What Does Indian Auto Industry Expect From Budget 2020
Finance Minister Nirmala Sitharaman is supposed to table the Union Budget on 1 February, The Auto Industry struggling with a drastic slowdown, is looking for support from the government
Photo Credit : Reuters
In the year gone by, the Indian automobile industry has seen one of the toughest times, undergoing a severe slump in sales, across the board. Overall low consumer sentiment, the upcoming transition to BS-VI emissions standards and a credit crunch with the NBFCs were cited as some of the causes. And now, as Finance Minister Nirmala Sitharaman prepares to present the first budget of her second term on 1st February, expectations run high among Auto Industry with the hope of favorable policies and incentives.
Manav Kapur, Executive Director, Steelbird International :
The Finance Minister should come up with the effective remedial measures to address the current challenges. As the country is going to adopt the BS-VI norm, which will eventually lead to price escalation, to compensate it, the Government should significantly reduce GST on automobiles. Besides, to boost market demand, the interest rate should be lowered on car, bike, and personal loans. Also, the industry seeks softer road and transport policies to overcome the existing slowdown.
Mr. P Srinivasavaradhan, President, TVS Srichakra Ltd.
We urge the government to address the supply-demand gap in natural rubber a critical raw material of the tyre industry. We request the government to reconsider the GST component in tyre pricing, also relook at relaxation in GST for two-wheelers. Steps to curb rising raw material and fuel prices will aid both vehicle manufacturers and auto component makers in the long-term. Some of the other focus areas are to strengthen the required road & transport infrastructure.
Mr. Shoeb Farooq, GM, Triumph Motorcycles
As a premium motorcycle manufacturer, we expect the budget to boost customer sentiment through rationalizing GST rates to 18% on premium 2 wheelers from the current 31 % so that it can absorb some of the impacts on prices due to BSVI up-gradation and in turn revive demand. Premium Motorcycle industry is small and in its nascent stages in India and needs support to withstand these challenging times.
Mr. Rajeev Chaba, President & Managing Director - MG Motor India
We hope that the government provides the right policy, incentives, and charging infrastructure to put more EVs on the road. It should also look at providing incentives to stakeholders for sourcing critical raw materials for EV battery manufacturing in India. This will enable a strong EV-centric ecosystem and will be beneficial for the long-term growth of this high-potential space.The government should also look at offsetting the increase in GST costs due to the recently-introduced BS-VI norms to stimulate market demand for ICE vehicles.
Sqn.Ldr. Prerana Chaturvedi, CEO & ED, Evolet- Rissala Electric Motors Pvt Ltd.
GST on raw materials is still a concern for manufacturers in addition to the import duty on technologies for e-drivetrain and other EV related products. The government needs to do more to support the localization of battery technology that power electric vehicles. Lithium-Ion Batteries that form close to 40% of the cost of an electric vehicle attract GST of 18%. The government should consider reducing the GST rate and encouraging companies to set up battery manufacturing plants in the country through tax exemptions. Also unlike the conventional automobile sector, financing has been a major concern for EV industry as Nationalised banks are currently not offering any financial help over electric vehicles. I think if the government solves the financing issue, it will aid in meeting the target of E mobility 2030 set by the government.
Truebil - Shubh Bansal, Co-Founder
We have Strong expectations from the Union budget when it comes to reduction in GST charges as it will encourage foreign investors to invest more in Indian startups. One of the biggest steps from the Indian government in tax norms has been the relaxation of the angel tax for the startups registered.
A reduction in personal income tax is necessary as it will put more money in the hands of the consumer. The assumption being that this extra money would then be spent on buying goods and/or services, thereby stoking demand.
Sunil Gupta, MD & CEO, Avis India (Auto)
I believe that the government should build on its recent push towards sustainability by prioritising the growth of the EV ecosystem. This can be done by promoting the creation of a strong and well-connected charging infrastructure on a pan-India level, promoting the setting up of EV battery capacity in the country and incentivising the adoption of EVs, especially for public transport buses, fleet operator cars and 2 and 3 wheelers. The road connectivity must also be improved between major urban centres and tier-2/3 regions to bolster the growth of the travel and tourism sector.
Budget Quote from Mr. Nimish Trivedi, Co- Founder of Prakriti E-mobility
In the upcoming budget, we hope to see reductions in road and registration taxes for EV taxi aggregators so that they are able to develop viable public transportation alternatives. We also hope for special permissions and reduced charges for EV aggregators for operating with kiosks around major hubs such as the airport, metro and railway stations. Promoting and encouraging widespread expansion of charging infrastructure is another key agenda item that the budget needs to address. These steps, coupled with incentives for faring passengers in EVs, will level the playing field for EV industry to compete with traditional auto players. As per an industry report, India has the potential to become one of the largest EV markets in the world and these initiatives will give the much-needed push towards this goal.
