GST rate cut to boost sagging car sales: Renault India MD & CEO

The upcoming Goods and Services Tax (GST) reform, expected in September, will help boost car sales and bring the passenger vehicle industry back on the growth path, according to Renault India managing director and CEO Venkatram Mamillapalle.

“What percentage it is (GST rate cut), we have to wait and watch. It should happen for both small cars and big cars in my opinion, in order to bring back the sales for the passenger vehicle segments,” Mamillapalle told Fortune India in an interview.

French carmaker Renault on Sunday launched the new Kiger with prices starting from ₹6.29 lakh (ex-showroom). The Kiger competes in the fast-growing compact sport-utility vehicle (SUV) segment, which contributes 31% to the total industry volumes.

Renault did not refresh its India portfolio for a long time as the French carmaker took a massive hit to its balance sheet after pulling out of Russia, where it had huge manufacturing plants. After its operations in Europe stabilised, Renault started a product revamp in other global markets, including India.

Earlier this year, Renault bought out its global alliance partner Nissan’s 51% stake in Renault Nissan Automotive India Pvt Ltd to take over full control of the factory in Chennai. The French automaker now plans to grow its market share from less than 1% in the financial year 2024-25 to 5% by 2030.

Renault is looking to go ahead with its plans for hybrid vehicles, whether or not the Centre re-looks the GST rate on such cars.

When asked if there should be a favourable tax structure for hybrid cars, Mamillapalle said, “We had been requesting through SIAM that they should look for overall GST reforms, whether it is EVs, which are already at 5%, hybrids and ethanol. It’s a joint discussion which we are doing with the ministry. We are waiting for the outcome. Maybe, this is the first step, the GST reforms that are going to come in a few weeks. Whether it is going to be beneficial for the automotive industry is a wait and watch. We cannot confirm that yet until we hear from the government."

As part of its product revamp for India, Renault launched a facelift of the Triber in July. Kiger is the second vehicle as part of this strategy. “There are two more vehicles after this. We announced we will be launching a 'B+' SUV and a 'C' SUV,” said Mamillapalle.

When asked if there has been a temporary slowdown in sales in anticipation of lower GST rates, Mamillapalle said that everybody’s anticipation is that if GST goes down, the value of the car also goes down. “If people can wait, they are waiting. There are retails and wholesales going on. It’s not that it has come to a standstill but sales have slowed down.”

“As we get closer to the GST Council meeting date, my guess is that the sales will come to a standstill, which is not good,” said Mamillapalle. “Bookings are going on. There are some cases where there is a postponement of invoicing by the customers. The government should have pre-empted this and pulled ahead the decision-making much closer to the date,” he added.

Mamillapalle, however, believes that the next five months should be good for the passenger vehicle industry. "We have two new launches. If the government helps with the GST, it will definitely boost industry volumes. We will also be able to take our pie on that."