The auto sector witnessed multiple challenges last year from the after-effects of demonetisation in late 2016, the changeover to BS IV emission norms from April 2017 and the implementation of GST from July 2017.
Sales volumes have however bounced back from these hiccups, with the industry recording an overall volume growth of 11.28 per cent in the April-December 2017 period. Favourable budget moves will keep the momentum going in all major segments.
A scrappage scheme for old vehicles, especially trucks and buses, is among the major expectations for the auto sector.
Listed truck and bus makers such as Tata Motors, Ashok Leyland and Volvo-Eicher could gain from any announcements on this front as it will boost new CV sales further.
- Higher allocations and tax concessions for electric vehicles
- Scrappage schemes for trucks and buses
- Boost to rural India from two-wheeler segment
If the massive thrust to rural India expected in the Budget comes through, two-wheeler manufacturers such as Hero MotoCorp, whose commuter bikes are a big draw in rural areas, will benefit.
TVS and Bajaj Auto may not be far behind too. There is also a demand to stick to only two GST rates and cess for cars instead of the multiple ones now based on parameters such as the size of the car, engine capacity, fuel type, etc. Expectations are running on allocations and concessions for EVs.
The government plans to have a 100 per cent electric vehicle (EV) fleet in public transport and 40 per cent electric mobility in private transport by 2030.
But so far, allocations for the FAME scheme (Faster Adoption and Manufacturing of ( Hybrid &) Electric Vehicles ) under the National Electric Mobility Mission Plan 2013, has been meagre at about ₹75-175 crore each year.
This is expected to go up steeply, considering the need to set up an ecosystem for mass use of EVs such as providing incentives to manufacturers and setting up charging stations.
While EVs now enjoy a concessional GST rate of 12 per cent, there are demands to further reduce it to 5 per cent.
Also, reduction in basic customs duty for import of critical components such as electric motors, lithium ion batteries is being sought. These components are now levied a basic customs duty of 7.5-10 per cent.
Many listed players will benefit from doles for EVs, if any. M&M already manufactures the Reva ( through a group company) and an electric version of the Verito.
Tata Motors has rolled out the electric version of the Tigor for supplies initially to the Government of India.
Maruti Suzuki will launch its EV in 2020. Two-wheeler and truck and bus manufacturers are also investing heavily in EV technology, given the Government’s 2030 target.