The automotive industry has embarked on a road to recovery and there are many steps that govt needs to take to bring it back on the right track
The Indian automotive industry is reeling on a rough patch lately. In the 2019 Calendar Year, the overall sales volume was not too impressive for a developing nation that was predicted to overtake some of the giants in terms of cumulative consumption. While 2020 started on a decent note, the public health crisis turned the tables around leading to zero sales in April as the dealerships and manufacturing facilities were closed.
The auto sector plays a significant role in the country’s GDP and let alone its manufacturing prowess. By the second week of last month, the central and state governments eased restrictions as carmakers got back into the working stage with the consumer as well as employee safety as their major priority while offering sufficient sanitization procedures across retail outlets and production bases.
In May 2020, the overall two- and four-wheel sales figures were nowhere as close to how they used to be, as getting to one-fifth of the usual monthly tally was a difficult task of its own. However, the industry is resilient and can fight back as it has the potential. While none can deny the fact that it is on a road to recovery, how soon normalcy can be attained is a big question.
With resource crunch and negative sentiments prevailing amongst customers, the companies are offering a wide range of discount deals, financial schemes and easy buying options to lure in new customers. But there are a few other ways we think progress could be made and here we have explained them:
1) Temporary deduction in taxes by central government:
Malaysian Prime Minister recently announced 100 per cent sales tax exemption on locally assembled CKD models while 50 per cent exemption has been imposed on full CBU imports from June 15 and it will run until the end of this year. This helps in a significant reduction in pricing. While the same scenario is almost certainly impossible in India, reducing the taxes by 15-20 per cent over the next six months could help largely in boosting sales.
2) Temporary reduction in road tax by the state governments:
With state governments run by their own regulations in imposing road taxes in most cases, a temporary reduction of 2 to 5 per cent (taxes on registration, RTO expenses, road tax, etc) could also help in further reducing the burden for manufacturers and reaching out more new customers.
3) Allowing manufacturers to sell the pending stock of BS4 vehicles:
This is quite a complicated one but has the potential to make a difference. The nationwide curfew was imposed just a week ahead of the BSVI regulations’ deadline and it was also before the auspicious Navaratri when the customers sentiments will largely be positive. Thus, automakers could have sold a sizeable chunk from the BSIV stocks with attractive discounts. Giving them more time to clear out BSIV stocks will certainly help the brands.
4) Scrappage policy for 15+ year old cars:
To boost auto manufacturing, implementing a clear cut scrappage policy is pivotal as it will ultimately help in increasing new car demand and curbing down pollution. The draft guidelines released late last year needs to be fine-tuned before coming into act sooner rather than later.
5) Giving car dealers MSME benefits:
Over the last year or so, many dealerships closed doors for good and job cuts were prevailed across the board due to the sales slowdown. If the automobile dealers, workshops and service centres are included under the MSME Act, they could benefit from many parameters. While the Cabinet has amended the definition of the Micro, Small and Medium Enterprises Development Act 2006 (MSMED), more transparency is expected by the automotive industry.