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    Auto industry needs boosters to come out of slowdown: JK Tyres Chairman Raghupati Singhania

    Synopsis

    India’s automotive industry needs a series of boosters including an early announcement of the vehicle scrappage policy to come out of the slowdown, which was exacerbated by the coronavirus pandemic, JK Tyre & Industries chairman Raghupati Singhania said.

    agenAgencies
    New Delhi: India’s automotive industry needs a series of boosters including an early announcement of the vehicle scrappage policy to come out of the slowdown, which was exacerbated by the coronavirus pandemic, JK Tyre & Industries chairman Raghupati Singhania said. The recent decision to curb the import of certain pneumatic tyres is a step in the right direction to promote domestic manufacturing, Singhania said. However, much more is needed to accelerate the process, he added.

    “A lot is riding on the implementation of the much-needed scrappage policy to effectively capitalise on the pent-up demand,” Singhania, also the managing director of the company, said in an email interaction with ET. “A temporary relief on GST from current 28% to 18% in the auto sector could also help in lifting the demand.”

    Automobile sales across categories recorded their steepest decline in the last quarter, shrinking 75% from a year earlier to 1.4 million units, as production as well as sales were severely impacted by the Covid-19 pandemic and lockdown. Auto sales had declined 18% to 21.5 million units in fiscal 2020 ended March 31. While demand has been recovering on a month-on-month basis since May when the market reopened, Singhania said the industry was still passing through a stabilisation period, where the focus was on improving the supply chain, bringing back labour and strengthening the business ecosystem. Demand is expected to be closer to the pre-Covid levels towards the festive period.

    JK Tyre has seen some green shoots in the replacement market and posted strong double-digit growth in the business in June, led by commercial vehicle tyres. Direct sales to automakers, which were subdued till a few weeks ago, too witnessed some revival in July, across passenger vehicle, two-wheeler and three-wheeler segments. Singhania said: “In the changed normal, personal mobility is expected to take priority and that might add to the sales momentum. Overall, while the short-term outlook looks subdued, the long-term growth prospects remain promising.”

    JK Tyre does expect a temporary and localised impact in certain pockets, especially on manufacturing and supply chain, due to intermittent lockdowns in some states, Singhania said. Therefore, the company is keeping a close watch on the Covid-19 trends and planning production and inventory accordingly to deal with the uncertainties and to ensure availability where the demand exists. It expects to reach 80% of pre-Covid production within the current quarter. Singhania admitted that managing liquidity had been one of the biggest challenges for the company amid the Covid crisis. “So, we are focusing on conserving cash currently, through multiple measures, such as, timely or early collection of receivables, prioritisation of vendor payments, optimising on costs and enhanced focus on overall efficiencies,” he said, adding: We have also deferred our major expansion projects. We will prioritise and move forward.”


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