Mr. Sharad Malhotra, President – Automotive Refinishes and Wood Coatings, Nippon Paint India
We expect Budget 2020 to walk a tightrope - there is need to push forward long-pending reforms and revive demand but also be fiscally prudent. With auto industry facing unprecedented slowdown, we are looking forward to demand-side measure that will pull the economy out of slump, provide much-needed relief to the sector and revive consumption. Auto industry is gearing up for implementation of BS-VI norms in 2020 and we are hopeful that demand will crawl back up from second half of the year. We are also hopeful of a lower GST rate for vehicles that will improve consumer sentiment and stimulate demand.
Rajeev Kapur, Managing Director, Steelbird Helmets
As far as the helmet industry is concerned, GST shall not be levied on helmets as they are meant for safety. Helmets are life-saving devices just like medicines. Therefore, just the way there is no GST on medicines so shall helmets be exempted. Moreover, unless helmets are exempted from taxes, prices will go up and the effort of the government to make the use of ISI helmets mandatory will be defeated.
Therefore, helmets should not be treated like other commodities. Every day approximately 13 people die in road accidents. Many of these deaths happen because of no or poor quality of helmets. In a country where people consider helmets as a financial burden, a zero percent GST will help to win people’s faith in good quality helmets and will induce them to buy and understand its significance.
PreBudget expectation quote on behalf of Jatin Ahuja, Founder & MD, Big Boy Toyz.
The pre-owned luxury car segment is eyeing 50% growth with this year’s Union Budget. We are also expecting the government to align its electric mobility vision with challenges faced by automakers and auto-dealers in terms of innovation and elasticity. The automobile sector is a crucial contributor in country’s GDP and so the government must take steps to ease the implementation of Bharat Stage VI norms which may lower the demand until the public fully understands the policies.
Amit Jain, CEO & CoFounder, CarDekho.
Last year was tough for the auto sector as industry sales witnessed negative growth. In 2020 we are expecting a policy that will boost sentiments and open opportunities for growth. Reducing GST on vehicles will be a positive step. With a continued emphasis on electric vehicles, the government should begin developing its infrastructure such as setting up charging stations in huge numbers. The main cost item in electric vehicles is the battery and the government must incentivize startups to develop/ innovate this product. The government must infuse investment in this sector which will also help generate employment opportunities. India has become the second-largest startup hub in the world. We hope that the government will continue encouraging startups. A pronounced emphasis on innovation is an essential requirement of the startup ecosystem in India."
Mr. Jeetender Sharma- Founder & MD, Okinawa Autotech Pvt. Ltd.
The revival of the automobile industry is expected to be on the priority list in the upcoming Budget session. Low market sentiment and the transition to BS VI emission standards were said to be the prime reasons for the industry slowdown last year. The industry is hopeful that the government will announce policies to support the industry and increase the demand in the market. Another buzzing word is about the growth of the electric vehicle segment in India. EV revolution has certainly picked up well in India. The government has also fuelled the market with subsidies and incentives to accelerate adoption. However, the cost of components and import duty remains a big concern for EV manufacturers. Certain parts of products are still imported, due to lack of manufacturing facilities, and this forms a major part of the overall product cost
Ayush Lohia, CEO Lohia Auto Industries
Retail Finance is not easy in Electric vehicles. So EV finance should fall under priority lending. Moreover, we want the government to refund the GST from whatever components the auto companies are currently purchasing. GST on battery is 18% currently both on Li-ion and Lead acid. So we request it should be reduced to 5% as currently charger is also 5%. Mr Ayush Lohia expects the electric two-wheeler industry to boom in the near future. Somewhere wherein they make an impact and come all guns blazing!
Ola Mobility Institute.
As India marches to become a global hotspot for electric mobility, a critical step in that direction is recognizing battery swapping as a viable charging mechanism for two-wheelers and three-wheelers. This requires policy interventions such as including battery swapping in FAME-II, treating electric vehicles and batteries as separate entities and extending demand incentives for both, reduction of GST on Li-ion batteries and earmarking funds for R&D to develop batteries locally.
Mr. Harsha Kadam, CEO & President -Industrial Business, Schaeffler
We believe that special attention and tax reforms to revitalize consumer spending will augur well for the economy. For component manufacturer’s like us stability in steel prices is also important so that growth trajectory can be sustained, and profit can be passed on to end consumers/customers. We are approaching thebudget with high optimism
Mr.Akhil Aryan, Co-Founder and CEO ION Energy.
Currently, Li-ion batteries amount to 45% cost in EVs which means that the cost of an EV is directly proportional to the cost of its batteries. We strongly support SIAM in suggesting the government to abolish the customs duty of 5 percent on li-ion cells. It is imperative to incentivize local manufacturing of lithium-ion battery cells which can further enable battery packs to be manufactured and assembled locally, reducing import costs.
