NEW DELHI: Finance Minister Nirmala Sitharaman’s announcements on Friday, aimed at reviving a flagging economy, are expected to bring the much-awaited relief to the struggling automobile sector.
Industry representatives say that sector-specific relief measures, combined with those focused on easing liquidity and enhancing credit disbursal, will boost demand after a nine-month-long decline in sales.
The decision to infuse Rs 70,000 crore into public sector banks (PSBs) to improve liquidity and the linking of repo rate with interest rates for automobile loans are seen widening access to finance, especially for cash-strapped commercial vehicle operators.
“Affordability and availability of retail finance, as well as finance for dealers, were major concerns for the industry and today’s announcements have adequately addressed concerns on both the fronts,” said Rajan Wadhera, president of the Society of Indian Automobile Manufacturers (SIAM).
Apart from easing of credit access, the government also announced several sector-specific measures. The implementation of the proposed hike in registration fees has been deferred until June next year, while depreciation for all vehicles acquired between now and March 31, 2020 has been increased by 15 per cent.
“The hike in registration fee would have had a significant impact on demand in the short term since costs would have gone up significantly. The deferment is positive for two- and three-wheelers and CVs in particular,” said Ashwin Patil, Senior Research Analyst (Auto Sector) at LKP Securities.
The hike in depreciation, analysts add, will give another boost to the CV industry considering the extreme stress on the entire value chain.
The decision to lift the ban on government departments purchasing new vehicles to replace old ones will renew demand from the government side, while allowing BS-IV vehicles bought before March 31, 2020 to run for the entire period of registration is likely to boost short-term demand in the PV segment.
“Consumers will no longer hesitate to buy BS-IV vehicles,” Wadhera noted.