M&M Says Fiscal Stimulus Needed For India’s Auto Industry
Pawan Goenka, president of the automotive sector of Mahindra & Mahindra Ltd. (Photographer: Prashanth Vishwanathan/Bloomberg News)

M&M Says Fiscal Stimulus Needed For India’s Auto Industry

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Mahindra & Mahindra Ltd. made the case for a fiscal stimulus package from the government for the automobile sector to tide over an unprecedented slump in sales and arrest job losses.

The automaker’s Managing Director Pawan Goenka told reporters in Colombo today that the automaker has retrenched about 1,500 temporary workers since April 1 this year, adding that if the slowdown continues it will be forced to lay off more employees.

However, he emphasised that the concern on job losses will come more from automotive suppliers and dealers and not as much from original equipment manufacturers.

Goenka was speaking on the sidelines of the opening of Mahindra & Mahindra’s first completely knocked down automotive assembly unit in Colombo, in a joint venture collaboration with Ideal Motors of Sri Lanka.

Christened Mahindra Ideal Lanka Pvt. Ltd., the local assembly plant located in Welipenna here on Saturday also rolled out its first product, the compact SUV, KUV100 petrol K6+ variant.

Also read: Auto Slowdown: More Layoffs May Be Coming In Sales, R&D

The local assembly-cum-manufacturing operations will lead to significant tax savings for Mahindra Ideal Lanka, which is hoping to price the KUV100 below 3.2 million Sri Lankan Rupee (Rs12.85 lakh).

This is our first effort to sell passenger vehicles in Sri Lanka and I hope with this effort we will get to a market share similar to or even larger than what we have in India, Goenka said.

He observed that achieving a turnaround was crucial for India’s automotive industry during the ongoing festive season, otherwise a significant negative effect may be witnessed in terms of jobs, investment, and even suppliers being forced to declare bankruptcy.

The only thing that can make a difference is if the government of India sees it fit to support the industry for 6-8 months, then you can perhaps see a big change, Goenka said.

Asked if a fiscal stimulus was required from the government at this stage, he replied in the affirmative.

In the previous slowdowns, both times the government had given a fiscal stimulus and both times they have worked very well, Goenka said .

Automobile sales in India witnessed its sharpest decline in nearly 19 years in July, dropping 18.7 percent, rendering almost 15,000 workers jobless over the past two-three months as the sector reels under a prolonged slump, auto industry body SIAM reported earlier this month.

“If you look at our capex we have 15-20 percent capex that has been deferred from our overall investment,” Goenka said.

Also read: Maruti Seeks Tax Relief For Hybrid, CNG Cars

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