Auto sector shows revival signs; schemes & discounts attract buyers

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The auto sector showed signs of revival in September due to low-cost benefits and heavy discounts.

The immediate price reduction due to the lowering of the effective corporate tax rate to 25.17% from 30% for all domestic companies has helped to deepen discounts and drive-in some more sales numbers.

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In August, Finance Minister Nirmala Sitharaman announced several measures to boost the sector, including lifting a ban on purchase of vehicles by government departments, and allowing additional 15 per cent depreciation on vehicles bought till March 2020 among others.

The auto industry is facing a harsh slowdown because of high GST rates, farm distress, stagnant wages, and liquidity constraints. The sales and production have plunged dramatically, leading to job losses. In August, all major Original Equipment Manufacturers (OEMs) comprising passenger, commercial, two and three-wheeler manufacturers reported a severe decline in domestic sales.

As per the Society of Indian Automobile Manufacturers’ (SIAM) August sales figures, the overall sectoral offtake in the domestic market plunged 23.55 per cent to 1,821,490 units, from 2,382,436 units sold during the corresponding month of the previous year. September sales results are awaited. Moreover, the industry has estimated that around 15,000 contractual manufacturing jobs have been lost and another million are at risk if the slowdown is not reversed.

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