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| The budget 2018 hold certain key themes for the Automotive industry. As expected there is significant push for rejuvenating the rural economy and improving economic development through better infrastructure connectivity. The Government has also provided a clear signal to encourage ‘Make in India’ by increasing customs duty rates on CKD and certain component imports. Impact on Automotive Demand 1. Rural and agriculture sector push- positive for Tractors, Utility vehicles and 2 wheelers 2. Increased investment in infrastructure to improve rural connectivity – positive impact on Commercial vehicles 3. Support for MSME 4. Personal income tax benefit is marginal 5. Long term capital gains on equity and dividend distribution tax on Mutual fund Impact on Automotive OEM and supplier industry 1. FM highlighted the importance for the industry to leverage digital. A center of excellence focusing on digital manufacturing, Robotics, Artificial intelligence, Big data analytics will be setup under NITI Aayog. 2. Auto component industry increase in import duty to 15% for select categories of automotive components. This is a clear signal that the Government supports the Make in India program for the automotive industry and also promotes deeper localization efforts of various vehicle programs. 3. Fully knocked down CKD imports increased from 10% to 15%. This measure will also encourage more local sourcing of components across vehicle segments 4. Motor vehicles carrying more than 10 people and Motor vehicles used for transport of goods which are imported in Completely Built Unit ('CBU') which earlier attracted a basic customs duty of 20% would now attract 25% basic customs duty. There were several industry expectations on supporting R&D, electric vehicles, and safety which did not find mention in the budget. Measures to streamline GST rates and compliance process especially for MSME were not announced as part of the budget. Overall we see this budget as focusing on the basic building blocks of the economy – Rural Agriculture, Infrastructure and MSMEs. These will translate into demand boosters for the Indian Automotive sector in the medium term. The push for localization will have a positive impact on Automotive component and supplier industry. |
| "The increase in the basic customs duty of auto parts, accessories and CKD components varying from 5% to 10%, clubbed with the new Social Welfare Surcharge at 10%, at a time when the auto industry is reviving, is unfortunate, and comes as a surprise. We believe it is going to impact the auto industry, the consumers and is also against the spirit of ‘Make in India’. The auto industry ended 2017 on a positive note, where it grew despite multiple policy disruptions in the previous year; but the customs duty hike is likely to reverse the growth trend. The automobile industry is already subjected to one of the highest rate of taxes under the GST regime, and with the successful GST implementation and the Government’s GST rate rationalization step in the recent times, the auto industry was expecting the Government to formulate policies and take decisions that would create demand, create additional jobs and help the industry to grow. As the overall costs due to various duty increase is imminent, we are left with no option but to pass on the resulting increase in price to the customers. We want to sustain and continue with our development of innovations and technologies, in introducing world-class products with unmatched safety standards, and also in our people and resources”. Mr. Folger further added, “The increase in basic customs duty hike will highly restrict the growth of the luxury car industry and this will only result in the loss of additional revenue, which would have increased significantly with increase in volume. The auto industry which contributes 7.2% of the GDP is likely to be affected and further job creation might be impacted with this decision. Further, since the customers will be burdened with higher maintenance costs, it is likely that this duty hike may delay their routine servicing, thereby affecting safety and environment at large. |
| The most distinct features of the last full budget by this government are a heavy focus on infrastructure and rural economy. An outlay of over 5 lakh crore for roads, over Rs 2 lakh crore for Smart cities and Rs 2000 crore for improving agricultural markets are positive moves. Reviving a slowing rural economy will by impact help improve rural demand. From the perspective of the bicycle sector, this is a positive move as rural sector comprises a significant market for it. On the other hand, improving infrastructure will have a multiplier effect on the economy and will serve as major thrust to the automobile sector specially commercial vehicles. The allocation of Rs 16,000 crore for electrification of rural areas would have a positive impact in creation of the electric vehicular ecosystem in the long term. Domestic manufacturing and “Make in India” trigger job creation. The special scheme to resolve the challenge of air pollution in the National Capital Region is appreciable and is in accordance to our objective of promoting clean mobility. The government through its previous annual budgets and through its monetary and financial policies has shown great resolve in undertaking several corrective measures and reforms for strengthening the economy. This year’s budget has further consolidated on these efforts and is indicative of futuristic plans of the government to encourage progressive economic growth within the country. |
