Union Budget 2019: The Expectations Of Auto Sector

The Newly elected Government is now all set to present the union budget for their second term. The Automotive Sector dealing with an overall slowdown in sales, coming in terms with BSVI norms and quicker adoption of Electrification. Here at BW Autoworld, We look into the demands and expectations of the Auto Sector from Union Budget 2019 

GST Reduction: GST just completed its second anniversary on 1st July. The current GST slab rate for Automobiles are 28 percent and the primary expectation of the automotive industry is to reduce the slab rate to 18 percent. The reduction in slab rate will be resulting in motivation for end-user as well.  

Mr. Rajeev Kapur, Managing Director, Steelbird Helmets said, "If a company has over 1000 employees recruited then they should get 20% rebate in GST and income tax. Likewise above 2000 there should be a rebate of 40%, for over 3000 it should be 60%, above 4000 it should be kept 80% and for above 5000 the rebate should be 100 %. This will help uplift all the rural areas and help them come at par with the metropolitan cities"

Shubh Bansal, Co-Founder, Truebil said, "we expect the Government to add on some efforts to turn the industry’s performance by reducing the GST on all vehicles to 18% from the current rate of 28%. This will reduce vehicle prices and help in spurring demand."

Federation of Automobile Dealers Associations (FADA) Recommends- Regulation of GST Rates to 18% to Boost Volumes in Automobile Sale.

Vinnie Mehta, Director General, ACMA said, “The auto component industry, being an intermediary, has recommended for a uniform GST rate of 18 percent on all auto components. The industry has significant aftermarket operations, which is plagued by grey operations and counterfeits due to the high 28 percent GST rate. A moderate rate of 18 percent will not only address this challenge but will also enhance the tax base through better compliance”. 

Smart Planning for NBFC- One of the key issues for the auto sector is the condition of NBFCs. There are lots of expectation from the government to revive the NBFCs. One of the main concern is that NBFCs are not able to raise funds at low cost and this needs to be addressed in this upcoming budget to revive the Auto Sector.

FADA believes that Ease of Liquidity in NBFC’s is one of the major Auto sector issues right now.

Vehicle Scrappage Policy- 

FADA President, Mr Ashish Harsharaj Kale said, "The Other main request to Revive Growth in the Auto Sector is to announce an Attractive Incentive Policy to encourage Scrappage of Older Vehicles which today are the main contributors to vehicular Pollution and Road Safety Concerns. A successful Implementation of the Voluntary Policy will further Pave the Way for a Mandatory Scrappage Policy in the Future.”

Shri Harish Sheth said  “As the MHCV & farm industry has witnessed hard time recently – For MHCV it would be in the best interest for the government to pull forward the implementation of the vehicle scrappage policy over 10 years in age. This will immediately spur growth and improve logistic efficiencies due to advanced technology"

Electric vehicle and Implementation-  Recent NITI Aayog report stated that FAME II and other measures in public and private space - are successful, India could realize EV sales penetration of 30 percent of private cars, 70 percent of commercial cars, 40 percent of buses and 80 percent of two and three-wheelers by 2030. 

It is a big challenge for India to step-up in the electric-based vehicle system within a given period of time. Here are what the auto industry think about it and what it expects from this budget:

Mr. N Naga Satyam Executive Director Olectra Greentech said "We strongly believe that the EV (Electric Vehicles) adoption in our country certainly needs support from the government. Though the long-term benefits of EVs are multi-fold still the relatively higher cost of acquisition of an EV is a bottleneck in its adoption. We expect the government to include Electric Vehicles in the Priority lending sector so that prospective buyers can be encouraged to move towards this environment-friendly transport option. The financial assistance will help in compensating the cost difference of the EVs making it more attractive for the buyers. "

Tarun Mehta, CEO, Co-Founder, Ather Energy "For end consumers, the FAME 2 incentive distribution to individuals is limited to only one vehicle per category but in a country where most households own multiple two-wheelers, this will limit adoption especially if all two-wheelers are to go electric by 2025".

Mr Sohinder Gill, Director General, Society of Manufacturers of Electric Vehicles (SMEV) said "A dedicated budget could be allocated for the ‘Clean Air’ campaign, which could be integrated under the Swachh Bharat mission. The “Clean Air Campaign” can create massive awareness on Electric mobility and can influence the mindset of customers to adopt electric mobility to make India less polluting and its citizens healthier" 

Mr. Rahul Sharma, Founder and Chief Revolutionary Officer, Revolt Intellicorp Pvt. Ltd. “The wave is not far away when consumers will adopt to EVs, and the government’s commitment towards electric vehicles is a positive sign for the auto industry. As a new entrant to the market, we need the government to review the current taxation framework and simplify the inverted GST structure as the input on raw material is at 18% wherein the output is at 12%. This will lead to significant working capital blockage. The proposed reduction of the GST on EVs to 5% will be beneficial if implemented. We expect the government to assess and reduce import duties on lithium-ion cells to further improve the industry’s cost issues at least in a phased manner for the next 5 years till we are self-reliant in building the critical components of an EV here in India."