2014 Union Budget: What it Holds for Indian Automobile Industry

The much anticipated general budget of the newly-elected government is finally out, which has tried addressing several issues including a few raised by the Indian Auto Industry. The Finance Minister had already announced the retention of the excise duty cut benefits, and today in the 2014 Budget he proposed the implementation of the Goods and Service Tax (GST) that the auto industry had been demanding for quite a long time. Mr. Jaitley said that a solution to the problems relating to the indirect tax regime may be finalised in the current year itself.

Moreover, announcements like reduction in steel prices and elimination of customs duty on auto components too will work in favour of the sector. Most importanly, the car and bike prices in India will remain pretty much the same because of the excise duty structure attention in the Union Budget 2014.

Read: What the Indian Auto Industry Expected From the Budget

Other than the above-mentioned demands, the auto industry also demanded withdrawal of 1 % national calamity contingent duty, acceleration of depreciation rate on motor cars to 25% and inclusion of interest paid on car loans in tax deduction, all of which went unaddressed in the Union Budget 2014-15. Furthermore, announcements like abolishment of tax for income up to Rs 2.5 lakh, allocation of Rs 14,389 crore for roads in villages might help the industry in the long run.

There was no announcement regarding the allocation of funds for the National Electric Mobility Mission Plan in the Budget 2014, which could cause a setback for companies like Mahindra & Mahindra, who have invested a considerable amount of resources for the development of electric vehicles. Electric vehicle makers were demanding that the customer buying an electric vehicle should be given subsidies, which will help in promoting and using alternative source of energy for mobility.

While we think that it's just an average budget for the auto industry, find out what our automakers have to say about this.

Mr. Vikram Kirloskar, President, SIAM welcomed the focused approach on infrastructure development and on simplified taxation in the General Budget 2014-15 presented by Shri Arun Jaitley, Hon'ble Finance Minister. Mr. 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.

Dr. Pawan Goenka, Executive Director, Mahindra & Mahindra Ltd. said, "The Finance Minister has 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. In fact, I see this budget as a blueprint to the direction the Government will take over the next nine months. "

"Specific to the automotive industry, the extension on reduction of excise duty had already been notified. We did expect an announcement on incentives for electric vehicles which did not come through. A firm date for GST implementation would have been welcome.", He further added.

Vinay Piparsania- Executive Director, Marketing, Sales and Service, Ford India said, "The Union Budget is growth oriented and presents a progressive roadmap to spur investments and infrastructure development. The ongoing excise benefits, along with the Finance Minister's proposal to boost savings through revised tax structure, will surely strengthen consumer sentiment. We hope the Government will continue its pro-reform outlook and will soon introduce a roadmap for the implementation of GST to benefit business environment as well as the auto industry."

Mr. Kenichiro Yomura - President Nissan India Operations said, "The Budget 2014 presented today by the Honourable Finance Minister is based on fiscal prudence with a progressive outlook. We appreciate his considerations and his aim to achieve 7-8% GDP in 3 to 4 years. Structural reforms, including FDI liberalization in defense and insurance, initiatives to support local manufacturing and commitment to remove retrospective taxation, are significant steps from a larger macro-economic perspective."

He added, "The previous financial year was challenging for the auto industry and we were expecting bolder reforms in favour of the auto industry. Though the earlier decision to continue the excise duty concession till December 2014 along with the reduction in steel prices and elimination of customs duty on auto components certainly bodes well for the sector. The Union Government's intent to move towards a GST regime is good news and we hope it is implemented at the earliest. The industry really needs a robust and streamlined indirect taxation structure that will lend customers the confidence to spend more owing to the taming of prices. This should have a positive impact on car shopping as well. In addition to the Government's willingness to give a fillip to the Indian auto industry, we were expecting a move towards making green vehicle technology a reality so that we could get the opportunity to bring our world-class electric and hybrid vehicles to our Indian customers' doorstep."

Mr. Vipin Sondhi, MD & CEO, JCB India Ltd said, "Given that this Government has been in office for less than 2 months, no big bang reforms were anticipated. The Union Government recognizing 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."

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