Auto Industry Reacts On Union Budget 2021

2021 Budget comes with several positive indications for the auto sector in India. The much-awaited scrapping policy has been announced, an increase in auto component duties and lots more has been announced.

Vehicle scrappage policy encourages vehicle owners to scrap their vehicles that are older than 15 years. The Finance Minister in her speech announced that private vehicles will have to undergo fitness tests after 20 years from the date of registration, while for commercial vehicles it will be 15 years. The policy will help to curb older, inefficient, and polluting vehicles and in turn promote the use of more environmentally-friendly vehicles.

In her speech, Sitharaman also announced the capital investment of Rs 5.54 trillion for developing infrastructure in the country, which leads to an increase in demand for commercial vehicles. The Commercial Vehicle segment has been struggling with low sales for the past two years and this should spur the growth of the segment.

Moreover, she also introduced the scheme to augment the public transport system. For this, the government will spend Rs18,000 crore to expand the public transport in Indian cities and also buy 20,000 busses.

This year, EV Sector misses out on its entry in Budget 2021. However, the government has announced one extra year of tax holiday for startups which indirectly supported the EV Sector as lots of the electric two-wheelers currently on sale in India are products of EV startups.

How Industry Reacts?

Dr. Raghupati Singhania, Vice-President JK Organisation, and,Chairman & Managing Director of JK Tyre & Industries Ltd: ‘The Hon’ble Finance Minister has presented a ‘pro-growth’ budget in these unprecedented times, which will give a boost to the Indian economy which is on path to recovery. Rightly, there is a huge emphasis on infrastructure, which will help revive economy as well as generate employment. Finally the much awaited scrappage policy has been announced, which is a welcome step. This will increase sale of new vehicles and in turn boost tyre demand.

Refocus on healthcare and skill building are very critical for a healthy growth of Aspirant India. The key however is faster implementation of the various important measures announced, which will have a meaningful impact on economy.’

Vikram Kirloskar, Vice Chairman, Toyota Kirloskar Motor: “Faced with the challenge of delivering rapid, inclusive, economic growth with heightened focus on health and welfare in an environment of economic contraction and sharp increase in fiscal deficit due to COVID, the Hon’ble Finance Minister has struck an remarkable balance between growth and fiscal prudence by setting pragmatic revised targets and glide path for fiscal consolidation.

From an auto industry perspective, the long-awaited voluntary Scrapping Policy can help take older vehicles off the roads thus contributing to lower fuel consumption, pollution as also generating additional demand for cleaner new vehicles. The auto sector welcomes this announcement and is hopeful that for realizing full benefits there will be an early and full implementation of this policy. Further, at Toyota Kirloskar Motor, we have continuously worked towards creating a self-reliant and competitive local manufacturing eco-system and are eagerly looking forward to the details of the Production Linked Incentive scheme that can potentially make India a part of the global supply chain for both traditional and advanced automotive technologies.”

Martin Schwenk, Managing Director and CEO, Mercedes-Benz India: “We welcome the policy stability that the budget provides to the industry by no new announcement of direct taxes, though we would have liked some reduction in compensation cess. It’s good to see some positive movement through the scrappage policy and we also expect the capital expenditures to indirectly help the industry. The decision to spend more on infrastructure despite of the high fiscal deficit, will boost the overall economic revival and we should see positive impact on the PV market. However, the increase in the rise in auto component duties is unexpected in such revival period, and it will increase the production cost, leading to higher cost for consumers. There could have been further push towards e-mobility by lowering import duties on EV.”

Venkatram Mamillapalle, Country CEO & Managing Director, Renault India Operations: “The government has shown keen focus on Atmanirbhar Bharat and its support for the manufacturing sector, especially in Technology Innovation in the Automotive Sector. The budget lays a lot of emphasis

on building core competencies and creating Global Champions in the manufacturing sector, creating world-class R&D, value chain providing scale and size in terms of growth, providing employment to youth in the country and the government has allocated INR 1.97 Lakh Crore over the next five years for the PLI scheme, creating fillip for economic growth. We also welcome the government’s announcement pertaining to the scrappage policy, made voluntary, for vehicle age of 15 years for Commercial Vehicles and 20 years for personal vehicle. This move will significantly reduce pollution and should help bolster demand for new vehicles in the CV & PV sectors.

The Indian economy is showing signs of resilience & recovery, intending to revive from the aftershock of the COVID pandemic. With the government announcing INR 35,000 Crore for COVID 19 vaccines, we are hopeful that India will bounce back and the workforce will return with new vigor and focus to contribute in bringing the economy back on track.”

