With the onset of Union Budget 2015-2016, Society of Indian Automobile Manufacturers (SIAM) hopes Finance Minister Arun Jaitley rolls-back excise duty. Indian auto industry concessions offered will buoy auto-sector demand, as multiple auto manufacturers have reported contracted sales in January 2015. Concessions were withdrawn at the end of December 2015.
In 2014, excise duty cut for Indian auto industry was initially implemented in February for all vehicle segments. Excuse duty concession was then extended to December 2014 by the Finance Minister in the interim budget last year, before it was finally rolled back as of January 2015. Excise duty roll back in February 2014 introduced tax reduction from 12 pct to 8 pct on small cars, two wheelers and commercial vehicles. Excise duty reduction on mid and large segment cars were from 24 pct to 20 pct, and 27 pct to 24 pct, respectively. Excise duty reduction on SUVs was from 30 pct to 24 pct.
Excise duty hike across the Indian auto industry has roughly translated into a 4-6 pct price hike across vehicle categories, and could have an adverse affect on demand. There’s also a need to consider stalled infra projects to help revive commercial vehicle demand. Excise duty reduction on automobiles is necessary to offset demand slowdown. Despite concessions for the most part of 2014, Indian auto industry conditions and demand remained subdued for a number of manufacturers.
Additionally, in the tyre sector space, the industry has called for removal anti-dumping duties on import of raw materials like rubber chemicals (Butyl Rubber SBR grade 1500/1700) which is not manufactured in India, and Carbon Black. Anti-dumping duties on imported Chinese tyres should also be removed. High import duty on rubber raw materials increases difficult level for domestic tyre industry to compete with imported finished Chinese tyres. The latter isn’t subject to such high duty rates.
The above Automobile budget expectation contains inputs from Vinay Khattar, Associate Director and Head of Research, Edelweiss.