The current stressful situation in the auto industry, which had begun in the third quarter of the fiscal year 2018-19, stemmed from the liquidity crisis at the non-banking financial companies, said Vinod Aggarwal, managing director and chief executive office of VE Commercial Vehicles, a unit of Eicher Motors. Weakness in sales continued for Eicher Motors in the month of May and the company also suffered market share loss across segments. “As far as the overall industry is concerned, this entire stress started sometime in Q3 of last year. While the drop was around 10-12 percent in Q3 and Q4, last two months the drop in the industry has been 20 percent,” said Aggarwal.
Aggarwal said axel load has also contributed to weak sales after the government increased the capacity of trucks, slowing down the replacement cycle. The company had sold 73,000 trucks and buses in the FY19, representing a growth of 11 percent, according to Aggarwal. “We are not running after the market share and we are not running after the volume, that is why our market share is under pressure but I think our volume growth story is intact and we are doing well,” said Aggarwal.
Aggarwal expects the infrastructure sector to get a major push as Nitin Gadkari, minister for road, transport and highways, said the government plans to increase the road connectivity from 32 kilometres per day to 40 kilometres per day. “The second thing that we are expecting from the new government is that they should come out with the scrapping policy for old trucks,” he said. The auto industry is also looking forward to some realisation in the goods and services tax rates in order to boost demand. “In the next fiscal budget, they should take some fiscal measures as well because the auto sector is highly taxed sector.” The government should also look at the direct taxes, the income tax rate also for the corporates, he added.
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