Budget 2013: The Auto Industry Speaks Up

With a hike on import duty for high end cars and motorcycles above 800cc, plus a 3 per cent increase in excise duty for SUVs, the 2013 Budget (See: Budget 2013 Report) has not provided the required impetus to the auto industry. The industry had some major expectations from the budget however they have been let down and some segments have to face more fire than others. We have compiled a list of quotes from the industry to let you get a first hand idea of just what each company thinks of the budget.

INDUSTRY REACTIONS 

Joginder Singh, President and Managing Director, Ford India 

“We welcome the focus on infrastructure development, social benefits for inclusive and sustainable growth in the country. The investment allowance to boost the manufacturing sector is a positive move. The automobile industry is a significant contributor to India’s economy and future growth potential. We are disappointed that there is very little in the budget that will help boost consumer confidence and revive growth. It is a missed opportunity to introduce measures that would have revived industrial growth significantly. As we all know the automotive industry has been going through very challenging times, we are disappointed with the increase in the excise duty for SUVs.”

Takayuki Ishida, MD & CEO, Nissan Motor India

“There is no significant or drastic change in the budget this year.  The 2013 budget is a “budget in motion” as it continues to focus on growth in predominantly primary sectors like agriculture, infrastructure and education. This growth will in turn support the growth in other sectors including the automobile industry.

We are very happy about the investment allowance of 15% for investments above Rs 100 Cr as a tax incentive.  We stand to benefit from this as we have plans to expand our operations in India.

We are also happy about the Chennai - Bengaluru Industrial Corridor to be developed jointly by the Department of Industrial Policy and Promotion (DIPP) and the Japan International Cooperation Agency (JICA). This industrial corridor will play an important role in terms of logistics infrastructure for companies like ours which are present in the said region.

The excise hike for SUV will not have a drastic impact; it is most likely to distinguish the price barometer between sedans and SUVs even more clearly than ever before.”

Mr. Michael Perschke, Head, Audi India

“Increase in Custom Duty for imported cars and Excise Duty on SUVs is very surprising. It will severely impact the auto industry and its growth. We will have to seriously evaluate the impact of this hike on our prices and, have no choice other than to pass on the increase to the customer. Overall it will have an adverse impact on automobile industry which is already going through a slowdown and specifically affect demand including that of SUVs.

Currently, the industry is facing pressure from a number of factors like increasing fuel prices, high input costs, persistent inflation, high interest rates; the increase in excise and customs duty will be a dampener. The government should have looked at extending support to auto industry, which has been contributing, significantly to the GDP and could have formed a strategic pillar of industrial development.

We are happy to note that there is a renewed focus on infrastructure especially roads. The proposed regulatory authority on road construction will hopefully fuel better infrastructure and speed up developments.”  

Ashish Chordia, Chairman, Shreyans

"The increase in import duties on CBU's and bikes over 800cc is indeed going to affect the growth of the automobile industry. A move which provided impetus to the industry, already under pressure, was needed. While aspirational products like Ferrari and Ducati may not have an immediate effect on demand, it may slow down the long range plan for India."

Lowell Paddock, President and Managing Director, General Motors, India

”The budget is encouraging due to its focus on agriculture, irrigation, education, skill development, health care and infrastructure. Since it addresses some of the concerns of the industry in general, it should help economic growth going forward.

As far as the automotive industry is concerned, the budget did not meet the expectations. We were expecting the roll back of the excise duty imposed last year. Instead there is an increase of 3 per cent excise duty on SUVs and there is also a hike in customs duty of 25% on high end imported vehicles. These hikes are not on the expected lines and will impact the sale of SUVs. Having said this, we have to see the fine print to understand the clear definition of SUVs. The automotive industry is one of the growth drivers of the economy with its backward and forward linkages to generate multiple and substantial employment opportunities any duty concessions would have helped the industry to register some growth as the industry has already started slowing down due to high interest rates, fuel prices, commodity prices, negative market sentiments etc. Some concessions announced for electric vehicles and increased allocation for the road transport sector are welcome decisions. ”

Uttam Bose, Managing Director, Hindustan Motors Ltd 

“The auto industry has been the worst affected by the ongoing economic slowdown. The current fiscal has registered virtually no growth in the car segment. No wonder, hike in excise duty on SUVs from 27 % to 30 % has come as an unexpected blow. The last budget too had witnessed excise on SUVs going up from 22 % to 27 %. The auto industry was expecting reduction in excise across all vehicle segments to combat the current crisis. The 10-year Auto Mission Plan has also been talking of a favourable excise regime for the industry. Notably, cut in excise duty from 12 % to 8 % had helped the auto industry in somehow bearing the brunt of the 2009 downturn. Nothing of the kind has happened this time. Thankfully, the excise hike is limited to SUVs.

The finance minister has, however, given hope to the auto industry by allocating Rs. 14,873 crore to Jawaharlal Nehru National Urban Renewal Mission (JNNURM) which will lead to growth in public transport. Companies in the commercial passenger vehicle segment should benefit. The move is also in line with the socio-economic reality of the country. One hopes that the finance minister will offer some incentives specially for smaller automobiles, which form the bulk of total auto sales, before the budget is eventually passed. The auto industry is amongst the biggest employers and tax payers. It cannot be allowed to languish for long.”      

Anders Grundströmer, MD, Scania Commercial 

“I feel that this is a good macro economy focused budget. I expect that stability will be further improved especially with the incentives that will bring in additional investments and provide a fillip to the manufacturing sector.

