The recent measures announced by the Government to help the auto industry overcome the ongoing slowdown is yet to take effect at ground level and uncertainty over GST reduction is making customers postpone purchases, automobile dealers body FADA informed.
The Federation of Automobile Dealers Association(FADA)however said it was cautiously optimistic about retail sales to be either flat or marginally positive during this festive season compared to last year when there was de-growth. “On the ground situation, I can’t say right now if I have seen much change from what we last reported. Inquiries are still there but postponement continues as of now,” FADA President Ashish Harsharaj Kale said here in a media interaction.
He was responding to query on whether the measures announced by Finance Minister Nirmala Sitharaman to help the auto industry has had any tangible effect. It is too early to comment. Whatever measures were announced were very recent and for them to actually reflect on the ground and in turn reflect into numbers will take time, he added.
“Towards September-end we will actually come to know whether measures announced by the Government have really helped us grow volumes. Currently, postponement continues,” Kale said. On August 23, in a bid to address the slowdown in the auto sector, Sitharaman announced a lifting ban on the purchase of vehicles by Government departments and allowing an additional 15 percent depreciation on vehicles acquired from now till March 2020.
Also, the Government clarified that BS-IV vehicles purchased up to March 2020 will remain operational for the entire period of registration while it will also consider various measures including scrappage policy to boost demand. Kale also said confusion over GST reduction for automobiles, which has been demanded by the auto industry, is also hurting sales with buyers postponing purchases. “If that is happening, it will immediately increase (sales). If it is not happening we need to get clarity on that,” he said, adding some reports have come recently about the Government recommending a cut to the GST Council which may confuse the customer resulting in the postponement of purchases.
Every consumer will like the best deal. If he knows that the Government will reduce GSTafter20dayswhy will he buy a more expensive vehicle now, Kale wondered. He, however, said, “if it (GST cut) has been recommended, we really welcome it. It is a very welcome step. That was one of the requests we have put out in our meeting as an industry.”
Elaborating on the situation at showrooms, he said, “Situation is tough, there is no doubt about it. But the confidence level of financers and bankers is coming back. That definitely can be seen but it is yet to reflect on the ground.” Kale further said, “Financers and NBFCs, which have been missing from our showrooms for the last four-five months have actually started visiting to discuss plans for the festive season, not very aggressive, but at least they have come back.” Once the confidence in lending and retail credit comes back, he said, “a lot should change. Currently, we are still where we were.”
While inquiries at showrooms have gone up, conversions to actual purchases have not happened. On average, Kale said the conversion rate is about 8-15per cent depending on brand and models but at present, it has almost halved. When asked about the outlook for the festive season, he said, “we have already said we are cautiously optimistic in terms of outlook and that continues. We are hopeful that whatever has been done by the finance minister last month, these effects we might see and we are waiting for those effects to come.
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