The government wants to understand better and take a deep-dive view on what is causing the auto sector slowdown, Tarun Bajaj, Revenue Secretary, Ministry of Finance said while rebutting industry captains, who were of the opinion that auto sales are going down because of high taxation.
In what turned out to be an interesting debate among the participants of the session on “Outlook of Indian Auto Industry and Its Role in India’s Economic Growth” involving RC Bhargava, Chairman, Maruti Suzuki India; Venu Srinivasan, CMD, TVS Motor and Bajaj, it emerged that the auto industry need to introspect on the overall auto sector slowdown.
Bajaj questioned if price elasticity the only cause of dropping sales of the auto sector? “The government wants to get a deeper look at what is causing the auto sales to go down as the demand for SUVs has risen high, while the compact car demands have gone down. A simple reduction in taxes won’t help in the growth of sales in the auto industry as it would translate to higher raw material prices in the future,” he added.
Earlier, making his opening remarks, Vipin Sondhi, MD, Ashok Leyland, and VP, SIAM shared that the sales of passenger vehicles in 2021 is the lowest in six years, two-wheelers in seven years, commercial vehicles in 11 years and three-wheelers in 19 years.
He further said that the growth of passenger segment vehicles is just 3.6% in the last decade compared to 10.3% in the previous decade. Similarly, 2W segment growth was 6.4% vis-à-vis 9.8%; CVs were 3% vis-à-vis 12.7%; and 3W segment 3.8% vis-à-vis 9.8%. While highlighting that Indian vehicle taxation is one of the highest in the world, he expressed industry aspiration to go back to double-digit growth quickly.
Bhargava said the industry has been witnessing comparatively slower growth in the last 18 months. The government and the industry need to take necessary action collectively to revive the sector.
“I totally support that Indian customers should get modern vehicles. If we follow all the European standards then the vehicle cost may rise. Our focus should be on how to make the vehicles affordable to the masses. If the affordability factor is addressed, then the Indian auto industry can certainly recover in the short term,” he added.
Bajaj, however, indicated that there will be no tax deduction in the near future. “India borrowed INR 12 lakh crore last year, and we'll be borrowing a similar amount this year too. If we reduce taxes and increase borrowing, it will come back to haunt us,” he said.