Mahindra’s Dr Pawan Goenka says 3 measures could reboot auto sales in India

In a conversation to India Today that had Union Minister Nitin Gadkari as part of the panel, Mahindra & Mahindra MD, Dr Pawan Goenka says that these three measures are needed to boost vehicle sales following the COVID-19 shutdown.

The Indian government has launched an aggressive Rs 20 lakh crore package that was need of the hour and there are lots of things that have come in the package. MSME sector would be the one to be largely benefited from this. The agricultural sector also has got things going for it in the package and in the mid-term to long-term, there will be a complete transformation for the agricultural sector.

With the packages announced, the MSME sector will see a cycle and I believe slowly the supply issues will be solved not just in the automobile industry but other industries as well. But with respect to demand, it will be a problem. You spoke about the challenges and I can understand them but I still think we have to do something in the demand side, especially in sectors like automobile and real estate, it will be harder to bring back the demand.

We have been talking to the Honourable Minister about this scrappage policy, which he also supports. If this scrappage policy is launched, it will certainly propel the demand. Another thing that is important is for the auto dealers if they could be treated as MSME. Because they are also facing the same problems that MSMEs are facing in terms of cash flow, employee salaries etc. Reduction of GST for a temporary period of three months can be done and it will be a big help because customers need that kind of enticement right now basically to reduce the ticket size of buying a car.

Similar sentiment was expressed by Rajan Wadhera, President, SIAM, who welcomed the focus of “Aatma Nirbhar Bharat” packaged towards MSMEs and the Agri sector but wants an immediate stimulus that will boost the demand in automotive industry in the country that has been severely affected by the Coronavirus lockdown. An assessment by SIAM indicates that the automobile sector in India will could see a de-growth in the range of -22 per cent to -35 per cent across several segments in FY 2021 (considering the Indian GDP is at 0-1 per cent for FY 2021).

Mr Wadhera further stated that SIAM is in talks with Government of India and has suggested some ideas to improve the demand that includes base GST reduction from 28% to 18% for a limited period and an incentive-based vehicle scrappage policy. Like Dr Goenka, Mr Wadhera too wants the car dealers to be included under the MSME Act to support them at this time.