High tax rate stunts auto industry potential, says SIAM President
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.