Auto firms seek stimulus to spur demand

Auto sales across categories declined over 12% in the June quarter of 2019.

Auto sales across categories declined over 12% in the June quarter of 2019.  

To meet FM with two key requests — cut in GST rate, steps to boost liquidity

Amid declining sales and job cuts in the sector, the automobile industry will meet Finance Minister Nirmala Sitharaman on Wednesday to seek a stimulus package to help spur demand ahead of the upcoming festive season.

“We largely have two demands — reduction of GST and introduction of measures to improve liquidity,” an industry representative, who did not want to be named, said.

Reeling under slowdown

The industry has been reeling under slowdown in demand with sales across categories declining over 12% in the June quarter of 2019 over the same quarter last year.

Sales of passenger vehicle — one of the worst impacted segments — were down 18.42%, while those of two-wheeler and commercial vehicles fell nearly 12% and 10%, respectively.

While vehicle manufacturers body SIAM had warned of job cuts last month, Automotive Component Manufacturers Association a few days later had said that more than 10 lakh jobs were at risk due to the slowdown. Recently, Federation of Automobile Dealers Associations stated that around two lakh jobs have already been cut across dealerships.

“The slowdown has hit all segments of the auto industry — four-wheelers, two- wheelers, commercial vehicles and even tractors. Now, the festive season is approaching. If the government takes some proactive measures, this festive season we could see good demand,” N.K. Minda, chairman and managing director, Uno Minda Group, which manufactures and supplies auto components to OEMs, told The Hindu.

Mr. Minda said the industry is seeking rationalisation of GST — currently between 18-28% — for the sector, Besides, solving the NBFCs crisis is “definitely required,” he said, adding that they would seek some sort of duty to discourage import of auto components from China.

Make in India

“We must encourage Make in India. We want to request if there is some kind of minimum import duty that the government can consider... I can understand players like Volkwagen importing parts from Germany or Honda, Suzuki importing from Japan, Hyundai, Kia from Korea and so on... But there are no players from China,” he reasoned.

It is estimated that 27% of total auto components imports worth over $1 billion are imported from China.

Another representative from the automobile industry pointed out that with monsoons getting better, a little push from the government can help make the second half of the year much better than the first half.

“We have another disruption coming in the form of switch to BS-VI compliant vehicles. If the industry doesn’t get the much-needed push now, no one can say how long the slowdown will last. A cut in GST rates will help trigger demand in the short-term.”

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Printable version | May 28, 2020 11:10:26 AM |

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