Auto firms seek Union Budget fuel to race ahead

Reduction in corporate and individual taxes, increased spending on infrastructure and research and development (R&D), incentives for using alternative fuel, introducing laws for mandatory replacement of old vehicles and incentives for fleet modernisation are some of the areas concerning auto industry that the upcoming Union Budget should look at, say experts.

Rakesh Srivastava, senior VP – sales & marketing at country's second largest automobile manufacturer Hyundai Motor India, more or less outlines the concern of the industry when he says, "Since the auto sector is synonymous with economic growth, the reduction in excise duty rates towards timely GST implementation along with lower corporate and income tax will benefit the industry. The new uniform tax structure will create a robust business environment and help auto industry to positively contribute to national GDP."

Abdul Majeed, a partner at consultancy firm PwC, affirms it by saying, "While growth is essential, there needs to be a balance between the overall growth of the automotive sector, promotion of sustainable mobility and automobile exports." Majeed further adds, "Hence, the Budget should focus more on growth and demand creation, along with incentivising private investments. It is important to aid in increasing disposable income in the hands of corporates and customers in tier-2 and 3 cities".

The experts and analysts are of opinion that there is an urgent need for the government to focus on the automotive industry as it significantly contributes to the overall growth of the economy. As per the data available with PwC, the automotive industry's share in GDP is 6–7%, 25–28% in industrial GDP, 5–6 % in overall exports, 12–14 % in overall excise duty collection and 9–10% in overall R&D expenditure. Over the last 10 years, the industry has also created around 20 million jobs with an investment of over $35 billion.

As per the latest data released by auto trade association body Society of Indian Automobile Manufacturers (SIAM), the Indian automobile sector sold a total of 21,901,572 units across segments and categories to record a growth of 9.17% during 2016. However, the negative impact of demonetization was seen in December's sales numbers.

The experts claim that 2016 was not really a smooth year for auto sector with several bumps on the way in terms of haziness over the policy issues.

Pravin Shah, president & CEO (automotive), M&M Ltd, says that last year several factors affected the growth of the industry, primarily the anti-diesel sentiment that swept across the nation, leading to a decline in the share of diesel vehicles. This was further fuelled by the National Green Tribunal's ban on diesel vehicles with engine capacity of over 2 litres in the NCR.

"Finally, demonetization, though a welcome step in the mid to long term, definitely dampened overall sentiments leading to postponed buying. This is particularly significant as the automotive industry had just started experiencing stability post a long and tough period of uncertainty" said Shah.

According to SIAM director general Vishnu Mathur, the entire industry is hoping that the government will bring measures to boost consumer sentiment. "We have also pointed out that the incentives for electric mobility under the FAME scheme must be extended as most of the automobile companies have been working towards this direction," Mathur told PTI. FAME, which stands for Faster Adoption and Manufacturing of Hybrid and Electric vehicles, was introduced earlier in order to promote eco-friendly vehicles.