Budget 2015 has little for the auto industry that has been facing one of its worst slowdowns in recent memory. Arun Jaitley's budget sets a good, solid foundation for further development. It seeks to bring about major reforms in the coming years by making small changes today.
The first full year Union Budget of the Modi government is out. Much was expected from Finance Minister Arun Jaitley as he started his speech in the budget session of parliament. With the prime minister's focus on making India a manufacturing hub and his much-publicised 'Make In India' campaign, the troubled auto industry was expecting some serious measures to boost growth and increase customer demand. This budget is devoid of any major reforms for the auto sector with some minor exemptions that are detailed below. What is clear however, is the emphasis on infrastructure and the government's intention to promote inclusive long
term growth rather than going for short term sops.
Speaking of short-term sops, the industry was hoping for a reduction in excise duty, which if implemented, would have helped raise customer sentiment because of cheaper cars. This concern was not addressed and will result in continuation of challenging times ahead. Concessions in customs and excise duties on particular parts used in the manufacture of electric and hybrid vehicles have been extended for another year. The government also has set aside Rs 75 crore for the EV (Electric Vehicle) industry. These are welcome moves as electric mobility has not really caught up with the masses, and EV manufacturers are barely managing to survive. This grant will act as a boost to the EV companies though most of them feel that it is not enough, and are hopeful of more funds to be pumped in the coming months. Also, with the lack of infrastructure for EVs in the country, duty cuts won't really help in pushing sales. A lot of work and support on a broader scale is needed to reach European levels of electrification in cars as well as two-wheelers. It will be interesting to see what effect this has on the pricing of hybrid vehicles as there are a few in the market. There are just a handful of hybrid cars currently sold in India, namely: Toyota Prius, Toyota Camry Hybrid and the recently launched BMW i8 sports car. The commercial vehicle sector it seems has benefited most from the 2015 Union Budget. The FM has increased customs duty on CV to forty per cent. This move is squarely aimed to promote manufacturing within the country and will not drastically affect CV manufacturers as it accounts for a very small number. Domestic CV players like Tata Motors and Ashok Leyland are immune to this reform but international manufacturers like Mercedes, Volvo and Scania will feel a slight pinch. Anders Grundstromer, MD, Scania Commercial Vehicles India says, "While the increase in customs duty for commercial vehicles is disappointing, overall, the positives outweigh the negatives. 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 km 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. Overall, the broad contours
are all positive and we look forward
to partnering with India on this
Another major announcement coming as a blessing in disguise for the commercial vehicles space is the improvement in infrastructure, with an enormous investment of Rs 70,000 crore. Development of another 1 lakh km of roads adding to the same number existing already, will also help in positive demand for commercial vehicles. Stating his views on the budget, Vinod K Dasari, MD, Ashok Leyland said, "Over 100,000 km of roads have been targeted over and above the massive push in the rail sector. The massive boost in infrastructure spend, as well as the mechanisms announced to fund it, will kick-start a virtuous cycle, resulting in significant primary demand for commercial vehicles."
Business friendly developments came in the form of corporate tax reduction from 30 to 25 per cent over a four-year period. Implementation of GST was one act that automakers wanted the government to pull, and it did. April 1, 2016 has been confirmed as the date on which it will become effective. GST provides more transparency and allows for a uniform tax structure across different states, making it easier to do business. Vikram Kirloskar, President, SIAM, had this to say, "A re-affirmation of the date of implementation of GST from April 2016 shall help the manufacturers develop more concrete long term plans on the products and investments. The reduction in corporate tax from 30% to 25% over the next four years lays down a clear roadmap, which removes the uncertainties for industry. The budget lays huge emphasis on development of infrastructure throughout the country and shall boost the prospects of a wide range of industries particularly the commercial vehicles industry."
In conclusion, the 2015 Budget has little for the auto industry that has been facing one of its worst slowdowns in recent memory. Arun Jaitley has tabled a budget that sets a good, solid foundation for further development. It seeks to bring major reforms in the coming years by making small changes today. The sentiment across the industry is aptly summed up by Arvind Saxena, President and MD, General Motors India, "Overall, the budget lays down a blue print for a stable tax regime that can lead to growth in the economy. These proposals and announcements made in the budget, if implemented effectively, should have a positive impact on industry and the economy as a whole going forward."