59th SIAM Annual Convention: Looking beyond the slowdown
At the 59th SIAM Annual Convention, the stakeholders of the auto industry strengthened their resolve to look beyond the slowdown in growth.
The 59th SIAM Annual Convention ushered in hope and optimism for the auto industry jostling with a slowdown. Held on September 05, 2019 in New Delhi, the annual fixture in the auto industry’s calendar had the stakeholders take stock of the downturn across segments that extended itself to nine consecutive months in August 2019 leading up to the congress. Titled ‘Moving into A New Era of Auto Industry’, the Chief Guest, Nitin Gadkari, Minister for Road Transport & Highways and Micro, Small and Medium Enterprises, Government of India kickstarted the proceedings of the day-long schedule by beginning on an optimistic note. He assured the stakeholders of the auto industry that the Government was standing by the industry in these trying times for the sector, weighed down by an overall slowdown in the economy and global pressures on the macroeconomic environment. Allaying fears of an extended slowdown, Gadkari spoke of the country’s potential as the preferred manufacturing destination. “India is poised to become the world’s largest manufacturing hub,” he stated.
On the fears looming large over the Government’s blanket ban on
the production and sales of Internal Combustion Engine (ICE) powered vehicles, Gadkari assured that there was no such intention on the government’s part to ban just for the sake of promoting EVs. “I want to clarify that though there have been talks that the government is planning to ban petrol and diesel vehicles, we are not going to do anything like that,” he mentioned. With hopes of the government paying heed to the industry’s demand of a GST rate cut, from the existing 28 per cent plus cess slab down to 18 per cent at an all-time high among stakeholders gathered at the convention, the Union Minister did not disappoint. Not only did the minister Gadkari spark hopes for the hybrid vehicles getting a level playing field in terms of GST levy compared to other class of vehicles, he assured of taking the demand for the GST-reduction to the GST council which would take a call on the demand at its meet scheduled for September 20, 2019, in Goa. This, he said, would ease the burden on the auto industry just in time for the upcoming festival season. A GST cut is crucial for the sector to reverse the negative sentiments as per popular opinion.
The Union Minister further drew attention to the ministry’s efforts in zeroing in on 68 infrastructure projects pegged at a valuation of rupees five lakh crore for their execution. Opined Gadkari that the automobile sector would be the biggest beneficiary as a result of the implementation of these projects. Talking about the issues pertaining to credit availability, Gadkari called for the need to establish an independent, proprietary financing arm by the sector to help boost sales. To highlight Government’s efforts to boost the sector, Gadkari cited the GST reduction on EVs, from 12 per cent to five per cent. “I will propose to the finance ministry to extend a similar benefit to hybrids,” he reiterated. On the much-awaited vehicle scrappage policy, the minister assured of the government’s intention to bring out an exhaustive policy in the near future. The union minister also drew attention to the construction equipment sector as a key contributor to the growth of the auto industry especially since the government was poised to focus more on the sector’s development. Stated Rajan Wadhera, President, SIAM & President, Automotive Sector, Mahindra & Mahindra, “The auto industry is a beacon of manufacturing marvel under the ‘Make In India’ initiative. The industry is hopeful of substantial solutions by the Government to end the Industry’s distress.” “Vehicles sales witnessed a de-growth of 20 per cent during the April-August 2019 period, while passenger vehicles sales witnessed a de-growth of 23 per cent with the slowdown leading to the elimination of 2.8 lakh jobs,” he added.
Bullish on the stimulus coming the way of the auto sector, he expressed confidence in the latter as a step in the right direction, in terms of helping in improving the market sentiments. Wadhera additionally urged the government to ensure the availability of BSVI fuel across the country by February 01, 2020 as against the current deadline of April 01, 2020 for the new norms to be implemented seamlessly. He also raised concerns over multiple nodal agencies being involved in policy framing for the sector. Wadhera urged the minister to look at the feasibility of setting up a single nodal agency instead that would be empowered to address all sectoral policies, citing the example of global countries. “At the moment polices concerning the auto industry encompass heavy industry, finance ministry, road transport ministry, petroleum ministry, power ministry and having one nodal agency for the auto industry is a crying need,” he opined.
Echoing a similar sentiment, mentioned Kenichi Ayukawa, VP, SIAM and MD & CEO, Maruti Suzuki India, “All stakeholders including OEMs, suppliers, dealers and banking sector need to work together to break through this crisis and move forward with a brave heart.” “Global challenges, coupled with the disruptions in the Indian domestic market, will require joint efforts by the industry and ministry,” averred Martin Peter Schwenk, Managing Director & CEO, Mercedes Benz India Ltd. At this juncture, the concerns around the rising BSIV inventory levels were also raised from both the manufacturer and the ancillary industry’s perspective. Representing the components industry, Ram Venkatramani, President at ACMA India said, “Managing the BSIV inventories are an area of concern for the component manufacturers. Through close coordination with the Government and the finance sector, we can jump into decisive recovery.” Drawing attention to the auto component industry crossing the USD 57 billion valuation mark in 2018-19, added Venkatramani, that with the industry currently
employing an estimated 50 lakh people and contributing 2.3 per cent to the country’s GDP, its revenues were impacted owing to the industry transitioning to the BSVI emission era. Averred Vinod Aggarwal, Treasurer, SIAM and MD & CEO, VE Commercial Vehicles Ltd, that the ‘Automobile Mission Plan’ is aimed at propelling the auto industry as the primary engine of growth for the ‘Make in India’ program.