Ashok Minda, Chairman & Group CEO, Minda Corporation Limited said, “I am pleased to see the Budget 2021, which has been delivered by our Hon’ble Finance Minister Shrimati Nirmala Sitharaman, who has committed Rs 50,000 crores for Research & Development for National Research Foundation. The foundation will ensure that the research ecosystem on the Country is strengthen and focus on identified national-priority thrust areas. We feel that green economy and better air quality is a national priority and in a decades time, when India is eyeing to Electric Vehicle Eco System, the budget of R & D will further enhance its development and localization. This will benefit the Auto manufacturing sector as a whole. This will additionally supplement Aatmanirbhar Bharat and Make in India”.

Bhavish Aggarwal, Chairman & Group CEO of Ola: "Ola welcomes a progressive & growth-oriented budget. Measures under Atma Nirbhar Mission will help create global champions in automobiles, financial services and technology and foster an environment where India becomes integral to global supply chains. Increased investment in insurance & infrastructure will open new avenues of capital. Improvement in ease of business will transform India into a global innovation hub. We strongly support the government’s clean air focus with our EV plans that will accelerate the world’s transition to sustainable mobility."

Prashanth Doreswamy, Country Head, Continental India & Managing Director, Continental Automotive Components (India) Pvt Ltd: 'We are pleased to hear the government’s decision on allocating Rs.1.97 lakh crore for PLI schemes, the industry will benefit from the increased local manufacturing. The voluntary vehicle scrappage policy is a positive sign. We await further details that could give an idea of the actual impact of this policy' 

Nagesh Basavanhalli, Group CEO & MD, Greaves Cotton Limited “Long term progressive budget built on sound strategy for improving national health and economic recovery. The government’s resolve to support manufacturing and infrastructure sector is commendable. The emphasis on government spending in building pan-India transport and allied infrastructure should have a positive impact in reviving consumer demand for vehicles. The allocation of a sizeable sum towards the PLI scheme will help the industry create jobs and boost economic growth. The recognition of the manufacturing sector as an integral part of the global supply chain and to grow the same in double digits, will be boost to the industry . While the auto sector would have liked to see more direct measures in the budget, however the Scrappage policy is certainly a step in the right direction. This is a step in the right direction for both ecology and economy. The focus on rural and agri credit growth will also have a cascading effect on the auto sector.”

Gurpratap Boparai, Managing Director, ŠKODA AUTO Volkswagen India Private Limited: “The union budget for 2021-22 presented by Honorable Finance Minister Smt. Nirmala Sitharaman, augers well to create capacity for developmental and growth in the country. Increased outlays in the road sector, infrastructure development and introduction of the voluntary vehicle scrappage policy will not only create a safer and environment-friendly auto sector but also drive replacement demand in the sector. The support announced for the rural economy and farm sector will be a big boost for wealth creation in the non-urban markets and increase the scope for auto demand in these regions. While further details of the prior announced PLI scheme is awaited, the same is expected to help the Indian auto industry to improve production efficiency and become self-reliant - "atmanirbhar'.

It is important to keep in mind that even in the coming financial year, the passenger vehicle market is unlikely to reach the level of 2018 and the much-required rationalisation of GST and cess to aid the auto industry was missing. Additionally, the increase in customs duty on certain auto parts to 15% will further increase input costs and prices for cars which depend on specialised components which cannot be manufactured locally due to unviable volumes.”

Ashwath Ram, Managing Director, Cummins India: "At first glance, it appears to be a progressive budget. There is a focus on the socio-economic development of the country with an emphasis on Railways, the Power sector, infrastructure, healthcare, and enhanced digital connectivity. The voluntary policy on the scrapping of vehicles will have a positive impact and will drive the commercial vehicle and auto sector forward, the industry wanted an incentive-based scheme so we are still seeing the details. In addition, MSMEs and other user industries have been severely affected by the recent sharp rise in iron and steel prices. The industry will definitely receive a push by the decision to double the allocation of MSME and reduce the customs duty on some of the steel products. The focus on highways and the infrastructure investment plan will definitely give the necessary impetus to the CV and construction equipment businesses."

