Auto Industry to Gain Marginally from the Union Budget
Care Ratings
Background
Economic slowdown, job losses and pay cuts, cautious stance of vehicle financiers, all on the back of the global financial crisis added to the woes of the automobile industry in 2008-09.
With the economy back on track supported by a number of incentives offered through the fiscal stimulus package, namely the cuts in excise rates (more pronounced in the case of small cars to 8 per cent and CVs), accelerated depreciation allowance for CV purchases, Government support under the JNNURM for purchases of buses by the SRTUs thus pushing up bus sales along with the revival in consumer confidence and availability of finance, post July'09, the automobile industry is witnessing revival in demand.
Also, a range of new launches especially in the compact Passenger Car segment has helped to push the sales. The April-December 2009 period has seen domestic automobile sales grow by 22.1 per cent.
Budget Proposals
|
| 1. |
Ad valorem component of excise duty increased by 2 per cent across board. |
|
| 2. |
Hike in excise duty on petrol and diesel by Re.1 per litre.
|
|
| 3. |
Full exemption from excise duty to trailers and semi-trailers used in agriculture. |
| Segment |
Domestic Sales |
Exports |
| FY09 |
Apr-
Dec 08 |
Apr -
Dec 09
|
Growth
(%) |
FY09 |
Apr -
Dec 08
|
Apr -
Dec 09 |
Growth
(%) |
| MHCVs |
184 |
143 |
156 |
9.73 |
17 |
13 |
15 |
9.82 |
| LCVs |
201 |
146 |
196 |
34.65 |
26 |
23 |
16 |
-29.11 |
| Passenger Cars |
1,219 |
865 |
1,071 |
23.79 |
332 |
250 |
328 |
30.80 |
UVs & MPVs |
332 |
240 |
297 |
23.83 |
4 |
4 |
3 |
-17.64 |
Three - Wheelers |
350 |
260 |
322 |
23.67 |
148 |
120 |
118 |
-1.87 |
| Two -
Wheelers
|
7,438 |
5,571 |
6,779 |
21.68 |
1,004 |
793 |
849 |
7.15 |
| Tractors |
304 |
NA |
NA |
- |
39 |
NA |
NA |
- |
| ('in 000 Units) |
Source : Society of Indian Automobile Manufacturers (SIAM) |
Duty Structure
| (%) |
Pre-Budget |
Post Budget |
| BASIC CUSTOMS DUTY |
|
|
CVs (Old and New) and Tractors
Passenger Cars, 2 & 3 wheelers
• Old
• New
Specified Parts of EVs |
10%
100%
60%
10%
|
10%
100%
60%
0% |
| EXCISE DUTY |
|
|
Passenger Cars, UV and MPV
• Small Cars*
• Hybrid Cars
• Othes1
Buses
Chassis of diesel operated CVs
Diesel-operated CVs other than buses and chassis
Petrol-operated CVs other than buses and chassis
Two-Wheelers
Three-Wheelers Tractors
|
8%
10%
20%
8%
8% +
Rs. 10,000
8%
8%
8%
8%
8% |
10%
12%
22%
10%
10% +
Rs. 10,000
10%
10%
10%
10%
10% |
Excise Duty excluding:
2% Education cess and 1% secondary & higher education cess
1% National Calamity Contingent Duty (NCCD); 1/8% Automobile Cess.
1 Additional duty of Rs. 15,000 applicable on cars & UVs with engine capacity exceeding 1500cc
* Of length not exceeding 4 mts [Engine capacity < 1500cc (Diesel) & 1200cc (Petrol)] |
Budget Impact: Industry
Commercial vehicles (CVs) Marginally Negative
Increase in excise duty on CVs is expected to be passed on to the consumers. This along with rise in operating costs (hike in fuel prices due to increase in customs duty and excise duty) is likely to result in a marginal negative impact on CV sales.
Two wheelers - Marginally Positive
Rejigging of personal income tax slabs coupled with continued impetus on rural development is likely to result in higher disposable income for target two-wheeler customers, thereby offsetting the hike in excise duty and fuel price.
Cars – Positive
Passenger Car manufacturers are expected to pass on the excise duty hike to the customers, leading to increase in passenger vehicle prices. However, increase in disposable income on account of changes in income slabs would more than offset the increase in vehicle and fuel prices. Individuals with income levels of Rs. 8 lacs and above (that align to the target income for affording ownership of car) are expected to save more than Rs. 50,000 on income tax.
Farm Equipment - Favourable Impact
Favourable impact for 'OEMs with presence in farm equipment is expected.
Budget Impact: Companies
| Company |
Products |
% of Sales |
Applicable
Proposals |
Overall
Impact |
| Ashok Leyland |
CVs |
90% |
1, 2 |
 |
| Tata Motors |
CVs
Cars
UVs |
65%
20%
8% |
1, 2 |
|
| Maruti Udyog |
Cars and UVs |
93% |
1, 2 |
 |
| M & M Ltd |
UVs and LCVs
Tractors
Three Wheelers |
55%
30%
3% |
1, 2, 3 |
 |
| Hero Honda |
Two Wheelers |
99% |
1, 2 |
|
| Bajaj Auto |
Two Wheelers
Three Wheelers |
74%
21% |
1, 2 |
|
| Legends : Positive - ; Negative - ; Neutral - |
|
| |
|
