Industry execs said footfalls at dealerships have started to decline, suggesting weak consumer sentiment.
Slumping vehicle sales and production cuts are generating a sense of crisis for automotive part producers and their carmaker customers in India. Around 1m jobs are said to be at risk among component manufacturers, OEMs are making cutbacks and more than 230,000 jobs have reportedly gone from car showrooms. Society of Indian Automobile Manufacturers (SIAM) figures show domestic production of all vehicles, including three- and two-wheelers, fell 10.5% year-on-year to 7.215m in the fiscal first quarter to June. Registrations declined 6.0% to 5.117m in the same period, according to the Federation of Automobile Dealers Associations (FADA). Initial reports suggest passenger car sales in July have shrunk by at least 30%, making it the worst month in the past two decades. June’s year-on-year fall was 5.4% to 1.648m.
Automakers made a strong pitch for reduction in the goods and services tax rate to 18% from 28%, higher depreciation benefits and a favourable vehicle scrap page policy to boost demand in a sector struggling with plummeting sales. They also sought the government’s intervention in allowing offloading of inventory complying with BS-IV emission standards after BS-VI rules kick in next year, even as they questioned the increased push for switching to electric vehicles. “Industry wants a stimulus package. They have sought reduction in GST,” said a person present at a meeting called by finance minister Nirmala Sitharaman to understand the issues faced by automakers. In addition to GST at 28%, passenger vehicles are levied a cess depending on the segment, further increasing the tax incidence.
The person said the industry was of the view that comprehensive steps were needed to address the current situation. Besides, the industry also wanted easier finance to aid sales. In the past year, passenger vehicle sales have fallen every month with an exception in October. Industry executives said footfalls at dealerships have also started to decline, suggesting extremely weak consumer sentiment. According to the Federation of Automobile Dealers Associations (FADA), the industry has cut nearly two lakh jobs in the past three months due to the slowdown.
During the meeting, the auto industry wanted the government to instruct banks not to stop lending to “people who are following healthy financial practices”, and not treat all dealers as defaulters. Automakers asked the government also to bring quickly an incentive-based scrap page policy to help replace old and polluting vehicles, which could help accelerate demand for new vehicles.
Maruti Suzuki NSE 0.24 % chairman RC Bhargava, president of Mahindra & Mahindra’s automotive business and SIAM RajanWadhera, executives from Toyota Motor and Hyundai Motor, as well as representatives from the Automotive Components Manufacturers Association and dealers body FADA attended the meeting. NitiAayog chief executive Amitabh Kant and officials from other stakeholder ministries were also present. Bosch Cuts Production: German auto components company Bosch said in an exchange filing on Wednesday it will suspend manufacturing at its Tamil Nadu plant for five days in August and eight days at the Nashik plant. It had earlier shut four of its plants for a collective 12 days in the past fortnight.