Auto companies want cheaper loans for customers, lower taxes

Battered by the recent economic downturn, the Indian automobile industry is looking up to the newly elected government to implement some key measures to kickstart car sales. Top on their wishlist is ensuring availability of auto loans at lower rates of interest, continuation of some of the sops announced earlier in a stimulus package and a reduction in taxes.

“With regard to the two-wheeler industry, there is an urgent need to bring down interest rates and ensure easy availability of consumer finance,” Hero Honda Managing Director Pawan Munjal said. Also, he said there is an urgent need to withdraw the additional excise duty enforced in June last year, which has stifled growth. In an effort to discourage customers from buying big engine vehicles, the government had imposed an additional excise duty of Rs 15,000 on vehicles with engines in the range 1500cc-1999cc and Rs 20,000 on vehicles with engines of more than 2000cc in size. A senior executive from the Society of Indian Automobile Manufacturers (Siam) pointed out that this had impacted sales.

“The government should withdraw the duties, as oil prices have come down from their highs of last year,” the source said. Also, the government has to take a call on growing opposition from some car makers on the increasing differential in duties paid on small cars as against large cars, which has widened in the past year.

Compact cars with engine size of less than 1200cc (petrol) and 1500cc (diesel) are taxed at 8 per cent, while others are taxed at 20 per cent. Ford India Managing Director Michael Boneham also said there is a significant differential in the way automobiles are taxed in India.

“The government should stop discriminating amongst small cars and mid-sized cars. We should have a more rational structure, as the gap is widening dramatically,” he said.

Sona Group Chairman Surinder Kapur said the government needs to quickly implement a uniform general sales tax (GST) regime across the country.

“Specific reforms, like implementing a uniform GST, have to be undertaken by the new government so that the whole country is not divided into numerous markets with numerous tax rates, but is a single market for all manufacturers,” Kapur said.

Meanwhile, commercial vehicle (CV) manufacturers are hoping for a further extension of the accelerated depreciation benefit of 50 per cent beyond the set September-end deadline. The government, in its second fiscal stimulus package announced in January, had declared an accelerated depreciation on all vehicles bought between January 1 and March 31.

As a senior executive from Ashok Leyland said, the accelerated depreciation certainly helped the CV industry, “...but the segment needs more support.”