitharaman announced several measures to help the industry. This comes at a time when the entire automotive sector in India is ailing with a slowdown that has resulted in it touching a 19-year low in terms of sales. This has been spread throughout the segments including passenger vehicles as well as commercial vehicles, with component manufacturers feeling the pinch as well. As per reports, since April 2019, there have been over 3.5 lakh layoffs across the industry with the situation only set to get worse.
Hence, I was time for the government to intervene to make things better and that’s exactly what was initiated by the finance minister.
The highlights amongst the measures announced were the minister’s reassurance that BS-IV compliant vehicles will continue to run through the entirety of their registration period, lifting the ban on the government departments from buying new vehicles, doubling the tax benefit for automakers and also postponing the revision of one-time registration fee.
Here’s how the auto industry is responding to these announcements.
Ram Venkataramani, President, Automotive Component Manufacturers Association (ACMA), said, “The announcements made by Hon’ble Finance Minister are indeed very assuring and welcome. We do hope that measures to improve liquidity and deferring of enhanced vehicle registration cost will revive the ailing sales in the auto sector. That apart, enhanced depreciation of 30% until March 2020 will motivate institutional sales of vehicles. Further, removal of the ban on the purchase of new vehicles by the government will also help reduce the current pileup of inventory. We do hope that the Central Government in consultation with the Sates will consider ensuring a uniform GST rate of 18% on all auto components. Currently, 60% of auto components are at 18%, while the rest are at 28%. A lower rate of GST will not only ensure better compliance but also help curb grey operations in the aftermarket.”
S S Kim, Managing Director and CEO, Hyundai Motor India Ltd, said, “We welcome the Government’s measures to boost the economy and automobile sector in particular. We are optimistic that this move will boost the customer sentiment in the current market scenario and encourage customer acquisition of car in the coming festival season.”
Vikram Kasbekar, Executive Director – Operations (Plants) and Chief Technology Officer, Hero MotoCorp, said, “We welcome the measures announced by the Honourable Finance Minister, to improve liquidity, increase ease of lending and transmission of rate reduction to the ultimate borrower. The announcements specific to the automotive sector provide clarity and positivity to both OEMs and customers. However, we would reiterate our request that two-wheelers, which are neither luxury nor ‘sin’ goods, require a reduction in the rate of GST from 28 to 18%. This will help boost demand immediately, leading to an even more positive impact. We hope this will be addressed in the next round of measures.”
Charles Frump, Managing Director, Volvo Car India, said, “Announcements by the government will rejuvenate the economy through the flow of credit and revival of consumption. The government has clearly signalled full support to the automobile industry which is reeling under a prolonged slowdown for more than 12 months now. The decision to allow a higher depreciation on cars, interest rate cuts and BS4 vehicles to run their life of registration will boost demand for the industry. The speed with which the government has responded after meeting various representatives of the industry is also highly appreciable.”
Venu Srinivasan, Chairman, TVS Motor Company, said, “These measures will provide the immediate relief that the industry was seeking. The promptness of this government’s response is reassuring for not just industry, but for the common man as well because it’s putting liquidity into the market and easing the squeeze on the small and medium sector. While there are indications of a global slowdown, this government has demonstrated its resolve to mitigate the impact of that in India through these measures. This is the stability and proactiveness that industry wants.”
Rohit Suri, President & MD, Jaguar Land Rover India Limited, said, “While the increased depreciation from 15% to 30% and deferment of increased registration fees till June 2020 will have a positive impact, moderation of GST base rate from 28% to 18% for all categories as being requested by the auto industry for some time now would have been the real demand stimulant!”
Rahil Ansari, Head, Audi India, said, “We highly appreciate the approach of the Government and the support with regards to the automotive industry taken. Now it is up to the banks and NBFCs to deliver the trust and benefit given. We are confident that the ease of access on loans to consumers will also be improved by banks. Independent of this we have had and will continue to have strong in-house financing that customers can continuously rely on. Additionally, the clarity on BS-IV vehicles and decision to support all fuels will remove the confusion that customers are facing. We have always maintained that luxury is not a sin and are thus enthused by the government’s focus on reviewing the Super Rich tax. This should improve customer sentiment specifically in the luxury industry.”
Martin Schwenk, MD & CEO, Mercedes-Benz India said, “We welcome the firm measures announced by the Finance Minister today. The host of positive measures announced has given the much required boost to the auto sector and also sets a clear roadmap. We are confident that these measures once implemented, will support growth and drive demand for the auto sector.”