59th SIAM Annual Convention Live: GST Rate Cut Alone Can’t Revive Demand For CVs, Says Pawan Goenka

Automakers must be aware of a “structural change” affecting their demand as the younger generation is opting for shared mobility companies such as Ola and Uber. That’s according to Uday Kotak, executive vice chairman & MD of Kotak Mahindra Bank.

" A car was a status symbol when I started my career," said Kotak, addressing the gathering at the convention. "But my son is more comfortable with Ola and Uber which is a classic example of capacity utilisation."

Also Kotak said abolishing state-wise levies (through GST), axle-norm tweaks and better roads have made trucks “more efficient” and impacted demand.

Other Highlights:

• Enough liquidity in the banking industry to finance vehicles.
• Automakers having a consumer-finance arm is an option to trigger demand.
• Credit scores are also impacting lending and borrowing thresholds.

The problem of auto slowdown could be ‘more severe” for commercial vehicle and a rate cut in Goods and Services Tax cannot revive demand. That’s according to Pawan Goenka, managing director, Mahindra and Mahindra Limited.

Other Highlights:

• M&M’s normal growth expectation is 8-10 percent growth and the number is now -20 percent.
• Bharat Standard VI engine switchover is a major disruption.
• Don’t anticipate any production cut for this month; may adjust production in October.
• Will defer about Rs 800-1000 crore of planned capacity expansion for this year.

India can afford to breach its fiscal targets in order to support the slowing economy and generate employment. That’s according to Venu Srinivasan, chairman & managing director, TVS Motor Co.

"Quantitative easing is required. We need to increase the fiscal space even if targets are not met in the short-term." said Srinivasan in an interview with BloombergQuint. The cyclical slowdown can be overcome with “palliatives” such as significant investments in rural infrastructure and affordable housing, he said.

Nitin Gadkari, India’s transport minister, acknowledged the need to support the country’s auto industry today, saying he has made suggestions to the Finance and Commerce Ministries regarding incentives that can boost auto exports.

• Government concerned about slowdown that impacts employment potential, growth of the country.
• Government will not ban diesel or gasoline vehicles.
• Rise in crude oil remains a concern for economy.
• In three months we are looking to award Rs 5 lakh crore worth of projects.
• Suggests auto companies to start financing arm.
• Will work with finance min to cut down on GST rate.
• Auto industry needs support now.
• Have suggested commerce and finance minister to offer incentives to boost export.
• Have proposed introduction of auto export incentives to Finance Minister and Commerce Minister

India’s automotive industry is at crossroads, SIAM President Rajan Wadhera said at the convention today, adding that investment is need for the hour.

“There needs to be investment as the industry is moving towards cleaner fuel and at the same time we need affordable vehicles,” he said.

Other Highlights:

• Vehicle demand has slowdown significantly.
• OEMs are cutting down production days and nearly 15,000 people have lost their jobs.
• Automotive Component Manufacturers Association of India estimates that million jobs are at risk.
• Welcome the assurances by government and incentives offered by the Finance Minister
• With implementation of BS-VI, price will increase and so will the GST earnings.
• We request the government to cut down GST rates.
• Hope restrictions imposed on specific vehicles will be removed.

India’s largest car maker’s sales dropped 33 percent to 106,413 units last month. Deliveries of its small cars fell about 72 percent to 10,123, while exports declined 10.8 percent to 9,352.

Car sales dropped 34 percent in July, the biggest decline in sales in almost seven years, as a slowdown in consumer spending, the largest driver of growth in the $2.7 trillion economy, became more pervasive.

Shashank Srivastava, executive director (marketing and sales) at Maruti Suzuki listed increasing cost of financing and vehicles coupled with changing norms etc, as the major reasons for the worst downturn faced by the auto industry in nearly two decades. “We are trying to do the best what we could do.”

Here’s key takeaways from Srivastava’s interview to BQ:

• Observing negative in retail for the last 12 months.
• Vehicle financing, increasing cost of vehicles and changing vehicle norms, among others one of the major issue for this downturn.
• Customer sentiment is playing a big role in the slowdown.
• Government has clarified doubts in customer’s minds.
• Rumour of GST cuts has a negative impact.
• Have taken efforts that are under our control.
• Offering best promos to bring customer acquisition cost, launching new vehicles, offering five-year extended warranty on diesels.
• Liquidity is still a concerns with regards to inventory financing.
• Talking to the banks to not offer high collateral to dealer who have had clean financial records.
• On festive season, buyer interest is there but whether conversion will be there is still to be seen.
• Hopeful that festive sales will be much better than last year.
• People are apprehensive because of so much negative growth.

The Society of Indian Auto Manufacturers have gathered for its 59th annual convention today and the theme is: “Moving into new era of Auto Industry”.

The event is being held in the backdrop of a deep slowdown in sales across the country as consumer demand slows and auto companies continue to face a liquidity crunch stemming from the NBFC crisis.

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• August Auto Sales: Bajaj Auto Declines 11%; Ashok Leyland Drops 47%
• In Charts: India’s Auto Slowdown And The Forces Behind It
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