Farrokh Cooper, Chairman & MD, Cooper Corporation Pvt. Ltd: "Budget 2021 is optimistic, driving the country towards Aatmanirbhar Bharat by putting significant stress on Railways, Power sector, infrastructure healthcare, banking, insurance, and agriculture, which will not only enable the country to revive its economy but will also stimulate growth. Voluntary policy on the scrapping of vehicles would have a positive effect and will move the commercial and automobile industries ahead. The industry would definitely be encouraged by the decision to double the allocation of MSME and to reduce the customs duty on steel. Focusing on highways and the investment plan would certainly give the CV and construction equipment the requisite impetus. The government’s increased focus on the infrastructure sector will certainly bring in positive impact”

Suresh KV, President, ZF India “We welcome the announcement of a voluntary scrappage policy. This will induce the demand for new commercial vehicles (CV) and passenger vehicles (PV). Though the scrappage policy is voluntary, this could be seen as significant step in view of the fact that the scrappage would be dependent upon the fitness certificate. This policy backed up by an effective implementation plan would really boost the growth of the industry.

Announcement of allocation of 1.18 lakh crores to improve the public transport in Indian cities and the procurement of 20,000 new buses will provide an impetus to the bus segment. Such a strong push in infrastructure building including roads, economic corridors and railways will become instrumental for enhancing the demand for heavy and medium duty commercial vehicles which in turn will have a positive impact on the employment opportunities.

It is also heartening to see the allocation of 1.97 lakh crores, over next 5 year, towards the production-linked incentive scheme (PLI). This will boost manufacturing in India and further propel the growth of the Indian automotive industry.

Overall this is a progressive and well-balanced budget and with the continued government support, we hope to see all industry segments returning to the path of growth in the coming year and beyond!”

Ashish Gupta, Brand Director, Volkswagen Passenger Cars: “The Budget 2021 as announced by the Hon’ble Finance Minister has potential to revive the economy at large. With respect to the auto sector, increase in custom duty on certain auto parts would impact the input cost, although we’re yet to assess the financial impact. On the voluntary scrappage policy, strict governance on the fitness test would determine the benefit on the environment and pollution reduction.”

Arun Firodia, Chairman, Kinetic Group: “There are some welcome features announced by the government like faceless assessment. I would like this to be extended to all permissions/returns required to start a new business and run the business. Digitalization of interaction with Government authorities will reduce corruption and improve the ease of doing business.

Another welcome announcement is the correction of inverted duty structure. Government has announced its intention to support the electric vehicle industry.

On the whole, the budget is a good compromise given that we need to fund our defence budget given the threat from China.”

Manish Bhatnagar, Managing Director, SKF India: “Concentrating on the revival of the economy, this budget is totally one of its kind. Along with bringing cutting edge technology, increasing the demand for new commercial vehicle (CV)and Passenger vehicles(PV), creating new jobs, schemes like the PLI and voluntary scrappage policy are likely to to nurture and boost the Indian manufacturing industry to become an integral part of the global supply chains.

Furthermore, ensuring liquidity in the economy and unhindered flow of capital, the package for roads and railways infrastructure is bound to give an impetus to the covid-hit economy. The robust push to infrastructure including economic corridors, manufacturing and MSME’s collectively, is likely to help boost demand for heavy & medium duty CV’s”.

Sunjay Kapur- Chairman, Sona Comstar: "The initial reaction is a positive one, Over the next few days, as the interpretation kicks in, the implications of the Union budget will gain clarity. For now a Thumbs Up from me! The major points that I’d like to touch upon, the highlights for me include, the positive step towards the roll out of scrappage policy with a defined 20 years for private vehicles and 15 years for commercial vehicles. There is an increase in custom duty by 15% on certain auto parts. The FDI limit increased significantly shows a promise to further India’s presence on a global platform, 49% to 74% in the Insurance sector is a good leap in the positive direction. Removal of GST anomalies shows that they are fine tuning the GST implementation. The announcement of spending on infrastructure (118,000 cr for Ministry of Roads) is strategically well- allotted finding via the set- up of a professionally- manager Development Finance Institution (DFI). As the network of public transports solidifies across Tier II cities, the usage of metros and public buses leads to an inevitable increase in job opportunities. The overall sense of relief with no increase in income tax, given the year that has gone by, rippled across and was seen as a reaction of the stock market."

Harsha Kadam, CEO Schaeffler India and President Industrial Business: This budget has the ingredients to deliver long term growth. The government is bullish on public spending and we are encouraged by it. We were certain that Budget 2021 would surely consider the gloom that hovered over the Indian auto industry and it is reassuring to see that it did. The infrastructure boost will surely benefit the heavy and medium commercial vehicle segment, which was much needed. The voluntary scrappage policy implementation is surely a step in the right direction keeping in mind the environment and auto industry at large. We have been awaiting it for a while and this is a step forward for sure. In fact, the announcement regarding the PLI scheme investments is going to play an accelerator for the manufacturing sector, which has seen really tough times along with the auto industry. The decision of commissioning dedicated freight corridors which will not only improve the overall movement of goods but also spur economic activities in the long run The only caution here is to look at the inflating fiscal deficit. Overall, the budget provides an opportunity for the state and the central governments to come together and rebuild for the future and we must seize these opportunities for future growth.

