Budget 2016: India's Automobile Industry Captain's Take On It

The Indian automobile industry goes through a metamorphosis every year during the budget season and this year has not been different. The industry captains look forward to what the budget is in store for the automobile industry.

The budget will have 1 percent increase in all the cars and an additional 2.5 percent tax on diesel cars irrespective of the displacement of the vehicles.

Dr. Pawan Goenka, Executive Director, M&M Ltd, said "On the face of it, imposing upto 4% Cess for Passenger vehicles is a concern for auto industry. However, one has to take it in stride, in view of all the priorities that we have for our economy and we in the industry have to manage it. Would have been good if some of the additional revenue from this cess was used to phase out older vehicles."

The budget has focussed on investment friendly steps and this could lead to better investment from the automobile industry. Sumit Sawhney, Country CEO & Managing Director, Renault India Operations, says, "To conclude, Budget 2016 rightly focusses on the core issues which needed attention. It will go a long way in putting India back on the global business radar by making it more investment-friendly, enhancing the ease to do business, lowering subsidies and optimising its allocation. The automobile industry features in the 'Make in India' program, and has been identified as one of the 25 thrust sectors outlined for growth. Together with its role in making India a manufacturing powerhouse, the common hope across the automobile industry was that the Government includes some industry-friendly policy decisions which will build confidence. In a nutshell, the Modi led government has triggered the right chords, keeping its promise of 'Sabka Saath, Sabka Vikas'."

Nissan India Operations President, Guillaume Sicard, said, "We also welcome Government's decision to amend the Motor Vehicle Act in passenger vehicle segment to allow innovation. This, coupled with a focus on infrastructure will help improve the overall public transport in the country. There is not much for Auto industry in this budget. Infrastructure cess increase up to 4% on passenger vehicles will definitely have an impact on the prices. We do not foresee that to be a major burden for small car buyers but the luxury cars and SUVs will feel the heat. We are still trying to understand the modalities of collection of TDS of 1% on more than 10 lakh priced cars. Further, curbing incentives on in-house R&D spends from 200% to 150% is not very positive. There is no presentation on roadmap for GST implementation, additional Incentives for Electric Vehicles and Hybrids under FAME Scheme and the plan for Vehicle Scrappage scheme which is damper."

The Rs. 1 lakh crore allocation for the roads and highways was a welcome aspect as well. Mr. Yadvinder Singh Guleria, Senior Vice President - Sales & Marketing, Honda Motorcycle & Scooter India Pvt. Ltd., says, "The INR 1 lac crore allocation on road and highways will accelerate connectivity and mobility across all geographies led by rural areas, which is very positive news for the overall auto industry. Overall, we expect such measures once implemented, will revive the stagnant demand of 2Wheelers in the rural market."

Automobile industry authority, SIAM (Society of Indian Automobile Manufacturers), President, Mr. Vinod Dasari said, budget towards the automobile industry it has been mixed bag, however, he was happy that the allocation of Rs. 200 crore to the FAME scheme and NATRiP. Moreover, the validity period of exemption granted to specified goods for the use in the manufacture of electrically operated vehicles and hybrid vehicles is being extended without time limit. This will help improve the consumer sentiment around these vehicles and promote faster adoption.

However, SIAM was expecting more on the fleet modernisation announcement, which had no mention on the budget, which was a disappointing factor.

The auto sector will be looking to pass on the additional burden of the increase in taxes to the customer and this could be a dampener for customers looking to purchase of a vehicle in the next fiscal.