Hit by unprecedented slump, auto industry seeks government’s help in revival

Auto industry leaders on Wednesday asked the government for a stimulus package, including GST reduction on vehicles, for the sector which has been hit by an unprecedented slump in sales. In a meeting with Finance Minister Nirmala Sitharaman, industry leaders, including Maruti Suzuki Chairman RC Bhargava, M&M President - Automotive Sector Rajan Wadhera, who is also president of SIAM, along with representatives from components sector body ACMA and dealers body FADA drew attention to the challenges, including job losses, faced by the industry.

“Yes, we have asked for certain enablers for the auto industry and they have thought on it. I am very hopeful that there will be a stimulus package (for the auto industry) coming soon,” Society of Indian Automobile Manufacturers (SIAM) President Rajan Wadhera told PTI.

The government wanted to understand from the industry about reasons for the slump in demand and possible solutions to the issue, he said, adding that the heavy industries ministry was supportive.

During the meeting, the auto industry broadly presented factors such as issues regarding availability and affordability of financing, increasing cost of acquisition of vehicles and change in axle load capacity for commercial vehicles that have hurt demand, he said.

Terming the meeting as “only consultative process”, Finance Secretary Rajiv Kumar said, “We have heard them. We are compiling (demands from the auto industry) and we will look at it.”

Speaking to reporters after the meeting, Kumar said the RBI rate cuts are very positive and “now it is for the banks to pass on these rate cuts”. Heavy Industries Minister Arvind Sawant also said the government listened to the auto sector’s concerns and assured that it will look into their concerns.

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Wadhera said the auto industry also reiterated that the pending notification on increase in vehicle registration fees should not happen as the sector is already reeling under stress of low demand. Besides, the government was also apprised of job losses in the sector following the market slump.

Commenting on the availability and affordability of finance, Wadhera said: “Immediate measures are needed to reduce finance cost. We told them (government) that banks should be directed to pass on the repo rate cuts to the market.”

The auto industry also wants the government to direct banks not to reduce lending to those segments which has the lowest NPA, such as the passenger vehicles segment. Wadhera also said during the meeting the auto industry wanted the government to also instruct banks not to stop lending to “people who are following healthy financial practices” and not treat all dealers as defaulters.

Besides, the industry also asked the government to bring quickly an incentive-based scrappage policy to replace old and polluting vehicles which can help accelerate demand for new vehicles. "To sum it up, what we really need from the government is that for the revival of demand there has to be reduction of GST rates from 28 to 18 per cent. We have been talking to the government on the same," Wadhera said.

Automotive Component Manufacturers Association of India (ACMA) President Ram Venkatramani said job cuts have happened in the components sector to keep in line with OEM production. The auto industry has been going on a prolonged slump. Passenger vehicles (PV) segment has been the worst hit with sales continuing to decline for almost a year now.

As per SIAM figures, vehicle wholesale across all the categories declined by 12.35 per cent to 60,85,406 units in April-June against 69,42,742 units in same period of last year. Federation of Automobile Dealers Associations (FADA) has stated that nearly two lakh jobs have been cut in the last three months due to the slowdown.