The Indian automotive sector is going through its toughest spell yet with the country being under lockdown which has meant that their sales have gone down unlike ever before. This is on top of the fact that the industry has been recording poor sales numbers month after month, registering a decline in growth in sales, even before the lockdown came in place. Add to that the fact that the BS-VI emission norm has come into place from April 1, 2020, and the situation has never been so grim – with production lines shut, dealerships closed, unsold BS-IV inventory and given the economic impact that the Coronavirus pandemic is expected to have, an expected sharp decline in demand for vehicles in the coming time. As a result, the automotive industry has reached out to the central government asking for a revive in demand, as per a report by CNBC TV18.
"We need a quick increase in demand in the short term. One of the ways by which the government can boost demand is by reducing GST for a limited period. Once the demand goes up, the revenue shortfall will be cushioned," cites the report courtesy Manohar Bhat, Head, Sales and Marketing at Kia Motors.
SIAM, ACMA and FADA – the three major auto industry bodies have requested the government for measures that could address liquidity crunch, demand and supply chain disruptions. This is along with the hope of the centre and states considering a short-term reduction in GST, as per the report.
It goes on to mention that SIAM has suggested the introduction of postponement of certain regulatory norms, a scrapping policy and availability of working capital at concessional rates, along with the request to the government for ensuring unhindered transportation of goods and address supply chain issues once the lockdown is lifted.
Nikunj Sanghi, Former President of the FADA, said to CNBC TV18, "The RBI may have imposed a moratorium on loan repayment, but there is no moratorium on interest. Dealers will incur a huge cost due to accumulation of interest on term loans and working capital at a time when the existing inventory cannot be sold. The RBI should impose a moratorium on interest payment as well or OEM's can absorb it."
We will have to wait and see how the auto industry copes up with the effects of the lockdown once it lifts, whenever that is, and how the companies absorb the costs of unsold inventory and manage to gather interest in their upcoming vehicles.