Auto industry banking on upcoming festive season to boost growth

New Delhi: The auto industry is upbeat about the festive season round the corner and is looking at increased sales over the next 2-3 months to push its growth figures.

"With festive season ahead to boost sales in the second half of the fiscal, we are eyeing double digit growth in the current fiscal," Hero MotoCorp CMD and CEO Pawan Munjal told reporters at the SIAM (Society of Indian Automobile Manufacturers) annual convention here on Wednesday.

Honda Motorcycle and Scooter India Pvt Ltd (HMSI), which has already had record sales in August at 4.5 lakh units, is eyeing a 20 per cent growth in sales over the next two to three months of festive season.

"The sales will get a boost from rural markets and in the scooter category from the urban and semi-urban market," HMSI Senior Vice President (Sales and Marketing) Y.S. Guleria said.

The auto industry is also looking at expansion plans on the home front and overseas to boost growth in this fiscal.

Hero MotoCorp said it is planning a new plant in Gujarat in the third quarter of this fiscal and another in Bangladesh in the fourth quarter.

"The Bangladesh plant's capacity is not much but the Gujarat one is big enough. We are also waiting to get possession of land for a plant in Andhra Pradesh. Globally, the country's largest two-wheeler manufacturer is soon starting exports to Nigeria, Argentina and Mexico," Munjal said.

HMSI is building on its installed capacity in Gujarat and Bengaluru plants. By the end of September, its Gujarat plant will have a capacity of 12 lakh, Guleria said.

"In Bengaluru we are on the lines of having the biggest two-wheeler plant. We have three lines of six lakh capacity and the fourth line is under construction," Guleria added.

HMSI is looking at taking its total installed capacity from the current 5.8 million to 6.4 million by June next year.

The auto industry felt that though the (Bharat Stage) BS-IV norms are round the corner, it is getting ready for the bigger challenge thrown by the policymakers of adopting BS-VI by April 1, 2020.

The government has decided to implement BS-VI norms directly from BS-IV, altogether skipping BS-V.

"We have accepted the challenge of BS-VI. The task is enormous," Munjal said.

On the effect of BS-VI on the pricing, he said that there is a cost to the technology.

"We do not know how much investment will go into the technology and how much can be passed on to the customer. It is too early to comment on the effect on prices," Munjal added.

The auto sector awaits another challenge of implementation of the Goods and Services Tax (GST) regime targeted at April 1, 2017 by the government.

It is too early to calcuate the effect on the automobile prices and strategise unless the GST Council fixes the rate, Hero MotoCorp said.

"Too early to do calculations until (GST) Council fixes the rate. I have my doubts on the April 1, 2017 deadline for GST, though we have done our homework," Munjal told reporters.

He said, "Implementation of GST requires huge amount of digitisation for which I have my doubts can be completed in such a short span of time."

Hero MotoCorp is at the forefront and are at an advanced stage for implementation of GST, but cannot say the same for other companies, he said.

"But GST is going to happen and it is a good thing. Companies, traders, economy, all will benefit from it," he added.

The sector that has been lying low following the ban on diesel cars in the Delhi-NCR region has suffered losses of Rs 4,000 crore in last eight months, SIAM said.

"The auto industry has lost Rs 4,000 crore in the last eight months. I feel everyone wants to regulate the auto industry," said SIAM President Vinod K. Dasari.

The ban was lifted by the Supreme Court earlier this month on diesel vehicles above 2,000 cc with one per cent environment cess.

Dasari said, the cess, however, will not deter people from buying the diesel vehicles and is unlikely to have any effect on pollution.

Union Minister for Heavy Industries Anant Geete, who was also present at the conference, said that four ministries -- heavy industry, road transport, environment and petroleum and natural gas -- were discussing the issue of pollution.

"The auto industry has the government's backing but the court's order must be respected," Geete said.

Another government representative, NITI Aayog CEO Amitabh Kant was of the opinion that the auto industry can play a much larger role by leading the private sector towards a greater contribution towards growth of the country.

"We must aim for 9-10 per cent GDP. We need to change the country's mindset to boost growth. Not only the government's but the private sector, led by automobile industry needs to change its mindset," Kant said.

Kant said that the government is putting in a lot of resources to put in place the right infrastructure to boost growth.

"The total constructed roads have increased by 40 per cent while the total roads awarded have seen an increase by 52 per cent," he added.