Union Budget 2016-17: Auto industry reactions

Even as captains of the automotive industry are busy reading the fine print of the Union Budget 2016 and checking out what specifically affects their companies and the sector they operate in, here are some of the responses we have received from major automakers:  

Pawan Goenka, Executive Director, M&M

Joe King, Head, Audi India

“The Budget presents a transformative agenda with clear-cut focus on initiatives for farmers, rural sector and infrastructure development. However, it negatively impacts the automobile industry. 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. The government has not announced any positive initiatives for the industry which contributes so heavily to the manufacturing sector and overall economy.

However, we are pleased to see the increase in expenditure on infrastructural development with specific announcements like approval of 10,000km of National Highways and total investment in road sector at Rs 97000 crore in FY17 that should help in people getting better road infrastructure.

Rakesh Srivastava, Senior VP (Sales & Marketing), Hyundai Motor India

“The finance minister has looked towards rural revival along with an infrastructure push and social welfare to restart the economy. It is an attempt towards fiscal prudence, enhancing demand and policy reform to address the strong headwinds in the global economy. The last few months have been challenging in terms of low volumes and growth and there were expectations of a scrappage scheme to revisit vehicles high on emissions and low on mileage. This was in addition to investment incentives to bring in more hybrid and fuel cell vehicles. In light of this, the increase in taxes comes as a dampener and will affect the entire spectrum of petrol and diesel vehicles.”

Sumit Sawhney, Country CEO & Managing Director, Renault India Operations

Citing pollution and the traffic situation in cities as a matter of concern, there is a proposal to levy a cess of 1 percent on small, petrol and CNG cars, 2.5 percent on diesel cars of certain capacity and 4 percent on other higher engine capacity vehicles and SUVs.

While doing this, the industry was hoping that the government should have taken progressive steps such as introducing a ‘scrappage incentive scheme’, to keep older cars off the roads and would not have impacted the industry. Such a policy will benefit the environment, reduce fuel consumption and also propel further demand for greener and efficient vehicles.

The industry was also hoping for excise duty reduction to be reintroduced and a roadmap on GST (Goods and Service Tax) implementation, as a unified excise and taxation structure will go a long way to benefit the industry.

Although the budget didn’t have much for the automobile sector, we are hopeful for some pro-business policies on a continual basis to benefit the industry.

A positive to the auto sector is the investments and reforms in agriculture and infrastructure sectors, which will have a rub-off effect on the core sectors that drive the economy. 

Guillaume Sicard, President – Nissan India Operations

“We 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.

There is not much for Auto industry in this budget. Infrastructure cess increase up to 4% on passenger vehicles will definitely have an impact on the prices. We do not foresee that to be a major burden for small car buyers but the luxury cars and SUVs will feel the heat.

We are still trying to understand the modalities of collection of TDS of 1% on more than 10 lakh priced cars. Further, curbing incentives on in-house R&D spends from 200% to 150% is not very positive. There is no presentation on roadmap for GST implementation, additional Incentives for electric vehicles and hybrids under FAME Scheme and the plan for vehicle scrappage scheme which is damper.”

Nigel Harris, Managing Director and President, Ford India

"We complement the Government for its vision of a strong economy built through sustained investment in rural growth and infrastructure development. The budget, however, lacks a roadmap for the automotive sector, which has for long continued to be an engine of India's economic growth. The high level of discounting in the domestic market today indicates weak consumer demand. Instead of introducing policies, such as excise duty rationalization, or vehicle modernization, the budget has levied additional taxes that will be further detrimental to sales and growth prospects for the industry.”
 

Roland Folger, Managing Director & CEO, Mercedes-Benz India

“The budget portrays a steady fiscal picture with considerable spending on infrastructure and rural development, which is laudable. However, taxing the luxury cars will be deterrent for the growth of the industry. We expected some reforms in the duty structure, which could have infused growth in the sector and would have provided additional employment. The rationalization of the duty structure would have also created a level playing field for all brands. Overall, 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.”

More on the Union Budget 2016-17

Union Budget 2016-17: Cars and SUVs to get more expensive

Union Budget 2016-17: Auto industry says additional taxes deterrent to growth

Union Budget 2016-17: Higher taxes hit car prices

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