The Auto Industry Reacts To Budget 2020

The Indian Auto Industry is struggling with an unprecedented slowdown, The auto industry is in desperate need of a boost. In the Union Budget 2020 on Saturday, there was a lot of expectation from the industry that the Union Government will announce measures to revive the industry. But there wasn’t much in the Budget2020 to cheer the Indian Automotive Industry. Finance Minister Nirmala Sitharaman said this budget was aimed to boosting incomes and enhancing purchasing power, stressing that economy’s fundamentals were strong and inflation was well contained. Central government is planning to construct 2500 access control highways, 9000 km eco-development corridors, 200 coastal and port roads, 2000 km strategic highways, Delhi-Mumbai expressway and 2 other corridors will be completed by 2023 and ₹1.7 lakh crore for transport infrastructure. 

Here is how the Auto Industry reacts to the BUDGET 2020

 Mr. Sudhir Sharma, VP - Finance & Corporate Development, GoMechanic

"The budget did not specifically talk much on the automobile sector which is going through its slowest phase in recent decades. We will continue to work with Industry bodies to bring the velocity back to the sector which is struggling for traction during this slippery phase."

Mr. Udit Sheth, Vice Chairman,  Setco Automotive Ltd. 

“The budget is a very progressive one - the focus on infrastructure & spending will boost the job market and build the confidence in the industry hand in hand. It’s a step towards a robust economic reform agenda.”

Mr Parag Satpute. Managing Director at Bridgestone India Private Limited.

“The Union Budget is a forward-looking budget and the government’s commitment to boost income, increase purchasing power and towards accelerated development of highways is a welcome step for the automotive industry. I am pleased with the thrust on sustainability, an area dear to Bridgestone, the focus on climate change and Rs 4,400 crore allocation for clean air.”

Sunny Kataria, VP Auto, OLX

The focus on the rural economy will be an integral factor for the auto industry as more income in the rural areas will translate to a spurt in demand for two-wheelers, Agri related auto products like tractors, cars such as entry-level cars and utility vehicles. I was glad that the government addressed the liquidity crisis of the NBFC’s which would mean more inflow of capital for the auto segment. The government allocating over 1.7 lakh cr for infrastructural development is a positive step towards ensuring more connectivity between key industrial corridors which should augur well for the automobile industry.

 Mihir Mohan, CEO & Founder, Pitstop.

We expected the Budget to focus on uplifting the automobile sector and support the emergence of electric vehicles by committing to an apt national ecosystem. While I must commend the boost provided to the startup and MSME sector, the budget leaves a lot to be desired by the automotive sector, which is in a crisis at the moment.

On a broader note, startups find a thriving ecosystem in the country with the new reforms. I appreciate employee tax reduction and also, DDT abolishment, businesses should be able to increase their profits by at least 5-10% by savings induced by corporate tax reduction and abolishment of DDT.

Mr. Vikram Kumar, Co-founder, Letstrack. 

The Union budget 2020 is providing a big push to the technology and digital connectivity in India which is helpful for the country.
India is embracing its sharing economy with aggregators and regular businesses which is going to be beneficial for all companies.
Setting up of an investment clearance cell to support the startup owners in funding is a welcome step.
Investment Clearance Cell will give investors free investment advisory, land banks and facilitate clearances even at state level
A pan-India single-window clearance system for investments will improve the ease of doing business in India.

P. Srinivasavaradhan, President, TVS Srichakra Ltd

 We welcome the steps on revisions in personal income tax slabs under the new tax scheme, with the changed direct tax structure some surplus income will be available which can drive consumption. These are key to boost manufacturing and revive consumer sentiments. Major fund allocation for infrastructure, warehousing and  logistics through rail, land and air will allow manufacturers to strengthen the business footprint domestically and are in line with international best practices. Will make India more competitive globally in the years to come. Consumers who had deferred their purchases now hold the key to aid growth in the automobile sector as well as the auto components sector. The economy can look forward to be buoyant and we are glad that the government in this budget has introduced steps in different areas to reduce the stress on the manufacturers as well as the customers. Government's step to extend support in the areas of technology upgradation, R&D will boost the auto component sector.

