The hot topic in all conversations from the office meeting room to your home's dining table is the 2016 Union Budget after being presented by Finance Minister Arun Jaitley in the Parliament on Monday. While the general sentiment was one of a pro-agrarian emotion, a dark cloud of confusion hovered over the EPF/PPF-related introductions, which the government had to later clarify on. Similar was the case with the automobile industry that had mixed reactions to the budget.
We spoke to some leading automakers in the country to find out how the vehicle industry reacted to the 2016-17 budget.
Voices supporting pro-agriculture proposals
One of the highlights of the budget was its attention on the oft-ignored agricultural sector. The allocation of funds to improve the road and highway framework of the country, in addition, has come in as further boost to the industry to reach the rural areas. Yadvinder Singh Guleria, Senior vice president of Honda Motorcycles and Scooters India said, "We welcome the Union Budget. The Honorable Finance Minister has walked a fine rope of balancing social welfare with economic growth. The Government's focus on rural sector will inject strength in rural economy."
"The Rs 1 lakh crore allocations to road and highways will accelerate connectivity and mobility across all geographies led by rural areas, which is very positive news for overall auto industry. Overall, we expect such measures once implemented, will revive the stagnant demand of two-wheelers in the rural market," he added.
Public transport, Make in India boost
Another move that has earned the Jaitley's budget praise is the proposal to amend the Motor Vehicles Act. Nissan India Operations president, Guillaume Sicard said, "We also welcome Government's decision to amend the Motor Vehicle Act in passenger vehicle segment to allow innovation. This, coupled with a focus on infrastructure will help improve the overall public transport in the country."
Tata Motors expects an impetus to be given to the Make in India initiative after the budget. "Boost in spends related to infrastructure and construction of roads and highways, will help increase spends on commercial vehicles, at the same time improve last mile distribution," it said in an official statement.
Alternate fuel lobby not impressed
The future of automobiles lies imperatively in the hands of green fuels and hybrid vehicles, but surprisingly, the budget failed to take note of this fact. Director of Society of manufacturers of Electric Vehicles, Sohinder Gill said, "I can say that we are approaching this budget with cautious optimism as we await finer print But I was certainly hoping for greater budgetary support for E-vehicle eco-system. There is no real clarity on the fund allocation for promotion of E-vehicles either or specific budgetary support for green vehicle infrastructure creation, for the year 2016-2017."
To this, vice chairman of Toyota Kirloskar Motor, Vikram Kirloskar added, "I am concerned about the extra green tax on cars, but I am fine with it if it is used to incentivise scrapping of BS 1 and BS 2 vehicles and promote the sales of alternate fuel technology vehicles which would help environment also".
No choice but to raise prices
Audi India head, Joe King was particularly critical of the added tax on luxury cars and the government snubbing the demand for reducing taxes. "We are disappointed that the industry's demand on reducing excise duty has not been addressed. On the contrary, 1% Infra cess on Petrol, CNG, LPG cars, 2.5% on small diesel cars and 4% on bigger diesel cars and SUVs has been added which will further affect the price and consequently demand. Also, we need to evaluate the impact of extra tax levy of 1% on purchase of cars above Rs. 10 Lakh."
Missed opportunity
Managing director and CEO of Mercedes-Benz India, Roland Folger believes that more could have been done in terms of short-term developments. "We applaud the infrastructural spending and the focus on building more roads and highways, which will have a long-term positive effect on the auto industry. But in the short to mid-term, we missed an opportunity to drive growth in the sector, which could have further benefitted the long-term prospects of the auto industry," he said.
Business perspective
The Society of Indian Automobile Manufacturers (SIAM) called the budget a mixed bag for the automobile sector. Highlighting the positives in terms of business, SIAM president Vinod Dasari said, "The industry is happy to note that a grant of 200 crores have been made to the FAME scheme and NATRiP," and added, "SIAM welcomes clarification regarding mode of payment of NCCD from cenvat for past period. Basic custom duty on raw material used for manufacture of catalytic converters has been reduced from 7.5 pc to 5 per cent. However, the basic customs duty on import of aluminium and aluminium products and zinc alloys has been increased which will impact the industry."
That said, JK Tyres head Raghupati Singhania summed it up by saying that despite the mixed nature of the suggestions, a lot will depend on the implementation. "Although there is nothing direct for the industry or for that matter manufacturing sector, there is enough scope to generate demand and kick start the industry."
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