Several automakers have hooked up with banks to offer purchase schemes involving long frowned-upon teaser loans, as sources say the central bank has softened its stance amid the pandemic-induced economic slump in India.
So far, at least Maruti Suzuki, Hyundai and Mercedes Benz have launched such schemes, according to press releases over the past week.
Teaser loans offer low interest rates for the first few months or years to attract customers, but rates are later rapidly increased.
For years, the Reserve Bank of India said their terms were not transparent and warned that similar products had been instrumental in the 2007-2008 subprime crisis in the United States.
Although the RBI never banned teaser loans, its disapproving stance kept lenders from offering them in the past, bankers said.
Five banking sources said there was now consensus that the promotional teaser loans were needed to revive car sales, which automakers have warned could fall as much as 45 per cent this fiscal year in a worst-case scenario.
“People will require some easier terms due to COVID-19 and thereafter they can pay higher, so it’s a scheme which is in line with the times,” said one of three sources aware of the RBI’s change in stance.
The RBI and the automakers did not respond to requests for comment.
Maruti Suzuki India – the country’s largest carmaker – on Monday reported total domestic sales of 13,865 vehicles last month. The sales recovered in May as the auto major resumed production at its manufacturing facilities during the month. In April, Maruti Suzuki had reported zero sales in the domestic market, marking the first time the company posted nil domestic sales in a month. Maruti Suzuki’s sales data comes days after the country entered the fifth phase of a lockdown to battle the spread of the coronavirus pandemic, which has crushed demand in an auto industry already struggling with falling sales that forced many auto manufacturers to trim production.
Total sales – including domestic sales and exports – came in at 18,539 units in May 2020, Maruti Suzuki said.
Maruti Suzuki said it resumed its manufacturing operations in accordance with government regulations and guidelines. The company resumed production at its Manesar and Gurugram facilities from May 12 and May 18 respectively.
Production at Suzuki Motor Gujarat Pvt Limited (SMG), which manufactures cars on a contract basis for Maruti Suzuki, resumed from May 25.
The company said it exported 4,651 vehicles following the resumption of port operations in Mundra and Mumbai “ensuring that all guidelines for safety were followed”.
Ride-hailing company Uber India said on Tuesday that it is laying off around 600 full-time employees due to the coronavirus pandemic. That marked about 25 per cent of the company’s workforce in the country. The impacted positions are around the company’s driver and rider support operations, and other functions, Uber India and South Asia president Pradeep Parameswaran said in a statement. The move by Uber India comes at a time when the country remains in the fourth phase of a nationwide lockdown with few exceptions to curb the spread of the coronavirus outbreak, which has pushed the economy into a standstill and forced many businesses to trim workforce.
“The impact of COVID-19 and the unpredictable nature of the recovery has left Uber India SA with no choice but to reduce the size of its workforce… Today is an incredibly sad day for colleagues leaving the Uber family and all of us at the company,” Mr Parameswaran said.
Uber India said the layoffs are part of the previously announced global job cuts.
Last week, the US-based Uber Technologies – which is the parent company of Uber India – announced a 23 per cent cut in its workforce, in a bid to become profitable despite the coronavirus pandemic.
Uber Technologies had said a total 6,700 jobs will be impacted, including 3,700 announced earlier this month, and will concentrate on its core businesses in ride-hailing and food delivery.
“Each (of the impacted employees) will receive a minimum 10-weeks payout, medical insurance coverage for the next six months, outplacement support, be allowed to retain their laptops and given the option to join the Uber talent directory,” Mr Parameswaran said.
Uber India’s rival Ola last week announced a layoff of 1,400 employees to navigate the strict coronavirus lockdown, which it said led to a 95 per cent decline in its revenue.
Auto major Maruti Suzuki on Wednesday reported a 28 per cent decline in net profit to Rs 1,292 crore for the quarter ended March 31. An already sluggish automobile market faced further distress due to the nationwide lockdown imposed in late March to arrest the spread of the coronavirus pandemic. The company had reported a net profit of Rs 1,796 crore for the corresponding period a year ago.
Revenue from operations fell 15 per cent to Rs 18,198 crore, said the company, which is the country’s top-selling carmaker.
The company’s shares reacted negatively to the March-quarter results, trimming most of their intraday gains after the announcement.
The Maruti Suzuki stock ended the day at Rs 5,035.25 apiece on the BSE, up 1.72 per cent compared to its previous close.
Mahindra & Mahindra (M&M) on Friday reported zero domestic sales for the month of April. Domestic sales of its vehicles last month was “completely impacted by the ongoing COVID-19 pandemic” and the resulting national lockdown, the auto major said in a regulatory filing. The crash in auto sales comes as the country remains in an extended nationwide lockdown to curb the spread of the coronavirus (COVID-19) outbreak. In March, Mahindra & Mahindra’s domestic sales had dropped 90 per cent year-on-year to to 6,130.
