Toyota Kirloskar Vice-Chairman Vikram Kirloskar recently took over as President of the Society of Indian Automobile Manufacturers . In an interview with Business Line , he talks about how the auto industry lobby plans to tackle the sector’s many challenges. Edited excerpts:
For the first time in six years, rating agency Fitch has downgraded the industry’s status to negative. What do you think are the reasons?
There has been a decline in auto sales for the last eight months, which is quite unprecedented. A large percentage of the vehicles we see on the roads are bought on EMIs. But the cost of EMIs has gone up. When you take a loan, you should be confident of the security of your job. And the stock markets have been unsteady. Even truck and bus sales have been hit because infrastructure projects have stalled. Unless the economy improves and bottlenecks are removed, this will continue to be a problem.
As per the Automotive Mission Plan, the car market was expected to grow to four-five million in the next three years or so. Companies built capacity based on the mission plan. But, in terms of supply chain, our component makers and raw material suppliers are extremely competitive and well organised. We, as a country, probably export more vehicles than the entire vehicles produced in Italy.
But there are labour issues, which have led to some tragic consequences…
If you look at the auto industry, salary levels are generally quite high compared with the rest. The industry has also been matching salary increases with the increase in inflation. But when the market goes down, even the ability to pay goes down. Therefore, there will be some frustration.
Do you expect big layoffs?
Typically, contract labour and trainees are rotated. There is no real record of how many people are working on contract and how many are permanent workers. I suspect a lot of contract labour has not been rehired. I have not heard of any layoffs of permanent employees.
As SIAM president, what will your agenda be?
Compete and co-operate. We should have healthy competition for the benefit of the customers and ethical co-operation for the benefit of the industry. The next is to improve the image and communicate the importance of the industry to the growing economy. Third, to make sure Auto Expo 2014 is very successful. This one will be bigger than the previous one.
Will you ask the Government for a stimulus package?
We have asked for three things from the Government. One, reduce taxes — we are the most taxed after the cigarettes. Two: float a cash-for-clunker kind of scheme. It will help in sale of new vehicles. And thirdly, local governments should be asked to purchase new vehicles. You cannot have a growth in manufacturing without automotive growth.
Do foreign automakers want to withhold investments here?
Not immediately but in the long term. They are very positive about the industry and the country as a whole, but they also talk about the coal and iron ore issues. We may not have had this currency crisis, if we did not have coalgate and the iron ore issue.
What is the stand SIAM has taken on quadricycles?
SIAM has decided not to take a stand. During the meeting , we realised the government of India wanted to have a definition and it wanted to go ahead. But during the SIAM meeting with those involved with the issue, no consensus could be reached.