Most Of The Auto Slowdown Is The Industry’s Own Making, Says Rajiv Bajaj
A lot of these companies are not able to export because their products are of ‘mediocre standards’, says Bajaj.
Most of India’s auto slowdown is the industry’s own making, said Rajiv Bajaj, managing director of Bajaj Auto Ltd., in an interview with CNBC-TV18.
While the industry should have offset the decline in domestic demand with sales abroad, it did not invest enough to be competitive globally, he said. “Industry must look at its own shortcomings before talking about stimulus from the government.”
A lot of these companies are not able to export because by world-class standards their products are of “mediocre standards”, Bajaj said. “Even if we do not have growth for some period of time, how does it matter? It is such a large market,” he said. “Go beyond the borders.”
India’s auto slowdown continued for the ninth straight month in July as sales of cars and utility vehicles recorded their steepest decline in almost two decades. Domestic sales of passenger vehicles fell 30.98 percent year-on-year to 200,790 units in July, according to data released by the Society of Indian Automobile Manufacturers. That’s the steepest decline since December 2000 when passenger vehicle sales fell 35.22 percent, SIAM data showed.
Acknowledging that it is a “difficult time for the industry”, Bajaj said the government should not make it worse by levying higher registration costs. There is going to be a hike in costs because of the BS-VI emission norms, he said.
Earlier in month, the auto industry unanimously demanded a reduction in goods and services tax on automobiles to 18 percent.
Mahindra & Mahindra Ltd. Group Chairman Anand Mahindra also pitched for a GST cut, saying that a revival of the industry would have a ripple effect on the entire economy. “I do believe that kick-starting the auto industry with a few short-term measures will serve a greater national purpose,” Mahindra said at the company’s 73rd annual general meeting. “The most obvious and welcome first aid would be some temporary relief on the GST front, either by modifying the slabs, or, if that is not possible, by removing the cess.”
This comes amid reports of job cuts by several automakers. Last week, Maruti Suzuki India Ltd.—the country’s largest carmaker—cut over 3,000 temporary jobs due to the ongoing slump.
Bajaj, however, said he will not take the same road. “I cannot build a strong world-class business if my message to my employees is going to be that—look guys when the going is good, I want you to work here not as an employee but with a sense ownership. But when the going is tough by just 5 percent, I am going to throw you out on your ass.”
Bajaj said the two-wheeler industry has not done enough to reduce dealer inventory unlike the passenger car industry. According to the Federation of Automobile Dealers Associations, the average inventory for two-wheelers stood at 60-65 days in July and for passenger vehicles it fell to 25-30 days from 30-35 days in June.
The company’s strategy for the upcoming festive season will be to “completely correct stock at the dealership level”, he said.