High tax rate stunts auto in­dus­try po­ten­tial, says SIAM Pres­i­dent

Auto components India - - SPECIAL REPORT - Story by: Sukh­preet Singh

The 58th SIAM an­nual con­ven­tion held in New Delhi got au­to­mo­tive OEMs and sup­pli­ers un­der one roof to dis­cuss about the fu­ture of mo­bil­ity. Set­ting the tone, Dr. Abhay Firo­dia, Pres­i­dent, So­ci­ety of In­dian Au­to­mo­bile Man­u­fac­tur­ers As­so­ci­a­tion (SIAM), and Chair­man, Force Mo­tors, spoke about growth and the chal­lenges that lie in front of the In­dian auto in­dus­try. He said, “GST was wel­comed by the auto in­dus­try. How­ever, soon af­ter its roll-out, the GST slab for pas­sen­ger cars was re­vised up­wards in Septem­ber to pre-GST lev­els. This dented the con­fi­dence of the auto in­dus­try.”

“The auto in­dus­try seeks a sta­ble pol­icy en­vi­ron­ment, and a change in the mind­set. Ve­hi­cles are con­sid­ered lux­ury goods that are akin to sin goods. They are in fact very im­por­tant for the progress of the econ­omy and should there­fore be given due recog­ni­tion by mod­er­at­ing the taxes levied on ve­hi­cles. The av­er­age EBITDA of the in­dus­try is 10% com­pared to other mar­kets where it is 17 to 20%. It is in stark con­trast to the de­vel­oped mar­kets. The very high pro­por­tion of ve­hi­cle taxes levied on the cus­tomer does not al­low the in­dus­try to grow to its full po­ten­tial. The pen­e­tra­tion of auto prod­ucts is very poor in com­par­i­son to most coun­tries. When this hap­pens, the abil­ity of the in­dus­try to con­trib­ute to the na­tional econ­omy is stunted,” he said.

Stat­ing that the 28% GST slab and the com­pen­sa­tion cess, which is sup­posed to be tem­po­rary, will ever be abol­ished, Dr Firo­dia said that the auto in­dus­try is one of the largest con­trib­u­tors to the na­tional econ­omy in terms of tax rev­enue, em­ploy­ment. “It is the en­gine that pow­ers the coun­try’s man­u­fac­tur­ing ecosys­tem. One may think that the in­dus­try has flour­ished un­der high tax­a­tion, it is a mis­con­cep­tion. The in­dus­try had, and has, the po­ten­tial to do much more,” he said. Dr Firo­dia called for poli­cies to be favourable for the in­dus­try to grow.

In his ad­dress, Dr Ra­jiv Ku­mar, Vice Chair­man, NITI Aayog, said that the auto in­dus­try is fac­ing a dis­rup­tion. Like other in­dus­tries, this in­dus­try has also en­tered its fourth in­dus­trial rev­o­lu­tion. “The good news is that In­dia is well placed to use dis­rup­tion

to its ad­van­tage by get­ting its act to­gether,” he said. Cit­ing as­pi­ra­tion mid­dle class and skilled peo­ple, Ku­mar opined that In­dia is a strong man­u­fac­tur­ing base. Ku­mar touched upon the auto in­dus­try’s con­tri­bu­tion to the ecol­ogy. On be­half of NITI Aayog, he ex­tended com­plete sup­port to the auto in­dus­try stake­hold­ers.

Set­ting aside the term leapfrog­ging, Ku­mar spoke about the need to plan the tran­si­tion. “You will see IC en­gines dou­bling in num­bers, and will make for a big tran­si­tion,” said Ku­mar. Draw­ing at­ten­tion to Kar­nataka be­ing the first state that has an­nounced an elec­tric ve­hi­cle pol­icy, Ku­mar said that it is im­por­tant for the cen­tral govern­ment to en­sure that such poli­cies are self sus­tain­ing and do not con­tra­dict the mes­sage that is in­tended to be de­liv­ered to dif­fer­ent play­ers in the in­dus­try.

Anant Geete, Min­istry of Heavy In­dus­tries, Govern­ment of In­dia, spoke about the chal­lenges the auto in­dus­try is fac­ing. He said, “That is log­i­cal of the in­dus­try to speak about the is­sues con­cern­ing GST and EV pol­icy. I am also of the same opin­ion that the In­dian auto in­dus­try is among the high­est taxed in­dus­try ver­ti­cals in the world. It is our re­spon­si­bil­ity to help the auto in­dus­try to sus­tain it­self. I be­lieve that any de­ci­sions to be taken re­gard­ing the auto in­dus­try should not be taken in a hurry. It is for this rea­son that we are for­mu­lat­ing a com­pre­hen­sive auto pol­icy. Ev­ery stake­holder of the in­dus­try will be con­sulted as the pol­icy is for­mu­lated.”

