In the past ten months, the automobile industry has seen a slowdown due to various reasons, including poor sentiment, a liquidity crisis, price increases and emission norms, and a hike in insurance premium.
The automobile industry might come out from the slowdown and probably start seeing growth between January and April next year, said Venu Srinivasan, chairman and managing director of TVS Motor Company. He also said that a series of policies and regulations, including BS-VI, has resulted in a 40% cost increase in three years.
In the past ten months, the automobile industry has seen a slowdown due to various reasons, including poor sentiment, a liquidity crisis, price increases owing to the implementation of several safety and emission norms and a hike in insurance premium, etc.
“I think the slowdown will be there for a couple of quarters more. I expect everything will be digested by the time and hopefully, by next year, we should start seeing growth – between January and April,” he told Business Standard.
Commenting on the increase in the price of two-wheelers, he said that there has been a significant cost increase from BS-III to BS-VI. The Supreme Court order mandating insurance to be provided for five years has increased the prices by another 8-10%. The implementation of ABS for higher-end two-wheelers has also contributed. While the registration cost might go up marginally, BS-VI is also coming up, and this would further increase prices.
“If you look at increase in cost, it should be around 40%, including switching over to BS-VI, over three years. It is not registration and road tax that are significant, but it is a series of increases that has raised prices very substantially for two-wheelers,” he added. Most of the vehicles will become BS-VI between September 2019 and January 2020.
The recent clarification by Prime Minister Narendra Modi that internal combustion engine (ICE) and electric vehicles will both be encouraged and grow is a strong step to encourage investment and employment in the automotive sector in India. This will increase confidence, create employment and bring in significant improvements to Make in India. India is also a major exporter and has global scale and competitiveness, and the approach would help the county to grow its exports, said Srinivasan.
The prime minister’s remarks will provide reassurance to millions of people across the supply chain, ranging from component manufacturers to original equipment manufacturers, dealers, mechanics and associated people across the country, he said.
A technology-agnostic approach that encourages all options is very important for a developing country like India, which is dependent on fossil-based sources for much of its power.
The industry doyen had earlier raised concerns over NITI Aayog’s demand that three-wheelers should be fully electric by 2023 and two-wheelers by 2025. He said that the BS-VI vehicles are cleaner than coal-based thermal electricity production since the electricity is produced from very poor quality coal with very high pollution. He added that the transmission losses were also high in the country.
Besides, the electric motor parts and batteries are coming from China and depending on lithium from China is more critical than buying oil from open sources. “If you put all that together, we are not yet ready,” he recently told shareholders in the annual general meeting. In countries where 60% power is produced from nuclear or renewable, like France and Germany, an electric vehicle could reduce pollution. Even those countries are aiming at 25% of vehicles to be electric by 2030,” he added.
Earlier, in a communication to shareholders, the company had said that it expects the two-wheeler industry to grow by around 6-8% in financial year 2020. In 2018-19, the domestic two-wheeler industry grew by around 5% to 21.2 million units, as against 20.2 million units a year ago.