In April 2019, Mahindra & Mahindra had sold 41,603 vehicles in the domestic market.
“At Mahindra, we are working hand in hand with all stakeholders, especially our dealer and supplier partners, to get our ecosystem started, once the lockdown is lifted,” said Veejay Nakra, CEO-automotive division, Mahindra & Mahindra.
The company, however, dispatched 733 vehicles to the overseas markets last month. That marked a 65 per cent fall compared to total exports in April 2019.
“The safety of all our employees will be of paramount importance to us while resuming our operations. We are hopeful that our dealerships will open soon and have stocks to cover the first few weeks of sale,” he said.
The coronavirus-triggered lockdown has crushed demand in the country’s auto industry, already struggling with falling sales that forced many auto manufacturers to trim their production.
Industry body Society of Indian Automobile Manufacturers’ data showed last month that domestic passenger vehicle sales dropped 51 per cent in March.
SIAM said the country’s automobile sector witnessed one of its sharpest decline in domestic sales during the month due to subdued demand, further aggravated by the COVID-19 outbreak.
The automotive industry is the backbone of the country’s manufacturing sector in terms of the employment it generates and its economic contribution.
New Delhi:
Automakers in India want a temporary tax cut on cars, trucks and motorbikes as well as incentives to scrap old vehicles, to try to boost sales and generate revenue after the coronavirus outbreak has brought the economy to a standstill.
Passenger vehicle sales in the country fell 18 per cent in the year to end-March 2020, their steepest recorded fall in years, after weak economic growth in the country over the last year. That has been compounded by a nationwide lockdown to slow the spread of the novel coronavirus.
The Society of Indian Automobile Manufacturers (SIAM), an industry body whose members include domestic companies such as Maruti Suzuki and Tata Motors and local units of global carmakers such as Volkswagen AG and Toyota Motor Corp, said on Friday it has sought government aid.
Companies want a temporary, 10 per cent cut in tax on the sale of all automobiles and auto parts and incentives, in the form of tax rebates, for car owners to scrap their old vehicles, SIAM said in a media statement. It did not specify how long it meant by temporary.
The automotive industry is the backbone of the country’s manufacturing sector in terms of the employment it generates and its economic contribution.
The coronavirus outbreak has left it in “deep distress”, making financial support and a revival of demand a necessity, SIAM president Rajan Wadhera said.
In common with other industries, auto manufacturing has ground to a halt and car showrooms have been shut since late March when Prime Minister Narendra Modi announced a 21-day lockdown to contain the virus’ spread. The lockdown has been extended until May 3 at least.
The coronavirus is expected to delay the recovery of passenger vehicle sales, rating agency ICRA said in a note, adding that it expects sales to dealerships to decline by 10-12 per cent in the current fiscal year ending March 2021, after an 18 per cent decline last year.
On Friday, the Reserve Bank of India (RBI) announced measures to discourage banks from parking idle funds with it and spur lending instead, to revive a flagging economy.
Automakers want a temporary tax cut on cars, trucks and motorbikes as well as incentives to scrap old vehicles, to try to boost sales and generate revenue after the coronavirus outbreak has brought the economy to a standstill.
Passenger vehicle sales in India fell 18 per cent in the year to end-March 2020, their steepest recorded fall in years, after weak economic growth in the country over the last year. That has been compounded by a nationwide lockdown to slow the spread of the novel coronavirus.
The Society of Indian Automobile Manufacturers (SIAM), an industry body whose members include domestic companies such as Maruti Suzuki and Tata Motors and local units of global car makers such as Volkswagen AG and Toyota Motor Corp, said on Friday it has sought government aid.
Companies want a temporary, 10 per cent cut in tax on the sale of all automobiles and auto parts and incentives, in the form of tax rebates, for car owners to scrap their old vehicles, SIAM said in a media statement.
It did not specify how long it meant by temporary.
The automotive industry is the backbone of the country’s manufacturing sector in terms of the employment it generates and its economic contribution.
The coronavirus outbreak has left it in “deep distress”, making financial support and a revival of demand a necessity, SIAM President, Rajan Wadhera said.
In common with other industries, auto manufacturing has ground to a halt and car showrooms have been shut since late March when Prime Minister Narendra Modi announced a 21-day lockdown to contain the virus’ spread. The lockdown has been extended until May 3 at least.
The coronavirus is expected to delay the recovery of passenger vehicle sales, rating agency ICRA said in a note, adding that it expects sales to dealerships to decline by 10 per cent-12 per cent in the current fiscal year ending March 2021, after an 18 per cent decline last year.
Earlier on Friday, the central bank announced measures to discourage banks from parking idle funds with it and spur lending instead, to revive a flagging economy.