Industry Seeks GST Reduction to Spur Demand, Government to Deliberate

Industry Seeks GST Reduction to Spur Demand, Government to Deliberate

At the 59th Annual Convention of SIAM, industry focus has been on collaboration along with demand for GST cut on automobiles. 

The Society of Indian Automobile Manufacturers (SIAM) concluded its 59th Annual Convention, title ‘Building the Nation Responsibly: Moving into a New Era of Auto Industry’. This year’s convention saw multiple industry leaders and stakeholders gathering to deliberate on the future of automotive mobility in India, with a specific focus on the current slowdown in automotive sales.

Union Minister, Nitin Gadkari, the Chief Guest at this year’s convention, spoke at length about the government’s understanding on the plight of the automotive sector. While talking about pro-reform policies, he also said that he will take up the industry’s demand of GST reduction with the Finance Minister.

Addressing another challenging factor for the auto industry, Gadkari recommended automotive companies to establish their own proprietary financing arms to boost sales and counter the prevailing liquidity crunch. The government had previously reduced GST tariff on electric vehicles from 12 % to 5 %, Gadkari proposed to discuss a similar reduction for hybrid vehicles with the Finance Ministry.

Uday Kotak, Managing Director & CEO, Kotak Mahindra Bank Ltd stated that due to stricter lending norms, customers are not able to avail loans easily which, in turn, is impacting the sale of passenger vehicles. He suggested that OEMs emphasis on exports to boost supply, as this will aid in recovering from the stress that is prevalent in the domestic market. Considering that the rupee is weak at this moment, it will also favour this method.

The automotive industry comprises nearly 50 % of the manufacturing GDP, 15 % of GST revenue and employs 37 million people directly and indirectly. Rajan Wadhera, President, SIAM & President (Automotive Sector), Mahindra & Mahindra Ltd stated that up till now, 15,000 contractual manufacturing jobs have been lost and another million are at risk if the current slowdown is not reversed. Wadhera also requested the government to consider lifting the ban restrictions on different vehicles based on fuels so as to bring the automotive industry at par with global standards. In his address, he also recommended the creation of a single nodal regulatory ministry for the automotive industry, similar to those in developed nations.  

Highlighting the focus of the auto component industry, Ram Venkataramani, President, ACMA & Director, Amalgamations Component Group, stated that the auto component industry crossed the 57 billion dollar mark in 2018-2019. Venkataramani said that the auto component industry employs nearly five million people and contributes 2.3 % to India’s GDP. He highlighted the concerns of the auto component industry stating that the current transition to BS VI norms has also impacted revenues in the component sector as well.  

Kenichi Ayukawa, Vice-President, SIAM and MD & CEO, Maruti Suzuki India Ltd. emphasised on the need for the industry to collaborate with various stakeholders to overcome the crisis. This year’s convention also focussed on how innovation, technology and automation will rewrite the future of mobility across the globe. Speakers and panellists deliberated on various means that will lay the ground work for future mobility and smart manufacturing.  

Speakers highlighted how digitisation and new business models will draw the mobility focus towards services and away from products. Further, experts outlined how consumer behaviour today has evolved past vehicle ownership to a pay-per-use model. With an outlook of shared mobility dominating the future, John Moavenzadeh, Executive Director – Urban Mobility Professional Education, Massachusetts Institute of Technology, Senior Advisor, Deloitte and Founder & Managing Partner, Mobility Nexus LLC stated that traditional mobility will continue to remain relevant while it will become more integrated with data at the centre playing a much larger role.

Industry leaders were of the opinion that in the Indian context global megatrends such as CASE can have a different connotation – Clean, Affordable, Safe and Efficient. Further, experts evaluated that the present condition of the industry will lead to partnerships being formed across government, infrastructure and the overall industry.

With the dawn of digitalisation, many companies have shifted their focus towards improving automation in their factories. On these lines, Gurpratap Boarai, MD, Volkswagen India Pvt Ltd & Skoda Auto India Pvt Ltd stated that this revolution would bring about smart manufacturing in India. He also used the platform to caution the industry that there is a need to have a roadmap to allow a smooth transition. Experts highlighted that mass customisation, region specific production, online factors and immediate delivery systems would influence the market scenario. Further, Dr Detlef, Zuhlke, Executive Chairman, Smartfactory KL e.v commented that there is a need to develop standards that will include interoperability, communication and electromechanical standards.

This year’s convention also featured a ‘CEO’s Panel’ that deliberated on the revival of the automotive industry. The panel comprising Guenter Butschek, CEO & MD, Tata Motors, Venu Srinivasan, Chairman, TVS Motor Company and Dr Pawan Goenka, MD, Mahindra & Mahindra Ltd, discussed at length, the measures that could possibly reverse the current downturn prevalent in the Indian automotive industry. While Dr Goenka, highlighted the need for the industry to come together in these challenging times to beat the downturn, Guenter Butschek stated that the government should lower GST before September 20, 2019, so that OEMs don’t miss out on the potential sales expected during the festive season. Further, clearing the air on electric vehicles (EV), Venu Sirnivasan stated that EVs would not replace combustion vehicles and that these technologies will co-exist.

Adding a counter view to the industries demand on a lower rate of GST, Dr A R Sihag, Secretary, Department of Heavy Industries, Ministries of Heavy Industries & Public Enterprises, Government of India stated that new automotive policies have been engineered keeping in mind the demands  of multiple stakeholders. He added that extensive discussions on the economic slowdown, along with talks on GST rate reduction will diminish consumer sentiment further, with consumers waiting indefinitely for such rate cuts which, will ultimately result in a further decrease of automotive sales.

 

 

 

Joshua David Luther
Author: Joshua David Luther
Joshua’s passion for cars & bikes brought him into the automotive media industry more than half a decade ago. A grease monkey at heart, he loves understanding how new technologies work and spends his time interacting with engineers and CXOs of companies, learning about these technologies. In his role of a Principal Correspondent, Joshua writes about technology, new vehicles and the automotive industry. He tweets @joshuadavidlut1