Component Manufacturers Rally Behind OEMs, Seek Uniform 18 % GST Implementation

 Component Manufactures Rally Behind OEMs, Seek Uniform 18 % GST Implementation
Component Manufacturers Rally Behind OEMs, Seek Uniform 18 % GST Implementation

Auto component industry seeks uniform 18 % GST on products; government to consider rate cut in September 20 GST Council meeting, says Anurag Thakur, Union Minister. 

The Automotive Component Manufacturers Association (ACMA) concluded its 59th Annual Convention today. The convention witnessed multiple stakeholders from the industry gathering to collectively assess and address the ongoing slowdown as well as the future challenges amidst multiple disruptions. While the Society of Indian Automobile Manufacturers (SIAM) had requested the government to reduce GST tariffs on automotive products from 28 % to 18 % aiming to boost the industry out of the present deterioration in sales, component manufacturers collectively rallied behind OEMs to seek a uniform reduction in tax rates on all components.

The Indian automotive component industry had a turnover of $ 57 billion during the period 2018-19. In the domestic market, this industry grew by 14.5 %, while exports grew by 17 %. The outgoing president of ACMA, Ram Venkataramani, attributed growth in the domestic market to the commercial vehicle segment as well as to the higher value parts being demanded for passenger vehicles and two-wheelers. However, he also stated that demand in the coming days will be challenging and the industry should expect subdued results for FY20.   

The prevalent liquidity crunch in the economy as well as a weakened consumer sentiment have been identified as primary factors behind the aggregated slowdown in the automotive industry. Considering this industry to be highly interdependent, ACMA members stated it was crucial for OEMs to consider the entire ecosystem. Rajan Wadhera, President, SIAM and President – Automotive Sector, Mahindra & Mahindra stated that this not the first slowdown the industry is facing, however the current slowdown is lasting longer and is different from the ones faced previously. Wadhera further remarked, that the transition from BS IV to BS VI is worrying as it will be difficult to predict exact sales, holding the potential for the industry to incur massive losses. He suggested that the industry would require help from the government in ensuring calculated decisions on production before a complete ban on BS IV products is imposed.

At this year’s convention, Shobana Kamineni, Past President CII & Executive Vice Chairperson, Apollo Hospitals Group also shared her insights with the gathering. She stated that the lowering of tax and its simplification would be central to growth. Bolstering this recommendation, Anurag Thakur, Union Minister of State for Finance & Corporate Affairs, Government of India, hinted that in the GST Council meet on September 20, the government is likely to consider slashing GST rates from 28 % to 18 %, as per the industry’s recommendations. He further stated that the government is closely working on a vehicle scrappage policy for a successful revival of the automotive industry.

Industry leaders and experts from the Indian automotive industry recommended that it was time the Indian auto component industry shifted gears and moved more towards Innovation. Venkataramani was of the opinion that the industry should use these evolving times to shift from labour arbitrage to knowledge arbitrage. He called for the industry to move from ‘Make in India’ to ‘Innovate in India’. Echoing his sentiments, Kenichi Ayukawa, MD & CEO, Maruti Suzuki India stated that it was important for the Indian automotive industry to develop in-house R&D capabilities to remain competitive at a global level. He emphasised that the industry needed to be prepared for market risks, future technology disruptions and changes in the global trade environment. Guenter Butschek, MD & CEO, Tata Motors submitted that the Indian automotive industry needed to adapt itself to the best global standards and specifications. He stated that the industry should jointly embrace the future in an integrated manner, by being globally competitive, Indian customer centric and ahead of the curve.

Experts have assessed that cost of vehicles have gone up by nearly 10 % in the span of just a few years due to multiple structural and policy level changes. With BS VI, it is estimated that vehicle prices will go up by another 5-6 %. While the outlook did seem gloomy, analysts predicted the long term growth story of the Indian automotive industry to still remain intact. However, Ashok Taneja, MD & CEO, Shriram Pistons & Rings stated there was a secular slowdown across the various industries in the economy and that it would affect multiple sectors simultaneously.