Speak­ing on the fear of in­vest­ment in the in­dus­try, Geete said that the same should not be the case since all the brands in the word are pro­duc­ing ve­hi­cles in In­dia. “It is our duty to sus­tain the con­fi­dence of those who have in­vested in the auto in­dus­try,” he said. Geete said that the new pol­icy would be favourable to all play­ers in the in­dus­try.

Dhar­men­dra Prad­han, Min­is­ter of Petroleum & Nat­u­ral Gas, GoI, drew at­ten­tion to the COP 21 agree­ment. He said, “In­dia is com­mit­ted to con­trib­ute to­wards pro­tect­ing the en­vi­ron­ment and re­duc­ing pol­lu­tion. Two to three years ago when In­dia had to align it­self to COP 21, the coun­try repo­si­tioned it­self to align with BSIV and BSVI emis­sion norms,” he said. Cit­ing that OEMs ex­ported Euro VI ve­hi­cles at that time, Prad­han praised the auto in­dus­try on the roll­out of BSVI as com­mit­ted at COP 21.

Union Min­is­ter for Road Trans­port and High­ways, Nitin Gad­kari, stressed upon the blame put on the auto in­dus­try for not do­ing enough to­wards en­vi­ron­ment pro­tec­tion and safety. Con­grat­u­lat­ing the auto in­dus­try for an ap­par­ent shift in the mind­set by coin­ing the theme, ‘Fu­ture of Mo­bil­ity’ for this conclave edi­tion, Gad­kari re­minded all those present of the re­luc­tance shown by the auto in­dus­try to move to BSVI. “We de­cided to bull­dose when we found that there was re­luc­tance on the part of the in­dus­try to meet the BSVI 2020 dead­line,” he said. The min­istry was ques­tioned on the ca­pa­bil­ity of mak­ing BSVI fuel avail­able be­fore the dead­line. With the oil in­dus­try mak­ing an in­vest­ment to the tune of Rs 60,000 crore to Rs 70,000 crore, the govern­ment has been suc­cess­ful in mak­ing BSVI fuel avail­able well in time, Gad­kari said.

Opin­ing that post the early re­luc­tance, the auto in­dus­try has come to take up the chal­lenge of meet­ing BSVI dead­line in the larger in­ter­est of the en­vi­ron­ment, Gad­kari an­nounced that elec­tric and al­ter­na­tive fuel ve­hi­cles with a com­mer­cial ve­hi­cle’s reg­is­tra­tion will be ex­empted from per­mits. He added, “This would en­cour­age com­mer­cial ve­hi­cle own­ers to shift to

al­ter­nate fu­els, if not elec­tric ve­hi­cles ini­tially. It would also en­cour­age the in­dus­try sen­ti­ment.” Gad­kari also touched upon the rise in the rate at which roads are be­ing built. He put the fig­ure at 28km per day. The Govern­ment, he said, as­pires to take the count to 40km per day next year. He also spoke about the axle load no­ti­fi­ca­tion. It will ben­e­fit the in­dus­try in the long term, he said.

Dr Pawan Goenka, Manag­ing Di­rec­tor, Mahin­dra & Mahin­dra, drew at­ten­tion to the Au­to­mo­tive Mis­sion plan 2026. He said, “The in­dus­try has made an in­vest­ment of over USD 35 bil­lion (USD 24 bil­lion by OEMs and the rest by sup­pli­ers) dur­ing 2000 to 2017.” Stat­ing that the In­dian auto in­dus­try will be among the top three of the world by 2026, Goenka said that the in­dus­try will con­tinue to pro­mote safe, ef­fi­cient and en­vi­ron­ment-friendly ecosys­tem for af­ford­able mo­bil­ity of peo­ple and trans­porta­tion of goods. This would be on par with the global stan­dards, he said. Fore­cast­ing that the CV sec­tor will ex­pe­ri­ence more growth, Goenka opined that FAME II will sup­port a steady growth in pas­sen­ger ve­hi­cles. Guenter Butschek, CEO and Manag­ing Di­rec­tor, Tata Mo­tors, said that mo­bil­ity in In­dia is poised to take a gi­ant leap into the fu­ture. Stress­ing upon fun­da­men­tal chal­lenges, he said that road safety will have to be looked in con­text to the ris­ing traf­fic con­ges­tion and poor road qual­ity. “Around 12 % of the road fatal­i­ties oc­cur in In­dia,” he men­tioned. “There is a lack of law en­force­ment,” Butschek said. He also stressed on the ris­ing pol­lu­tion lev­els, and men­tioned that 14 out of 15 most pol­luted cities (PM 2.5 level greater than 94 mi­cro­grams per cu­bic me­ter) in the world are in In­dia. Butschek spoke of the need to put in place strin­gent emis­sion norms to meet CAFE roadmap in tight time­lines to match the global stan­dards.

