Bring in counter measures to arrest fall: BS Seo

Hyundai Motor India MD Discusses Difficulty Of Mkt Recovery Stimulus For Auto Industry

With growth getting stumped and visibility of revival looking more distant than what it was few weeks ago, foreign investors, especially those who have sunk huge investments into India are getting worried at the tardy situation domestically. Hyundai Motor India’s MD B S Seo told Rajesh Chandramouli that the government must work towards improving the market sentiment, among host of measures he expects to see as an investor. Excerpts:

What is the bother for you at this stage? Sluggish sales or no visibility of recovery over the near term?

It is worrying that the pace of recovery is very slow. This has had an effect on sales, which continues to remain sluggish. Demand in both Indian and global markets is slack and coupled with high interest rates, high fuel prices, volatile rupee and the uncertainty in the global economy, the chances of a quick recovery is bleak.

While the rupee movement must be hurting most carmakers, for HMIL, it is a blessing as it is India’s largest car exporter. However, last month, we saw HMIL’s exports contract. Your views:

Yes. HMIL is the largest exporter. The rupee depreciation has helped the company to a certain extent, in the short term. However, continuous depreciation will have a reverse impact on pricing in the export market. The depreciating rupee will have an adverse impact on the input costs, which may lead to a further drop in already stagnating demand. HMIL is focusing on various strategies and is also looking at newer markets like Latin America and Africa. For example, we are looking at increasing our share of exports to Africa to about 37%. Development of new markets is time-consuming and needs high investments but we hope that these efforts will sustain in the long run.

There are talks of a stimulus package for the auto industry. What do you think should be the components of the package?

Indian auto industry is in a tough phase with falling demand month after month. To revive demand, the government could take a step back in time and re-introduce the measures when a similar situation plagued the industry in 2008. Duties were reduced from 12% to 8% and special duties on high-end vehicles were brought down.

Additionally, the government could also consider introducing a vehicle replacement policy customers could be incentivized to replace vehicles over 10 years. This will also have environmental benefits of lower emissions and reduced fuel consumption due to improved technology.

Increase in percentage benefits under the Focus Product Scheme and Focus Market Scheme could also be done. Similarly enhancement of Duty Draw Back Rates for all industries could be considered to support export.

If you were the finance minister, what would you do?

a) Stimulus package to industry as detailed earlier b) Plan a focused attention to the rupee and introduce counter measures to arrest its depreciation c) Improve market sentiments by attracting more FII d)Focused thrust on restarting stalled infrastructure projects which will have a positive impact on other industries e) Avoid retrospective amendments in taxation and bring out clarity in transfer pricing issues to avoid disputes, higher tax demand and high litigation cost.

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