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BW Businessworld

Automobile: Hike To Be Passed On To Consumers

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AM Muralidharan, President, Volvo Construction Equipment
While the Budget has left much to be desired, Infrastructure sector has seen reasonable support during this crucial pre-election year. The signs for the road segment seem promising considering the government’s plan to begin work on the Delhi – Mumbai and Bangalore – Mumbai industrial corridors; and infrastructure investment in terms of continuous focus on roads and PMGSY projects. It has planned to award 3000 kms of road projects in the first six months of FY 2013 - 14, which will provide impetus to the sector. Further, the mining sector has seen some bright spots with the government encouraging PPP projects hence reducing dependence on imported coal. I believe this is one of the high points of the budget since mining companies will look at venturing into newer projects.

The implementation of the GST model will be watched carefully as this is the first time that money of 9000cr has been kept aside for it. We hope to see a practical road map for GST, in the next two years, with strong constitutional amendments. This will be a huge boost for equipment manufacturers as it will reduce taxes on sales of equipment between states.

Apart from this, there are few investments around ports segment; and support for renewable energy using waste, garbage and wind energy however there is disappointment in terms of direct taxes. I don’t see any motivation for the real estate segment barring the 1 lakh benefit that could be taken from the tax for first time buyers; there is no push for power and retail sectors; and don’t see any direct investment for skill development.

Michael Perschke, Head, Audi India

Rating on 10: 3
Increase in custom duty for imported cars and Excise Duty on SUVs is very surprising. It will severely impact the auto industry and its growth. We will have to seriously evaluate the impact of this hike on our prices and, have no choice other than to pass on the increase to the customer. Overall it will have an adverse impact on automobile industry which is already going through a slowdown and specifically affect demand including that of SUVs.

Currently, the industry is facing pressure from a number of factors like increasing fuel prices, high input costs, persistent inflation, high interest rates; the increase in excise and customs duty will be a dampener. The government should have looked at extending support to auto industry, which has been contributing, significantly to the GDP and could have formed a strategic pillar of industrial development.

We are happy to note that there is a renewed focus on infrastructure especially roads. The proposed regulatory authority on road construction will hopefully fuel better infrastructure and speed up developments.

Takayuki Ishida, MD & CEO, Nissan Motor India
There is no significant or drastic change in the budget this year.  The 2013 budget is a “budget in motion” as it continues to focus on growth in predominantly primary sectors like agriculture, infrastructure and education. This growth will in turn support the growth in other sectors including the automobile industry.

We are very happy about the investment allowance of 15% for investments above Rs 100 Cr as a tax incentive.  We stand to benefit from this as we have plans to expand our operations in India.

We are also happy about the Chennai - Bengaluru Industrial Corridor to be developed jointly by the Department of Industrial Policy and Promotion (DIPP) and the Japan International Cooperation Agency (JICA). This industrial corridor will play an important role in terms of logistics infrastructure for companies like ours which are present in the said region.

The excise hike for SUV will not have a drastic impact; it is most likely to distinguish the price barometer between sedans and SUVs even more clearly than ever before.

S. Sandilya, President, SIAM
Under the current economic environment, the Finance Minister has tried to balance the need for growth with fiscal compulsions. The announcement of investment allowance reintroduction is very positive. Focus on infrastructure is also a welcome move which will help growth of the economy.

While there are several innovative proposals, the auto industry had expected that the Finance Minister would come out with more specific roadmap for implementation of Goods & Services Tax (GST). The industry would be keenly looking forward to full implementation of GST at the earliest.

SIAM appreciates the Finance Minister’s gesture of allocating double the funds under JNNURM scheme enabling substantial part for purchase of upto 10 thousand buses.This was very much needed for revival of CV sector. Finance Minister has also accepted SIAM recommendation to lower excise duty on commercial vehicle chassis from 14 per cent to 13 per cent which was raised in the last budget and led to significant drop in off-take of chassis by the body builders.

With a view to deteriorating market sentiments, SIAM had also recommended reduction of excise duty for passenger cars by 2 per centwhich could have led to significant improvement in sales.

However, the Finance Minister has accepted SIAM’s recommendation on extension of concession for import of electric and hybrid electric vehicle parts till 31st March 2015.

The increase in customs duty for luxury cars and motorbikes seems to be an effort to raise more revenue and to encourage local manufacturing, value addition and employment. The proposal to increase duty on second hand vehicle from 100 per cent to 125 per cent is the right step. It clearly conveys that India is not ready to accept second hand old vehicles from other countries.

The other area which the industry did not expect was the increase in excise duty on SUVs used as personal vehicles. This is the only segment in the industry which has been doing well this year and increasing price of these vehicles would dampen sales and impact market sentiments further.

S Sandilya thanked the Finance Minister for accepting various suggestion of SIAM and hoped that the budget will help take us back to growth path and improve performance of the industry. The critical thing, however, will be speedy implementation of the policies.
J V Adhia, Vice President - Finance, Atul Auto
The Budget is neutral to the Auto Industry especially the three wheelers. Putting excise duty on the SUV’s was a different move and unexpected.  There is nothing to benefit the common man in the entire budget.

Tax on goods, SUV, Jewellery, dining out, mobile phones etc… is surely going to affect the common man. A focus on women’s development is a good step but is there a real need of introducing a women’s bank? The Finance Minister has put a good step forward by putting the tax exemption for the first time house buyers with loan under 25 lakhs. Moreover, a lot of budget has been increased for the Healthcare in India which is a good step, provided the plans reach the desired audience successfully. The Infrastructure projects have also got a good benefit with the tax free bonds; now we expect a change in the infrastructure in India too. With the budget we doubt if the fiscal deficit will really be reduced by 4.8%.  A lot of plans introduced by the Finance Minister are similar to the last year’s, but overall a neutral budget.