Speak­ing on un­sus­tain­able ecosys­tem, Butschek touched upon the den­sity of ve­hi­cles out­grow­ing the in­fra­struc­ture. He also spoke about the in­ef­fi­cien­cies in the value chain and ris­ing fuel prices. Bustchek called upon the need to prac­tice holis­tic growth. He ad­vo­cated the need to be proac­tive rather than be re­ac­tive. He high­lighted the in­dus­try’s com­mit­ment to triple bot­tom line, and urged that there was a need to look at a mo­bil­ity ecosys­tem that is in­clu­sive, sus­tain­able and trans­form­ing.

The CASE (Con­nected, Au­ton­o­mous, Shared and Elec­tric) ap­proach find­ing a men­tion with many in­dus­try lead­ers who gath­ered at the con­ven­tion, the dis­cus­sions dwelled upon the need to sub­sidise ve­hi­cles run­ning on al­ter­na­tive fu­els like CNG and FCEVs (FuelCelled Elec­tric Ve­hi­cles) as a vi­able op­tion other than EVs. If the lack of de­pen­dency on charg­ing in­fra­struc­ture was men­tioned as the high point of ve­hi­cles run­ning on al­ter­na­tive fu­els, a dis­cus­sion on fu­ture tech­nolo­gies en­sued among the in­dus­try stake­hold­ers on the side­lines of the con­ven­tion. The avail­abil­ity of re­new­able sources was also pon­dered upon by the in­dus­try stake­hold­ers. An in­dus­try leader said that at the mo­ment the avail­abil­ity of re­new­able en­ergy was less than one per cent in In­dia. Although flow seemed to emerge that re­new­able en­ergy gen­er­a­tion will need a ma­jor push in order to re­duce en­vi­ron­men­tal im­pact of gen­er­a­tion of elec­tric­ity in the fu­ture.

An­other in­dus­try leader spoke about solid state bat­ter­ies be­ing re­searched upon on a global scale. An in­dus­try stake­holder said that raw ma­te­ri­als used to build a lithium-ion bat­tery were scarce. The value of the raw ma­te­rial would in­crease over a pe­riod of time, he said. He men­tioned that in such a sce­nario FCEVs can play a ma­jor role.

At the SIAM An­nual Con­ven­tion, many OEMs show­cased the tech­nolo­gies they have de­vel­oped for the fu­ture mo­bil­ity. Putting the spot­light on prac­ti­cal and sus­tain­able so­lu­tions in the area of mo­bil­ity, the event also had vis­i­tors talk­ing about the Govern­ment’s Vi­sion 2032, which was ear­lier known as Vi­sion 2030.

(L-R) Ram Venkatara­mani, Pres­i­dent, ACMA & MD, IP Rings; Anant Geete, Union Min­is­ter for Heavy In­dus­tries & Pub­lic En­ter­prises, Govern­ment of In­dia; Dr Abhay Firo­dia, Pres­i­dent, SIAM & Chair­man, Force Mo­tors and Ra­jan Wad­hera, Pres­i­dent, Au­to­mo­tive Sec­tor, Mahin­dra & Mahin­dra, light­ing the lamp be­fore the start of the con­ven­tion.

(L-R) Ra­jan Wad­hera, Pres­i­dent, Au­to­mo­tive Sec­tor, Mahin­dra & Mahin­dra; Dhar­men­dra Prad­han, Min­is­ter of Petroleum & Nat­u­ral Gas and Skill De­vel­op­ment & En­trepreneur­ship; Dr Abhay Firo­dia, Pres­i­dent, SIAM & Chair­man, Force Mo­tors; Nitin Gad­kari, Union Min­is­ter for Road Trans­port and High­ways; PK Ban­er­jee, Deputy Ex­ec­u­tive Di­rec­tor, SIAM.

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