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Too much tax, high interest rates biggest hurdles for growth of auto industry: Force Motors

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New Delhi: Excessive tax and high interest rates are the two biggest impediments in the growth and profitability of the automotive industry in the country, according to Force Motors. The Pune-based company, which makes commercial vehicles under the Traveller brand and utility vehicle Trax, besides a range of tractors, said the situation calls for a very detailed and thorough reform.

The Indian automotive industry, having grown and matured, remains burdened with two major handicaps which are serious constraints to the growth of the market as well as encouraging investments and ensure the profitability of the industry, the automaker said in its Annual Report for 2019-20.

The issues particularly affect domestic companies, other than multinational firms operating in the country, the company noted.

“The first unfortunate factor is the very high interest cost in comparison to the global industry which makes investments very burdensome particularly in times where the technology scenario is rapidly changing and new investments in technologies, products, plants and business practices have to be aggressively made,” Force Motors said.

The difference in interest rates when compared to developed countries is in the range of 6-8 per cent which grossly impacts the competitiveness of the industry, it added.

The second adverse factor is very high GST level and also very high road taxes imposed on automobiles in the country with the total incidence of taxation being 50 per cent in case of certain segments, the automaker said.

The auto manufacturers earn around Rs 10 lakh on each crore in its turnover and out of that it has to pay interest, tax and depreciation etc, it noted.

Whereas the government collects taxes on the same vehicle which is sold by the industry at Rs 10 lakh to the aggregate value of taxes at nearly Rs 5 lakh thus between central and state governments, up to 50 per cent of the ex-factory value is collected in taxes, Force Motors said.

“This situation calls for a very detailed and thorough reform. These reforms need to be both economic and regulatory reforms (Motor Vehicles Act, state government permits, license regime etc),” it said.

Going forward in the post COVID-19 era when the auto industry is gasping for breath, on account of the huge compression in the first half of the current year and the effects of which will be felt for several years, such fundamental reform is crucial, it added.

The automaker said it focuses on light commercial and medium commercial vehicles, including their electric versions. All of these market segments are heavily regulated and thereby suppressed, it added.

“The disparate and very much arbitrary system of allowing and restricting permits, licences etc to operate passenger vehicles for hire, to fix the fee and geographies of operation is most obnoxious and retrograde,” the company said.

It throttles competition, goes against the interest of the consumer, breeds open and rampant corruption, it added.

Besides causing capacity restriction, overloading and general inconvenience to the travelling public, the system especially hurts the economically weak segments which use public transport, it noted.

This needs to be made an open field in the interest of the consumer, the automaker said.

The COVID-19 situation offers the country an unprecedented opportunity to revamp modernise, energise and liberate its economy, Force Motors noted.

“The huge tangle of red tape, the plethora of complex and confusing laws — creating delays, losses, litigation and breeding opportunity for corruption and malpractices need, in a swift and decisive manner to be modified, simplified and like other advanced and industrialised countries made supportive and helpful to productive industrial activity,” it added.

On government’s push towards electric mobility, the company said, “While on one hand, it is welcome on the other hand it demands major industry structure change not just terms of the technology but in the overall business environment and regulatory framework.”

Force Motors recently announced to undertake an enterprise-wide cost optimisation in all areas of its vehicle business in the wake of slowdown in the auto sector, the impact of BS-VI transition and the coronavirus pandemic.

It sold 25,229 units last fiscal as compared with 27,603 units in 2018-19. The company’s sales turnover stood at Rs 3,053.08 crore last fiscal as against Rs 3,620.01 crore in 2018-19.

In the quarter ended June 30, the company had posted a consolidated net loss of Rs 64.99 crore against a consolidated net profit of Rs 26.17 crore in the year-ago quarter.

The company’s revenue from operations also came down to Rs 185.4 crore in the first quarter of this fiscal from Rs 802.48 crore in the same period last year.

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Tata Gravitas: Tata Gravitas to hit the market by early 2021

