Union Budget 2019: Auto Industry Disappointed With Budget, But Welcomes EV Support

The automobile industry has welcomed the government's support for the electric vehicle industry in the announcements in the Union Budget 2019, but is disappointed that there has been no support for the automobile industry at a time when the industry is facing several challenges, including a slowdown in sales. Auto industry body SIAM (Society of Indian Automobile Manufacturers) has said in a statement that the auto industry is happy that Finance Minister Nirmala Sitharaman has extended wholehearted support to electric mobility, but cautioned that this will not help the automotive industry in emerging from the current slowdown it is facing today.

Also Read: Govt Proposes Rs. 1.5 Lakh Income Tax Reduction On EV Loans

The industry has welcomed the support for electric vehicles

"We warmly welcome the various additional measures announced to promote EVs like reducing the GST to 5 per cent, exemption in customs duty on EV parts and specially the Income Tax deduction on the interest component paid for loans taken for purchasing EVs. All these were recommendations given by SIAM and we are grateful to the FM for having accepted them. These measures will certainly help in making EVs more affordable and attractive to the consumers, which is in line with the recommendations made in the Economic Survey," said Rajan Wadhera, President, SIAM.

Also Read: Govt Recommends Reduction Of GST On Electric Vehicles

"However, the auto industry is currently going through a very difficult time and the industry was expecting some form of a stimulus package in the Budget in line with what had been done by Government during the previous two similar slowdowns. It is disappointing that the FM has not recognised the distress in the auto sector and not come out with any kind of support or stimulus," Wadhera said in a statement.

"However, the initiatives for improving liquidity in the market by capital infusion in the Banks should help the industry to some extent. Furthermore, the industry had expected that a voluntary scrappage policy would be announced which did not happen. There was also no announcement of extension of the 200 per cent weighted deduction for R&D expenses," the SIAM President stated.

The industry has been going through a crisis with low sales and overall slowdown

The Federation of Automobile Dealers' Association echoed similar sentiments, saying that while the Budget is aimed at overall economic development, it was a disappointment for the automobile industry as a whole, which is already reeling under a slowdown.

"The Honourable Finance Minister has delivered a balanced budget which will augur well for overall development and economic conditions as well as social inclusion of all citizens. In particular for the auto sector, our budget expectations were high, looking at the current state of the industry as we were expecting specific measures in the budget to revive growth in the auto industry and to that extent we are disappointed," said Ashish Harsharaj Kale, President, FADA.

Also Read: Petrol, Diesel To Be Costlier After Additional Cess Announced In Budget 2019

"Moreover, with an addition of cess on petrol and diesel leading to price hike by 1 rupee might impact auto sales, especially in the price sensitive two-wheeler segment. A spend of Rs. 80,250 crore for upgradation of roads under PM Gram Sadak Yojna will definitely boost commercial vehicle sales and with better connectivity will have a rub off effect on overall rural auto sales in the longer term. Focus on ensuring regular funding to sound NBFC's as well as allowing them similar treatment as allowed to banks for booking interest income, will help in bringing down the current liquidity crises and provide some respite to NBFC's, who play a very crucial role in auto sales growth."

"In these trying times, when auto sales are struggling, raising the limit of 25 per cent corporate tax from turnover of up to Rs. 250 crore to up to Rs. 400 crore will definitely boost sentiments towards doing business and will benefit some of our members. Although, our demand of covering partnerships and proprietary concerns was not met, which would have benefited majority of our members, we will continue to follow-up on the same and hope to get relief during the Budget in February 2020.

"The focus on EV, the benefits announced in Income Tax Rebate, the Intent to reduce GST on EV and the Budget allotted to FAME 2 spells the strong intent of the Government in ensuring self-reliance on our country's energy needs and will benefit our nation in the longer term. We are extremely happy to note that on FADA's recommendation to remove card charges, to further boost digital payments and bring in ease of doing business has been considered by the Honourable Finance Minister and now no charges or merchant discount rates (MDRs) will be imposed on customers using card payment options with auto dealers having annual turnover of more than Rs. 50 crore. FADA will work towards getting this limit lowered to Rs. 25 crore, so that it benefits the smallest of auto dealers as well," Kale added.