Auto industry leaders meet FM, seek stimulus package to spur demand

FM Nirmala Sitharaman during a meeting with the representatives of automobile sector in New Delhi on Wednesday | Photo: PTI
Automakers, who are facing the worst slowdown in a decade, asked for a stimulus package, including GST reduction, more liquidity and relaxation of credit facilities for retailers, in a meeting with Finance Minister Nirmala Sitharaman on Wednesday. The industry warned that the slowdown could lead to immediate job loss if no steps are taken.
This is the first meeting the auto industry had with policymakers after the companies have been witnessing steady decline of sales for more than 18 months now.

However, no concrete proposals came out of the hour-long meeting, which saw participation from R C Bhargava, chairman at Maruti Suzuki, Pawan Munjal, chairman and managing director of Hero Moto Corp, Gurupratap Boparai, managing director at Volkswagen India, among others. Heavy Industries Minister Arvind Sawant and NITI Aayog Chief Executive Officer (CEO) Amitabh Kant were also present in the meeting.

According to a source, the government wanted to understand from the industry about the reasons of the ongoing slump in demand and possible solutions to the problem. He said that the heavy industries ministry was supportive. 

The industry broadly presented factors such as issues regarding availability and affordability of financing, increasing cost of acquisition of vehicles and change in axle load capacity for commercial vehicles that have hurt the demand.

 “We have told the government that if any concrete measures are not taken, the industry will be forced to do immediate job cuts,” an executive, who attended the meeting, said.

“Employment is a big concern and there is a huge risk of job losses. They are happening in areas like suppliers, dealers and unorganised players such as roadside garages. Of these, original equipment manufacturers will be the most reluctant to cut jobs because of their moral responsibility towards the society. But if this situation continues then we have to start resetting the production lines,” the person said.

The industry also reiterated that the pending notification on increase in vehicle registration fees should not happen as the sector is already reeling under stress of low demand.

“The government was in a listening mode today. They heard our concerns and promised to come out with concrete steps in the next few weeks,” Saharsh Damani, CEO of Federation of Automobile Dealers Association (FADA), lobby group of dealers said.

According to Damani, one of the primary requests was asking the banks to relax lending terms for dealers. 

State Bank of India (SBI) has tightened lending terms dramatically for auto dealerships, seeking to reduce its exposure to risk from a sector in the midst of a sharp downturn.

The industry has been going on a prolonged slump. Passenger vehicles segment has been the worst hit, with sales continuing to decline for almost a year now. According to figures from Society of Indian Automobile Manufacturers (SIAM), vehicle wholesale across all the categories declined by 12.35 per cent to 6,085,406 units in April-June against 6,942,742 units in the same period of last year.

FADA has stated nearly 200,000 jobs have been cut in the past three months. “Yes, we have asked for certain enablers for the auto industry and they have thought on it. I am hopeful that there will be a stimulus package coming soon,” Rajan Wadhera, president at SIAM, said.

The industry demands...
  • Reduce goods and services tax
  • Ask banks to relax lending criteria for dealers
  • Increase liquidity in market
  • Not increase registration fee on new vehicles

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel