Source: LiveMint.com, Aug 24, 2019
Most believe the liquidity situation at both the dealer and customer end will ease after the recent announcements.
To boost demand for automobiles and arrest the precipitous decline in sales the Centre on Friday announced a slew of measures like mandating government agencies and departments to replace old vehicles, increasing depreciation on new vehicles for commercial fleet service providers, urging banks to make automobile loans cheaper and increase credit availability to non-banking finance companies.
Finance minister Nirmala Sitharaman also assured buyers and manufacturers that vehicles compliant with Bharat Stage IV emission norms registered before March 31, 2020, will be able to run for the entire registration period or the life of the vehicle.
The announcements, industry executives believe, will boost the morale of companies and customers alike, just before the festival season.
According to Venu Srinivasan, chairman, TVS Motor Company, the measures will provide the immediate relief that the industry was seeking. The government’s prompt response has not only been reassuring for just industry, but for the common man as well because the steps will boost liquidity in the market.
“While there are indications of a global slowdown, this government has demonstrated its resolve to mitigate the impact of that in India through these measures. This is the stability and proactiveness that industry wants,” added Srinivasan.
Lobby groups in the sector like Society of India Automobile Manufacturers (Siam), Automotive Component Manufacturer Association of India (ACMA) ans Federation of Automobile Dealers Associations (Fada) had also been urging the government to ease financing options for dealers and customers and reduce Goods and Services Tax on two and three-wheelers.
“Affordability and availability of retail finance as well as finance for dealers, was a major concern for the industry and the announcement today have adequately addressed concerns on both the fronts. The release of ₹70,000 crore for PSU banks recapitalisation and ₹20,000 crore for National Housing Bank will give banks and NBFCs enhanced liquidity in the system,” said Rajan Wadhera, President, SIAM.
According to Ram Venkatramani, president ACMA, measures to improve liquidity and the deferring of enhanced vehicle registration cost will revive ailing sales in the auto sector.
That apart, enhanced depreciation of 30% until March 2020 will motivate institutional sales of vehicles. Further, removal of ban on purchase of new vehicles by government will also help reduce the current pileup of inventory.
“The easing of liquidity in banking sector was followed up with a slew of announcements like increase depreciation rate till March 2020, deferment of one time registration fees which would have further burdened the affordability of customers. Coupled with the soon to be announced scrappage policy, will definitely boost demand,” said Ashish Kale, president, Fada.