on 24, Mar 2015

Four days before The Indian Union Budget we bring to you what changes are the OEMs expecting in the 2015 Union Budget. The Indian Auto Industry hasn’t seen tremendous growth in the last couple of years given the potential of it has achieve phenomenal numbers year-on-year. Let’s see what manufacturers demand.

Excise duty cuts

The government had announced the 4-6% cut in excise duty as an interim measure to help stir up demand against continuous low sales. The industry has seen a feeble recovery since the start of the fiscal year in April, though it was limited to just some top players. Since the excise duty cuts weren’t extended beyond December 2014, auto manufacturers had to hike prices and the consumers eventually borne the brunt. For the 2015 Union Budget, the auto industry is hoping that excise duty cuts will be implemented, helping manufacturers slash prices, subsequently giving a boost to the industry.

Incentives for replacement

Car Allowance Rebate System (CARS) as the US calls it. Around 80% of India’s pollution is caused by vehicles that are more than 10 years old. India introduced the first emission norms only in the year 2000. Vehicles older than that do not conform to the norms. Incentives need to be given for the replacement of vehicles registered before the year 2000. This could not only help control pollution, but also boost car demand.

Lower interest rates

Over 80% of the vehicles purchased in India are purchased with financing from banks and other institutes, according to a Business World report. A reduction in the bank rates will reduce vehicle loan costs. This could encourage customers to purchase two- and four-wheelers, thus improving demand for the sector.

Government Incentives for green cars

The Eco-friendly variant of the four-wheelers, electric cars, are something people wish to buy. But then its still a ‘wish’. The downside is the lack of infrastructure for charging these cars. This needs the setup of such charging locations across the country, much like having petrol pumps. The auto sector needs the government to help setup the charging infrastructure across cities. Moreover, the government can also announce special tax incentives to promote Eco-friendly vehicles. These measures could not only boost demand for the cars, but also help tackle the issue of pollution in cities.

Customs duty on imported vehicles

Fully imported cars attract a customs duty of 125%. The industry hopes that the budget will retain the customs duty at the current rate. A high customs duty increases the cost of imported cars. This allows home-grown Indian brands to remain competitive.

Increase tax on imported tyres

Tyre import from China has been on rise, affecting the home-grown tire manufacturers who would demand an import duty on tyres be raised for the upcoming budget. The Automotive Tyre Manufacturers’ Association said that they are at a disadvantage as tyres can be imported at a rate of 5 per cent or even nil rate of duty under various trade agreements, while the same for natural rubber is at 20 per cent.

Image credits: BCCL, IndiaTransportPortal

Sources: Yahoo Finance, Business Standards, SIAM, Economic Times.


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