Government Says Auto Slowdown Is Cyclical, Taking Steps To Support Sector
Sport-utility vehicles (SUV) move along a conveyor on the production line at a manufacturing unit in Chakan, Maharashtra, India. (Photographer: Udit Kulshrestha/Bloomberg)

Government Says Auto Slowdown Is Cyclical, Taking Steps To Support Sector

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The government on Tuesday said it is taking various steps including release of funds worth Rs 70,000 crore to state-owned banks to help the sector, terming the slowdown in the automobile sector as cyclical.

Minister of Heavy Industries and Public Enterprises Prakash Javadekar said the sector is facing a prolonged downturn due to various reasons, including reduction in finance availability and increase in cost due to upfront collection of insurance premium.

"There is a cyclical slowdown across sectors including automotive sector since last few months. But the festival season demand has shown year-on-year growth of 0.3 percent in the passenger vehicle segment," Javadekar said in a written reply to the Lok Sabha on Tuesday.

Citing reasons for the slowdown, he said increase in axle load limit for commercial vehicles by up to 25 percent expanded freight capacity, leading to shrinkage of new vehicle demand.

Besides, increase in collateral for dealers from 25 percent to 60 percent resulted in reduction in inventory finance to dealers, the minister said. Further, there has been postponement of purchases in anticipation of discounts by original equipment manufacturers for clearing of stock with Bharat Stage-IV norms, he added.

Elaborating on the steps being taken to help the sector, Javadekar said the government as a policy maker always attempts to keep and improve momentum of the economy through a package of measures for comprehensive and continued development of the auto sector as and when required.

He said the government has taken steps like reduction in corporate tax to 22 percent, continuation of registration of internal combustion engine vehicles in future.

Besides, the scrappage policy for auto sector is under consideration of the government, he added. Javadekar said the proposed increase in registration of new cars has been deferred till June 2020 and funds worth Rs 70,000 crore have been released to public sector banks to help the sector.

Domestic passenger vehicle sales witnessed year-on-year decline in wholesales for almost an year till September this year. The sales increased marginally by 0.28 percent in October, driven by festive boost.

Also read: Festive Season Drives October Sales Higher, Says Auto Dealers’ Body

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