The Indian automobile industry, which is currently experiencing one of the worst slowdowns it has ever seen, received a fair bit of assurance from the government to help it tide over troubled times.
The Society of Indian Automobile Manufacturers (SIAM) organized its 59th Annual Convention today in New Delhi, on the theme of 'Building the Nation, Responsibly: Moving into a New Era of Auto Industry'. Chief guest Nitin Gadkari, Minister for Road Transport & Highways and Micro, Small & Medium Enterprises, Government of India, provided assurance to the automobile industry of support from the government and said that he will take up the industry’s demand of GST reduction with the finance minister.
Gadkari assuaged industry stakeholders that petrol and diesel-engined vehicles will not be banned albeit the country's huge crude oil import bill and high levels of pollution remain a concern. While the Rs 7 lakh crore fuel import bill hurts the country's economy, India loses out on new investment and also sees its image impacted due to the high levels of pollution in certain regions of the country.
Gadkari also pointed out that India has far more road accidents than other nations. Annually, there are over 500,000 road crashes and over 150,000 fatalities with nearly 65 percent of them belonging to the 18-65 age sub-group, which impacts the country's future.
On a positive note, he said that MoRTH is to commission 68 projects covering Rs 5 lakh crore worth of road projects in the next three months. This will give a huge impetus to the construction equipment industry, and in turn to the M&HCV sector, which is seen as the barometer of the economy.
Talking about the issues related to auto financing, Mr Gadkari asked the auto industry to establish their own, proprietary financing arm to boost sales. He stated, “The industry has asked that there should be reduction in GST of petrol and diesel vehicles considering the forthcoming increase in prices of vehicles and the BS VI norms deadline. Even if GST is reduced for some time, it will help the sector to increase vehicle sales.” He added, “GST on electric vehicles has been reduced from 12% to 5%. I will propose to the finance ministry to make the same benefit available for hybrid vehicles.”
Gadkari assured that the government is trying to bring out the vehicle scrappage policy quickly, which will lower production costs to a huge extent. He further added, “I also want to clarify that though there have been talks that government is planning to ban petrol and diesel vehicles, we are not going to do anything like that.”
Commenting on the banking system, he said private national banks are not funding government projects and asked the auto sector to appoint finance advisors collectively, adding that auto companies can start their own finance bank to fund car buying, thereby giving a new charge to sales. He pointed out that small scale banks have close to Rs 2.5 lakh crore of funds available per bank and auto companies must tap those banks and scheduled banks.
As regards the commercial bus sector, Gadkari said the bus population in the country has to increase. By adopting the London public transport model, new demand could be created for nearly 12-15 lakh buses. He said that state governments have been told to aggressively market their transport corporations. Meanwhile, private manufacturers must launch their own public transport bus fleets. Gadkari reiterated that electric buses run at Rs 55 a kilometre against Rs 65 for ethanol and Rs 115 for diesel.
He said the government will decide on incentives for export promotion of automotive goods: "We're looking for incentives in exports & are in talks with the Finance Ministry to improve export figures. Be quality-centric, not cost-centric. India's auto industry has the best export & employment figures. I urge the automotive industry to be positive."
Gadkari acknowledged that India's auto sector is in need of help. He assured industry stakeholders that he will take up SIAM's request to reduce GST (from the existing 28%) on petrol and diesel vehicles with Finance Minister Nirmala Sitharaman. He said the ongoing slowdown in the domestic auto industry is not just a worry for the vehicle manufacturers but also for the government and the country.
Uday Kotak, President- Designate, CII and Managing Director & CEO, Kotak Mahindra Bank Ltd said, “The auto industry needs to emphasise on exports to boost supply. This will help to overcome the stress present in the domestic market. The rupee which is weak at present will also favour this method.”
Speaking at the event, Rajan Wadhera, President, SIAM & President (Automotive Sector), Mahindra & Mahindra, reiterated the need to reduce GST on automobiles. He also highlighted the need for the government to consider a single nodal regulatory ministry for the auto industry. “The automotive industry is integral to economic and social development of the nation. With BSVI norms coming into effect from April next year, restrictions on different vehicles based fuels needs to be removed for the auto industry to be at par with the best in the world when it comes to pollution.”
Presenting the current scenario, Wadhera said, “The automotive industry constitutes almost 50% of manufacturing GDP, 15% of GST revenue and employees 37 million people directly and indirectly. Till now, 15,000 contractual manufacturing jobs and have been lost and another million are at risk if the slowdown is not reversed.”
