The Society of Indian Automobile Manufacturers (SIAM) on Monday said that the market has still not responded to the various measures initiated by the government to reverse the slowdown that has dented the industry.
Reacting to the dismal sales numbers of various companies for August, SIAM president Rajan Wadhera said the series of announcements on credit availability and reducing the cost of credit that were made do not seem to have percolated down to the non-banking finance companies (NBFCs) which support the bulk of finance for the automotive industry.
"The consumer sentiment also continues to be low and there is clearly a trust deficit in lending money to the dealers," he said, as per a SIAM statement.
To help revive the sector, finance minister Nirmala Sitharaman on August 23 had announced that the government departments would be allowed to buy new vehicles, automobiles purchased till March 31, 2020 could avail the benefit of additional depreciation of 15 percent, with total depreciation up to 30 percent, and BS-IV vehicles bought till March 31, 2020 would remain operational for their entire registration period.
The auto sector has been going through a slowdown for the past few months due to several reasons including, high goods and services tax (GST) and liquidity crunch.
Wadhera pointed out the urgent need for the government to reduce the GST rates on automobiles from the highest 28 percent.
"All this while, the industry has pulled out all stops in offering attractive deals and discounts to the consumers," he said.
"However, the ability of the industry to provide large discounts is limited and this only highlights the need for the government to consider reducing the GST rates from 28 percent to 18 percent which would significantly reduce the cost of vehicles and, in turn, create demand."
Sitharaman had Sunday said the GST Council would take the call on reducing the tax on motor vehicles.
Wadhera also cited the requirement of an integrated incentive-based "scrappage" policy covering all segments of the auto industry.
"As the festival season is around the corner, it is imperative that these decisions are taken quickly and announced without delay so that the industry could hope for a better festival season that could harbinger a recovery in the industry," he said.
On Sunday, automobile majors reported significant declines in their respective sales for August.
Tata Motors reported a 49 percent slump in its domestic sales on a year-on-year (YoY) basis at 29,140 units. The commercial vehicles' sales dipped 45 percent to 21,824 units. It sold 7,316 passenger vehicles in August, decline of 58 percent from 17,351 units during the year-ago month.
Maruti Suzuki India reported a 32.7 percent decline in its vehicle sales last month YoY. The company sold 106,413 units, including exports, compared with 158,189 vehicles in August 2018.
Similarly, Mahindra and Mahindra's (M&M) local sales declined 26 percent YoY. It sold 33,564 vehicles during the month against 45,373 units in year-ago month.
"The auto industry continued to be subdued in August due to several external factors," Veejay Ram Nakra, chief of sales and marketing, Automotive Division, M&M.
Hyundai Motor India sold 38,205 units, lower by 16.58 percent from 45,801 units in August 2018.