The auto industry, which is already reeling under the burden of low demand and high inventory, both of which have got accentuated with the lockdown, is staring at another big problem. How to meet a maze of regulatory changes which have come into effect from April? Not getting any relief from the Supreme Court, the industry on Thursday sought the intervention of road transport and highways minister Nitin Gadkari. In a video conference with the minister over the impact of Covid-19 on the automobile sector, members of the Society of Indian Automobile Manufacturers Institute, sought that switchover to certain safety norms, which have kicked in from April, should be deferred by a year.
More importantly, the industry members urged that the sector be given more time for registration of BS IV vehicles sold till March 31 as lockdown has delayed matters. Pawan Goenka, managing director and CEO, Mahindra and Mahindra, said that around 20% of the BS IV vehicles sold within the March 31 deadline are still stuck with the concerned regional transport authorities (RTOs) for various reasons. “The Supreme Court had given a grace time till April 30 for registration of BS IV vehicles that were sold before March 31. But the process has not got completed for about 20% vehicles and they are stuck with RTOs for variety of reasons. Now the April 30 deadline has passed, so how do we register them? We need to find a solution for them,” Goenka told Gadkari.
Goenka added: “Some RTOs are putting their own restrictions. For instance, Delhi RTO says they will register vehicles sold till March 25, which is causing problems.” The issue is complex because the Supreme Court has not provided any relief to the industry on this front. Gadkari said though the government is bound by the SC verdict, but on industry’s suggestion, he will get the matter examined afresh. Regarding relaxations sought on other regulations, Gadkari stated that he will endeavour to provide relief wherever possible where industry is seeking extension of time. He said that he has directed the ministry officials to finalise the auto scrappage policy quickly, and it will go a long way in cost reduction. He also suggested exploring cheaper credits, including foreign capital, for enhancing liquidity in the automobile manufacturing sector.
The industry’s plight has turned from bad to worse. Due to the lockdown, it sold nil vehicles in the domestic market during April. But, even before, the condition was no good. For instance, domestic passenger vehicle sales in FY20 stood at 2.77 million units, which was at a similar level in FY16 when sales stood at 2.78 million units. “With the already existing slowdown during FY20, the industry is likely to suffer huge losses going forward. Even if the pandemic is curtailed, the consumer sentiments are expected to be unfavourable and demand is expected to remain muted during H1FY21 led by volatile economic conditions. Also, government spending on infrastructure is expected to be low during the period, further impacting the demand for commercial vehicles,” a report by CARE Ratings said.
Goenka said suppliers, OEMs and dealers are struggling and the biggest problem being faced by the sector is of cash flows.
Another area the industry members sought Gadkari’s help is CAFE norms, where it wants deferment by a year due to the pandemic. CAFE norms seek to lower emissions based on the portfolio of a company. This has also kicked in from April 1. This norm generally puts more burden on companies which have large diesel vehicles in their portfolio so a company like M&M would get hit severely by it but Maruti Suzuki would be fine. “The request to you is to put a moratorium for next 12 months on new regulations that are currently in pipeline. There are at least 12 such regulations,” Goenka said.
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