Rajan Wadhera: "For India 's GDP to touch $5 trillion by 2025, the auto industry, which contributes around 50 percent of India's manufacturing GDP, has to grow at 14 percent CAGR over the next five years."
Wadhera said: "The auto industry is going through a difficult time and the stress visible across the automotive value chain. Passenger sales have dropped 23.5 percent in April-July, 15,000 contractual workers laid off and FADA India estimates 280,000 jobs have been lost. For India 's GDP to touch $5 trillion by 2025, the auto industry, which contributes around 50 percent of India's manufacturing GDP, has to grow at 14 percent CAGR over the next five years."
Wadhera urged the government to reduce GST on automobiles to address price increase arising out of BS VI norms. He also suggesteds appointment of a single nodal agency for finalising auto sector policies.
Wadhera added, "The auto industry is a beacon of manufacturing marvel under Make in India. The industry is hopeful of substantial solutions by the government to end the industry’s distress. Shri Nitin Gadkari's words were very reassuring."
Speaking on beha the auto component industry, Ram Venkataramani, President, ACMA & Director, Amalgamations Component Group, said that the auto component industry crossed the 57 billion dollar mark in 2018-19. Talking about the importance of the sector, he said “The industry currently employs 50 Lac people and contribute 2.3% to the country’s GDP. The current transition to BS VI norms has also impacted our revenues to an extent.”
WHAT CAPTAINS OF INDUSTRY SAID & GROWTH OUTLOOK
Kenichi Ayukawa, Vice-President, SIAM and MD & CEO, Maruti Suzuki India: "Creating a common platform for all the different ministries governing the automobile industry in India, to come together and address their concerns with the automobile industry, is the need of the hour. All stakeholders including OEMs, suppliers, dealers and the banking sector need to work together to break through this crisis and move forward with a brave heart."
Venu Srinivasan, Chairman, TVS Motor Company: "Two-wheeler prices have gone up by 35 percent in a little over 2 years as a result of multiple regulations in quick succession including the GST level of 28 percent, the same as luxury cars. Bringing in the scrappage policy will be the biggest transformation that the auto industry will undertake. We need an organised system where vehicles are received, shredded and segregated. An inclusive approach, with the government’s support, would be required in bringing the industry out of its current stage."
Guenter Butschek, CEO and MD, Tata Motors: “The Indian growth story is too big to be washed away basis a few quarters of low demand. We, as the industry, need to win back the customers’ confidence by being disciplined in our approach and consistent in our messaging. We need to make sure that we keep our customers attention through product interventions, improving on TCO, and providing superior experiences.
To bring sanity and calibration between demand and supply, we expect SIAM to lead the discussions on the shift of reporting from wholesale to retail, in order to measure what finally gets on the road. As an industry we need to have ‘One Voice’ on technology play. While ICE and EV will co-exist for the decade or even beyond, ICE will require some evolution to meet the CAFE fleet emission norms while the EV would require a complete ecosystem beyond auto. But in order to get out of the current crisis and not to miss the festive season, we require clarity from the government, here and now, on GST and the scrappage policy.”
Dr Pawan Goenka, MD, Mahindra & Mahindra: "This slowdown comes at a wrong time because we are just about to shift to BS VI. We would have liked to go as a healthy industry to prepare for the inevitable impact of BS VI. So the ability to absorb the impact now will be lower."
"The industry has suffered a lot in reputation in the past 8 to 10 years. We're not seen as a powerhouse that creates jobs and contributes significantly to the economy but as an industry that pollutes the environment. The Indian automotive industry has to win back the aspirational value that it has lost in the past 8-10 years. It has to emerge as a new auto industry."
Martin Peter Schwenk, MD and CEO, Mercedes-Benz India: "The auto industry is undergoing major disruption and these changing trends will shift markets and revenue pools. India is in dire need of regulatory stability, along with policies that are technology agnostic."
Gurpratap Boparai, MD, Volkswagen India and Skoda India: "Industry 4.0 will disrupt the way we go about automobile manufacturing by bringing in emerging technologies like Artificial Intelligence, resulting in higher flexibility and shorter delivery time."
Venkatram Mamilapalle, Country CEO and MD, Renault India: "Industrial revolution 4.0 has both opportunities and challenges as it is customer-driven but it also requires the right skill force to support it."
Also read: Rajan Wadhera: 'The inventory correction is largely in the CV segment, which is a mirror of the economy.'