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NEW DELHI: Tata Motors revealed that the Gravitas will finally hit the roads early next year after seeing a fair share of delays. The Tata Gravitas was showcased at the Auto Expo 2020 and was slated for a festive season launch but ultimately got delayed due to the pandemic.
The Tata Gravitas is the 7-seater version of the homebred Harrier, which has managed to get a decent market share ever since its launch in 2019. The Gravitas will also be based on the same platform as its sibling, the OMEGARC, which is derived from Land Rover’s D8 platform. The 7-seater SUV is expected to be 63mm longer and 80 mm taller than Harrier and will most likely retain the Impact 2.0 design and styling language too.
The Tata Gravitas will lock horns with the MG Hector Plus, the upcoming next-gen Mahindra XUV500, and the upcoming 7-seater version of the Hyundai Creta. The 7-seater SUV will be powered by the same BS6-compliant 2.0-litre Kryotec turbo diesel engine as the Harrier that offers 170 PS of power and 350 Nm of torque. The engine might be paired to the same 6-speed MT and the 6-speed AMT transmission derived from Hyundai.
Tata Gravitas will also see a refreshed interior design with a completely new colour palette and is expected to flaunt enhanced tech and a few additional safety features as well. The Tata Gravitas is expected to start somewhere around Rs 15 lakh (ex-showroom).
“Going forward two additional models are going to come- Gravitas and Hornbill. Gravitas will be a seven-seater SUV while Hornbill will be a sub-compact SUV so we will have four SUVs in our portfolio which would be the widest portfolio. It would help strengthen our market position and sales in the coming years. The company plans to launch the Gravitas during the last quarter of this fiscal. It is yet to fix a date for the Hornbill introduction,” said Shailesh Chandra, President, Passenger Vehicle Business Unit, Tata Motors.


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Toyota halts operations at Indian plant again as union strike continues

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BENGALURU: Toyota Motor Corp again halted operations at its car plant in southern India from Monday, as the majority of members of its workers’ union continued a sit-in strike, the automaker said.

Both the Toyota Kirloskar Motor (TKM) factories in the industrial hub of Bidadi, Karnataka, had declared a “lock out” on Nov. 10 after the union went on strike, saying that their demand to withdraw the suspension of a worker was not met.

The local state government’s labour department had prohibited the strike by the workmen, as well as the “legal lock out” declared by the management from Nov. 19 and directed operations to resume, a spokesperson for the automaker’s India unit said on Tuesday.

Even after the lock out was lifted by TKM, only a few team members have reported to work, the company said.

“For plant operations to run smoothly and effectively, a minimum workforce of 90% in each shift is required. In view of the current situation, it is not viable to carry on with manufacturing activity.”

The disruption follows several months of a slump in sales, and comes at a time when vehicle deliveries to dealers are picking up in anticipation of strong demand during the November festive period in India.

The country’s top car maker Maruti Suzuki India Ltd last month said sales between October and December were expected to be good due to demand for personal transport and big-ticket purchases during the festive season.


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Nikola shares fall after CEO fails to reassure investors GM won’t pull out of $2 billion deal

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Nikola Motor Company Two truck

Source: Nikola Motor Company

Shares of embattled electric vehicle start-up Nikola Corp. fell by more than 8% in afterhours trading after CEO Mark Russell failed to reassure investors that the company’s $2 billion deal with General Motors would still go through and that ousted founder Trevor Milton wouldn’t suddenly sell off his shares.

During an interview on CNBC’s “Mad Money with Jim Cramer,” Russell said discussions with GM about supplying fuel cell and battery technologies as well as an all-electric pickup are ongoing, but he wouldn’t comment much further than that.

“Both of those things are interesting to us,” he said regarding GM’s technologies. “We continue to talk to them about those things.” If a deal isn’t finalized by Dec. 3, either side can walkaway.

Russell also declined to speculate about what Milton, who stepped down as chairman in September, plans to do with the 91.6 million shares he owns after a lock-up period that prevented him from cashing in his equity ends Dec. 1. That includes 6 million shares in “founder options” he gave to the early employees, leaving him with 85.6 million shares. There are roughly 360.9 million shares of company stock outstanding, making Milton Nikola’s largest single shareholder.

All of those shares will be eligible to sell next week, according to the company.

“Can’t comment for Trevor, of course,” Russell said. “But we believe that as we execute on our milestones and on our business plan, we’re going to reward our long-term focus shareholders. That’s our focus, is on the long-term.”

Owners of 136.5 million shares of Nikola agreed to extend their lock-up until April 31, including 39.8 million shares held by a separate company controlled by Russell but owned by Milton called T&M Residual.

Milton stepped down after the Department of Justice and Securities and Exchange Commission started investigating allegations of fraud raised by short-seller Hindenburg in September.

Hindenburg accused Milton of making false statements about Nikola’s technology in order to grow the company and partner with auto companies. The report, titled “Nikola: How to Parlay An Ocean of Lies Into a Partnership With the Largest Auto OEM in America,” was released two days after the company announced a deal with GM that sent both companies’ shares soaring in September. It characterized Nikola as an “intricate fraud built on dozens of lies” by Milton.

Nikola shares closed Tuesday at $34.50, up 17.3% for the day and continuing their volatile streak since the company went public on June 4 in a reverse merger with VectoIQ, a special purpose acquisition company, or SPAC.


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