In search of the difference engine

Staring at prospects of declining automobile sales, bleak outlook and the possibility of 25 per cent “green tax” on diesel cars, notwithstanding the Centre denying any such levy for the moment, Society of Indian Automobile Manufacturers (SIAM), the apex lobby group of automakers, wants to stay with its current estimate of 1 to 3 per cent growth rate for passenger cars.

Further, given the modest overall growth rate of 12.24 per cent last year and 3.62 per cent in H1 2013, the industry is no longer sure of achieving its $145-billion sales target by 2016 in line with that envisioned in the Automative Mission Plan for 2006-16.

It is also questioning the logic behind “green tax”, apart from seeking rationalisation of the excise duty structure. SIAM President and Chairman of Eicher Motors  S Sandilya sits down with  S V Krishnamachari and Hrithik Kiran Bagade to share the industry  perspective:

What do you feel about sales projections made in the first week of October for the auto industry? Weren't they revised downward?

The October forecast stands as of now. For the quarter ending December, we will come up with one around January 9 or 10 next year.

What do you think about the Automotive Mission Plan 2006-2016 projecting a turnover of $145 billion for the industry?

We had visualised certain projections, but given the slowdown last year and the current year, there is likely to be a shortfall in achievement. Therefore, we are exploring options to extend this so that we can focus on India becoming an automobile hub.

When you say exploring options, what exactly are you referring to?

Extending time. We are requesting the government to see if the Automotive Mission Plan could be extended to 2026 so that the gap that has arisen in the last couple of years can be bridged.

What about exports? You witnessed a decline in the first seven months of this year.

Indian automobile exports have been impacted on account of the overall global slowdown. However, there are opportunities for components and aggregates because global companies do see India as a major source for frugal designs and frugal manufacturing. This segment could significantly grow over the next few years. Vehicle exports will take time.

Are there emerging markets that India can look at?

If you look at it, the African continent is a major emerging market, though there are many challenges: like, no proper roads. We do look at it as a major potential area.

Is the industry expecting concessions from the government?

We are not looking at concessions, but we are expecting a certain amount of rationalisation of (excise) duty structure. Today, we have various sizes of cars that have differential duties; we want these to be common. We also want to ensure that the government does not relax import duty in any manner. Further, we want cascading taxes to be eliminated. If Goods and Services Tax (GST) is brought in, it will make movement of goods across states more free.

Do you see any impact on discretionary spends in the wake of interest rates being reduced by banks?

Interest is certainly not the driving force, but yes, if interest rates are high, customer sentiment will always be low because payments are affected. This is more so in the commercial vehicle sector where interest becomes a significant part of the payment. Otherwise, interest is not an all-encompassing, all-comprehensive thing which people consider while purchasing discretionary products.

Has the concept of green vehicles made any impact on the industry?

They will. But they will need a lot of investment to make them really effective. The government may also have to come up with subsidies.

What do you think of the scope for diesel cars, given the fact that the government seems to be keen on them?

Look, what the government is doing... it is a retrogade step, the diesel cess on cars. What SIAM has been talking about is to decontrol diesel prices; they should be market-led rather than government-controlled. Now, charging diesel cars, either from the revenue perspective or from a pollution perspective is not necessarily correct, it is counter-productive. If you use that logic, all users, like mobile towers, housing complexes or diesel generation sets should be subject to tax.

Automobile sales

Category               Growth/Decline
                                          (in %) on y-o-y basis
Passenger Cars    2.84
Commercial Vehicles    4.26
Three Wheelers    2.57
Two Wheelers    4.47
Exports    4.94
Overall    5.26

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