Budget 2017: Expectations For Indian Auto Industry - watsupptoday.com
Budget 2017: Expectations For Indian Auto Industry
Posted 01 Feb 2017 12:52 PM


In a few Minutes from now, India’s finance minister, Arun Jaitley will announce the 2017 Union Budget. As the country watches with bated breath, one of India’s largest employers and money makers, the auto industry is hoping that for a favourable budget this time around. The last few budgets have not exactly been revolutionary for the industry and, if nothing, have made cars and particularly SUVs even more expensive for the end buyers. So here are a few things we can expect for the Indian automobile industry in Budget 2017.

GST Rollout:

The long awaited rollout of GST will certainly help standardise many aspects of the industry. Smaller cars are expected to get a rebate and get a flat 18 percent tax structure while larger cars which are classified as luxury items will get a 24 percent tax structure. That said, the definition of differentiation between a smaller car and a larger car might change from what it is today (under 4 meter and engine limitation) which in turn might lead to a whole new direction and some added vigour in the Indian auto segment.

Electric and Hybrid Subsidy:

Although schemes like FAME (Faster Adoption And Manufacturing Of Hybrid And Electric Vehicles) do give some benefits to makers of electric and hybrid cars, the higher costs involved in manufacturing these cars make them much more expensive than its non-electric/hybrid rivals. SIAM has suggested a completely different GST based tax structure for electric and hybrid cars for the next few years. Although the best direction to promote these cars would be a blanket tax holiday, we do not expect the government to go that way. We do hope that these cars get classified in an even lower tax bracket as compared to the 18 percent small car tax that will be levied through GST.

Electric Automotive Infrastructure:

In a recent statement, R. C. Bhargava, Chairman, Maruti Suzuki, mentioned how Maruti was not looking to invest in the electric cars sector as the infrastructure to support it just did not exist in the country. This has been discussed for several years and like most countries around the world, the onus of installing public charge points lies with the government. The Budget could announce a future plan for electric charging points or a similar infrastructure push through the private sector but considering the fact that this does not seem to be top priority for the Indian government as of now, we wouldn’t hold our breath.

Roadways and General infrastructure:

Having a better set of roads to drive on always gives a boost to the auto sector in any country. Similarly, the increasing number of road projects announced and a higher allocation of funds for better urban and rural roads will no doubt help in boosting sales of cars, commercial vehicles and two wheelers. Increasing number of expressways connecting major cities and better cross country highways will also greatly help in reducing lead times in road-based transport and commodity deliveries.

Auto Components:

Auto component manufacturers are as large a part of the Indian automotive industry as the actual auto makers are. Expect GST rates for auto component makers to be at the 18 percent level instead of a higher bracket. Also expect some sort of tax benefits from the government for auto component manufacturers who invest in R&D facilities and processes.

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