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Run-up to the Budget 2002-03: Automobiles

Background

India is the world's second largest market for two wheelers after China. However, India's passenger car and utility vehicle industry is small by international standards due to low purchasing power of the population. The industry is one of the key sectors of the economy in terms of the employment generation.

  • It directly employs close to around 0.2 million people and indirectly employs around 10 million people.
  • Good volume growth and cost savings in the current fiscal are expected to lead to improvement in operating profits for most of the companies in the sector.
  • The passenger car segment is expected to see increased activity next fiscal, with many players planning new launches in order to satisfy Indian customers. For instance, DaimlerChrysler India is planning to launch its M Class four-wheel drive as well as sport segment offerings - SLK and CLK - in the country in the first half of 2002. Japanese auto major Toyota is also planning to launch Camry in India in 2002.

    Sales Statistics

     

    Sales (Domestic+Exports)

     

    Apr 01-Jan 02

    Apr 00- Jan 01

    Change

    Passenger Cars

    489,615

    477,242

    2.6%

    Multi-Utility Vehicles

    100,347

    98,077

    2.3%

    M&HCVs

    67,702

    65,853

    2.8%

    LCVs

    42,031

    49,187

    -14.5%

    Three Wheelers

    175,736

    170,684

    3.0%

    Scooters

    751,705

    753,342

    -0.2%

    Motorcycles

    2,379,583

    1,767,977

    34.6%

    Mopeds

    413,822

    585,128

    -29.3%

    Source: Society of Indian Automobile Manufacturers

    Duty Structure

    Products

    Excise

    Customs (Basic)

     

    2000-01

    2001-02

    2000-01

    2001-02

    Two Wheelers (<75cc)

    16%

    16%

    35%

    60%

    Two Wheelers (>75cc)

    24%

    16%

    35%

    60%

    Motor Vehicle (<=6 seater excluding driver)

    40%

    32%

    35%

    60%

    Motor Vehicle (10-12 seater excluding driver)

    32%

    32%

    35%

    35%

    Motor Vehicle (13 seater and above)

    16%

    16%

    35%

    35%

    Commercial Vehicle - Petrol driven

    40%

    32%

    35%

    35%

    Commercial Vehicle (other than petrol driven)

    16%

    16%

    35%

    35%

    Secondhand Motor Cars

    NA

    NA

    35%

    105%

    Secondhand motor cycles <= 75 CC

    NA

    NA

    35%

    105%

    Secondhand motor cycles > 75 CC

    NA

    NA

    35%

    105%

    Tractors (<1800cc)

    16%

    16%

    35%

    35%

    Tractors (> 1800cc)

    16%

    16%

    35%

    35%

    Major announcements in previous year's budget

    • Special Excise Duty (SED) of 8% on scooters and motorcycles was abolished.
    • Subsequent to the collapsing of three SED rates to a single rate of 16%, the SED on cars was reduced to 16%.
    • Basic customs duty on used cars & motor cycles and old multi-utility vehicles was raised to 105%.

    Industry's demands from Union Budget 2002-03

    Some of the major demands made by industry associations like Society of Indian Automobile Manufacturers (SIAM) and Confederation of Indian Industry (CII) are as follows:

    • Value Added Tax (VAT) should be implemented in a manner that will eliminate the cascading effects of taxation.
    • Excise duty on vehicles with a seating capacity of up to 8 persons, excluding the driver, should be reduced to 16%. If the Government is not in a position to bring down the rate to 16% in one go, it should reduce it to at least 24% from the present level of 32%.
    • For vehicles with a seating capacity of 9 -12 persons, excluding the driver, excise duty should be reduced from 32% to 16%.
    • Customs duty on components (imports in any form other than CBU) should be reduced to 30% from the current level of 35%.
    • Customs duty concession of 5% on CNG kits/ parts of kits should be extended to raw materials required for manufacture of CNG kits and its parts.
    • To encourage the use of pollution free electrical vehicles, customs duty on their major inputs should be reduced to 5%.

    Key Players
    Ashok Leyland, Bajaj Auto, Bajaj Tempo, Daewoo Motors, Eicher Motors, Escorts Yamaha Motors, Fiat India, Ford India, General Motors India, Hero Honda Motors, Honda Siel Cars, Hindustan Motors, Hyundai Motors India, Kinetic Motor, LML, Mahindra & Mahindra, Maruti Udyog, TELCO and TVS Suzuki.

    YOU MAY ALSO WANT TO READ:
    The Rediff Budget Special
    The Rediff-Dun & Bradstreet Budget Analysis
    Run-Up To The Budget
    Money


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