The Indian auto industry has been witnessing and fighting the worst slowdown in decades. So much so that lakhs have lost their jobs in the past few months. According to FADA (Federation of Automobile Dealers Associations), nearly two lakh jobs have been cut in the last three months due to the slowdown. In order to revive the industry which has been one of the biggest employers in the country for years, the central government has announced eight measures. Each one could potentially contribute to bringing back the good days.

Firstly, the government has made it clear that both electric vehicles (EVs) and those with internal combustion engines (ICEs) will continue to be registered in India. The centre will focus on strengthening the infrastructure for developments of ancillaries/components, including batteries for exports. This announcement beefs-up the belief that although the government is targeting an all-electric future for transportation, the conventionally-powered vehicles will continue to exist.

Secondly, an additional depreciation of 15 per cent, taking the total to 30 per cent, has been announced for vehicles being purchased till March 2020. Thirdly, the ban on the purchase of new vehicles to replace the ageing ones for government departments has been lifted. Theoretically, both these developments should boost bulk sales for carmakers and help in clearing piled-up inventory.

The fourth measure is that the planned hike in vehicle registration charges has been postponed till June 2020. This should help bring some numbers for the manufacturers, at least on a temporary basis. The fifth one is that all BSIV-compliant vehicles purchased until March 2020 will be legally allowed to run for the entire period of registration. The sixth announcement came as a blessing for automobile dealers who have been suffering the most. The finance minister said that pending GST (Goods and Services Tax) will be released within 30 days.

The seventh announcement came in the form of linking repo rates with vehicle loans. In other words, any change in the repo rate will be directly passed on to the lender. In turn, the lender will be able to adjust the rate of interest on auto loans more flexibly or launch more repo rate-linked products, and customers will have more choice to finance their new vehicle. Lastly, the government confirmed that many policies are being framed to help the industry, including a vehicle scrappage policy which should encourage people shifting from older vehicles to ones which are equipped with cleaner technologies.

Pundits and head honchos of automobile manufacturers in India hailed these developments. One of them was Charles Frump, who is the MD at Volvo Car India. He said:

Today’s announcements by the government will rejuvenate the economy through flow of credit and revival of consumption. The government has clearly signalled full support to the automobile industry which is reeling under a prolonged slowdown for more than 12 months now. The decision to allow a higher depreciation on cars, interest rate cuts and BSIV vehicles to run their life of registration will boost demand for the industry. The speed with which the government has responded after meeting various representatives of the industry is also highly appreciable.