The Budget's impact is expected to be largely neutral on the auto industry. In its pre-budget wish list, the Society of Indian Automobile Manufacturers had asked the Finance Ministry to have a uniform rate of excise duty on all passenger vehicles, cars, MPVs and MUVs of 16 per cent. It had asked excise duty on two and three wheelers should be reduced to 8 per cent.
According to J P Sinha, Director and Head Research of Ambit Capital, "Auto component industry will be negatively impacted due to reduction in customs duty. The reduction in peak duty will make the industry more competitive. There was nothing for the two wheelers and for passenger vehicles in the Budget. Auto stocks of tractor manufacturers like Mahindra & Mahindra, Punjab Tractors and Escorts will benefit."
According to Angel Broking report the Budget impact on the auto and auto ancillaries will be neutral. The Budget has focussed on agriculture investment, spending and lending.
This will have positive impact on farm equipment and tractor manufacturers. It will be positive for Mahindra & Mahindra. Secondly an increase in defence allocation to Rs. 96,000 crore will be positive for Tata Motors and Ashok Leyland.
Its top pick is M&M. The other expectations from the Budget were import duty tariffs on vehicles not to be brought down below 12.5 per cent.
The rate of excise duty for motor vehicles having seating capacity up to 13 persons including driver when registered, as maxi-cab should be 16 per cent. Rate of excise duty for motor vehicles for transport of goods fitted with petrol engine should be 16 per cent.
The industry body also asked the government to continue the tax incentives on research and development incentives, which expires this March for another 10 years.
It had also asked a deduction similar to housing loan should be granted for the car loans as this will lead to a growth in the passenger car segment.
The depreciation rate on plant and machinery to be increased from 15 per cent to 25 per cent. Motor vehicle depreciation to be raised from 15 per cent to 25 per cent.
SIAM also suggested a one-time incentive-based fleet modernisation programme to be launched during the year.
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