It is good to note that the duty on commercial vehicles has remained constant, and this we hope will promote the sales of commercial vehicles in the country. What will provide further impetus is duty concessions and extension of special duty rebates for electric, hybrid and all vehicles, giving room for alternate and green fuel. This will act as a catalyst for moving towards alternate fuels in the commercial vehicles segment as well.  

We also see immense scope for India’s transportation sector through the newly announced JNNURM project for buses and the various corridors that will provide greater connectivity hence furthering the need for good transportation systems in the country.”

Anirudha Bhuwalka, MD & CEO AMW Motors Ltd 

“We welcome the Budget as it is growth oriented. The measure taken by the honorable Finance Minister will help in revival of the HCV industry. Investment in schemes like JNNURM, Tax free Infra Bonds, Constitution of road authority, Increase and revival of road networks, increase in the tax holiday fro power plants and policies to encourage PPP along with Coal India are all the measures taken in the right direction both long and short term besides having a multiplier effects.”

Rajeev Kapur, Managing Director, Steelbird Hi- Tech India Ltd.

"It’s a very Normal budget and Industry is neither gone to gain or suffer. As Steelbird Group, We fall in the category of above 1 Crore income and we will lose lakhs of Rupees".

Vineet Agarwal, Joint Managing Director, TCI

“The Union Budget 2013-14 has not triggered much of an excitement for the logistics sector. Though the commitment of the Minister to ensure fiscal prudence of the economy is positive for the economy the demands of logistics sector has been met partially.

The budget is silent on the long pending demand of the logistics sector for the industry status for easier access to finance, robust regulatory mechanisms and a better image. Also, no move on the separate regulatory authority for the sector to ensure better coordination between ministries for an integrated policy on the sector is a disappointment.

There has been no change in peak custom and excise rates, which will further delay the industry recuperation that has been a victim of lack of critical sops in previous budgets. We are hopeful that the Finance Minister will stick to his promise to present the draft bill on GST in the parliament in next few months to enable the creation of the common market to permit free and unimpeded movement of goods and services across the country.”

 S. Sandilya, President, SIAM 

“Under the current economic environment, the Finance Minister has tried to balance the need for growth with fiscal compulsions. The announcement of investment allowance reintroduction is very positive. Focus on infrastructure is also a welcome move which will help growth of the economy.

While there are several innovative proposals, the auto industry had expected that the Finance Minister would come out with more specific roadmap for implementation of Goods & Services Tax (GST). The industry would be keenly looking forward to full implementation of GST at the earliest.

SIAM appreciates the Finance Minister’s gesture of allocating double the funds under JNNURM scheme enabling substantial part for purchase of upto 10 thousand buses. This was very much needed for revival of CV sector. Finance Minister has also accepted SIAM recommendation to lower excise duty on commercial vehicle chassis from 14% to 13% which was raised in the last budget and led to significant drop in off-take of chassis by the body builders.

With a view to deteriorating market sentiments, SIAM had also recommended reduction of excise duty for passenger cars by 2% which could have led to significant improvement in sales.  However, the Finance Minister has accepted SIAM’s recommendation on extension of concession for import of electric and hybrid electric vehicle parts till 31st March 2015.

The increase in customs duty for luxury cars and motorbikes seems to be an effort to raise more revenue and to encourage local manufacturing, value addition and employment. The proposal to increase duty on second hand vehicle from 100% to 125% is the right step. It clearly conveys that India is not ready to accept second hand old vehicles from other countries.

The other area which the industry did not expect was the increase in excise duty on SUVs used as personal vehicles. This is the only segment in the industry which has been doing well this year and increasing price of these vehicles would dampen sales and impact market sentiments further.”

K. H, Viswanathan, Executive Director, RSM Astute Consulting Group

“The decision to increase customs duty on high end passenger cars and other motor vehicles with CIF value exceeding US $ 40,000 and / or engine capacity exceeding 3000 CC and Motor cycles with engine capacity of more than 800 CC from 75 % to 100 % is a measure to curtail imports and tax conspicuous consumption.   While this will make these products expensive, in a way it will benefit Indian Automobile companies who are manufacturing and selling products in such segments”.

Vinesh Kriplani, Tax Partner - Automotive practice, Ernst & Young 

“Budget 2013 proposals have disappointed the auto sector due to increase in corporate tax surcharge for companies having taxable profits in excess of 10 crores, a 3 % increase in excise duty  for certain SUVs and a higher customs duty on high value and big cars by increasing the basic customs duty from 75% to 100%.  The saving grace is that the general excise duty rate of 12% has been left untouched.”

Rohit Saboo, President & CEO, National Bearing Company Ltd. 

“The industry was expecting a big push to bring it out of the downturn. There has been no support from the Govt. on the auto segment, instead there is an increase in the excise of the SUV which was the only sector in the Auto space doing well. Now this will also be under pressure.  “

Babu Rao, President, Association of Indian Forging Industry (AIFI)

“The Budget proposals of the Finance Minister for 2013-14 do not seem to address the slow-down in the manufacturing industry more specifically the Auto-sector on which the Forging Industry depends to a large extent. The investment allowance of 15% announced by the Finance Minister will help only the larger industries with outlays of over Rs. 100 Crores. The majority of the members of the AIFI who are SMEs will not be able to avail of this. The Finance Minister should reconsider and extend it to the entire industry to give the much needed stimulus to manufacturing.” 

Suvajit Karmakar, CEO, ALD Automotive Private Ltd

“We are happy to hear that the Service tax has not been increased thus not effecting our pricing negatively. However we are awaiting to see the impact of increase in excise duty on SUV as these are one of the most commonly leased vehicles… it is surely not a very good news especially when this segment was contributing significantly to the leasing fleet. We were expecting to hear more on the roadmap for implementation of GST. Overall we feel it’s an average budget.”