Indian Auto Industry’s Wishlist for Budget 2021

While the Indian Auto sector has been struggling with the NDFC crisis, BSVI migration, and low sales in 2019-2020. The corona virus-induced lockdown saw for the first time in the history of the Indian Auto Industry – Zero sales in the month of April 2020. Social distancing, Work from home and people generally not moving meant sales were low throughout the last year. CV sales stayed low due higher costs with BSVI products, Manufacturing units, infrastructure projects and import export slowing down. The industry demand coming back during the festive season with consumers preferring the safety of personal mobility over shared mobility.

The Govt did bring in the Auto component sector under the PLI (Production linked Incentive) ambit with 57000CR and 18000CR for Li-on battery aiming to make India a part of the global supply chain and attracting investments at the same time. While this is a great initiative to kick start investments, the Industry demands more. Scrappage is one of the biggest demands of the Industry, especially from the CV industry.

Here we are listing out the expectations from the leaders of the industry.

Subrata Ray, Senior Group Vice President, ICRA Ltd on Automobile sector says “ICRA expects the Government to maintain its focus on the rural economy and infrastructure investments in the upcoming Budget. This apart some roadmap for the recently announced production-linked incentive (PLI), can be expected. Another long pending auto-specific policy, relating to the scrappage of Commercial Vehicles (CV) may also find a mention in the Budget.”

Waman Parkhi, Partner, Indirect Tax, KPMG in India says “Union Budget 2021-22 may lead to introduction of policy level initiatives for providing boost to the auto sector in Part I of the Budget. An important measure in this regard could be the vehicle scrappage policy, incentivizing scrapping of vehicles more than 15 years old. If implemented, this policy could boost automobile demand by phasing out old and polluting vehicles. Another much eagerly awaited measure is the release of the details of Production Linked Scheme (PLI) for automobiles and auto components as well as battery cell manufacturing.

From a GST standpoint, the industry is expecting a temporary reduction in GST rates from 28% to 18% as well as withdrawal of GST input tax credit restriction on automobiles, to reduce the cost of vehicles. However, considering the long history of applicability of these provisions (even before GST), the chances of implementation of the changes appear to be low. Moreover GST changes are not part of the Budget and are brought out in the GST Council meeting.

In respect of electric vehicles (EVs), steps for easier financing of EVs and tax breaks for expansion of charging infrastructure could be few expectations.”

Sandeep Aggarwal, Founder & CEO, Droom says “The auto industry expects relief from the Union Budget 2021-22 in the following multiple areas also - The government should aim to announce things in this budget that can simplify the automobile industry including direct and indirect taxation, whether making it more complex. I really hope that government makes enough rules so that inter-state transfer of vehicles has a very low entry barrier and digitization of extremely important industry for the economy. All-in-all, time is now ripe for the government to take initiatives to digitize the highly important industry which is Automobile.”

Amit Kumar, CEO OLX Autos India says “Even though the automobile industry has demonstrated considerable recovery in the last few months, I look forward to consumer and dealer friendly budget announcements which will spur a boost in consumption and supply levels of new and pre-owned cars. I hope the policies announced would be consumer-friendly & any decisions related to introducing the speculative COVID cess would be short term in order to leave more disposable income in the hands of consumers.”

Saurav Kumar, Founder and CEO, Euler Motors says “In the EV space, while policies like FAME II is a great step, we need reliefs and relaxations in the existing policy framework to allow more companies to avail its benefits. Putting stringent restrictions in the initial stage makes these incentives inaccessible for many. Once we attain scale and EV supply chain matures, these norms could be tightened then.

Reducing custom duty on imports of lithium-ion battery cells and exempting electric vehicles from GST will help bring down the price parity to make EVs affordable. while policies like FAME II is a great step, we need reliefs and relaxations in the existing policy framework to allow more companies to avail its benefits. Putting stringent restrictions in the initial stage makes these incentives inaccessible for many.The Government needs to bring back its focus on establishing fabrication units. From a localization and Atmanirbhar perspective, these units will be key to support low-cost manufacturing of electronic components, batteries, and power electronics for EVs. We expect the Government to introduce concrete measures that support this outlay and kickstart production of lithium-ion cells in India.”