| "The Union Budget presented today is a balanced Budget with a focus on the Agri Sector, Rural Development, Healthcare and a continued thrust on Infrastructure creation. All of these will provide significant impetus to the revival of growth and creation of employment. The Budget also addresses the opportunities to modernise and create new infrastructure in Affordable Housing, Railways, Airports which continues the effort of the last few years. These will present favourable opportunities for growth to the Indian Construction Equipment Industry. Incentivisation to the MSME sector, which forms the backbone of industrialisation of a Nation, as also job creation is another welcome step.” |
| As the EV Policy is not a part of the budget, we were not expecting any major announcement related to electric vehicles in today’s budget. However, we are happy to note that there are general announcements made today, which will support the cause. For example air pollution, higher excise duty for indigenization, increase in agriculture infrastructure spends as well as other announcements alike, which will directly and indirectly support the automobiles, especially two wheelers, hence giving a further boost to EVs. We all know that the new EV policy is in the advance phase of formulation and it will be a separate policy which will come after a few months. It is expected that the policy will be stable in the long term, which will shape up the future of the electric vehicles. The only thing we were expecting from the budget was rationalization of GST rate i.e. currently 12% for EVs and 28% for EV batteries. Also, we had requested that GST should be made at least either 0 or 5% for initial years. But we didn’t find any mention of the same. Perhaps it will be covered in the policy, later. Overall we are happy with the outcome of the budget. |
| For the luxury auto sector, the Union Budget 2018-19 is disappointing and is against the spirit of partnership. As manufacturers, we have a core social responsibility towards our workforce and the dealer network. Increase in custom duty and introduction of Social Welfare Surcharge in lieu of an Education Cess (which is higher than the erstwhile Cess), is going to definitely affect the prices again, which will further confuse the customer. The market sentiment had only recently become stable after the introduction of GST Cess. The budget clearly lacks a focus towards the luxury auto industry, which otherwise would have given us a better clarity to plan our strategy for the India market for short and long term. While as luxury car manufacturers, we are undertaking several initiatives in terms of investment to make the dream of owning a luxury vehicle more realistic for all, we also expect the government to support this industry. The budget definitely needed an inclusive view for the luxury automobile industry which would have helped the industry to rebound and create more jobs. There is no doubt that increase in auto sales would definitely help the Government in garnering more taxes because of volumes. Lack of concrete measures for government's ambitious E-mobility project is surprising. However, investments in infrastructure and rural electrification are a welcome move as it will have a long term positive impact for automobile sector. |
| The Budget unveiled by Hon’ble Finance Minister is indeed inclusive and pro-manufacturing. The component sector is delighted that the duty on select items such as engine & transmission parts, brakes and parts thereof, suspension and parts thereof, gear boxes and parts thereof, airbags etc. have been enhanced from 7.5/10% to 15%. These items account for more than 50% of USD 43.5 billion domestic component industry’s turnover and over 30% of its USD 11 billion exports. The industry is extremely competitive in these areas and this measure will not only encourage investments but also encourage technology development in these areas. Further, reduction in corporate tax to 25% for SMEs with turnover of up to Rs. 250 crore is yet another welcome step as over 80% of the companies engaged in the auto component manufacturing are SMEs. This measure, as also enhanced budgetary allocation of Rs 3,794 crore for credit support, capital and interest subsidy will have a benign impact on the smaller enterprises. That apart, simplification of procedure for credit availability through online-system for SMEs is a very welcome step. The thrust given to the development of rural economy, infrastructure, particularly roads, augurs well towards creating a vibrant automotive market in the country, which in turn, will fuel growth and development of the domestic auto component industry. |
| From an automotive sector perspective, much was expected from the Budget. However, the Budget provided only a few positives on the direct tax side such as reduction in corporate tax rate to 25 percent for companies having turnover up to Rs 250 crore, rationalisation of the tax incentive for hiring new workers. On the indirect tax side, with a view to promoting the Make in India program the customs duty rates have been increased on automobile parts, CBU and SKDs. However, there has been no extension of direct tax benefits for R&D which was much needed keeping in perspective the upgradation to BS VI emission standards. |