FADA President, Mr Ashish Harsharaj Kale’s reaction on Budget:

“The budget presented by Hon’ble Finance Minister Mrs Nirmala Sitharaman is an inclusive budget but lacked immediate Demand Boosters. The budget's Focus on Agriculture, Irrigation and Rural Development  will have a rub off effect on rural demand in the next 3-4 months if all the measures  are actioned immediately and will give a fillip to rural auto demand, especially 2W, Tractors & small CV's. It was disappointing that as part of auto ecosystem, no direct benefits for the automobile industry was announced. A budget allocation for an attractive incentive based scrappage policy would have been a demand booster for commercial vehicles and also a positive for cleaner environment and road safety. Even though GST is not a part of budget, an indication of rationalisation of GST rates in automobiles would have also brought much respite for the industry which is stumbling under extensive stress for more than a year now.”

“On the other hand, liquidity support for NBFC’s will act as a confidence booster  for them to lend, helping the auto sector. The Income Tax amnesty scheme will also free up allocated resources and will thus help businesses to allocate fund for growth. The continued focus on Infrastructure and especially highways will support CV demand at current levels till high growth revival. The personal Income Tax rates under the new regime, if are net tax positive for the tax payers will act as an immediate sentiment booster, especially for the 2W and entry level passenger vehicles.”

Mr. Jeetender Sharma- Founder & MD, Okinawa Autotech Pvt. Ltd.

“ A lot of startups are expected to benefit in terms of early stage advise and direction with the investment clearance cell that has been proposed in the budget. Nurturing and supporting the startups in their initial stage is imperative to strengthen the foundation of the entire ecosystem. Further, increase in turnover limit for tax exemption from 25 crore to 100 crore will help in higher valuations for startups. This will further attract investments in the ecosystem,”

Mr. Naveen Soni, Senior Vice President, Sales & Services, Toyota Kirloskar Motor

“The budget exhibits a fine balance between spending to drive growth and maintain fiscal prudence. Directionally, continued thrust towards world class infrastructure will drive growth and create employment besides improving the ease of living. Especially noteworthy is the attempt to enhance infrastructure funding by encouraging the use of equity and not to rely too much on debt. The attempt to address the trust deficit by institutionalisation of taxpayers’ charter’ would exude more business confidence and trust amongst tax payers and is a welcome step. Attempt towards simplification of individual taxation will drive better compliance, increase disposable income for consumption and generally augur well stimulating growth”.

Sunil Gupta, MD & CEO, Avis India

"The Union budget takes a calibrated approach to boost the country’s growth by investing in new infrastructure and ensuring clean air and environment for the people. Avis is a strong believer in making available transportation and infrastructure of the future, to build an environment-friendly economy. The allocation of Rs 1.7 lakh crore for transport infrastructure and the announcement of setting up 100 new airports under UDAN, is a big booster for travel and tourism in the country. At the same time, allotment of Rs 4,400 crore for clean air policies is a step in the pursuit of sustainable development. The scheme to boost electronic manufacturing in the country will also support the electric vehicle ecosystem in the country.  Setting up of on-site museums at five archaeological sites will help promote tourism and on road-transport in the country. The vision of the current government is to promote the domestic industry, tourism, and entrepreneurs, and the budget lays down its foundation through focused policies in the same direction."

Mr. Shoeb Farooq, GM, Triumph Motorcycles

“It was overall a balanced budget where changes in Income tax slabs, removal of Dividend Distribution Tax coupled with increased focus and investment in infrastructure, agriculture technology and smart cities will spur demand and indirectly help auto sectors revival over a period of time.

Although Auto sector maybe was looking for more direct measures but the budget for sure provided some remedies which should expedite revival in the medium to long term”.

N Nagasatyam Executive Director Olectra Greentech

The announcements in the Union Budget has come as a fresh and rather a clean breeze. The financial support for the EV sector was already earlier addressed in FAME – 2 scheme, but allocation of INR 4,400 Crores towards promoting clean air in the cities with more than 1 million population and steps to close the thermal power stations surpassing the permissible emission limits, reaffirms Government's commitment towards curbing the pollution. The allocation of INR 1.7 Lac Crore will help in better transport infrastructure offering a comfortable travel to the commuters across the country.

