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Auto sector slowdown: Anand Mahindra calls for short-term booster dose

I believe the government's measures to push the auto industry towards change are sincere and far-sighted, Mahindra said

Shally Seth Mohile  |  Mumbai 

Anand Mahindra
Anand Mahindra

The auto sector, which is facing one of its worst and most-prolonged slowdowns since 2001, is awaiting a short-term stimulus like reduction in goods and services tax (GST) for revival. .

Otherwise, the industry is unlikely to see a demand uptick, leading to job losses.
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Speaking to shareholders at the company’s 73rd annual general meeting (AGM), chairman of the Mahindra Group said, “We need short-term measures to catalyse consumption. I believe the government’s measures to push the auto industry towards change are sincere and far sighted. I can well understand the government’s hesitancy in looking at GST concessions.”
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Citing auto industry body SIAM estimates, he said the slowdown has resulted in an 8 per cent loss in GST collections in the first six months of 2019.
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On Wednesday, the maker of XUV 500 and Swaraj Tractors reported a 26 per cent fall in net profit and a 4 per cent decline in revenue on lower tractor and SUV sales. Net profit at M&M and Mahindra Vehicle Manufacturing Ltd (M&M+MVML) contracted to Rs 918 crore from Rs 1,238 crore a year ago while revenue and other income decreased to Rs 12,997 crore from Rs 13,551 crore a year ago. The company’s tractor volumes during the quarter declined to 15 per cent to 82,013 units over a year ago while automobiles, which include commercial and passenger vehicles, dropped 5 per cent year-on-year to 12,997 units.

ALSO READ: Auto industry leaders meet FM, seek stimulus package to spur demand

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Pawan Goenka, managing director of M&M, said the cannot revive without the government’s help in the form of a GST cut. Otherwise, he said the situation may worsen, leading to job losses. Goenka called for a 5-6 per cent reduction in GST rate from the current 28 per cent.
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“This is the fourth slowdown in my career,” he said. Goenka pointed out that after a 3-4 per cent reduction in excise duty during previous slowdowns, which typically lasted for six to eight months, “the industry took off.” He expects the same to happen this time.
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PV demand continues to be impacted by slowing down of the overall economy, which, along with tight credit conditions and delayed monsoon, impacted consumer sentiment in both urban and rural India, M&M said in a statement.
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Tractor volumes in the June quarter remained sluggish and were adversely impacted due to a weak sentiment in the agri-economy. This was because of delay in the southwest monsoon, among other reasons.
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The domestic tractor industry declined by 14.6 per cent to 1, 91,305 units over the year-ago period.
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Goenka said considering the industry’s poor performance in the June quarter, which typically accounts for three-fourth of the total volumes, he expects the full year tractor sales to remain unchanged compared to last year. This is in contrast to a 5 per cent growth he guided for in the previous quarter.

First Published: Wed, August 07 2019. 23:25 IST
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