An auto sector slowdown over the past several months has affected commercial vehicle sales in the country, with volumes declining 11.61 percent in May. (Photographer: Prashanth Vishwanathan/Bloomberg)

Volvo-Eicher Seeks Fiscal Measures To Spur Bus, Truck Sales

Eicher Trucks & Buses, a part of Volvo-Eicher Commercial Vehicles Ltd., has called for fiscal measures to boost growth in the heavily-taxed auto sector.

The company, which on Monday unveiled the country’s first Bharat Stage VI-compliant new range of light-duty trucks under its Pro 2000 series, said it plans to invest Rs 700 crore this fiscal, a part of which will go into adding capacity.

The BS VI-compliant truck’s launch comes nine months ahead of the new emission norms coming into effect on April 1, 2020. An auto sector slowdown over the past several months has affected commercial vehicle sales in the country, with volume declining 11.61 percent in May.

The newly launched engine. (Source: BloombergQuint)
The newly launched engine. (Source: BloombergQuint)

The company, a joint venture of India’s Eicher Motors Ltd. and Sweden’s Volvo AB, blamed factors such as the ongoing non-banking firms’ crisis, the new axle-load norms, election-induced construction lull as well as slowing economic growth for falling volumes.

Calling for fiscal measures, Volvo-Eicher said mere interest rate reduction will not help the auto sector revive volumes.

“The RBI has cut repo rates. But that is not going to benefit auto players much as NBFCs, which were heavily into funding auto purchases, are not getting funds for many months now. Therefore, fiscal measures such as GST rate cuts are required, as the auto sector is heavily taxed,” said Vinod Aggarwal, managing director and chief executive at Volvo Eicher Commercial Vehicles, said.

He said a few years back, government had “promised” to reduce corporate tax to 25 percent and withdrew incentives like additional depreciation, and tax benefits on research and development as part of a roadmap for reforming the corporate tax regime.

“Though the incentives were removed,companies continue to pay taxes according to the old system,” Aggarwal said, urging the government to either reduce taxes or restore the incentives.

Aggarwal, however, sounded optimistic about the commercial vehicle segment as he expects the new government to push infrastructure spending.

He said the company is investing Rs 800 crore to set up a new plant in Bhopal with an initial capacity of 40,000 units and another Rs 400 crore to develop new truck cabins and new engines and towards BS-VI implementation.

Aggarwal said its Pithampura plant in Madhya Pradesh has already reached 90,000 units annual capacity. With the commissioning of the Bhopal plant next April, total capacity will reach 1.30 lakh units.

To ramp up domestic market share, Volvo-Eicher plans to focus on truck volume and the Bhopal plant can help achieve this by adding another 40,000 units per annum.

"We will not require a new plant in the next 10 years as this capacity would be suffice to meet the demand," Aggarwal said, adding that its plants are running at 80 percent of installed capacity.