Mahindra and Mahindra group chairman Anand Mahindra on Wednesday said the current slowdown in the auto industry poses a greater threat to the government’s financial arithmetic, while suggesting short-term measures like GST cut or rollback of the increases in road tax and registration fees to catalyse consumption.
Speaking at the 73rd annual general meeting in Mumbai, Mahindra said the most obvious and welcome first aid would be some temporary relief on the GST front, either by modifying the slabs or by removing the cess.
“I can well understand the government’s hesitancy in looking at GST concessions. But there is a paradox here. The auto industry contributes revenues of upwards of `180,000 crore to government treasuries,” Mahindra said, adding the slowdown has resulted in an 8% loss in GST collection in the first six months of 2019.
Stating that to catch up with the FY19 GST collections, the auto industry will need to grow at a rate of at least 7% in the remaining eight months of the FY20, Mahindra said kickstarting the auto industry with a few short-term measures will serve a greater national purpose.
Mahindra, who has barely spoken on the current auto sales slowdown, sought support for both wholesale and retail financing. “I would appeal to lenders to take a more supportive approach to the suppliers and dealers, who are the backbone of the auto ecosystem,” Mahindra said.
His comments come at a time when banks and NBFCs have been cautious in lending to dealers to purchase stock on fears of default, as vehicle sales across categories have been subdued for around a year now, with inventory rising to above normal levels. Post the defaults by IL&FS and DHFL, NBFCs have been reeling under a liquidity crunch and have trimmed their exposure to consumer and dealer financing. As a result, interest rates on loans have gone up, putting customers on the backfoot, further adding to the high cost pressures emanating from hike in insurance premium last year.
Mahindra said that the above mentioned measure along with the traditional post-monsoon revival will set the industry back on track and positively impact the economy. “I am hopeful that re-energising the auto industry will have a benevolent ripple effect. Revival of the auto industry would lead to the revival of freight, revival of freight would lead to the revival of trucks, all this revival would lead to the revival of jobs,” Mahindra said.
The slowdown in the sector has led to job losses across the supply chain as the OEMs have been cutting production and dealerships have been closing down. While Maruti Suzuki had to let go of around 1,200 contract workers, Honda Motorcycle & Scooter India asked around 700 workers to leave. Last month ACMA announced a job loss of 8,000-10,000 people due to low demand from the OEMs while FADA said some 300 dealerships have shut down in the past one year, leading to job losses of around 30,000 people.
