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KPMG Report: Potential Impact of COVID-19 on the Indian Economy- Automobile and Transport & Logistics
Automobile:
- Continued cash flow tightening will impact the market further; passenger vehicle demands likely to continue to be muted
- Auto OEMs will need to delay any new launches by at least a few quarters, or till sentiments improve
- Auto components sourcing might get dearer due to disturbance in supply chain across the globe. However, Indian auto component industry can emerge in medium to long term as an alternative source of supply if duly supported by policy framework
- Key policy recommendations:
- Tax and compliances related: Tax booster in the form of short-term GST rate cuts to increase the demand (Ex: Rate cut for ICE – Internal Combustion Engine)
- Support for end customer: Fasttrack the implementation of the scrappage scheme for passenger and commercial vehicles to incentivize the purchase of new vehicles
- Easing financial stress in the sector: Develop a repayment support scheme for automobile and related firms, especially the MSME dealers and auto component manufacturers and sellers
- Support for end customer: Fast-track the implementation of the vehicle-scrapping scheme for passenger and commercial vehicles to incentivise purchase of new vehicles
- Reduced demand for logistics due to reduced production across will put downward pressure on prices across various transportation and logistics sub-scetors like warehousing, freight transportation, among others
- Asset utilization across the transport and logistics sector anticipated to reduce in the short term
- Decreased passenger movement on urban transportation systems will reduce utilization of assets such as MRTS, SRTCs, cab aggregators etc. which will impact their revenue and operations
- Trucking sector is expected to witness immediate adverse impact in the short-term account of reduced demand due to decrease in production as well as domestic and EXIM trade
- Ports are also expected to experience reduced traffic volumes
- Reduced freight volume is expected to result into low utilization of road and rail infrastructure
- Key policy recommendations:
- Tax and compliances related: Digitization of compliance related processes
- Support for end customer: Fair and transparent pricing of all relevant transport and logistic services through price caps etc. and Direct Benefit Transfer to daily wage earners impacted by the sector slowdown
- Guidelines for transport: Policy support and standardization for hygienic travel