Sharad Malhotra, President – Automotive Refinishes and Wood Coatings, Nippon Paint India: “With an expansionary Budget that focuses on growth, the Finance Minister has delivered on major counts. The Budget has announced a massive infrastructure boost with huge outlay for Railways and privatizing airports. Along with this, measures that will increase consumer spending and make India more self-reliant are a step in the right direct. Fitness testing for both PVs and CVs is a positive move that will not only generate employment opportunities but also ensure a cleaner environment. Our sector has got a favorable boost in form of FM's voluntary vehicle scrappage policy announcement.”

Satyakam Arya, MD & CEO DICV: “The government continues to focus on addressing the critical issue of rising pollution and on promoting infrastructural growth. DICV welcomes the government’s decision of introducing the voluntary vehicle scrapping policy and the budget allocation for the road projects under Bharatmala programme. We will also need to understand the actual infrastructure spends in the state government budgets that will help create buoyancy in the market. With the announcement of Infrastructure for roadways, we see even more demand for BharatBenz products in the construction tipper segment where we already enjoys a growing customer base. Furthermore, the push towards increasing national highway corridors will help Improve inter-state connectivity; thereby creating a stimulus for fresh demand in urban transportation.

An incentive based scrappage policy can accelerate the need for cleaner vehicles and will be more impactful for the environment. Overall, the scrappage policy and Infrastructure spends will trigger the demand for the MHCV segment.”

Nishant Arya, Executive Director of JBM Group: "The allocation of Rs 18,000 crores for the public bus transport services has come as a sigh of relief for the bus makers who have been caught in the doldrums from 2019. The proposed PPP model will in turn help the sector to create employment as well and overcome the adverse effect of the pandemic. We, as an industry player, are now looking forward to the details of the vehicle scrappage scheme which will be an added advantage for the auto sector. The heavy and medium commercial vehicle sector will also have a boost in demand as a sum of Rs 5.54 trillion has been allocated for infrastructure development. The 2.5-5 percent reduction in the customs duty on some of the semi-finished and finished steel products will have a positive impact on the automotive industry.”

Tarun Mehta, Co-founder & CEO, Ather Energy: “The voluntary vehicle scrappage policy announced to phase out old and unfit vehicles will encourage the sales of new vehicles. It is good to see that the government is looking at addressing the concerns regarding GST inverted duty structure. We look forward to more details on the inverted duty structure and the Production-linked incentive (PLI) scheme announced by the Finance Minister.”

Mr. Sidhartha Bhushan Khurana, Managing Director, STUDDS Accessories Ltd : "Finance Minister Nirmala Sitharaman has delivered a positive, pro-growth budget for 2021-22. We welcome the long awaited voluntary scrappage policy that will definitely give a boost to the sector by phasing out older, inefficient and polluting vehicles and the use of more environment-friendly vehicles. While we are waiting for the details of the policy to come out in next few days, we are hoping that the government has adopted the incentivised model for this policy. 

The announcement of capital investment of Rs. 5.54 trillion in infrastructure development will lift-up the demand for not just commercial but private vehicles as well. "

Chetan Maini, Chairman & Co-founder, SUN Mobility : “The Budget is focused on speeding up recovery post-COVID, while also providing solid direction to do so, over the next few years, which is excellent. The announcement of the outlay of INR 18,000 crores to support augmentation of public bus transportation services is a welcome announcement, along with the deployment of ‘MetroLite’ and ‘MetroNeo’ services for ease of mobility across Tier 2 cities and peripheral areas of Tier 1 cities. This opens up the possibilities of providing last mile connectivity in and around these locations via electric vehicles like e-autos and e-rickshaws, provided adequate support is given by the government for setting up charging and swapping infrastructure.

Similarly, implementation of the Scrappage policy is a good move, which can be further enhanced by providing additional incentive for replacing old vehicles with electric ones, instead of other ICE vehicles, for driving mass EV adoption.

The EV industry needs to not only ‘Make in India’, but also ‘Design in India’, so we look forward to the details of the INR 50,000 crores Innovation and R&D outlay that was announced today, as well as the PLI scheme and how they can benefit the sector, as these will be key enablers in making EVs take off in the country. This will help create manufacturing global champions for an AtmaNirbhar Bharat, boosting start-ups to achieving a USD 5 trillion economy.”