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The change
‘Make in India’ and ‘clean energy’, two of the Government’s pet themes, reflect in the Budget sops offered to the auto industry. These include increase in the effective basic customs duty on fully-built commercial vehicles from 10 per cent to 20 per cent, a ₹75-crore allocation for promoting electric vehicles and extension of existing concessional excise and customs duties for electric and hybrid vehicles.
Better times
A cyclical recovery in domestic auto sales is firmly in place right now. Auto sales for the first ten months of this fiscal have grown by about 9 per cent, compared to the 2-3 per cent levels in the last two years.
Recovery in truck and bus sales has been the highest at 13 per cent. So in contrast to trying times when the industry expects excise duty cuts and gets it too, not much was expected this time round. Yet the allocation of ₹75 crore for electric vehicles seems tiny. But it must be seen in the light of the ₹1,000-crore allocation made earlier to the National Electric Mobility Mission Plan 2020.
The verdict
Mahindra and Mahindra, whose subsidiary manufacturers the Reva electric cars, will benefit from the allocations and duty concessions for electric vehicles. M&M has plans for an electric version of the Maxximo mini-van and Verito car. Tata Motors and Ashok Leyland will benefit too. The former is working on an electric Ace, while the latter recently showcased its electric bus, Versa, which it expects to sell in 2017. Besides, at a time when truck and bus sales are regaining speed, these two market leaders will benefit from the increase in import duties for commercial vehicles, as it gives a fillip to local manufacturing.
A reduction in excise duty on chassis for ambulances from 24 per cent to 12.5 per cent will help Maruti Suzuki and Force Motors, whose vehicles Omni and Traveller are predominantly used as ambulances.
Finally, the commitment towards implementing GST from April 1, 2016, will help makers of large cars and SUVs, for which excise duties are currently the highest in the industry at 20-30 per cent.
A lower uniform GST rate is expected, which will likely make these vehicles cheaper. M&M, which manufactures SUVs such as the Scorpio, Bolero, Xylo and XUV500, will be a major beneficiary.
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