Why this Kolaveri for the Indian Car Industry?!! NOTE : This thread is to discuss the inconsistent policy making & Center's lack of support to the Indian Auto Industry. A dedicated thread on the proposed diesel car tax can be found at this link.
The Indian Automotive Industry defied global trends until last year, recording whopping growth at the same time that other markets were down. Still, car penetration levels in India remain at a pitiful level of <20 per 1,000 Indians. The same for developed nations is between 500 - 700 per 1,000 citizens.
A household with a car enjoys superior quality of life than one without. Just when we thought car penetration levels will improve, the Government's apathy for the sector rears its ugly head.
The Auto Industry contributes significantly to: - The country's GDP and overall industrial strength
- Employment to lakhs of Indians (directly & indirectly)
- Tax collection to the tune of billions of Rupees (directly & indirectly)
- Foreign Exchange Earnings
- Providing a means of transportation in a country with pathetic public transport infrastructure
- Getting new technology & research facilities to India
The Indian Auto Industry's turnover is 25 times smaller than the American ( Source), yet contributes 1/6th of the US Auto Industry in taxes.
April & May 2012 have seen an absolute bloodbath in the Industry. Let's take a look at the unfortunate developments of the recent past: - Petrol prices hiked by Rs. 7.5 / liter in May! It's hard to believe that the now-precious fuel cost only Rs. 44.55 (Mumbai) in January 2009
- The Government increased excise duties on all cars in Budget 2012
- The Rupee hits a record low of Rs. 56.52 to the US$, thereby increasing import costs for manufacturers
- It was officially announced that India's annual GDP growth has slowed down to a 9-year low of 6.5%. This isn't the best time to buy big ticket items like cars
To top it off, Delhi is said to be considering a hefty tax on all diesel vehicles. The expected outcome: - Sales levels, already suffering, will further crash. There will be a severe fall in the demand of diesel cars
- Investment activity will slim down. Overall Industrial activity will reduce too
- As the industry copes with excess capacity, job creation in the sector (and security of existing jobs) will nosedive
- Foreign car makers who were considering an India entry will look at other parts of the BRIC instead
- Inventory levels have already reached their highest level in May 2012 (150,000 cars across the brands)
- India will be perceived as an unstable, unfriendly economy by MNCs
- Car penetration levels won't improve from their dismally low levels
If the Government thinks hefty taxation on diesel cars will lead to market recovery for petrols, it is grossly mistaken. Petrol cars aren't going anywhere too soon, what with the fuel costing Rs. 75 / Liter.
Dr. Goenka, President - Automotive, Mahindra & Mahindra, had this to say: Quote:
The primary point that we have made is that overall consumption of diesel fuel for private diesel vehicle use is less than 2%. That's proven without any doubt. Therefore, the whole argument that by doing so we are somehow taking care of the loss due to diesel fuel subsidy doesn't hold water....
It's going to be a difficult year for auto industry. 2011 was not best of the year that we have had and 2012 also appears to be a difficult year.
We are of the view that the government should raise diesel prices to market-based pricing, encourage replacement of petrol by diesel and there by save on oil import bill.
If there is any tax that comes on diesel vehicles, it will not move demand from diesel to petrol, but it will slow down the industry which has already had a difficult year in 2011.
We may slow down some investments we had planned on the basis of certain assumptions.
| Michael Boneham - President & MD of Ford India - had this to share: Quote:
Long-term investment decisions are predicated on and require stable government policies. Short-term, reactionary decisions are not conducive to growth in any industry, especially the automotive industry which generates significant employment and economic impact.
If an additional tax on diesel cars is imposed it will make it harder for all automakers to justify future investments and, thus, employment generation. We believe in India, and we are proud to be a good corporate citizen making major investments at this time.
However, policies like the diesel tax do not make it easy for us to remain optimistic about the overall business environment in India.
| To such an important industry, is the Government supposed to provide stimulus or deterrence?
Last edited by GTO : 18th June 2012 at 14:15.
Reason: Correcting typo. Thanks SS-Traveller!
|