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:
- Lifting the ban on the purchase of new vehicles for replacing all old vehicles by government departments.The government will consider various measures including scrappage policy. The scrappage policy, if implemented, is likely to give stimulus to customers to make new purchases supported by government incentives in place of their old vehicles.
- BS4 vehicles purchased up to March 2020 will all remain operational for their entire period of registration.
- Revision of one-time registration fees being deferred till June 2020.
- Additional 15% depreciation on all vehicles, to increase it to 30% acquired during the period from now till 31st March 2020.
- Government's focus will be on setting up of infrastructure for the development of ancillaries/components including batteries for export.
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.