CV Makers Look For Scrappage Policy, GST Cut For Revival
Commercial Vehicle (CV) industry analysts continue to maintain a negative outlook over the near-term due to multiple factors. According to data released by the Society of Indian Automobile Manufacturers (SIAM), commercial vehicle sales fell by 28.75 per cent to 7,17,688 in FY 2020 from 10,07,311 in FY 2019. The downhill in sales could be attributed to the economic downturn in the country, slowdown in infrastructure projects, the liquidity crunch, implication of axle load norms, the impact of GST and similar others. The Covid-induced lockdown exacerbated the nightmare.
A leading Industry player like Volvo Eicher Commercial Vehicles Ltd (VECV) opine that the government loses more vis-à-vis industry players as tax collections on products sold are hitting rock bottom. It also believes that incremental volumes via fleet modernisation programmes can only be generated if there are more cash flows in the hands of consumers.
In a videoconference with reporters recently, Vinod Aggarwal, Managing Director & CEO, VE Commercial Vehicles said, “The (current) GST rate is 28% and the government losses that percentage (of the on-road price) for every unit less sold. Whereas the company’s profit is 5-7 percent margin (on the total price). I think the stakes of the government are much larger than the stakes of the industry. And indirectly, it contributes to the economic growth as the CV industry is the backbone of the economy.” He also maintained, “We are absolutely confident that the govt will take the right steps which will help the industry and the economy.”
Vipin Sondhi, the newly-appointed MD of Ashok Leyland, had earlier maintained, “An immediate trigger for the CV industry would be well regarded had the government considered a few suggestions that the industry made through SIAM. For example, we have talked about the scrappage policy. We have asked for – at least for a limited term – the reduction of GST from 28 per cent to 18 per cent.”
According to TechSci Research, the medium and heavy commercial vehicles (M&HCV – read trucks) segment was the worst impacted as it witnessed a degrowth of around 42 per cent in FY2020 compared to the corresponding period in FY2019.
Scrappage Policy
When queried on the scrappage policy, Aggarwal stated, “We have always been trying to convince the government that it is going to be helpful only when it is incentive-based scrappage policy. Since it is going to be voluntary and not mandatory, you have to create the right cash flows in the hands of the customers who are replacing 15-year+ old trucks. And this will be generated from three sources. a) From the govt in terms of lower duties. b) The scrap sales value and c) is the additional discount which will comes from the manufacturer. Furthermore, since there are additional sales, it will mean more revenues for the govt despite lower duties imposed on these products. So, the ball now is in the government’s court.”