Aggarwal advocated a different connotation of the abbreviation CASE in the Indian context. Clean, Affordable, Safe and Efficient, he quipped. Of the opinion that the CV industry performance is directly linked to the sentiments, explained Aggarwal, “If the economy is down, the CV industry has to be down and right now the entire economy is down. Last month was very bad for the industry, the sales of heavyduty trucks dropped by more than 60 per cent and light-medium trucks witnessed a decline of 40 per cent. So overall, the drop has been very significant.” Speaking about the current predicament of the auto sector and its revival, Guenter Butschek, CEO & MD, Tata Motors Ltd, cautioned that the Indian automobile industry growth story might collapse soon due to ongoing slump, triggered by multiple factors including low consumer sentiment and non-availability of liquidity. He, however, was quick to mention that he was optimistic albeit cautiously, about a recovery owing to the various recent measures announced and promised by the government. Of the opinion that the low economic activity led to subdued demand, triggered by the liquidity crisis and the revised axle load norms had together contributed to the uncertainty in the minds of consumers, in turn severely hurting the sector. Speaking on behalf of the OEM’s gathered, Butschek claimed that automobile manufacturers were taking steps to overcome the challenge by adjusting production to demand. “Block closure has become the word of the year,” he quipped.
Commenting on the importance and urgency of right financing required at these critical times, Uday Kotak, President-Designate, CII and Managing Director & CEO, Kotak Mahindra Bank Ltd, urged the auto industry to brace themselves for change. He opined that cars were no longer an aspiration. Speaking at the annual convention, Kotak said that customers’ preferences were swiftly changing and manufacturers ought to be prepared for the onset of shared mobility like disruptors. Assuring financial support to the auto sector, he urged industry stakeholders to brace themselves for changes especially expected in the mobility pattern. Kotak further mentioned of the issues being faced by the auto sector as largely structural in nature and cyclical in recurrence. Calling for the industry to introspect the challenge areas, Kotak voted for deep-rooted internal changes. “We need to be confident and not arrogant about the current state in the auto sector,” he remarked. He also expressed hope in the possibility of the sector being revived by a push in the form of government spending and price rationalisation by the manufacturers. Kotak also asked the stakeholders to hedge their investments by looking at export avenues to counter the slumber in the domestic market.
The New Era of mobility
The forum touched upon the trends shaping the new era of mobility. It will be based on the following: decarbonisation, autonomous vehicles, shared mobility, integrated mobility, connected vehicles, aerial and micro, opined John Moavenzadeh, Executive Director
Urban Mobility Professional Education, Massachusetts Institute of Technology. “Urbanisation, economic growth, climate change, shifting consumers and technology will be driving the future of mobility,” he opined. Rahul Jain, Managing Director and Senior Partner, The Bosting Consulting Group touched upon consumers delaying their purchases. Taking an optimistic view on the medium to long term outlook of the industry, Jain cautioned of the massive risk averseness seen in lending. Contradicting the industry’s demand for a GST rate cut, and the expectation that it would help the industry overcome the slowdown, opined Jain, that it would be a short term view on the industry’s part to bank on the rollback for a turnaround. He urged the industry to take a long term view instead.
Future scenario
A comparison between global markets and India presented interesting insights. Calling for the need to evolve according to market requirements, Jain added that the current challenges called for increased partnerships between all the stakeholders. He cited multiple trends that were giving rise to new ownership models and on-demand mobility services. “While rise in urbanisation and a shared economy are shaping consumer demand and market demographics, rise in big data analytics coupled with an increase in connected ecosystems are paving the future direction for technology to take in the future,” he added. Opined Moavenzadeh, “Digitisation and new business models would shift the mobility focus from products to service.” He claimed that consumer behaviour had shifted from vehicle ownership to pay-per-use models, and that shared mobility was expected to dominate the future, while traditional mobility continues to remain relevant. That apart, Moavenzadeh stated that over the future, mobility could get more integrated– with data at the core of mobility integration powered by mobility Big data and advanced technologies. The members of the apex body urged the government to articulate its goals with respect to safety, equity, and green initiatives with a clear timeline for implementation. The focus should be on the end objective and not the means to attain them, it was opined, correlating to the Government’s push for attaining desired emission standards through select technologies. “They must create an environment where the private sector can actively participate in the challenge, contribute toward the solution, and profit from their success, thereby resulting in an agile governance module, which is highly standardised,” expressed Moavenzadeh. On the future growth prospects, averred Dr Pawan Goenka, MD, Mahindra & Mahindra Ltd, that auto OEMs should work cohesively in this testing times and urged the govt. and the industry to come together to beat this downturn. He further added that in the past, when slowdowns occurred, reduction in excise duties then had helped in picking up demand immediately. Sharing his optimism of a revival, Venu Srinivasan, Chairman, TVS Motor Company Ltd, said that he expects to see a growth in demand within the next three or four months time owing to the government’s intervention in boosting the market sentiments’. For the immediate future,it was opined that the industry ought to recover faster ahead of BSVI kicking in, which in turn would bring new set of challenges for the industry.