It’s a dud Budget for the automotive sector

A lot was expected from Finance Minister Arun Jaitley for the automotive sector but none of that figured in the Union Budget 2014-15 announced on July 10, 2014. The Budget focussed on infrastructure and simplification in taxation. The industry was hoping to see some demand stimulation measures for the commercial vehicle sector which has been reeling under severe gloom for over 27 months. But unfortunately nothing was announced for the CV industry.

An extension on reduction of excise duty on motor vehicles had already been notified. The industry was hoping that a slew of incentives for electric vehicles which sadly did not come through. Neither was a firm date for GST implementation announced. The automotive industry, however, praised the Budget in a guarded manner and hoped that in the near future a lot more would be done for the industry to grow.  

SIAM welcomes focussed approach: Vikram Kirloskar, President, SIAM welcomed the focused approach on infrastructure development and on simplified taxation in the General Budget 2014-15. Kirloskar said that under the current tight fiscal situation, the Finance Minister has tried to balance and manage the expectations from different quarters with a need for growth and fiscal prudence. The budget has rightly given a positive direction on issues like implementation of GST, retrospective taxation as well as simplification of the tax regime. This will revive investor sentiment and kick start growth and development in the medium to long term.

 The announcements of increase in FDI in defence and insurance to 49pc are also positive moves to make these sectors competitive. Focus on infrastructure development through allocation of Rs.14,389 crores for rural roads and Rs. 37,880 crores for National and State Highway, development of 16 new ports projects is also a welcome move which will boost growth of the automotive industry in the long run. Initial funding of Rs. 24 crore for National Electric Mobility Mission plan through the Ministry of Heavy Industries will kick start the electric and hybrid vehicle manufacturing in India.

 Kirloskar said that an announcement on resolving the current impasse in the mining sector expeditiously would be helpful in reviving the commercial vehicle segment to some extent. He said with a strong government at the centre, SIAM expects more bold interventions in coming days.

ACMA expresses satisfaction: ACMA, the apex body representing India’s auto component sector, welcomed the thrust given in the Union Budget towards kick starting the national economic growth and making it inclusive. The industry body expressed satisfaction on the focus on infrastructure development, education, skilling, infrastructure development and attracting investment. Further, it also appreciated the measures announced for sustaining growth and scaling-up of the MSME sector.

 President ACMA, Harish Lakshman, said the Finance Minister had unveiled a pragmatic budget with adequate focus on development of the social sector as well as that of the industry and infrastructure. ACMA also welcomed the announcement of the intent for implementation of GST and DTC at an earliest, as well as measures to encourage the Micro, Small and Medium sector (MSMEs) including revision of its definition. MSMEs constitute over 70 pc of ACMA’s membership.

Lakshman further added, that extending 15pc allowance to companies investing more than Rs 25 crore in new plant and machinery will help attract investments in manufacturing sector including automotive.

 As a major relief to the manufacturers, an amendment has been announced in the Central Excise Law to overcome the impact of the Supreme Court’s Fiat judgment. This has been a long standing demand of the manufacturing industry at large and more specifically of the auto industry.

 The budget also announced continuation of the reduced excise duty on the automotive sector stated earlier in the Interim Budget.

FADA says it’s a positive budget: Mohan Himatsingka, President, Federation of Automobile Dealers Associations (FADA) said that given the little leeway available to him and tight-roping walk he had to do, the Finance Minister has presented a balanced Union Budget 2014-15.

FADA was expecting higher rates of depreciation especially in the case of commercial vehicles that have been reeling under acute slowdown for about 3 years now. Likewise, FADA was also expecting raise in the depreciation rates in the case of passenger vehicles in tune with the market reality and to spur demand. We, in FADA, hope that these suggestions would be incorporated before the Union Budget 2014 is finally passed, said Himatsingka .

JCB says no big bang reforms were anticipated: Vipin Sondhi, MD & CEO, JCB India said that the the current Government has been in office for less than 2 months and hence no big bang reforms were anticipated. “The Union Government recognising the need for revival of investment cycle had already extended the Excise Duty Cut on Capital Goods for another 6 months in June, 2014 itself. The Budget’s focus on infrastructure sector, encouraging banks to lend long term funds to infrastructure sector, extending the benefit of investment allowance to Small and Medium Enterprises and emphasis on manufacturing growth should help revive the capital goods sector. While PPP in relation to many new projects has been announced, however, a roadmap for execution of existing held up projects could have helped turn things quickly,” he said

Pragmatic Budget says AMW: Anirudh Bhuwalka, MD and CEO, AMW Motors Ltd said the Budget is a very pragmatic one with the Finance Minister addressing several issues to invigorate growth related to housing, infrastructure, manufacturing and the finance sector. The increase in FDI limits on insurance and defence, while expected, is a welcome step, he said. While the budget is not "big bang" given the fact that he has had only six weeks, he has built in continuity as well as a new direction to spur growth, he added. A Ramasubramanian, President, AMW Motors Ltd noted that the measures for development of infrastructure development like highways, industrial corridors, housing, manufacturing , FDI in Defence sector and power projects are welcome and will contribute to demand generation for commercial vehicles, which have seen record lows in recent years.

R. N. Rao, Director - Sales & Marketing, AMW Motors Ltd.the speeding up of highway projects and development of 8000 kms of roads will give a boost to M&HCVs as also the measures announced in the power and housing sectors.

Prudent Budget says Pawan Goenka: Dr. Pawan Goenka, Executive Director, Mahindra & Mahindra Ltd. said that the Finance Minister had delivered a well defined and prudent budget with specific focus on infrastructure, manufacturing and rural schemes.  To view it in the macroeconomic perspective, it has laid clear emphasis on supporting investment.  Though there were no big bang announcements, the intent of the budget is clear. It is a move towards the right direction and there is an attempt to put a lot of placeholders through the various Rs. 100 crore schemes, he said.