The reduction in the corporate tax rate is also going to benefit the companies with an additional availability of funds for more R&D including the EV companies.

Mr. Nimish Trivedi, Co-Founder of Prakriti E-mobility

“The budget 2020 started with a promise for the common man and that was the highlight throughout, with new personal tax regime and initiatives like Vivad Se Vishwas. While we welcome moves such as raising turnover limit to 100 crores or setting up an investment clearing cell; we hope that the scheme to boost mobile, electronic manufacturing and semi-conductor packaging will help electric vehicle manufacturing and encourage more technology penetration in the auto industry. Another silver lining was India’s continuing commitment to the Paris Agreement, and the 4,400 crore allocation to State Government to encourage clean air. We hope that the initiative will take in to account the substantial contribution that EVs can make to the environment and climate change.”

Prashanth Doreswamy -  MD, Continental Automotive India & Country Head of Continental Group India

"The Union Budget 2020 is extremely forward-looking. Several of the initiatives announced today, be it for agriculture or renewable energy will have long-term gains for the country. The focus on digitizing India and the implementation of technology in various sectors were also much needed and will help create more opportunities for the future. India is looking to be a technology-oriented, growth-oriented country of the future. For this to happen, several measures announced today are critical. While there was nothing specific for the automotive sector, we have always believed that the downturn is temporary and things will improve shortly. The measures announced today towards setting up renewable energy stations will help us in the required power generation as we transition to electric vehicles.  The focus on enabling higher internet penetration is also positive for India as well as the automotive sector. Given the impulse of connected technology both in mobile phones and vehicles, a policy that enables the private sector to build data centre parks will help enhance connectivity and digitisation, which will also benefit our sector. Focus on electronic and semiconductor manufacturing will be a big boost for FDI and the scheme will promote automotive electronics in a big way."

Sulajja Firodia Motwani, Founder and CEO of Kinetic Green and Vice Chairperson, Kinetic Group on the Budget 2020 announced today

The Budget 2020 announced by Hon’ble Finance Minister today is a practical budget, with directional announcements towards improved ease of business, with ideas such as amendments to Companies Act, simplified GST returns, reduced tax harassments etc. and also various developmental schemes. However, we look forward to speedy and efficient implementation. There are some measures to attract foreign investments as well and a new optional income tax regime, for a feel good factor. DDT has been abolished but dividend taxed at the hands of the investor will pinch her or him.

From an EV industry point of view, the budget is quite neutral. FM has announced new scheme to promote automotive electronics and semi-conductors manufacturing which in the long run, can aid EV component manufacturing in the country.

Budget also contains notifications on increased customs duty on EV imported in form of CBU/SKD/CKD, to encourage “Make in India”.  In coming years, we feel that duty on EV component import should also be increased to promote local component manufacturing. 

Overall, while the budget lacks big impact announcements, we welcome this budget and appreciate Government’s steps towards development, ease of doing business and steps to increase EV manufacturing by the industry.

Deepak Jain, President ACMA

“While we are happy that the process of GST continues to be streamlined and made effective, it is critical that the GST rate on all auto components be a uniform 18%. Currently 60% of auto components attract 18% while the rest are at 28%. Being an intermediary industry, reduction in rate will be revenue neutral. It will also help curb grey operations in the auto components after market.”

Mr. Rajeev Kapur, Managing Director, Steelbird Helmets

We surely welcome the overall budget presented by the Finance Minister. . But the more focus should have been given to the automotive sector as it is heavenly going down day by day, which gives more than 5 million jobs, no provision has been given on it.  The auto sector will definitely improve but would definitely take time till the money will come in India the liquidity will be better. After having investment in infrastructure the liquidity will get better and money will come in India and then we can definitely expect the sector will improve. For the lower class and upper lower class people, we must reduce GST TO 5% for motor-cycle, scooters less than Rs.40, 000 and the same way for cars less than 2,00,000. Also, for cars for more than 2,00,000, the GST should be double. This will increase the consumption and the auto sector will be able to survive.