Nishcal Chaudhary, Founder & CEO - BattRE, says “We are expecting a GST reduction in Lithium batteries from 18% to 5%. Also, if nationalized banks provide affordable loans for the purchase of low-speed electric vehicles. These will speed up EV adoption in India".

Jatin Ahuja, Founder & CEO, Big Boy Toyz says "Two things which we as citizens of this country constantly stipulate from our government are - Tax Simplification & a decrease in Taxation rates. In my opinion, if something can be done which will probably go a long way is bringing down the income tax rates to 10% while keeping the GST rate the way it is. This, I feel might be the biggest budget reform of the century & will be talked about for years to come"

Harsha Kadam, CEO Schaeffler India and President Industrial Busines says “Budget 2021 is an opportunity to bring in measures that can help to boost a sustainable growth for the industry. The auto components industry will also see more investments if further clarity is provided on the PLI Scheme announced in 2020. Implementation of the scrappage policy will also improve sales that will benefit the industry and environment. From an overall manufacturing industry perspective, stabilization of raw material prices is of importance to the industry, promoting finished good exports will in turn increase forex reserve and a positive step. The industry also requires some relief in custom duties especially for raw materials and other manufacturing elements. The government is putting efforts in public spending on infrastructure projects that are driving the core sector industries. Considering the year 2020 and the effects of pandemic, government should also focus on steps that will enable job creation, which will be a critical success factor. Budget 2021 is hope for many industries and we are looking forward to it with anticipation. “

Manish Bhatnagar, Managing Director, SKF India says “After the global 2020 interruption, the economy is clearly on the revival mode and we are positive that 2021 will be a game changing year specifically for the Indian manufacturing sector. The flexible nature of the Indian economy will help expedite the recovery path, however it needs to be backed by robust policy and investment interventions. We also expect the upcoming budget to address and resolve some of the pain points such as – increased cost of raw materials like steel, rise in import freight, IP safety regulations and labor laws”.

Dhianu Das, CoFounder at Luxury Ride "Used Luxury Automobile market has been growing at a great rate. The industry growth will help Indian economy in multiple ways. We see tier 2 and tier 3 cities driving the market in 2021. Hence, these are the expectations that we in the Industry have from the Budget is To focus on long term solutions than short term, Make GST less complicated and provide relaxation in GST for ULA dealers and Garage owners, To look at priority sector lending for the space, More relaxed interest rate regime which will further demand. Together if these things are done it will lead to a much higher growth for the industry in the coming year which will be beneficial for the larger economy as well."

Anand Ayyadurai, Co-founder and CEO, VOGO said “We believe the outlook of mobility sector will be majorly driven by electric vehicles as the world is moving towards greener and cleaner transit solutions. In order to drive this movement, we are hoping to see a reduction in GST on EV batteries from 18 % to 5% along with this subsidies on all Electric vehicles including low-speed Electric two-wheelers. This will not only support the manufacturers and service providers but will also reduce the overall cost of the vehicle for consumers.”

Ankit Saluja, Co-founder, Premium Autoz, "We all have been holding up somehow. Covid-19 has already affected the auto sector to a large extent and left no room for hopes. But the whole auto industry has been looking forward to the union budget 2021-22. We expect cuts in GST rates on pre owned cars,which means rationalising the tax structure. Along with that we are also expecting import duty to be reduced so that both customers and we business owners can be benefitted on a whole. Infact, the auto industry also requires some sort of relief in overall custom duties, as in for raw materials and miscellaneous manufacturing elements.We are just expecting the government to assist and help us in recovering from the Covid-19-induced economic shock and slowdown." 

Akshay Singhal, Founder, Log 9 materials, working in Nanotechnology Domain and EV: "I think for startups there are already a  lot of initiatives in action, improved mechanisms for the execution of those schemes is extremely important. However, I am more concerned about the economy as a whole. To boost the economy my suggestion would be to increase spending under Swachh Bharat Scheme may be via MNREGA to get Indian cities clean by employing the bottom of the pyramid."