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Indian Union Budget 2015 and the Automobile industry

Snapshot: What does the budget hold for the Automobile industry, have a look here.

One can hardly believe the very fact that after Cricket and Election news, Union Budget is one of the most watched presentations on the television. And why it shouldn't be? After all, the Union Budget affects our livelihood directly or indirectly. Year after year, the then Finance Minister of the country comes out with a briefcase in hand, waving hand and creating anxiety among the stakeholders that includes corporate, businessmen, office bearers, salaried employees, housewives and who's who of the country.

And this year was no different. Arun Jaitley, the current Finance Minister of India, had a huge task ahead of him. He was elected the Minister from the party which clean swept the mandate in the 2014 Lok Sabha election, proving the very fact that Indian people have entrusted a task on him. And so was the anticipations high this time with the current budget, which was presented on 28th February, 2015.  

But what does the budget hold for the Automobile industry? Let's have a look here -

The automotive industry had huge hopes with the Union Budget, which we feel, left us disappointed. The Indian automotive industry was hoping that Mr. Jaitley will address issues pertaining to the:

·         Additional excise duty on vehicles,

·         Speeding up the implementation of GST (Goods and Service Tax),

·         Lowering interest rates on vehicles, and much more.

Accept the assurance to speed up the implementation of the GST, most of the demands were not addressed in the current budget. Excise duties have always been a point of contention for all the sectors including the automotive one and the new budget neglected the demand to lower the current excise duty rates, meaning the cars and bikes will not get cheaper.

Contrary to this, the previous UPA II Government reduced the excise duty on all the vehicles in February 2014 to revive the sales. The reduced rates were -

·         SUVs - 24% from 30%,

·         Mid-Size cars - 20% from 24%

·         Large cars - 24% from 27%.

But the new government, after extending the benefits by six months, rolled back the rates in January 2015. And continuing their stand on the excise duty structure, Indian government will not reduce the rates. Though, they have announced speed up the process of Goods and Service Tax (GST), which is one of the major demands for quite a some time now. The new GST implementation process will come into effect from April 2016.

Though, not directly, reduced corporate tax, which will be 25% from now on as against the earlier 30% and the government's focus on infrastructure can indirectly help the auto industry. The Government has decided to build 1 Lakh kms of road creating a more conducive environment for road transportation, boosting the sales in the long run. Whether or not it will happen, will be a thing to closely watch!

Also, the Government has proposed to give Rs 75 Crore to aid the electric vehicle manufacturing. The GOI will continue with the excise duty concession given to the Electric vehicles. This will boost the confidence among the manufacturers like the Mahindra Reva to make more electric vehicles.

Here are some of the reactions that poured in from some of the known faces in the automotive industry after the proposals made by Arun Jaitley, Finance Minister, India -

Rakesh Srivastava, Sr. VP, Sales & Marketing, Hyundai Motor India Ltd

“We welcome Initiatives on ease of doing business, Enhancing the global competitiveness of the Indian industry, Skill development for creating employment in rural sectors mom, rationalization of taxes for GST rollout & enhancing social security will be a marginal increase of basic duties.  The service tax increase is not expected to have much impact on manufacturing, since there is a facility to offset it.”

Arun Malhotra, Managing Director, Nissan Motor India

“The industry would have benefited a lot had the excise duty benefits been extended but this budget has the potential to raise the consumer sentiment which will help the industry grow. There were concessions given on some identified components for EV’s in the past and these concessions continue for another year; we welcome this move”

Sumit Sawhney, Country CEO and Managing Director, Renault Operations in India

“Although the budget didn’t have much for the automobile sector, we are hopeful for some pro-business policies in the near future to benefit the industry. We hope for ongoing measures and policies to maintain a healthy balance between interest rates, inflation and arrest the fall of the rupee, which will benefit the economy.”

Arvind Saxena, President and MD, General Motors India

“The focus on rural roads, highways, expressways and incentives for electric vehicles are welcome decisions.  Some of the other announcements made by the finance minister on the direct taxation front are also positive steps.  Overall, the budget lays down a blue print for a stable tax regime that can lead to growth in the economy.”

Joe King, Head, Audi India

“We welcome the reduction of Corporate Tax as well as focus on infrastructure via various schemes and investments. However, we expected more of a direct support to the auto industry which has been contributing, significantly to the GDP.”

Anders Grundströmer, Managing Director, Scania India

“While the increase in customs duty for commercial vehicles is disappointing , overall – the positives outweigh the negatives. The clear commitment to implement GST by 1st April 2016 which is a game changer, easing of norms to aid flow of technology, flow of capital, and focus on sustainable development along with a road map of clearly stated goals in terms of 1 Lakh KMs of roads, doubling the clean energy cess on use of coal and launch of a scheme for faster adoption are all measures in the right direction.”

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