Auto industry fears collapse, Nitin Gadkari offers comfort at mega meet

With auto sales sliding for over 13 months now, industry captains went all out to demand a cut in goods and services tax as the only way to revive demand

This may be an odd time for the automobile industry to gather under a common roof to discuss a “new era”, but that exactly was the theme of the much awaited annual convention for the sector held in the capital on Thursday. 

Around 1,300 delegates from vehicle, engine and component manufacturing companies were in attendance at the 59th Annual Convention of Society of Indian Automobile Manufacturers (SIAM) —Moving into a new era of auto industry.

With auto sales sliding for over 13 months now, industry captains went all out to demand a cut in goods and services tax (GST) as the only way to revive demand.

Compared to previous years, the attendance at the SIAM meet was muted, in sync with the overall gloomy mood.  “My company’s head of sales thought it would be more efficient to use the time meeting dealers rather than participating in a conference which would have no outcome,” said a senior executive of a carmaker.

“The Indian automotive growth story is about to collapse. The customer is confused,” Guenter Butschek,  CEO & MD at Tata Motors said. Butschek has reasons to worry. Passenger vehicle sales at his firm had more than halved in August compared to last year.

“Don’t ask me about how full year’s sale will be. Under the current circumstances, I can’t even tell you how things are going to be after ten days,” Pawan Goenka, managing director at Mahindra & Mahindra (M&M), said. If sales don’t pick up in the festive season, the companies will be forced to retrench more workers, he added. According to SIAM, more than 15,000 contract workers have already lost their job due to the slowdown as companies cut down production. “Industry has done whatever it can. We have not been able to revive demand. The government’s intervention is a necessity now,” Goenka said.

Nitin Gadkari, Union Road Transport Minister, tried his best to lift the mood, assuring the industry that he would pitch for cutting the GST rate from 28 to 18 per cent. “We know what you are worrying about now. The government is also concerned. The slowdown has relation to job losses and finally to growth of the country. Will take your request to the finance minister for at least a temporary relief on GST,” Gadkari said, sitting next to industry majors such as Kenichi Ayukawa, CEO of Maruti Suzuki, and Venu Srinivasan of TVS Motors.

The government will not ban internal combustion engines to push electrification, according to Gadkari. Also, despite NHAI’s (National Highway Authority of India) high debt, some 68 road construction projects amounting to Rs 5 trillion will take off in the next three to five months, the minister stated.

“Such a large construction project will definitely push the steel and cement industry which had gone cold, hitting the sales of medium and heavy commercial vehicles. Hopefully with the revival of economic activity, sales will show an uptick,” said Anuj Kathuria, Chief Operating Officer at Ashok Leyland.

Sales of trucks crashed by 60 per cent in August with Ashok Leyland registering a fall of 70 per cent in high tonnage trucks. The company has announced a five-day holiday at one of its plant starting Friday.

In contrast to Gadkari’s soothing words, AR Sihag, secretary, Ministry of Heavy Industry and Public Enterprise, rapped the industry. The industry has been talking way too much, he said. 

Instead of talking, companies should concentrate on their jobs, he argued, alluding to the auto industry demand for GST reduction, the narrative of slowdown and job losses and its apprehension over the transition from BSIV to BSVI.

In the end, the gloom stayed on as the industry continues to wait for a ‘’new era’’.