The clamour for the government to take a relook at a much-needed stimulus package for the ailing Indian automotive industry is getting louder by the day. Hit by a prolonged slowdown that has gone on for over 20 months and more recently the unprecedented pandemic which has led to plant shutdowns, India Auto Inc is staring at a difficult future, both near-term and likely long-term.
Apex industry body SIAM too the other day voiced its opinion about there being few direct benefits to the industry is the recently announced humungous Rs 20 lakh crore Atmanirbhar Bharat economic package for the country. SIAM president Rajan Wadhera said: “The agri sector package may benefit the auto sector indirectly in the medium-term but the Indian automotive industry needed an immediate stimulus to boost demand, which has not happened.”
SIAM, as well as component body ACMA, has had several engagements with the Government at various levels, where specific suggestions were made for a demand stimulus. These include reduction in base GST rates from 28 to 18 percent for a limited period and an incentive- based vehicle scrappage policy, which would have made it a less painful revival and kick-started the industry.
Now Vipin Sondhi, Managing Director and CEO, Ashok Leyland, has spoken about his expectations for the auto industry in general and commercial vehicles in particular. “The combination of an ‘Aatma Nirbhar Bharat’ with integration with the global supply chain is inspiring. The packages announced last week went big on much-needed reforms in agriculture, mining, defence, public health and education and more. These will augur well for the future of our economy.
"Coming to the automotive industry, specifically commercial vehicles, this has been one of the worst-hit sectors, owing to pressure from a prolonged slowdown and further, from an unprecedented pandemic. Therefore, there was an expectation of a direct stimulus package in the form of reduction in GST, an incentive-based vehicle scrappage policy and a thrust on the purchase of buses for public transportation. This is the need of the hour, and the government may please consider a structured policy intervention. Further, an accelerated infrastructure spend in rural India would create assets, jobs and income in rural India, which would bring movement of goods, thereby also providing a fillip to the CV industry.
Sharp 22 to 35% decline likely in FY2021
The last fiscal was an eminently forgettabe year for the industry and if there are no revival or growth-driving measures coming up soon, FY2021 could be headed the same way too.
FY2020's overall sales of 215,46,390 vehicles were 17.97% down yoY. PVs were down 18% (27,73,575), CVs down 29% (717,688: M&HCVs (-42% / 224,806) / LCVs (-20% / 492,882); three-wheelers down 9% (636,569) and two-wheelers by 17.76% (174,17,616).
To put things into perspective, the Indian automotive industry supports employment of more than 3.7 crore people and contributes to 15% of the GST amounting to Rs 150,000 crore every year. The sector was already facing an unprecedented challenge with 18% de-growth last fiscal. As per an assessment made by SIAM on the impact of Covid-19 on demand for vehicles in the current financial year FY2021, the automobile sector could see a sharp sales decline in the range of -22 percent to -35 percent in various industry segments, if the overall Indian GDP growth is at 0-1% in the same period.