GST rate cut must to revive auto demand, says M&M MD Pawan Goenka

Mahindra & Mahindra’s Managing Director (MD) Pawan Goenka said on Thursday automakers had taken every step to revive consumer sentiment, but only a goods and services tax (GST) rate cut would boost demand. “I think the industry has done whatever it could. An intervention from the government can only revive the demand,” he said, adding: “It’s not good to ask for a cut in GST rate, but we are now in a situation where only that can help us.”  

M&M has decided to defer capacity expenditure by at least 15-20 per cent in light of the slowdown. A lending crisis among the country’s shadow banks, which fund nearly 55-60 per cent of commercial vehicles and 30 per cent of passenger cars, has led to automakers, including M&M, Maruti Suzuki India, and Tata Motors, to either cut production or temporarily close plants.

Goenka said things could become worse if the expected festive season demand doesn’t pick up in the next 10 days. “Right now, we are not even thinking in terms of year, we are thinking what would happen in the next ten days and if it remains subdued, I am afraid manpower has to be rationalised to align with capacity cut,” he said, when asked about if there would be further job loss.

M&M has retrenched about 1,500 temporary workers since April 1. “No one wants to cut jobs, but there are no other options in unprecedented times,” he said.

Auto sales in India witnessed its sharpest decline in nearly 19 years in July, dropping 18.71 per cent, rendering almost 15,000 workers jobless over the past three months, Siam reported earlier this month. However, Goenka was enthusiastic about the future of electric vehicle and said that the company has recongnised electric and not hybrid as the future of mobility. “I am not at all against incentive for other solutions like hybrid but regarding M&M we have decided to put our money in electric,” he said.

Maruti has demanded that incentives be provided to hybrid cars as it considers that it would be difficult to make an affordable electric vehicle in near future.