Mumbai: The current crisis in the automobile industry in the country is largely due to “overproduction and stocking” by companies and to a small extent to the economic slowdown, and there’s no need for a GST cut, Bajaj AutoNSE 3.22 % managing director Rajiv Bajaj has said.
His statement comes days before the GST Council is scheduled to convene on September 20 when, among other things, it is expected to take a call on the industry’s demand for a cut in goods and service tax on automobiles.
The industry is now rapidly correcting the stock levels for Bharat Stage-VI emission norms and the problem will be sorted by November, Bajaj said.
“There’s no industry that keeps growing forever without correction, so no point chasing that mirage,” Bajaj said in an interaction with ET. “The answer lies in being global so that the company doesn’t fall sick if one market catches flu.”
Bajaj Auto, the country’s third largest motorcycle maker, exports one out of every two motorcycles it produces.
Automobile sales have declined by over 30 per cent in certain categories during July and August, of which only 5-7 per cent decline in sales volumes is due to economic reasons, over which companies have little control, Bajaj said.
“Every industry has its up and down cycles. It may take a year, maybe two, for it to correct,” Bajaj said. “Nobody knows how long this will last, but it certainly doesn’t deserve a GST cut.”
According to him, automakers in the country caused the current situation upon themselves due to overproduction of vehicles based on growth forecasts.
“They roll the dice sans any logic,” Bajaj told ET. “The result is a matter of luck-by-chance. We don’t waste time or money on forecasts. We simply expand capacity once we’re close to full.”
If a GST relief is to be given, it should be limited to vehicles compliant with the cleaner BSVI emission norms, he said, reiterating his earlier stance.
Most players in the automobile industry have been lobbying for an immediate reduction in GST levied on vehicles to 18 per cent from 28 per cent to boost demand, but the Bajaj Auto boss had voiced concern that such a move will result in a blockage of dealers’ money.
Dealers had already paid GST at the higher rate while purchasing their existing inventory from manufacturers and customers would not want to pay the same post any announcement on GST cut, he had said last month. Hence, Bajaj had argued, a GST cut should be limited to BS-VI compliant vehicles to avoid such a scenario. It would also partially absorb the sharp increase in the prices of vehicles as they become compliant to the new emission norms, he had said.