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Tata Motors CEO to Indian Govt: Corporate tax cut will not solve vehicle sales slowdown problem

Tata Motors CEO Guenter Butschek minced no words while saying that corporate tax rate cut by the Indian government would not solve the current sales slowdown that the auto industry in India is facing. He also said that the corporate tax rate cut was a long overdue move from the government and that it would help in the medium to long term.

Here’s what he told FinancialTimes,

The corporate tax cut is nothing which is going to help us get out of the current situation. It was an overdue measure anyway, to improve the attractiveness of India to the manufacturing sector…I would rather take this as a mid- to long-term play. Everyone wanted to believe that this is just another crisis. Nobody wanted to believe that this could be a structural crisis which could last as long as [18 months].

Tata Motors’ sales have dropped 50 % in September 2019, a huge decline when compared to the same month last year. The GST council not cutting the rate of GST on vehicles could be a big reason why September 2019 sales didn’t pick up despite being bang in the middle of the festive season. Many buyers had deferred their purchases in anticipation of the GST rate cut, which never materialized. Passenger car sales were down to 8,097 units in September 2019, a massive decline from 18,429 that Tata Motors managed in September 2018. It’s the same story in the commercial vehicle segment, where Tata Motors managed 28,079 units in September 2019, another steep decline from 51,419 units in last September.

Mayank Pareek, the president of Tata Motors’ passenger vehicles business is hopeful of sales picking up in the rest of the festive season, and said that showrooms were seeing higher footfalls. Here are his comments,

Towards the end of the month, there was an encouraging response in terms of customer footfalls. The customers have responded well to our festive offers as reflected in 11% more retail in September 2019 compared with August. However, the industry continued to decline in September. Our focus continued to be on retail in line with our strategy of New Paradigm. In September 2019, our retail was 31% more than offtake as a result dealer stock came down by around 10%. During H1 of FY19, network stock has been reduced by 21%, lowest in last 10 quarters. This helped in rotation of dealer working capital and preparing the network for the upcoming festival season. 

Tata Motors is offering large discounts on almost all its cars sold in India including the recently launched Harrier SUV. Other Tata cars such as the Tiago, Tigor, Nexon, Hexa and Safari Storme are also selling at big discounts. Check out the exact discounts here.