Mr Ayush Lohia ,CEO Lohia Auto Industries 

Budget 2020 contains no major reforms for the electric vehicle sector specifically, while the sector was hopeful that the government would take steps to spur demand. However, the budget has some positives as there is massive state funding to help India’s farm sector, aiming to get broader economic growth back up from its lowest in a decade.
Furthermore, there is some support for the MSME, as the government will now allow NBFCs to extend invoice financing to MSMEs. MSME ministry's allocation stood at Rs 7,011 crore which is a 71 percent rise over and above the budgetary allocation made last year.  

Mr Rajan Wadhera, President, Society of Indian Automobile Manufacturers (SIAM)

The Indian Automobile industry was looking forward to some direct benefits in the budget, which could have helped in reviving demand in the context of the current slowdown and huge investments made by the Industry for transition to BS-6 and from that aspect, the Budget speech was not what we were expecting

The increase in customs duty for CKDs and SKDs of electric vehicles and CBUs of Commercial vehicles however are positive steps for Make in India. The announcements made with respect to rural economy and infrastructural development are some positives and we are hopeful to see quick execution on ground, since it can act as an enabler for increased economic activity and hence increase in vehicle demand.

Mr. Nitin Prasad, Chairman, Shell Companies in India:

“The policy reforms announced in the Union Budget by the Finance Minister sustain the Prime Minister’s vision for India’s journey towards a climate resilient and clean energy society under pinned on electro-mobility, a gas based economy and renewable power delivered through accelerating innovation from startups.”

Mr. Rajeev Chaba, President & Managing, MG Motor India 

"We welcome the budget announcements to lift the overall consumer sentiment and bring the economy back into the growth trajectory. The tax reforms being undertaken to boost income levels and the steps taken towards Make in India are also encouraging. Furthermore, we also applaud the proposal to encourage and incentivise states that are formulating plans for ensuring cleaner air. However, we feel that the customs duty hike on EVs assembled in India from 10% to 15% is a bit harsh, as this may impact the nascent category which was beginning to expand off late."

Mr. Shailesh Chandra, President, E-Mobility Business & Corporate Strategy, Tata Motors Ltd.

“'Make in India' has been the priority of the Government for greater value addition and employment generation in the country. While we are going through the details of the announcement by Union Finance Minister, the proposed hike in SKD/ CKD forms of Passenger EVs is consistent to the 'Make in India' approach and encourages progressive localization of Electric vehicles in the country. This will drive the efforts of OEMs more towards local operations and ensure greater commitment to Electrification in the country. This also, in a way, complements the Phased Manufacturing Plan laid down by the government under the FAME program.”

Mr Sohinder Gill, Director General, Society of Manufacturers of Electric Vehicles (SMEV)

Despite the adverse effect on the cost of the electric vehicles, the increase in import duties on the components (other than the power train and battery cells) is a rational step under the "Make In India" initiative of the government. It will have a bit of an adverse impact on the vehicles that have high import content forcing the manufacturers to either localise or pass on the costs to the customers.

Mr. Diego Graffi, CEO & MD, Piaggio Vehicles Pvt. Ltd

“We warmly welcome the union budget for the year 2020-21. The incentives that have been introduced for the manufacturing sector will give it a boost and help promote new technologies such as connected platforms to help in the Indian automotive industry besides attracting investment from FDI in the market. Over the last few years the government has been looking to make India a hub for manufacturing industry and with the abolition of Dividend Distribution Tax (DDT), we will further see an increase in investments from foreign players. It will also help in covering the revenue losses partially for corporates. The new scheme would encourage the manufacture and assemble of automotive electronics and semi-conductors to attract foreign investment. It will also boost the development of EVs in the country. The “handholding support” that the government has announced for Indian automotive component industry for product improvements, research and development, and business strategy will help the industry to improve by manifolds. The scheme is launched at a time when the Indian automobile industry is undergoing a major transformation. Linking of technology in vehicles is going to significantly assist the automotive sector in the coming years. I am confident that the government will continue to help the automotive sector and give it a push in 2020.”

 Mr. Pankaj Tiwari, Business Head – Nexzu Mobility

The budget missed addressing the EV sector. In fact, the Electric Vehicles, which are seen as the future of mobility globally, have been made to bear a customs duty hike by 10% on SKDs and 5% on CKDs, which would not go down well, as this segment is still evolving and looks up to the Government for necessary support to enable R&D, technology development, innovation and market development.

To be updated...