Union Budget 2018: This is what the automobile sector wants from FM Arun Jaitley

Key developments

• In spite of a volatile regulatory environment, FY2018 has been a healthy growth year for India’s automotive industry
• Industry volumes grew by about 11.3% in April-Dec on a year-on-year basis
• Passenger vehicles segment rose around 8.1%, CV by around 15.2%.
• Total two-wheeler market grew 11.8%, while exports grew at a healthy rate of 13%.
• The automotive component industry continued to thrive due to a sharp growth in OEM demand and attractive exports growth.
• Technology change and its importance have become apparent to the industry.
• Safety and fuel efficiency came to the centre stage with expected regulation changes — to BSVI by 2020 being the steepest challenge

 

Industry ask
Demand side

• Measures for employment generation: Core focus of the Budget is likely to be on employment generation led by public spend.Addressing rural distress and triggering private investments will be other key priorities.
• Credit availability to rural sector: With lowering interest rate, the government is expected to take aggressive steps to manage high banking NPAs. Improving credit availability at the grassroots through rural finance programmes as well as focus on small businesses is expected.

 
Supply-side

• R&D and tech acquisition: Facing an uphill challenge with the rapid technology shifts, the industry needs to invest heavily in R&D. An increase in weighted deduction of R&D investments will provide additional resources to the industry. The government might also consider further investments in automotive testing, validation and safety.
• GST rates and compliance: The automotive industry wishes for fewer GST slabs for vehicles and streamlining of compliance processes. Automotive component GST rates may be standardised to 18%.
• Push for e-mobility: The government’s commitment to promote e-mobility may be supported through the Budget by lowering the GST rate on Battery Electric vehicles (BEV) to 5%. GST rates and import duty for BEV components can also be reduced to encourage domestic manufacturing and localisation of this segment.

Kavan Mukhtyar, Partner & Leader (Automotive), PwC India

PwC POINT OF VIEW

• In the coming year, the impact of technology will be huge
• E-mobility, a shift to BSVI by 2020, compliance with the latest efficiency and safety norms as they evolve will all be key.
• Next few years will see the automotive players investing heavily in technology to stay relevant.

 

Vikram Kirloskar,
Vice-Chairman & Joint Venture Partner,
Toyota Kirloskar Motors 

 

Industry Voice

• To facilitate industrial growth and promote ‘Make in India’, Budget 2018 should look at reforms improving the quality of infraand logistics like wider roads, modernisation of ports, railways and airports.
• Considering the critical issue of environment pollution, we hope the government to relax tax rate in favour of clean and green technologies, such as strong hybrids similar to the pre-GST era.