Javadekar: Auto sales decline due to upcoming BS VI norms, SC order on 3rd party insurance

New Delhi: There is cyclical slowdown across sectors including automotive sector since last few months. But the festival demand has shown YoY growth at 0.3% in the Passenger Vehicle Segment.

There are various financial and regulatory causes together with perceptional reasons for the slump in automobile sales:

  • Reduction in finance availability to Auto Sector;
  • Increase in Axel Load limit for commercial vehicles by up to 25% expanded freight capacity leading to shrinkage of new vehicle demand;
  • Increase in vehicle cost due to Supreme Court order for upfront collection of long-term 3rd party insurance premium for 3 years (new cars) and 5 years (new two-wheelers);
  • Increase in collateral for dealers from 25% to 60% resulted in reduction in inventory finance to dealers;
  • Postponement of purchase in anticipation of discounts by Original Equipment Manufacturers (OEMs) for clearing of stock with BS IV norms (situation similar to the transition from BS III to BS IV).

The Government, as a policy maker, always attempts to keep and improve momentum of the economy through a package of measures for comprehensive and continued development of the auto sector as and when required. Some of the steps taken by the Government to counter the slowdown in the automotive sector:

  • Reduction in Corporate Tax to 22%;
  • Continuation of registration of ICE and EV in future;
  • Scrappage policy under consideration;
  • Proposed increase in registration of new cars deferred till June 2020;
  • Funds worth Rs 70,000 crores released to PSU banks;
  • Linking of repo rate to interest charged for vehicle purchased;

This information was given by the Minister of Heavy Industries & Public Enterprises, Prakash Javadekar, in a written reply in the Lok Sabha on 19 November.

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The ID Staff

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