Slump In Auto Sector Seems To Be Ominous

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Speaking at the 59th SIAM annual convention, SIAM President Rajan Wadhera said, “A million contractual manufacturing jobs are at risk due to the consumption slowdown.” He also remarked that the market has still not responded to the various measures initiated by the government to reverse the slowdown that has dented the industry. Reacting to the dismal sales numbers of various companies for August, SIAM President RajanWadhera said the series of announcements on credit availability and reducing the cost of credit that were made do not seem to have percolated down to the NBFCs which support the bulk of finance for the automotive industry.”The consumer sentiment also continues to be low and there is clearly a trust deficit in lending money to the dealers,” he said, as per a SIAM statement.

To help revive the sector, Finance Minister Nirmala Sitharaman on August 23 had announced that the government departments would be allowed to buy new vehicles, automobiles purchased till March 31, 2020 could avail the benefit of additional depreciation of 15 per cent, with total depreciation up to 30 per cent, and BS-IV vehicles bought till March 31, 2020, would remain operational for their entire registration period.The sector has been going through a slowdown for the past few months due to several reasons including, high goods and services tax (GST) and liquidity crunch. Wadhera pointed out the urgent need for the government to reduce the GST rates on automobiles from the highest 28 per cent. “All this while, the industry has pulled out all stops in offering attractive deals and discounts to the consumers,” he said.

Recently, Tata Motors reported a 49 per cent slump in its domestic sales on a year-on-year (YoY) basis at 29,140 units. The commercial vehicles’ sales dipped 45 per cent to 21,824 units. It sold 7,316 passenger vehicles in August, a decline of 58 per cent from 17,351 units during the year-ago month. Maruti Suzuki India reported a 32.7 per cent decline in its vehicle sales last month YoY. The company sold 1,06,413 units, including exports, compared with 1,58,189 vehicles in August 2018. Similarly, Mahindra and Mahindra’s (M&M) local sales declined 26 per cent YoY. It sold 33,564 vehicles during the month against 45,373 units in the year-ago month. “The auto industry continued to be subdued in August due to several external factors,” Veejay Ram Nakra, Chief of Sales and Marketing, Automotive Division, M&M.Hyundai Motor India sold 38,205 units, lower by 16.58 per cent from 45,801 units in August 2018. Speaking on the auto component industry, Ram Venkataramani, President, ACMA & Director, Amalgamations Component Group, said that the auto component industry crossed the 57 billion dollar mark in 2018-19. Talking about the importance of the sector, he said “The industry currently employs 50 Lakh people and contribute 2.3percent to the country’s GDP. The current transition to BSVI norms has also impacted our revenues to an extent.”

Cars are no more an aspiration
Uday Kotak urged the auto industry to brace for change as, he added, cars are no more an aspiration. Speaking at the annual convention of Society of Indian Automobile Manufacturers (SIAM), Kotak said that customers’ preferences are swiftly changing and manufacturers should be prepared for the onset of shared mobility. Asia’s richest banker gave a personal example and said that his son prefers to travel by cab aggregators such as Uber and Ola.”A car was a status symbol when I started my career. But my son is more comfortable with Ola and Uber which is a classic example of capacity utilisation,” he said at the convention.

PETROL AND DIESEL VEHICLES WON’T BE BANNED
At the recently held 59th SIAM (Society of Indian Automobile Manufacturers) annual convention, Nitin Gadkari, Minister of Road Transport and Highways of India announced the government’s take on the BSVI emission norms that come into effect next year, shift to electric vehicles and also how it is looking at private investments in the public transportation sector to bring in necessary growth.

Nitin Gadkari, Minister of Road Transport and Highways of India
Addressing automobile and ancillary manufacturers present at the 2019 SIAM convention, the minister mentioned, “We know what you are worried about now. The government is also concerned. The slowdown has relation to employment potential as well as the growth of the country. The finance minister, Nirmala Sitharam is trying to find solutions”. He also added, “The government is not proposing to ban petrol and diesel cars in the country. The ? 4.50 lakh crore automobile secto, provides a lot of jobs and exports too have increased. But the government is facing some problems. First among which is the cost of import of crude oil. The second is pollution and the third is road safety.”

The preventive measures that he said which the government is taking to make things better are as follows:
Petrol and diesel powertrains won’t be banned.
BS-VI vehicles will be more expensive, so car-makers need to find new ways to ease buying for the consumer.
Will propose to the Finance Minister to offer GST reduction benefit on hybrids.
Will also propose to the FM to offer tax relief on petrol and diesel fuels amid rising crude oil prices.
Proposes the auto industry to device their own finance schemes to counter the challenges posed by the banks.
Proposes adoption of London transport model.
Proposes private investment in public transport to add up to 15 lakh buses and subsequently generate employment.
Says that the Road Transport Ministry will award 68 new road projects in the next three to four months, worth Rs 5,00,000 crore.

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