Infrastructure

FY20 Was Slowest Growth in Last 7 Years for Indian Auto Sector Primus Partners Report

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Already beaten by a historic slowdown before the coronavirus pandemic, the Indian auto industry was tested harshly when the nationwide lockdown began in the end of March 2020. This situation is set to aggravate the several challenges already facing the auto industry, including stricter CO2 emissions standards and higher investments in new technologies. As per SIAM, in April 2020, the Indian auto industry reported a revenue loss of about INR 69,000 crores. In 2020, the overall auto unit sales were estimated to have declined by 30% as compared with 2019. While the passenger cars segment may witness some recovery in 2021, the luxury and super luxury segments will continue to face challenges.

In a report, Primus Partners lists five broad areas as the roadmap for sustainable growth of the auto industry in 2021. These include Production Linked Incentive Plan, roll out of Scrappage Policy, more investments in Research and Development, push to E-Mobility, growth of electronica in vehicles.

Expanding on the Production linked Incentive Plan (PLI), the report states that the PLI scheme is expected to deliver benefits to a few select firms that would meet the eligibility criteria laid under the scheme. “However, the real benefits are expected to penetrate inside the automobile value chain and make an impact at each level,” it says. “The PLI scheme for automobile sector is expected to act as a growth enabler to make the sector cost competitive, increase market share, attract investments, Promote R&D, local value addition & creating jobs in turn making itself as a Global Champion for both Domestic and Global markets and build on the Government’s initiative on “Atmanirbhar Bharat”,” it adds.

The report also states that an effective Scrappage Policy in India can help create an industry of its own with a business opportunity worth $6 billion1 (Rs 43,000 crore) per year. Apart from the $6 billion steel scrappage potential, there is an additional business that can be generated from recycling of plastic and rubber and other body parts of scrapped vehicles.

The report also emphasizes that increased investments in R&D would bring sustainability going forward. “India presents a strong investment opportunity considering the ‘percentage of revenue’ metric for allocating R&D budget. An important factor to be highlighted is the need for better-aligned collaboration between academia, industry and the government to ensure commercially viable projects focused on,” it adds.

A big push to E-Mobility will also help the auto sector. As per the report, the Government of India is targeting having only EVs being sold in the country in the next 10 years. The Ministry of Heavy Industries has identified 11 Indian cities for the launch of EVs in their public transport routes under the FAME scheme. The first phase of the scheme involved the Government approving the FAME-II scheme with a fund requirement of INR 10,000 crore for FY20-22, the report points out.

The report also high

Already beaten by a historic slowdown before the coronavirus pandemic, the Indian auto industry was tested harshly when the nationwide lockdown began in the end of March 2020. This situation is set to aggravate the several challenges already facing the auto industry, including stricter CO2 emissions standards and higher investments in new technologies. As per SIAM, in April 2020, the Indian auto industry reported a revenue loss of about INR 69,000 crores. In 2020, the overall auto unit sales were estimated to have declined by 30% as compared with 2019. While the passenger cars segment may witness some recovery in 2021, the luxury and super luxury segments will continue to face challenges.

In a report, Primus Partners lists five broad areas as the roadmap for sustainable growth of the auto industry in 2021. These include Production Linked Incentive Plan, roll out of Scrappage Policy, more investments in Research and Development, push to E-Mobility, growth of electronica in vehicles.

Expanding on the Production linked Incentive Plan (PLI), the report states that the PLI scheme is expected to deliver benefits to a few select firms that would meet the eligibility criteria laid under the scheme. “However, the real benefits are expected to penetrate inside the automobile value chain and make an impact at each level,” it says. “The PLI scheme for automobile sector is expected to act as a growth enabler to make the sector cost competitive, increase market share, attract investments, Promote R&D, local value addition & creating jobs in turn making itself as a Global Champion for both Domestic and Global markets and build on the Government’s initiative on “Atmanirbhar Bharat”,” it adds.

The report also states that an effective Scrappage Policy in India can help create an industry of its own with a business opportunity worth $6 billion1 (Rs 43,000 crore) per year. Apart from the $6 billion steel scrappage potential, there is an additional business that can be generated from recycling of plastic and rubber and other body parts of scrapped vehicles.

The report also emphasizes that increased investments in R&D would bring sustainability going forward. “India presents a strong investment opportunity considering the ‘percentage of revenue’ metric for allocating R&D budget. An important factor to be highlighted is the need for better-aligned collaboration between academia, industry and the government to ensure commercially viable projects focused on,” it adds.

A big push to E-Mobility will also help the auto sector. As per the report, the Government of India is targeting having only EVs being sold in the country in the next 10 years. The Ministry of Heavy Industries has identified 11 Indian cities for the launch of EVs in their public transport routes under the FAME scheme. The first phase of the scheme involved the Government approving the FAME-II scheme with a fund requirement of INR 10,000 crore for FY20-22, the report points out.

The report also highlights that with rapid adoption of technology and artificial intelligence in every sphere of life, AI-powered connected cars are going to be the differentiators for automobiles in the coming times.  In India, cars like MG Hector, Kia Seltos and Hyundai Venue come with various connectivity features. MG Motor India calls its Hector SUV as the internet-enabled car.

The report by Primus partners also talks about the policy changes that will aid the growth of the industry. It says that the Commercial Vehicles are closely associated with economic development of a country. Using population vs trucks as an indicator would require India to heavily invest on infrastructural development to catch up with countries like US and China which have a strong presence of commercial vehicles. Aligning tax laws with global standards

for example, the timeline for carrying forward tax losses, which in India is 8 years but ranges from 20 years to an indefinite period in various other countries like Germany, France, Russia, Brazil among others, could be adopted and implemented in India too. The report suggests a reduction on total cost of ownership for the vehicles which could be reduced as a measure towards making products more affordable to the customer

lights that with rapid adoption of technology and artificial intelligence in every sphere of life, AI-powered connected cars are going to be the differentiators for automobiles in the coming times.  In India, cars like MG Hector, Kia Seltos and Hyundai Venue come with various connectivity features. MG Motor India calls its Hector SUV as the internet-enabled car.

The report by Primus partners also talks about the policy changes that will aid the growth of the industry. It says that the Commercial Vehicles are closely associated with economic development of a country. Using population vs trucks as an indicator would require India to heavily invest on infrastructural development to catch up with countries like US and China which have a strong presence of commercial vehicles. Aligning tax laws with global standards

for example, the timeline for carrying forward tax losses, which in India is 8 years but ranges from 20 years to an indefinite period in various other countries like Germany, France, Russia, Brazil among others, could be adopted and implemented in India too. The report suggests a reduction on total cost of ownership for the vehicles which could be reduced as a measure towards making products more affordable to the customer


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