Auto Crisis More Due to Overproduction than Slowdown in Economy: Rajiv Bajaj.

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DOWN CYCLE may take a year, may be two to correct, but it certainly doesn’t deserve a GST cut, says Bajaj Auto MD

“There’s no industry that keeps growing forever without correction, so no point chasing that mirage,” Bajaj said. “The answer lies in being global so that the company doesn’t fall sick if one market catches flu.”

The current crisis in the automobile industry in the country is largely due to “overproduction and stocking” by companies and to a small extent to the economic slowdown, and there’s no need for a GST cut, Bajaj Auto managing director Rajiv Bajaj has said.

His statement comes days before the GST Council is scheduled to convene on September 20 when, among other things, it is expected to take a call on the industry’s demand for a cut in goods and service tax on automobiles.

The industry is now rapidly correcting the stock levels for Bharat Stage-VI emission norms and the problem will be sorted by November, Bajaj said.

“There’s no industry that keeps growing forever without correction, so no point chasing that mirage,” Bajaj said. “The answer lies in being global so that the company doesn’t fall sick if one market catches flu.”

Bajaj Auto, the country’s third largest motorcycle maker, exports one out of every two motorcycles it produces. Automobile sales have declined by over 30% in certain categories during July and August, of which only 5-7% decline in sales volumes is due to economic reasons, over which companies have little control, Bajaj said.

“Every industry has its up and down cycles. It may take a year, maybe two, for it to correct,” Bajaj said. “Nobody knows how long this will last, but it certainly doesn’t deserve a GST cut.” According to him, automakers in the country caused the current situation upon themselves due to overproduction of vehicles based on growth forecasts.

“They roll the dice sans any logic,” Bajaj. “The result is a matter of luck-by-chance. We don’t waste time or money on forecasts. We simply expand capacity once we’re close to full.”