| To further foster the national initiative of Make in India by automobile players as well, basic customs duty rate for import of various parts (including engines) by automobile manufacturers have been increased. With doubling of the BCD rate for engines from a current levy of 7.5% to 15%, manufacturing cost of automobiles with imported engines is expected to see a steep rise. The costs further being stressed with increase in BCD rates for various parts & accessories as well as seats. While these would typically impact auto manufacturers in India who import parts of the vehicle, similar impact is expected to be sensed by those importing motor vehicles in CKD forms as well. |
| Budget 2018-19 as anticipated has put major thrust on the agro-rural economy. The allocation of nearly Rs. 15.7 lac crore to this sector, which is almost 10% of the GDP, is many time higher than in the previous year. Various measures to put in place a mechanism to boost farmers’ income, higher credit for agri sector, creating clusters for horticulture crops and supporting food processing, will give tremendous boost to agro rural economy. This in turn will improve their buying power and will encourage consumption. Health protection programme envisaging medical care and hospitalization for 10 crore poor families is indeed a bold step forward in ensuring healthcare for all. Credit support and lowering of tax rates for the MSME sector will boost the sector that plays an important role in the economy. Renewed emphasis on infrastructure development, in particular large outlays in railways, will keep the economy ticking. The corporate sector was hoping that the Finance Minister will live up to his promise of reducing corporate tax from 30%. On the other hand, surcharges have been increased, thereby making effective rates even higher than before. |
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Originally Posted by coron
(Post 4349078)
as they will have some parts getting imported and then assembled here in India |
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Originally Posted by SoumenD
(Post 4349034)
Healthcare(insurance worth 5L) for close to 500 million people is probably the biggest health care initiative ever. Implementation remains to be seen but it's probably the single most 'Wow' point of the budget. :thumbs up |
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Originally Posted by coron
(Post 4349078)
Also mentioned here are price hikes on imported electronic devices, which if you think about is pretty much any foreign brand, as they will have some parts getting imported and then assembled here in India... |
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Originally Posted by mjumrani
(Post 4261031)
After I got the tax invoice, I was shocked to see the amount of tax (GST) on the car, below is what I was able to figure out, Landing cost of the car according to Zauba (September 2016 information) is: 15,59,394/- Import duty: 33,21,509/- (213% according to Zuaba HSN code 87033291) Ex-Manufacturer: 55,24,475/- (Volvo India adds about 6.43L) GST: 28% on ex-manufacturer: 15,46,853.14/- Cess: 15% on ex-manufacturer: 8,28,672/- Ex-Showroom: 79,00,000/- Road Tax (19.98%) + registration charges: 15,80,659/- Total: 94.8L Out of 94.8L that I paid to the dealer, the government took 72.7L as taxes and only 22.02L reached Volvo. |
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Originally Posted by GTO
(Post 4349152)
I support the increase in custom duties as I'm a firm believer in the "if you want to sell it here, build it here" philosophy. Car manufacturers source from their regional / global part hubs or sister companies, even though there are ample volumes to justify local production. E.g. in a car like the Creta which sells up to a massive 10,000 units / month, what is the need to have even a single imported part? |
| On the other hand, I'm disappointed that the Budget didn't even mention electric vehicles (or hybrids), despite the government's own "all electric by 2030" ridiculous claims. |
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Originally Posted by SoumenD
(Post 4349034)
Healthcare(insurance worth 5L) for close to 500 million people is probably the biggest health care initiative ever. Implementation remains to be seen but it's probably the single most 'Wow' point of the budget. :thumbs up Automobiles however are set to get dearer with tax on imports and CKDs/CBUs increased:Frustrati |
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Originally Posted by mayuresh
(Post 4349358)
Tax evasion due to cash based parallel economy is elephant in the room the Govt is not seen showing any resolve to address. Increasing tax net is need of the hour. Besides stricter enforcement of law, incentivizing non cash transactions and dis-incentivizing cash is absolutely necessary. On the contrary there present systems incentivize cash as most means of cashless transactions are charged. |
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