Budget 2021

No direct benefits for autoindustry

S Ronendra Singh New Delhi | Updated on February 01, 2020

Increase in custom duties to impact EV pricing

The Indian auto industry, which is already facing harsh times, said the proposals in the Budget have no major benefits for it and some felt there will be an immediate impact on electric vehicles (EVs) because of the higher custom duties announced.

The Budget proposed an increase in customs duties under Phased Manufacturing Programme (PMP) for EVs to promote its ‘Make in India’ initiative. The rate of duty now ranges from 15 per cent to 40 per cent from the earlier range of 10 per cent to 25 per cent.

For instance, completely knocked down (CKD) units of passenger vehicles, three- and two-wheelers, bus and trucks has gone up to 15 per cent (from April 1) from 10 per cent earlier. Similarly, rate of duties on completely built units (CBUs) of bus and trucks has gone up to 40 per cent from 25 per cent earlier. For CBUs of commercial vehicles (other than EVs), the rate has been increased to 40 per cent from 30 per cent.

“We feel that the customs duty hike on EVs assembled in India from 10 per cent to 15 per cent is a bit harsh, as this may impact the nascent category which was beginning to expand of late,” Rajeev Chaba, President & Managing, MG Motor India, said.

Currently, the most hit companies are likely to be MG Motor and Hyundai Motor India as they sell the maximum number of EVs whose crucial parts are imported from outside.

Rajan Wadhera, President, Society of Indian Automobile Manufacturers (SIAM), said that the domestic automobile industry was looking forward to some direct benefits in the Budget, which could have helped in reviving demand in the context of the current slowdown and huge investments made by the industry for transition to BS-VI norms.

“The Budget speech was not what we were expecting...On behalf of the automobile industry, SIAM had made specific recommendations on steps that could revive demand like an incentive based vehicle scrappage scheme; budget allocation for diesel buses procurement by STUs and nil customs duty for lithium ion batteries, doesn’t seem to have been considered,” he said.

Wadhera, however, felt that the increase in customs duty for CKDs and SKDs of electric vehicles and CBUs of commercial vehicles are positive steps for ‘Make in India’.

Ayush Lohia, Chief Executive Officer, Lohia Auto Industries, said that the Budget did not contain major reforms for the EV sector specifically, but the sector was hopeful that the Government would take steps to spur demand.

Auto comp sector

Another positive was the proposal to extend handholding support for technology upgradations, R&D, business strategy with a scheme of ₹1,000 crore for mid-size companies including the auto components sector.

Deepak Jain, President, Automotive Component Manufacturers Association of India, said, “The scheme will help the component sector remain relevant and competitive. This has also been a long-standing request of ACMA.”

Kenichi Ayukawa, Managing Director and Chief Executive Officer, Maruti Suzuki India, said: “This Budget has a new direction. It creates a stage for private sector to invest and grow with ease and speed. All of these will help the auto industry. We also hope the GST Council will look at lower taxation of products like cars which have a multiplier effect on jobs in the economy; the resultant economic growth will more than compensate for the lower tax rates.”

Published on February 01, 2020

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