India’s automotive sector has some positives to take from the budget announced today by India’s Finance Minister Pranab Mukherjee. Contrary to the expectation of an increase in excise duty the Finance minister spared it from any change. The move would be a certain welcome by the industry as it is already fighting rising input costs. Hopefully now we might not witness a significant increase in car prices in the short-term.
Another announcement to benefit carmakers and auto component suppliers is the reduction of custom duty on raw steel. With steel prices going down the industry will benefit from strengthening margin lines as it will become cheaper to source finished steel from tier 2 & 3 suppliers.
Green cars & technology received a shot in the arm from the Finance Minister as he announced a National Mission for hybrid & electric vehicles to promote their adoption as well as incentivise them. Going forward critical parts/assemblies required to manufacture hybrid vehicles would be granted exemption from the basic custom duty of 10% and special CVD. A concessional rate of 5% excise duty will be granted to hybrid vehicles if manufactured locally. In addition, the excise duty on kits used for conversion of fossil fuel vehicles into hybrid vehicles has been reduced from 10% to 5%, thereby making them cheaper. Technology for such kits has been developed indigenously and the move will not only promote adoption by customers but will also help the R&D for such technologies.
In a nutshell, the budget has helped in the creation of a growth-conducive environment for the Indian automotive industry. Apart from not increasing the excise duty rates and hence not making cars more expensive the budget will also help the manufacturers, especially SMEs to improve their profitability due to reduction of excise duty for raw steel. The focus on green technology along with promoting their adoption is also a welcome move and even though the effects might not be visible right now a continued focus on the sector will ensure growth in the medium and long-term.
Another announcement to benefit carmakers and auto component suppliers is the reduction of custom duty on raw steel. With steel prices going down the industry will benefit from strengthening margin lines as it will become cheaper to source finished steel from tier 2 & 3 suppliers.
Green cars & technology received a shot in the arm from the Finance Minister as he announced a National Mission for hybrid & electric vehicles to promote their adoption as well as incentivise them. Going forward critical parts/assemblies required to manufacture hybrid vehicles would be granted exemption from the basic custom duty of 10% and special CVD. A concessional rate of 5% excise duty will be granted to hybrid vehicles if manufactured locally. In addition, the excise duty on kits used for conversion of fossil fuel vehicles into hybrid vehicles has been reduced from 10% to 5%, thereby making them cheaper. Technology for such kits has been developed indigenously and the move will not only promote adoption by customers but will also help the R&D for such technologies.
In a nutshell, the budget has helped in the creation of a growth-conducive environment for the Indian automotive industry. Apart from not increasing the excise duty rates and hence not making cars more expensive the budget will also help the manufacturers, especially SMEs to improve their profitability due to reduction of excise duty for raw steel. The focus on green technology along with promoting their adoption is also a welcome move and even though the effects might not be visible right now a continued focus on the sector will ensure growth in the medium and long-term.
