CHENNAI: It’s not just macro factors alone that are weighing on automobile sales, but changing consumer behaviour by millennials too is affecting the sector, finance minister Nirmala Sitharaman said on Tuesday. “There are multiple factors impacting slowdown. Some buyers want to wait for BS6. We also understand that millennials don’t want to lock themselves up with EMIs on auto loans and hence prefer Ola or Uber or Metro (trains). We are listening to everyone,” Sitharaman said at a news conference to list out the government’s achievements in the first 100 days of its second term. While the government has announced some measures aimed at checking falling sales, auto companies have been demanding a reduction in GST, which is as high as 43% for some of the vehicles.
“We heard the auto industry and came out with a package of incentives (on August 23), including accelerated depreciation. They have sought a GST reduction. I can’t singularly say anything on rate reduction. It is for the (GST) Council to decide,” she said. The council is scheduled to meet in Goa on September 20. The government has been battling economic slowdown with quarterly growth slowing to a six-year low of 5% during April-June this year. The auto industry is among the worsthit sectors with sales falling to an over two-decade low, prompting companies to cut production and lay off workers.
he FM’s comment on changing consumer behaviour are similar to the views expressed by industry chiefs in recent weeks. At the opening session of the auto industry body Siam’s annual convention last week, banker Uday Kotak said that his son is “not ready to buy a new car, but prefers to hire an Ola or Uber” for his commute. Similarly, the head of sales at two-wheeler maker Honda Motorcycle and Scooter India said that the population that migrates for work across cities is not buying new two-wheelers but rather prefers shared mobility to move around.
Realising the need to spur consumption by spending in key areas, the government has said it will front-load infrastructure investments. It will also wait to see GST council’s decision on rate cut for automobiles. “Consumption increase through government spending will have to be speeded up. The task force which has been appointed to identify projects for investment has started work,” she said. The Budget has provided for an investment of Rs 100 lakh crore over a five-year period. With economic growth slowing to a weak 5% as measured by GDP growth, tax collections could have an impact. “Given the situation, there is a need to widen the basket,” she said. Last week a Memorandum of Intent was signed to open a full-fledged maritime route between Vladivostok and Chennai. “The southern region will benefit from the maritime trade. The activity at Chennai port will increase significantly,” she said. Rest of India will get from Chennai and there exists a multi fold opportunity for growth because of this, she added.
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