On August 7, Mahindra & Mahindra (M&M) and MVML reported a revenue of Rs 12,997 crore Q1 FY2020, down 4 percent. The company reported that it is for the first time in six years that all the segments of the industry posted a decline in the same quarter. However, Anand Mahindra, M&M Group chairman, exuded positiveness about M&M's performance the first quarter at the company's 73rd AGM in Mumbai.
Mahindra observed that the company's performance has far exceeded that of the entire industry across all the sectors. While the three-wheeler industry's sales declined 7 percent, M&M declined 2.5 percent. In the CV segment, M&M declined 9.4 percent while the industry declined 9.5 percent. The passenger vehicle segment declined by 18 percent and M&M declined 2 percent.
M&M's chairman extended his support to the government and lauded the Prime Minister’s ‘bold, well-thought-out, holistic’ vision for the future of mobility which would free the nation from the dependence on expensive, imported fossil fuel and promote the culture of shared, electric mobility and zero emissions.
At the AGM, Anand Mahindra reminded everyone that Mahindra Group group did not enter electric mobility with the acquisition of Reva, but with the introduction of ‘Bijlee’, an electric three-wheeler way back in 1999.
Roadmap to sustained growth
With NITI Aayog encouraging the government for a partnership with the private sector, especially in the mobility sector, Anand Mahindra lauded the move with a quote from Henry Ford -- “If we move together, then success will take care of itself.”
Taking a stand for India Auto Inc, Mahindra urged the government to extend support for both wholesale and retail financing. With the rate cuts, and a more lenient approach from the RBI, the future for NBFCs looks bright, enabling greater liquidity and ultimately benefits to the end consumers. He though is keen to see more support for component suppliers and also the dealers, the backbone of the auto industry's ecosystem.
On the consumption side, although Mahindra did acknowledge the sentiment behind concessions in GST, he urged some short-term measures to tackle the current situation.
- Some relief on the GST front, either by modifying the slabs or by reducing the cess or removing it.
- Relook at the registration fees. These have gone up very substantially and a rollback of the increases in road tax mandated by the state governments after the introduction of the GST is absolutely necessary for the sales to pick up.
"These few actions, along with the post-monsoon revival that we are looking for, could set us back on track positively," said Mahindra.
The ripple effect
The Indian auto industry contributes about Rs 180,000 crore to the government treasury, 7.1 percent to the GDP, 49 percent of the manufacturing GDP and about 37 million jobs, but the current slowdown has led to an 8 percent drop in the GST. So, if the industry has to catch up with the FY2019 GST collections, the auto industry would need to grow at a rate of at least 7 percent in the remaining 8 months of FY2020.
Thus, the revival of the auto industry will lead to the revival of freight, which would in turn drive the revival of the truck industry, filtering down to the manufacturing sector, employment and eventually would lead to the revival of consumption. This would essentially eliminate the three factors that led to the current downturn -- liquidity crunch, high prices and weak consumer sentiment.
Road to a $5 trillion economy
It is said that the path to an economic superpower is through innovation. Extending his support in making India the global hub for electric vehicles, Mahindra asserted that India should become the largest manufacturer of EVs and EV components, for which the country needs to own the R&D and the technology along with a robust supply chain infrastructure.
Mahindra said, “We should come together to create the infrastructure and the ecosystem that India needs to become the global hub for EVs. We should combine the skills of the industry and the reach of the government to bring about the change. Let a healthy and flourishing industry be the fuel that propels this change. We need a joint transition plan that takes care of the economy.”
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