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auto | IST

Exclusive: Government mulls ways to revive automobile sales

With the auto sales slowdown conundrum, the government is mulling ways to arrest dip in sales, a government official told CNBC-TV18. Meetings are expected to take place among the Prime Minister’s Office, finance ministry, NITI Aayog and road transport ministry in the near future to discuss the matter further.

The government has started assessing the slowdown in automobile vehicle sales and is looking at ways to arrest it, sources close to the development told CNBC-TV18.
The sector has been witnessing a continuous spell of weakness since August last year, when floods in Kerala had derailed the sales graph for many big automobile manufacturers, especially Maruti Suzuki India Ltd and Eicher Motors Ltd. Since then, a host of other factors including weakness in financing sector and high insurance costs hit the sales. Tightening liquidity in NBFC sector, especially, affected the sales as nearly 80 percent of new cars being sold are financed. The situation has only worsened with reports of some banks stopping dealer inventory financing to some automobile makers.
“Initial discussions have started taking place between the concerned departments. It is being looked at as a matter of concern as the sector contributes to job creation, almost 50 percent to manufacturing GDP and a substantial percentage to the country’s GDP as well. So, the government is seriously looking at it,” the sources said on condition of anonymity.
Meetings are expected to take place among the Prime Minister’s Office, finance ministry, NITI Aayog and road transport ministry in the near future to discuss the matter further, the sources added.
The matter is being seen as one of utmost importance with the government expected to prioritise it over promotion of electric vehicles.
“The focus has shifted from an aggressive electrification roadmap to an approach of moving forward in consultation with stakeholders. The government is no longer looking at setting deadline for electrification of entire categories of vehicles, in fact, a broader target is seen at overall 10 percent electric vehicle sales in a period of five years,” another source aware of the development said, adding that the government is looking at prioritising the matter of automobile sales slowdown over promotion of electric vehicles, for now.
A number of factors including weakness in financing sector, postponement of demand due to implementation of Bharat Stage VI fuel emission norms from April 2020, and high road tax in certain states are seen as reasons causing the slowdown.
“The government is likely to mull over proposal of lower GST rate for automobiles and some incentives to boost sales. Scrappage policy is also seen as a sales booster and efforts are being made to fast-track its roll-out. New regulations may not be introduced for the time being except the ones which have already been announced,” the sources said.
The idea is at a preliminary stage and concrete discussions are yet to take place on the matter. It still remains to be seen whether a formal discussion is initiated to address the slowdown in automobile sales, especially in terms of reduction in GST rate as that will have serious revenue implications. It also remains to be seen how the government plans its final electrification roadmap given the push from NITI Aayog.
Sales of automobiles in the country had fell the most in nearly two decades at 12.4 percent in the June quarter, as per data from the Society of Indian Automobile Manufacturers. Not a single category of vehicle registered growth in June or in the June quarter.
Total domestic sales fell 12.3 percent on year to 19.98 lakh units in June. Total production also declined 13 percent on year to 23.36 lakh units in June.