Finance Minister Nirmala Sitharaman Friday announced a slew of measures to assuage the bleeding auto sector. Addressing the media in New Delhi, Sitharaman said that the government will make auto loans cheaper and the banks will launch the repo rate or external benchmark linked loan products.
Other steps announced by the finance minister include:
The auto sector is facing an unprecedented slowdown. Sales of passenger vehicles to car dealers fell 30.9% to 200,790 in July, data released by the Society of Indian Automobile Manufacturers (SIAM) showed. Commercial vehicles sales fell 25.7% to 56,866 units, SIAM said. Motorcycle and scooters sales fell 16.8% to about 1.51 million units, while passenger car sales fell 36% to 122,956 units, the data showed.
The data also showed that domestic passenger vehicle production was down nearly 17% in the month.
The fall in car sales comes at a time when demand for consumer goods is falling and what is seen as a major sign of an economic slowdown in India, amid a liquidity crunch in the country's shadow banking sector that has impacted the availability of credit in the market.
India's auto sector is cutting tens of thousands of jobs citing slumping sales of cars and motorcycles, with many companies forced to shut down factories for days and axe shifts.
The downturn - regarded by industry executives as the worst ever suffered by the Indian auto industry - is posing a big challenge for Prime Minister Narendra Modi's government as it begins its second term at a time when India's jobless numbers are climbing.
The domestic auto industry demanded tax cuts and easier access to finance for dealers and buyers at a meeting with Indian government officials last week to discuss the sector's woes, in an effort to revive sales that have slumped.