By M H Ahssan
Despite the announcement of the second stimulus package on the second day of the New Year, the auto industry continues to be sceptical of the demand that this new package will manage to spur.
“ Although, directionally, the stimulus package is an excellent step, whether or not this will create the confidence in businesses is a question mark,” said Abhay Firodia, chairman and MD, Force Motors.
According to the second stimulus package, an accelerated 50 per cent depreciation has been allowed for commercial vehicles purchased between January to March this year.
States will also be provided assistance to purchase buses and NBFC’s will be provided credit by public sector banks.
“ The return on investment is a very important factor,” said Firodia. He further said that the depreciation allowance was good for profitable operators.
This is of limited relevance in the goods and transportation industry. However, it will help infrastructure industry as commercial vehicles are used in the construction industry and for carrying goods.
Some major players in the light commercial vehicle space include Force Motors, Tata motors, Ashok Leyland and Eicher Motors. Players in the medium and heavy vehicle segment include Ashok Leyland, Swaraj Mazda and Volvo.
“ The increase in the depreciation rate will definitely spur demand, although only in the short run,” said Gulshan Ahuja, secretary general, Federation of Automobiles Dealers Association.
“ Assistance to the state is a welcome step as this will see a revival in the state transport fleet. Though how much the line of credit from public sector banks translates into positive action on the ground remains to be seen. Banks have not yet significantly reduced their interest rates also.” “ Only after a certain period, can the effectiveness of these packages be ascertained,” added Firodia.
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