GST relaxation, scrappage policy needed to lift Auto Inc: Soumitra Bhattacharya, MD, Bosch

The Covid-19 pandemic may drag the Indian automotive market by a decade and there is a desperate need for a stimulus package to help revive the industry,
Soumitra Bhattacharya, managing director of Bosch, tells
Ketan Thakkar and
Nehal Chaliawala in an interview. Without a dedicated package, it may take at least 4-6 years for the industry to regain the previous peak. On its part, Bosch has already put in 717 crore to restructure its operations, and the company will rely on more content per vehicle to outpace the market. Edited excerpts:

Can you review for us FY20 and the restructuring plan put in place?

During 2019-20, the automotive market dropped 17% and our turnover dropped by 18%. Our net profit before tax, before exceptional items for the year was down by 17%. Given the environment, we have provided for a substantial amount of 717 crore for our restructuring programme, which was started pre-Covid, and for redeployment and reskilling. This also includes some amount of impairment for assets for BS-IV and some BS-IV inventory write-off.

What will the new normal be like for businesses?

We have to understand the new normal in a very holistic way. Last year, we needed 8-9% GDP growth and we were at 4%. Now, for 2020-21, the Indian economy may see a growth of -1% to 0.5% GDP. In 2020-21, we see the automotive market drop anywhere between 30-40%. In 2018, which was the all-time high for the automobile industry, car production was over four million units.

This year, we are looking at two million units. HCV (heavy commercial vehicles) was 500,000 units, and now we are looking at a maximum of 200,000 units. Two-wheelers were at 25 million units and now we are looking at 12-13 million units. These are all ballpark numbers, but they are substantially lower. These are 2008 to 2010 numbers. Will this crisis take us back by 12 years? No. Our estimate is that the economic slowdown pre Covid had taken the sector back by 3-4 years as against the all-time peak of 2018. Post Covid, you can add another 1-2 years.

At best, it will take four years to regain the past peak and at worst it may take six years, unless the government, like in many other countries, offers industry-specific packages for the auto industry. These include a relaxation in GST — from 28% to 18% — and a scrappage policy, which is long-awaited, because eight lakh old vehicles can be taken off the roads and our emission levels will improve dramatically.

As for Bosch, based on our increased content-per-vehicle in BS-VI vehicles and our improvement in adjacencies and our future digital play including mobility services and electrification, we should be doing better than the market.


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