Auto sector needs stable long-term policy road map to grow and develop new tech2 min read . Updated: 04 Sep 2020, 04:14 PM IST
- Leading automakers say certainty about future policy initiatives and regulations will help them plan products efficiently and protect their profitability.
New Delhi: The automotive industry needs a stable long-term policy road map from the Union and state governments to seamlessly transition to alternative powertrain technologies and meet other regulations in the coming years, top executives of leading automakers said at the 60th annual convention of Society of Indian Automobile Manufacturers (SIAM) .
Certainty about future policy initiatives and regulations will help the vehicle manufacturers to efficiently plan for products and protect their profitability, they added.
Vehicle manufacturers have been witnessing double-digit decline in sales from the second half of FY19 due to the prevailing economic slowdown and increase in prices of vehicles as result of transition to the new safety and Bharat Stage VI (BS) emission norms. In FY21, sales of vehicles fell in the range of 15% to 25% across categories.
The covid-19 pandemic exacerbated the plight of automakers as some of them like Maruti Suzuki reported a loss for the first time for the April-to-June quarter as sales plunged due to lockdown measures. Vehicle sales are likely to further decline in the range of 25% to 45% in the current fiscal, SIAM forecast.
According to Vikram Kirloskar, vice-chairman, Toyota Kirloskar Motor India, investments by auto companies are amortized over a period of sever years and the government should give a 15-year timeline for upcoming regulations and this will help protect the profitability of the companies.
“Auto companies tend to recover the cost of development of vehicles, powertrains and engines over a period of time. (A road map) That will help us since this is not an iphone that can be changed every year. We cannot afford any impairment if our product life cycles are reduced to five years," added Kirloskar.
Automakers and component manufacturers had to invest significantly in the last three years to transition to BS VI emission norms from BS IV norms, which took a toll on the balance sheets. Most of them had to reduce production substantially to exhaust stocks of BS IV vehicles by 31 March 2020 and increase supply of BS VI vehicles gradually.
“The government should take on the task to revisit the Automotive Mission Plan (AMP) with the automakers, component industry and dealer association and see if we can lay out a new long-term map for the auto industry, where everybody, including the industry sectors and all departments of the government, will come together and try and grow this industry to the level that we have been used to," said Pawan Goenka, managing director, Mahindra and Mahindra Ltd.
Apart from emission norms, sudden change in load-carrying norms for trucks, which allowed them to take more freight, led to massive fall in sales of heavy and medium commercial vehicles in the last fiscal.
Sales of commercial vehicles are down by almost 70% compared to last year when sales were down by 30%. Hence, it will take another two years to reach the FY18-19 level, said, Vinod Aggarwal, managing director and chief executive, Volvo Eicher Commercial Vehicles (VECV).