Localization of EV components, improved availability of battery technology and extensive charging infrastructure setup can reduce the overall cost of EVs, making them viable for shared mobility as well as for personal use.
Mr. Suyash Gupta, Director General, Indian Auto LPG Coalition (IAC)
We seek the attention of Finance Minister Nirmala Seetharaman towards the imminent need for devising friendly policies to allow rapid growth of environment-friendly transport fuels such as Auto LPG. Auto LPG which is being promoted actively by governments across the world is facing discriminatory policies in India. It is taxed at a high GST slab of 18%. Similarly, conversion kits for auto LPG and CNG are placed at the highest slab of 28% which is meant for either luxury goods or demerit items like tobacco products
Mr. Sudhir Sharma, VP - Finance & Corporate Development, GoMechanic :-
The Auto service sector is still split between Authorized Brand Workshops and small unregulated neighborhood workshops. There is huge potential to attract capital to consolidate the space with standardized workshops offering multi-brand services under one roof. To this effect, the Union Budget can create avenues for easier access to capital and also simplify the lending procedures for fund availability for entrepreneurs to upgrade their workshop equipment. A single GST rate on services and consumables will also come in handy.
Nagesh Basavanhalli, MD & CEO, Greaves Cotton Limited
The government should also extend certain benefits to last-mile EV fleet operators as a way to promote EV adoption for commercial movements.
The government will have to consider certain progressive policy measures. Key among these will be the roadmap for nation-wide vehicle scrappage policy, this will reduce emissions and generating demand in the sector.
We are also looking forward to the integration of EV manufacturers with Sector Skill Council of NSDC for upskilling the workforce. The collaboration will prepare employees to move from conventional technologies to the emerging ecosystem.
In addition to these, the industry-wide expectation will be towards the revision of GST on automobiles from the existing 28% to 18%. This can lower the cost of ownership for consumers and spur demand. This will also allow the industry to sustain investments in R&D and introduce energy-efficient technologies to the market.
ACMA’s expectations from upcoming Union Budget 2020
We are hopeful that the Government would consider our long-standing recommendation of 18 per cent GST on all auto components as also extend impetus to R&D and indigenous technology development.
Mr. Rajan Wadhera, President of the Society of Indian Automobile Manufacturers (SIAM).
“As SIAM we have urged the Finance Ministry to consider announcing an incentive based Scrappage Policy and also increase budget allocation for ICE bus procurement by state transport undertakings. Increased cost of BSVI may effect demand, hence we have also requested Government to reduce GST rates for BSVI vehicles effective 1st April from 28% to 18%.”.
Sulajja Firodia Motwani, Founder and CEO of Kinetic Green and Vice Chairperson, Kinetic group on: Expectations from the Union Budget 2020
There is a need to give strong stimulus through continued and even more aggressive export incentives policy and boost R&D through tax holidays for R&D investments. Huge funds of corporate sector are blocked in tax refunds such as GST refunds, or pre-GST CENVAT credit, or earlier sales tax regime. These dues and repayment of huge business dues from Government to companies should be released on urgent basis. Mechanism for expediting tax refunds and one time concessional tax dispute settlements will release cash flow. While repair of financial sector such as Banks, NBFC, PSUs is still underway, opening of foreign capital, esp. debt like ECBs, NCDs will help. For demand creation, more money in the hands of the consumers through lower income tax rates and abolishing capital gains tax will help.
Anil G, Co-Founder and COO, Bounce
“Shared mobility, especially the two-wheeler segment, is gaining ground in India as a reliable, affordable and sustainable alternative to the usage of personal vehicles. It compliments and works seamlessly with the existing public transport network. However, two-wheeler attracts GST at 28%, while cab aggregators are charged 5%. We believe shared mobility is a key piece in solving traffic, pollution and other social woes and hence providing incentives on initiatives which further it's adoption, will benefit the nation in the long run. We are also looking at electrifying our fleet and offer a green, clean and more economical commute option. The current 18% GST on battery-operated vehicles is a deterrent to this transition. Considering the government's strong focus on EV, we hope that the GST rates are waived or reduced, to accelerate adoption. Also, from an employer perspective, ESOPs exemptions will be a welcomed relief for us, start-ups.”
Mr. Ayyushman Mehta, Managing Director, MAVOX Helmets, Sandhar Amkin Industries Pvt Ltd. said,
we expect that the Government should also focus on constructing safer roads in both rural as well as urban areas so that accident figures can be reduced. Furthermore, we hope that there would be stricter norms and implementation to allow only original ISI marked helmets on the roads and lower GST rates from the current 18% to 5% given it is a safety and essential product so that every rider can purchase ISI helmets at an affordable price. We hope this year’s budget can brighten the future for the auto industry in India.