Economy

Stimulus package: Auto industry cheers FM’s booster dose

S Ronendra Singh New Delhi | Updated on August 23, 2019 Published on August 23, 2019

File photo   -  Bloomberg

Move on BS IV vehicles, higher depreciation hailed

The weekend partying for the auto industry began on Friday afternoon with slew of announcements made by Finance Minister Nirmala Sitharaman, which came as a booster shot.

Some of the announcements including registration of BS-IV vehicles beyond March 31, deferring of one time registration fees till June, higher depreciation on all vehicles (doubling to 30 per cent from earlier), lifting of ban from new vehicle purchase by all government departments and the government’s focus on setting up infrastructure for development of components including batteries for export will all bring cheer to the auto makers.

Also read: New measures unveiled for auto sector to boost demand

“The announcements made today show that the government is listening to industry’s problems. These will bring positive sentiment in the short term. But, the biggest takeaway is that there are a number of measures to achieve, which will make long-term workings of the economy and various branches of the economy far easier than what it is today,” RC Bhargava, Chairman, Maruti Suzuki India told BusinessLine.

“I think one of the biggest things she’s announced is the business of paying government bills on time and putting in a mechanism for that,” he added.

S S Kim, Managing Director and CEO, Hyundai Motor India Ltd, said: “We welcome the government’s measures to boost economy and the automobile sector in particular. We are optimistic that this move will boost customer sentiment in the current market scenario and encourage customers’ acquisition of cars in the coming festival season”.

Pawan Goenka, Managing Director, Mahindra & Mahindra, said for auto industry there were three broad reasons for slowdown — poor sentiment, availability of finance and transaction cost for buying vehicles.

Therefore, “The announcement today will go a long way in improving sentiments because it shows that the government is listening to the industry. I think the financing concerns have been more or less taken care of by the announcements. Not much for reducing transaction cost but several other measures that will incentivise vehicle purchase and also remove some of the unfounded fears such as BSIV vehicle registration.”

Companies like Maruti Suzuki, Hyundai Motor India, M&M and Tata Motors all have been cutting production over the last several months and also shutting down plants for a few days because of slowing demand. Also, with BS-IV vehicles being limiting to registrations till only March 31, many manufacturers who don’t have BS-VI on offer were suffering.

“The clear message by the Finance Minister that BS IV vehicles that are purchased till March 31, 2020 will all remain operational for their entire period of registration has cleared the air on this subject and consumers will no longer hesitate to purchase BS IV vehicles,” said Rajan Wadhera, President Society of Indian Automobile Manufacturers.

He added that the need to lower the vehicle transaction cost will be a very significant step and the industry will await for the next announcement of the Finance Minister on the GST reduction, post the GST Council meeting.

“While the increased depreciation from 15 per cent to 30 per cent and deferment of increased registration fees till June 2020 will have a positive impact, moderation of GST base rate from 28 per cent to 18 per cent for all categories as being requested by the auto industry for sometime now would have been the real demand stimulant,” said Rohit Suri, President and Managing Director, Jaguar Land Rover India Limited.

Published on August 23, 2019
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