Solid reason for GST reduction on two-wheelers

CEO of Hero MotoCorp company, Niranjan Gupta stated that there is a solid reason for reduction of Goods and Services Tax (GST) on two-wheelers with engines of about 125 cc or less. These vehicles are not identified as luxury or harmful commodities. In contrast to this, these vehicles are considered as a means of transport for many people in the country. He further states that the government of India should focus in the direction of economic stability, investments and also long-term economic growth.

Although, GST is not the topic of the Union Budget discussion, he believes that lowering of GST to 18 percent in the two-wheeler’s vehicles with an engine of 125 cc or less compared to its current GST of 28 percent (for all two-wheelers) should be considered. The reason for this is these two-wheelers are most affordable and popular among the Indian population. Hero MotoCorp is considered as the largest manufacturer of two-wheelers in India. The company is not worried about the weakening demand in the urban auto market. It believes that this market’s consumption level has been unbalanced since Covid-19 pandemic.

Reasons
Reduction in GST will help two wheelers with engines of up to 125 cc to increase its demand in the market. This will be aided by the recovery of sales observed in the entry-level vehicles segment after a long period of slow demand.

The two-wheelers with engine less than or equal to 125 cc are not only non-sin and affordable goods but also creates employment. It plays a great role in creating indirect as well direct employment levels.

Gupta further states that policies of incentives or subsidies undertaken by the government should take into consideration the long-term perspective of growth. This will give business adequate time to adjust with the changes taking place in the economy due to implementation of government policies. He also states that the government’s focus on expanding employment generation projects should remain ongoing. This will help to create more employment opportunities for the population in the nation.

Shares of urban and rural consumption
After the pandemic, urban consumption played a significant role in taking the responsibility of growth in various segments. While rural demand was low back then. In recent times, rural demand has picked up the pace and is now in the returning phase. It has resulted in growth in consumption level between rural and urban areas more towards rural consumption. Due to this, there is a belief that urban consumption is weakening. It is important to understand that the urban area has played a major role in the proportion of consumption level till now.

The sales of Hero vehicles in urban areas had declined to 47 percent in the initial nine months of the current financial year compared to the 60 percent in the previous financial year.

The rural market consumption is able to exceed urban market consumption in recent months. This situation was particularly observed from the time of the festive season. Gupta stated that the growth in the rural market will act as an addition to the total growth in the two-wheeler industry of India. He further stated that the growth in rural consumption will be supported for the upcoming 6 to 8 quarters by factors such as good monsoons, high minimum support prices and also better kharif harvest season.

Gupta further states that rural consumption has taken some time to recover and it will lead to a positive impact on both the rural and urban market. Also, the economic growth will be observed at a range of 6 to 7 percent and supported by increasing capital expenditure. He thinks that overall growth will hike up in the near future.

Launch Plans of Hero MotoCorp
The company has decided to have a number of launches in the entry-level as well as premium two-wheeler segment to strengthen its position in the market. Along with this, the company is planning to launch its third EV scooter in the quarter of June.

To have success in sales and market share in the electric vehicle segment, one has to lead in terms of efficient cost structure. The company is working on its cost structure regarding electric vehicles and functioning without subsidies. As the company has considered the potential action of termination of subsidies for EV in the next few years.

The Hero Motocorp is focused on export as well as local sales. It is taking steps towards creating products which are customised according to the different needs of various markets. The company will also invest its funds in the top 10 global markets in the world. Gupta states that international business is one of the growth factors. Today, the company has its presence in around 48 countries in the world.

The company announced its entry in Brazil and is making efforts to establish their presence. It has also started its work in the Philippines and it is considered as the company’s entry in the Southeast Asian market. The company is also making progress in countries such Bangladesh, Mexico, and Colombia. Overall, this expansion has led to an increase in growth close to 40 percent in the international business. This growth is recorded in the initial nine months of the current financial year, along with a rise in the market share.

The image added is for representation purposes only