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Union Budget 2019: The Expectations Of Auto Sector

The Indian Auto Sector is dealing with a slowdown in sales and with BSVI norms right around the corner and electrification high on GOI's priority, the coming years are going to be tough for the Auto Industry.

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The Newly elected Government is now all set to present the union budget for their second term. The Automotive Sector dealing with an overall slowdown in sales, coming in terms with BSVI norms and quicker adoption of Electrification. Here at BW Autoworld, We look into the demands an:d expectations of the Auto Sector from Union Budget 2019 

GST Reduction - 

GST just completed its second anniversary on 1st July. The current GST slab rate for Automobiles are 28 percent and the primary expectation of the automotive industry is to reduce the slab rate to 18 percent. The reduction in slab rate will be resulting in motivation for end-user as well.  

Mr. Manohar Bhat – Vice President and Head of Sales & Marketing - Kia Motors India. said: "We are looking forward to the upcoming budget as the industry urgently needs a push amid the slowdown. As put forward by SIAM, we are hopeful of a reduction in GST from the government to counter the slowdown and elevate the sentiments of potential car buyers. "

Mr. Rajeev Kapur, Managing Director, Steelbird Helmets said, "If a company has over 1000 employees recruited then they should get 20% rebate in GST and income tax. Likewise above 2000 there should be a rebate of 40%, for over 3000 it should be 60%, above 4000 it should be kept 80% and for above 5000 the rebate should be 100 %. This will help uplift all the rural areas and help them come at par with the metropolitan cities"

Shubh Bansal, Co-Founder, Truebil said, "we expect the Government to add on some efforts to turn the industry’s performance by reducing the GST on all vehicles to 18% from the current rate of 28%. This will reduce vehicle prices and help in spurring demand."

Federation of Automobile Dealers Associations (FADA) Recommends- Regulation of GST Rates to 18% to Boost Volumes in Automobile Sale.

Vinnie Mehta, Director General, ACMA said, “The auto component industry, being an intermediary, has recommended for a uniform GST rate of 18 percent on all auto components. The industry has significant aftermarket operations, which are plagued by grey operations and counterfeits due to the high 28 percent GST rate. A moderate rate of 18 percent will not only address this challenge but will also enhance the tax base through better compliance”. 

Mr. Sandeep Aggarwal, Founder & CEO, Droom said: "The government should also make GST on e-commerce inapplicable for five years, along with facilitating R&D to drive innovations."

Mr. Diego Graffi, MD & CEO Piaggio Vehicles Pvt. Ltd said: "I feel GST on automobiles should be reduced from 28% to a more rational level of 18% as this will absorb some of the cost impacts of the future introduction of BS VI at and this will add to affordability for the customer & be an impetus to growth. "

Smart Planning for NBFC 

One of the key issues for the auto sector is the condition of NBFCs. There are lots of expectations from the government to revive the NBFCs. One of the main concerns is that NBFCs are not able to raise funds at low cost and this needs to be addressed in this upcoming budget to revive the Auto Sector.

FADA believes that Ease of Liquidity in NBFC’s is one of the major Auto sector issues right now.

Vehicle Scrappage Policy-

FADA President, Mr Ashish Harsharaj Kale said, "The Other main request to Revive Growth in the Auto Sector is to announce an Attractive Incentive Policy to encourage Scrappage of Older Vehicles which today are the main contributors to vehicular Pollution and Road Safety Concerns. A successful Implementation of the Voluntary Policy will further Pave the Way for a Mandatory Scrappage Policy in the Future.”

Shri Harish Sheth said  “As the MHCV & farm industry has witnessed a hard time recently – For MHCV it would be in the best interest for the government to pull forward the implementation of the vehicle scrappage policy over 10 years in age. This will immediately spur growth and improve logistic efficiencies due to advanced technology"

Mr. Diego Graffi, MD & CEO Piaggio Vehicles Pvt. Ltd said: "A comprehensive policy on the scrapping of old vehicles will not only benefit emission aspects but will in addition help the auto sector & consumers with new technology vehicles.  As far as electric vehicles are concerned we are looking forward to a comprehensive policy on the phased introduction of EVs in India. "

Mr. Manohar Bhat – Vice President and Head of Sales & Marketing - Kia Motors India. said: "New policies and schemes with regards to electric mobility vision and new incentive-based scrappage policy of old vehicles will also act as a catalyst to restore the growth in the automobile industry."

