Though there were no direct benefits for the automobile sector, the income-tax relief measures announced in the interim Budget are expected to lift the subdued sentiments in the entry-level car and two-wheeler segments, while the stronger rural and agrarian focus would spur demand for tractors and light commercial vehicles.

Tax breaks will result in higher disposable income among the middle class that should translate into higher spending. “Tax exemption for income up to ₹5 lakh per annum for individual tax payers is a historical step, which will provide more disposable income at hand for the working class. The decision will have an impact. We expect more buyers of two-wheeler vehicles and in turn, help the industry’s growth,” said Venu Srinivasan, Chairman, TVS Motor Company.

A couple of days ago, Hero MotoCorp management indicated in its Q3 conference call that rural demand for two-wheelers was slightly muted due to low sentiment and subdued rabi season sowing. Also, scooterisation trend had slowed down on the back of a rise in fuel costs impacting the sales of scooters, which are lesser fuel-efficient compared to bikes.

Hence, this Budget’s focus on the rural economy, marginal farmers and low-income segments come at a right time as it could fuel the rural demand.

“Two-wheeler industry in rural sector will also be positively impacted as ₹6,000 per year cash support to about 12 crore small and marginal farmers under Pradhan Mantri Kisan Samman Nidhi scheme,” said Srinivasan.

Vehicle segments, particularly the car and scooter segments, have been reporting sluggish sales in December 2018 quarter. Even January sales of some of the companies that were announced on Friday were not encouraging.

“The automobile industry, across segments, has faced demand headwinds over the last 2-3 months. The boost from the interim Budget to rural and middle-income people will be demand positive and the impact on consumer sentiment would be especially relevant for entry level two-wheelers, passenger vehicles and the traction should be felt in the near term,” said Subrata Ray, Senior Group Vice-President, ICRA.

Kavan Mukhtyar, Partner & Leader - Automotive, PwC India, also agreed that income-tax relief will translate into positive demand momentum for two-wheelers and small cars in Q1 of next fiscal.

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