As crisis deepens, auto industry seeks stimulus package from govt

Representative Image

Auto industry leaders on Wednesday asked the government for a stimulus package, including GST reduction on vehicles, for the sector which has been hit by an unprecedented slump in sales.

In a meeting with Finance Minister Nirmala Sitharaman, industry leaders, including Maruti Suzuki Chairman R C Bhargava, M&M President - Automotive Sector Rajan Wadhera, who is also president of SIAM, along with representatives from components sector body ACMA and dealers body FADA drew attention to the challenges, including job losses, faced by the industry.

"Yes, we have asked for certain enablers for the auto industry and they have thought on it. I am very hopeful that there will be a stimulus package (for the auto industry) coming soon," Society of Indian Automobile Manufacturers (SIAM) President Rajan Wadhera told PTI.

The government wanted to understand from the industry about reasons for the slump in demand and possible solutions to the issue, he said, adding that the heavy industries ministry was supportive.

During the meeting, he said, the auto 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 demand.

He said the auto 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.


Wadhera said the industry also apprised the government of the job losses in the sector following the sales slowdown.

On the availability and affordability of finance, he said: "Immediate measures are needed to reduce finance cost. We told them (government) that banks should be directed to pass on the repo rate cuts to the market."

The auto industry also wants the government to direct banks not to reduce lending to those segments which has the lowest NPA, such as the passenger vehicles segment.

Wadhera also said during the meeting the auto industry wanted the government to also instruct banks not to stop lending to "people who are following healthy financial practices" and not treat all dealers as defaulters.

Besides, the industry also asked the government to bring quickly an incentive-based scrappage policy to replace old and polluting vehicles which can help accelerate demand for new vehicles.

"To sum it up, what we really need from the government is that for the revival of demand there has to be reduction of GST rates from 28 to 18 per cent. We have been talking to the government on the same," Wadhera said.

The auto industry has been going on a prolonged slump. Passenger vehicles (PV) segment has been the worst hit with sales continuing to decline for almost a year now.

As per SIAM figures, vehicle wholesale across all the categories declined by 12.35 per cent to 60,85,406 units in April-June against 69,42,742 units in same period of last year.

Federation of Automobile Dealers Associations (FADA) has stated that nearly two lakh jobs have been cut in the last three months due to the slowdown.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

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