Auto firms want policy shift to make vehicles affordable

Source: Livemint

What is the news?

India’s automobile industry recently asked the government to frame policies that would make vehicle purchases more affordable for customers to revive sales. India’s two-wheeler makers have also been urging the Union government to reduce goods and services tax (GST) imposed on entry-level two-wheelers to 18% from the existing 28%.

Reason 

Sales of entry-level two-wheelers have remained low due to an economic slowdown and increase in ownership cost.

Hence, the industry requested the govt for policies that would help recovery in sales, especially of passenger cars and two-wheelers.

Present scenario

1. First, automobile sales in India have been on the downtrend since the second half of FY19 when the bankruptcy of Infrastructure Leasing and Financial Services caused a liquidity crisis among non-banking financial companies (NBFCs).
2. Second, higher fuel prices, weak consumer sentiment and an increase in vehicle prices to meet new regulations on safety and emissions led to a decline in car sales in FY20.
3. Third, the outbreak of the pandemic led to another double-digit decline in sales in FY21 as sales and manufacturing operations came to a halt due to a strict nationwide lockdown. The second covid wave also derailed a possible recovery.
4. Fourth, adequate policy measures have not been announced to arrest the decline.
5. Fifth, new regulations such as Bharat Stage VI (BS-VI) emission norms and higher taxes imposed by states have made entry-level cars unaffordable for buyers. This coupled with taxes imposed by states have made the increase substantial for a price-sensitive customer.

Conclusion

The need is to come up with policy support to encourage the recycling of components such as lithium batteries and motors used in electric and combustion engine vehicles. The policies should take into account the carbon footprint of a product in its entire lifecycle.

Terms to know:

• BS-VI norms