What Auto Industry Expects From The Upcoming Budget

A lot is at stake for the domestic auto industry on 1 February, when Finance Minister Arun Jaitley will present the Union Budget 2017-18.

The auto sector, which contributes 7.1 per cent to the country's GDP, had many ups and down in the form of diesel car ban, GST passage and demonetisation in the financial year 2016-2017. While consumers are expecting taxes to be lowered on passenger and commercial vehicles, the Indian automobile industry expects the government to implement GST, lower corporate tax, lower excise duty, more incentive on electric and hybrid vehicles and few other favorable policies.

YK Koo, MD and CEO of Hyundai Motor India, said the automobile industry has been facing multiple challenges and is slowing down due to weaker customer sentiment. To steer the growth, the sector is looking forward to positive initiatives on ease of doing business from Union Budget 2017-18.

Koo said, "Reduction in excise duty rates towards timely GST implementation along with lower corporate and income tax will benefit the industry. The new uniform tax structure will create a robust business environment and help the industry to positively contribute for National GDP."

Sumit Sawhney, country CEO and MD, Renault India Operations, said: "Owing to multiple macro-economic factors, the industry has not achieved its growth potential during the last few years. Announcements during Union Budget 2017 thereby will be keenly observed by the automotive industry, which expects the government to introduce pro-business measures to boost the industry."

He added that one of the focal decisions for the automotive sector from this budget is on the GST roll-out, and how different vehicle categories will be taxed.

"Another area which deserves attention is the vehicle scrappage policy or the proposed 'Voluntary Vehicle Fleet Modernisation Plan (V-VMP)' which will keep older cars off the roads," Sawhney said.

The ripple impact of demonetisation is expected to fade away in the coming months and automakers want government to promote online payments.

Roy Kurian, VP, marketing and sales, Yamaha Motors India, said, "Demonetisation effect would diminish in coming months and people would slowly get used to banking. Government’s initiative of incentivising a common man for online purchase would have positive impact overall."

"The union budget is also expected to have changes in income tax structure leaving more disposable income with consumers eventually boosting the economy. The two-wheeler sector also hopes that the rural infrastructure is given due share, as the development will directly lead to rise in sales," he said.

Manufacturers are also advocating the need to improve infrastructure and improve rural economy.

Pravin Shah, president and chief executive (automotive), Mahindra and Mahindra Ltd, said: "Given the situation post-November 8, we expect the Finance Minister to announce a well-defined, right and prudent budget with specific focus on infrastructure, manufacturing, taxation and provide rural stimuli to revive and boost consumer, business and investment confidence."

He added, "In the short term the economy has been shaken and this budget will have to bring the economy back on growth track. Hence a bold and rational budget is what one can expect."

Commercial vehicle maker Scania said that the shift from private transport to public transport is essential to address the environmental impact from carbon emissions, and the company hopes the government will address the issue and encourage public transport.

"In line with the 'Make in India' initiative we are looking forward to financial allocations and tax benefits to encourage manufacturing and use of sustainable transport solutions that are safer, greener and more fuel-efficient and drive on locally produced Biofuels," said Stefan Palskog – president, Scania India, and Mikael Benje, managing director, Scania India, said in a joint statement.

On improving the existing R&D capabilities of the domestic auto industry, Sawhney of Renault said that finance minister should announce restoration of weighted deduction of 200 per cent on R&D expenditure to enhance spending on R&D and create relevant infrastructure.