Besides input cost pressures and interest rate concerns, what kept auto stocks muted in the run up to the budget was the fear of a hike in excise duty and the possibility of diesel price de-regulation.

What the budget brought instead, was a slew of excise and customs duty concessions for the use of green technology. Although current efforts by auto makers to develop environment- friendly vehicles has not been widespread, three sops for green vehicles and their related components clearly point to the government's intention to encourage the mass manufacture of such vehicles and their parts.

One, the proposal to reduce excise duty from 10 per cent to 5 per cent on kits (and their parts) for the conversion of fossil fuel vehicles into hybrid vehicles; two, a concessional excise duty of 5 per cent to incentivise the production of critical parts and sub-assemblies for hybrid vehicles domestically and three, a concessional excise duty of 10 per cent for vehicles based on fuel cell or hydrogen cell technology.

Apart from this, batteries imported by electric vehicle manufacturers for the replacement markets too have been given full exemption from basic customs duty.

This was available previously only for factory-fitted batteries. For companies, these duty benefits will help increase localisation and decrease the cost of production where as for the customers, this will translate into reduced prices.

Profitable models

This move encourages all auto-makers to take the plunge; but players such as Tata Motors, Ashok Leyland and Mahindra and Mahindra who already have electric/hybrid products will be the immediate beneficiaries in the listed space. In the commercial vehicles segment, both Tata Motors and Ashok Leyland have introduced hybrid buses. Ashok Leyland, has, last year, acquired a 26 per cent stake in UK-based Optare, which has one of the best designs and technologies for electric buses. Tata Motors is working on an electric version of the Indica for the European markets and the electric and hybrid Nano. Another beneficiary in the passenger car segment will be Mahindra Reva.

Two new models from the Reva stable is expected to hit the markets in 2011. Besides, the micro-hybrid Scorpio will also receive a fillip. In the LCV segment too, both Tata Motors and M&M are working on electric versions of the Ace and the Maxximo respectively.

Urban mass transport

Another positive development in the budget has been the pat for urban mass transportation vehicles. A refund-based concession for taxis up to a seating capacity not exceeding 13 persons (including the driver) has been announced.

This will again benefit Tata Motors, which, with products like the Ace Magic and Winger, has slowly been taking the users of three-wheelers under its fold. M&M too is onto a similar passenger carrier on the Maxximo platform.

Foreseeing a structural shift to four-wheeled passenger carriers, Bajaj Auto, the market leader in the three-wheeler segment is also working on a four wheeled vehicle in its new ‘RE' platform.

Besides, Force Motors, manufacturers of the ‘Traveller' range of vehicles will be a beneficiary. In addition, Force Motors will also benefit out of the outright excise concession to factory-built ambulances, as the ‘Traveller' is widely used as one.

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