After France, Germany Gives Rs 42,000 Cr To Auto Sector; India? Nothing!

With automobile sales dwindling for a while now, Germany has decided to offer a stimulus package to the auto sector to boost car sales in the country. For this, Germany¡¯s Ministry of Economics has proposed a 5 billion euro (~Rs 42,000 crore) buyer bonus scheme as part of the package.

The complete package, possibly extending to the amount of 80 billion euros (Rs 6,71,184 crore), is expected to be announced on Tuesday by the heads of the co-governing Social Democrats (SPD) and Angela Merkel¡¯s Christian Democrats (CDU).

The confirmation comes through a recent Reuters report citing two people close to the matter. The package will help revive sales in Germany¡¯s automobile market that has been hit with the Coronavirus pandemic induced shut down of production lines and showrooms.

Once passed, the scheme will be in effect till the end of this year. As per it, purchase premiums will be paid to buyers of electric vehicles and conventionally powered cars worth less than 77,350 euros (~Rs 65 lakh) each.

(Representative Image: Reuters)

The plan will see a basic premium of 2,500 euros (~Rs 2.1 lakh) per car. In addition to this, 500 euros (Rs 42,000) will be offered for fuel-efficient vehicles. ¡°Existing incentive programmes would be increased by 1,500 euros (Rs 1.25 lakh) for electric cars and 750 euros (Rs 63,000) for hybrids,¡± says the report.

But before it passes, there are several roadblocks to be cleared. Some members of the committee, for instance, feel that incentivising the purchase of conventional combustion engines is not the right decision and that only emission-free, new age vehicles should be incentivised.

¡°If the state subsidises (new cars), then that must go along with a change toward alternative engines. If discounts, then that must be for electric cars¡±, SPD head Norbert Walter-Borjans told Reuters. Many other policymakers want the package to adhere to such lines.

An example of this can be seen with the recent stimulus package released by France, worth Rs 66,000 crore, for its automobile industry. Focused on the three majors - Renault, Citroen and Peugeot, the package does not just help the automakers revive sales, it even helps them refocus their strategy towards electric mobility. ¡°We need not only to save (the industry) but transform it,¡± said French President Emmanuel Macron.

No relief for the Indian auto industry!

(Representative Image: Reuters)

Despite the Indian auto industry being in a similar tight spot, no such relief package was announced by the Indian government for its revival. Industry body SIAM had appealed for the same to the government at the time of the Covid-19 lockdown. Hopes had been high at the time when a Rs 20 lakh crore stimulus package was announced for the country struggling with the pandemic.

Despite its huge impact on the nation¡¯s economy, no financial aid was announced for the sector. As per a report by Autocar, the Indian auto industry supports the employment of more than 3.7 crore people and contributes to 15 percent of GST. This GST amounts to Rs 1,50,000 crore every year. A stimulus package, thus, could have been very beneficial for the long term stabilisation of the economy. With no such aid on the side, the automakers now rely on a resurgence of sales in the post-lockdown era.