Nothing much in stimulus to make consumers happy, say carmakers

Despite the measures announced by the finance minister to boost the automobile sector, carmakers have said the sector would only see some revival in sentiments, that too, at the industry level and not at the consumer level. 


A spokesperson at two-wheeler market leader, Hero MotoCorp, said the measures would improve liquidity, increase ease of lending and the transmission of rate reduction, but there is an urgent need to reduce GST on two-wheelers to 18 per cent from 28 per cent. “Two-wheelers are neither luxury nor ‘sin’ goods. Reducing GST to 18 per cent will help boost demand immediately, leading to an even more positive impact. We hope this will be addressed in the next round of measures,” the spokesperson said. 


An official from another two-wheeler firm said, “There is nothing in the stimulus for two- or three-wheelers that would help us sell more today than we did on that Friday.”


Despite the booster dose, analysts also expect the ongoing financial year to see a mid-single-digit drop in overall volumes across all vehicle segments. 


In a bid to arrest the steep decline in auto sales the government on Friday announced a slew of measures like mandating government agencies and departments to replace old vehicles, increasing depreciation on new vehicles for commercial fleet service providers, urging banks to make auto loans cheaper, and increase credit availability to non-banking finance companies. 

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The FM also assured buyers and manufacturers that vehicles compliant with Bharat Stage IV emission norms registered before March 31, 2020, would be able to run for the entire registration period or the life of the vehicle. Auto sales in India have been falling for nine straight months. Among these, sales of passenger vehicles dropped to the lowest in two decades in July. 

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“We don’t know whether we have reached the bottom in the current cycle. If we have, it needs a booster shot,” said an official at a carmaker. While the measures would definitely have an impact, one doesn’t know how much time it will take. The liquidity measures are expected to help wholesale finance (finance sought by dealers for purchasing vehicles), but end consumers will benefit only if the borrowing rate of interests are lowered.

In his address to company’s shareholders on Tuesday, R C Bhargava, chairman Maruti Suzuki India, said he was hopeful the measures announced on Friday would go a long way in reviving demand in the domestic market. “Some of the measures are very good and faster availability of GST refunds will fuel further growth. Also, the assurance from government that bankers will not attract punitive measures for bonafide commercial decisions will also help,” Bhargava said.

Meanwhile analysts remain sceptical of recovery. 

“While the measures will help revive sentiments, it is unlikely to translate into demand,” said Bharat Giani, analyst at Sharekhan. “For instance, a mere increase in depreciation rate will not prompt transporters to buy trucks. Unless the freight availability goes up and the utilisation of existing fleet improves, they may not buy new trucks. Most of the other announcements and clarifications... will only ensure sentiments don’t get impacted further. It will not change much on the ground,” he said.