Forbes India 15th Anniversary Special

Auto sector hopes for a sop opera

Battling slowdown, automakers feel GST rate cut will improve sentiment

Manu Balachandran
Published: Aug 26, 2019 10:00:35 AM IST
Updated: Aug 26, 2019 01:31:01 PM IST

Auto sector hopes for a sop operaImage: Shutterstock

The automobile industry desperately needs sops. And there are two that interest automakers. “In the short term, the government should bring down the GST rate from 28 to 18 percent,” says Puneet Gupta, associate director of automotive forecasting at IHS Markit.

According to the Federation of Automobile Dealers Associations, around 2 lakh people have been laid off across automobile dealerships in the last few months. “While the festive season will see some revival, customers are still holding back their purchases,” SS Kim, Hyundai Motor India’s MD and CEO, had said on August 21. “We expect some government intervention. The most tangible one is a GST rate cut.”

In the medium term, Gupta reckons a new scrappage policy that will encourage customers to go in for new purchases in exchange for government incentives for their old vehicles could help improve sales. “The sector is in a cyclical slowdown,” he says. “Over the next few years, a scrappage policy will help.”

“Two other areas that we need to focus on are higher insurance costs and a one percent tax collected at source for vehicles above ₹10 lakh,” says Vinay Piparsania, consulting director–automotive, at Counterpoint Technology Market Research.

On August 23, the government announced a few measures to revive the sector. These include allowing all BS IV vehicles purchased until March 2020 to remain operational through the course of their registration and lifting a ban on purchasing new vehicles by government departments to replace older ones.

(This story appears in the 13 September, 2019 issue of Forbes India. To visit our Archives, click here.)