2014 Union Budget: What the Indian Auto Industry Expects

The Indian automobile industry has experienced a year-on-year decline in sales for two consecutive financial years now. The market has been difficult, and the industry hopes the new union budget will bring some relief.

The automobile industry is one of the key drivers of India's overall economy despite the fact that it has been rather sluggish off late. Rising fuel prices and poor consumer confidence have hit the auto industry so hard that sales often touched new lows in the last 10 years. The auto industry's desperate need of an overhaul has led automakers to whip up their own wish-lists for the budget.

Continuation of excise duty reduction benefits, implementation of GST, and rationalization of tax structure are among the immediate demands that the industry wishes the Finance Minister will address in the 2014 Union budget.

For the overall growth of the industry, Society of Indian Automobile Manufacturers (SIAM) expects:

1. Excise duty to be reduced to 10% on select auto components

2. Expected timeline for Introduction of GST

3. 1% NCCD on Vehicles should be withdrawn

4. Make necessary amendment to Section 4 of the Central Excise Act for

excise valuation

5. Introduce fleet modernization scheme

6. Accelerate depreciation rate on motor cars to 25%

7. Customs duty on CBUs of passenger vehicles and two wheelers to be

retained and on CV be increased to 40%

8. Allow Standard Deduction for car purchase like individuals having

proprietary business can claim depreciation

9. Interest Paid on Car Loan should be allowed for Deduction in Chapter VI A

10. Allocate funds for National Electric Mobility Mission Plan

11. Allocate Fund for city bus purchase

Mr. Jnaneswar Sen, Senior Vice President,  Marketing & Sales, Honda Cars India Ltd., said that the induction of a new government has had a positive effect on buyer sentiment in the market, and hopes that the government will retain the excise duty structure. He explained, "The industry is expecting the government to continue excise duty reduction benefits, uniform implementation of GST and rationalization of tax structure. If the excise duty structure is retained, it will give the much needed boost to the growth of the industry. The overall objective is to bring down the cost of acquisition for the customer so that he is interested in car purchase which will in turn improve the demand."

Mr. Rakesh Srivastava, Senior Vice President, Marketing & Sales, Hyundai India, agreed with the sentiment about the excise duty structure. He said, "The economic slowdown in the past two years has adversely affected the industry. We are happy that the government viewed the industry's appeal for an extension of duty cuts positively. However the recent increase in freight cost, rising fuel prices, high interest rates and the weak monsoon forecast is still distressing the demand and is creating a negative sentiment for the overall economic growth. We hope government will consider these factors."

Mr Srivastava hopes the new budget will bring a long-term, consistent and uniform government policy on tax regime and standardized fuel price policy for sustainable revival of the industry and for the benefit of the customers. He also added, "We also look forward to have some initiatives towards scrap policy and added incentives for R&D in India."

Mr Sen is also of the same opinion and said, "Honda is quite confident about the long term growth story for the Auto industry in India and look forward to the new government's intervention for strong policy framework so that we can align our future strategies and contribute effectively to the overall economy."

Vikram Kirloskar, President, SIAM, told NDTV that the reduction of excise duty and its implementation till December was good news. He said, "The other thing we are looking at is how to get the economy moving again. The auto sector we have a lot of excess capacity, and there have been some large investments in last 5 years worth about 70,000 crore. So this is a low hanging fruit. Anyway, to rev up demand one of the ideas we suggested is fleet modernization. Some incentives for fleet modernization and revving up of demand in the auto sector will help to kick start the economy."

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