With the government set to present the Union Budget in a few weeks, all eyes are on the auto sector and what the government would do to revive it.
The year 2019 was the worst year for the auto sector in almost 20 years. Passenger vehicle (PV) and two-wheeler sales fell 16 percent and commercial vehicle sales fell 21 percent. While, sales for medium and heavy commercial vehicle (M&HCV) fell the most by 36 percent. The industry is now also looking at making a smooth transition to BS-VI before the March 31.
Rajan Wadhera, president, Society of Indian Automobile Manufacturers (SIAM), Vinod Aggarwal, MD and CEO, VECV and Shashank Srivastava, senior executive director at Maruti Suzuki spoke to CNBC-TV18 on what the auto industry expected from budget 2020.
Talking about his expectation, Srivastava said, “I think the government is the doctor who will prescribe what is best for us because they know not only about the auto industry but they have to balance the requirement for all other industries as well."
"Our point of view is that the slowdown in the industry was largely driven by the higher cost of acquisition, which came from the new norms as well as the increase in some of the road taxes in states and also because of the insurance charges, which went up, " said Srivastava adding that tightening of the financial lending norms both for inventory financing, as well as for retail financing affected it negatively.
"Since 7 percent of the gross domestic product (GDP), 16 percent of the goods and services tax (GST) collection and 50 percent of the manufacturing comes from auto industry – the government should treat this as a champion industry rather than a sin industry and support it in terms of lowering the cost of acquisition and also through some financial means then it would be great,” Srivastava said.
The recovery in the real sense is not yet fully there, said Wadhera, adding that the festive season, which is generally aided with a lot of schemes did see an upswing in terms of the numbers. "In terms of availability of finance and change in customer sentiment, the UV segment has seen some improvement, largely aided by new models but overall in the PV segment we have not seen growth yet,” said Wadhera.
“We are seeing some positive sentiment with respect to pre-buying. However, that window is only there for two months, especially for the trucks, where still majority of the trucks are sold without bodies or without cabins in the industry,' said Aggarwal.
However, now there is a condition that by March 31, all these vehicles have to be registered along with the bodies. Therefore, the financiers are becoming slightly more conservative in financing. In the month of March, there will be a lot of conservatism, so that no financier, or no manufacturer, or dealer ends up with BS-IV stocks which cannot be registered after April 1, said Aggarwal adding that this will have some impact on the sales in the last month.
"Therefore, there will be some impact of positive sentiment but overall, last quarter will not be as good as last year,” Aggarwal said.
When asked about the response for BS-VI vehicles, Srivastava said, “The response has been pretty good despite their higher prices. First half for the industry is very bad but the Q3 (October-November-December) for Maruti has been positive over last year. The competition is negative, but that is because the BS-VI vehicles which we had introduced much earlier than the planned government deadline of April 1, 2020.""In fact 8 of our models, and 70 percent of our petrol sales are already BS-VI and have sold more than 500,000 vehicles in BS-VI, which has been a positive for Maruti,” said Srivastava.