Electric vehicle and Implementation 

Recent NITI Aayog report stated that FAME II and other measures in public and private space - are successful, India could realize EV sales penetration of 30 percent of private cars, 70 percent of commercial cars, 40 percent of buses and 80 percent of two and three-wheelers by 2030. 

It is a big challenge for India to step-up in the electric-based vehicle system within a given period of time. Here are what the auto industry think about it and what it expects from this budget:

Mr. N Naga Satyam Executive Director Olectra Greentech said "We expect the government to include Electric Vehicles in the Priority lending sector so that prospective buyers can be encouraged to move towards this environment-friendly transport option. The financial assistance will help in compensating the cost difference of the EVs making it more attractive for the buyers. "

Tarun Mehta, CEO, Co-Founder, Ather Energy said: "For end consumers, the FAME 2 incentive distribution to individuals is limited to only one vehicle per category but in a country where most households own multiple two-wheelers, this will limit adoption especially if all two-wheelers are to go electric by 2025".

Mr Sohinder Gill, Director General, Society of Manufacturers of Electric Vehicles (SMEV) said "A dedicated budget could be allocated for the ‘Clean Air’ campaign, which could be integrated under the Swachh Bharat mission. The “Clean Air Campaign” can create massive awareness on Electric mobility and can influence the mindset of customers to adopt electric mobility to make India less polluting and its citizens healthier"

Mr. Rahul Sharma, Founder and Chief Revolutionary Officer, Revolt Intellicorp Pvt. Ltd. “ We need the government to review the current taxation framework and simplify the inverted GST structure as the input on raw material is at 18% wherein the output is at 12%. This will lead to significant working capital blockage. The proposed reduction of the GST on EVs to 5% will be beneficial if implemented. We expect the government to assess and reduce import duties on lithium-ion cells to further improve the industry’s cost issues at least in a phased manner for the next 5 years till we are self-reliant in building the critical components of an EV here in India."

Mr. Jeetender Sharma, Founder & Managing Director, Okinawa Autotech Pvt. Ltd said: "we would like to see reduced import duties on lithium-ion cells, motors and motor controllers so that the batteries can be produced locally aligning with Governments’ Make In India initiative. We also want GST on batteries to be reduced from the current 18 percent slab to the lowest possible slab."

Parveen Kharb, CEO and Co-Founder, 22KYMCO. said: "The government should incentivize and promote practical EV solutions and the charging infrastructure, which is essential for the EV eco-system to succeed. Incentives on capital investment for charging networks across cities and battery subscription programs can fetch faster adoption of EV which is in line with the government’s vision.”

Mr. Ayush Lohia CEO Lohia Auto industries said: "It will be good if the new government brings down the GST slab on electronic vehicles to 0-5 percent. Moreover, in the coming times, the government should encourage the sales by offering subsidies, etc. so that the demand for these vehicles goes up significantly and the plan should also be to make EV’s economically viable on its own. "

"The budget must also bring in incentives on investment on EV technology and subsidy on capex for setting up EV manufacturing plants. The next three years will be crucial for the Indian auto industry in terms of investments in EV and I believe tax incentives must be extended to manufacturers as well", said Mr. Nishant Arya, Executive Director, JBM Group.

Alternative Fuels

Union minister for transport Nitin Gadkari has stressed on the importance of moving towards alternative fuels as it will reduce the dependency on fossil fuels. 

Looking forward to the upcoming Budget 2019  Mr. Suyash Gupta, Director General, Indian Auto LPG Coalition said "Among the most notable initiatives of NDA's first term in office were its efforts to dramatically increase the penetration of domestic LPG across Indian households through Ujjwala. As the new government readies to announce its first budget, we expect a similar push to be given to Auto LPG which is a much cleaner fuel than petrol and amongst the most easily deployable alternative fuels"