2015 Union Budget | What It Has For Indian Automobile Industry

The Indian Automobile industry includes two-wheelers, trucks, cars, buses and three-wheelers which play a crucial role in growth of the Indian economy. The Economic progress of this industry is indicated by the amount of goods and services produced which give the capacity for transportation and boost the sale of vehicles. There is a huge increase in automobile production with a catalyst effect by indirectly increasing the demand for a number of raw materials like steel, rubber, plastics, glass, paint, electronics and services.

Automobile industry accounts for almost 7% of our country's GDP and employs about 19 million people both directly and indirectly and 1 is one of the fast growing sector in India.

Top & Major Manufacturers in Automobile Industry

Maruti Suzuki
Hero Moto Corp
Hyundai Motor India Ltd.
Tata Motors
Honda Cars India
Toyota India
Ford India Ltd
Eicher Motors
Bajaj Auto
TVS Motors

Provisions For Automobile Industry in the budget

Finance minister presented our first full time budget after an interim budget in the previous year. With the increased growth in demand on back of rising income, expanding middle class and young population base, in addition to a large pool of skilled manpower and growing technology, it will propel India to be among the world's top five auto-producers by 2020.

In the Union Budget the following factors have an eminent effect in the Automobile industry:

Customs Duty

In order to push local manufacturers, finance minister Arun Jaitley increased effective tariff rate on imported commercial vehicles,thereby making the import of completely built units expensive."Tariff rate on commercial vehicles is increased from 10 per cent to 40 per cent and effective rate from 10 per cent to 20 per cent".

Excise Duty

The FM also moved ahead to rationalise duties by subsuming the education cess, which saw the basic excise rate on smaller vehicles like compact cars and entry sedans ,go up from 12.36% to 12.5%. The burden due to this would be marginal, ranging from a few hundred rupees and going up to the range of Rs 1,000.

Implementation of GST (Goods and Services Tax)

Implementation of GST from April 1, 2016 is one of the Auto Industry’s top demands in the pre-budget coverage. Direct taxation will simplify vehicle pricing and will see standardization of prices across the country. The Finance Minister has called for transformative measures on this front. Also this will persuade more exports through increased competitiveness in the International market. The auto industry is keenly looking forward Onto the roadmap and Introduction of GST.

Green initiatives to manufacturing of electric and hybrid cars

An Investment of Rs 75 crore has been proposed under Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme for FY'16 to benefit the Electric Vehicles. For the industry to realize sizeable growth in sales of electric vehicles or better infrastructure like charging stations, the investment allotted does not seem to be of much impact. It will however benefit the growth of small bicycle and electric two wheeler makers to increase electric mobility inside closed campuses.

The government has an ambitious target of putting 5 million electric and hybrid vehicles per year on the road by 2020 under the National Electric Mobility Mission Plan (NEMMP).

Corporate Tax

Corporate Taxation cut will be implemented from next year. Corporate tax trimmed to 25% from 30% for next year. It is a good news as the companies will have more money to invest. However, only worry is that, it is still not clear as what would be the amount of cut ,as a five year time line has not been given.

Infrastructure

Road infrastructure gets a boost with a proposal Rs 79,000 crore investment in infrastructure covering one lakh kilometers to connect smaller regions of the country. Car sales in smaller towns should improve as a result but this will depend on speedy execution of road construction projects.

Misses

Only Rs 75 crore is allocated for electric vehicle manufacturing that is seen as a disappointment as the industry was expecting much more in this direction.
There was no announcement for the automotive sector in specific. No revision announced in the Excise Duty slabs.
Nothing was offered to give boost to R&D in the automotive sector.
Increase in service tax cess on the petroleum products will also hurt the industry.
No announcement to correct the inverted tax structure. Some of the raw material attracts more duty than the finished goods such as rubber, ally etc. This puts Indian manufacturer in a less comfortable situation.

Finance Minister Arun Jaitley states clearly that a boost to the "Make in India "campaign will see a growth in manufacturing and exports soon from the stagnating levels and this will definitely help the Automobile sector to expand more.