Impact of Budget on the Auto Sector

Impact of Budget

on the Auto Sector

• Tax proposals in the budget generally influence the automobile

sector significantly.

• For eg: if there is an increase in cost of the car, post budget,

there is increased demand for cars before the fiscal end.

• This is because, duty increases become effective from the new

fiscal.

Impact of Tax

Proposals

• This time things will be different

as the budget is being

announced during the fiscal.

What’s different this

time?

Here are some pointers that could explain the

influence of budget on auto companies -

Government’s agenda

• To boost manufacturing of automobiles

and related parts in India.

How can it be

achieved?

• Offering tax incentives for carmakers in India.

• Announcing deductions on investments on plant and

machinery for companies upgrading their plants or setting up

new plants.

Government uses

taxation as a tool

• To influence consumption, for example:

Government may

increase duties or taxes

on some types of vehicles

Car Imports to discourage

Government uses

Government’s action

in Budget 2013-14

• The government hiked excise duty on some of the non-taxi

sports utility vehicles, based on ground clearance.

• The government allocated more money to urban

development and rural infrastructure.

Impact on companies

• Some impact on companies like Tata Motors and Mahindra

and Mahindra which manufacture non-taxi sports utility

vehicles in India.

• Good news for bus and truck making or tractor making

companies like Tata Motors and two-wheeler companies like

Bajaj Auto, as rural consumption could have received a boost.

Government’s focus

for Budget 2014-15

• Expected to be positive for consumption and investment.

• Focus on manufacturing.

• Talks about boosting urban and rural infrastructure.

Which means…

• Car and two-wheeler companies listed in India could get

incentives to boost production.

• Bus manufacturers in India could benefit as a result of a

higher allocation.

Important terms to watch out for

• Excise duty on manufacturing of automobiles or spares,

• Customs duty on import of luxury goods or spares

• Allocation to Jawaharlal Nehru Urban Renewal Mission.

• Fuel subsidies

Final note

• In a nutshell, the automobile sector will remain a focus area

in the upcoming budget and markets are expecting that, there

will be an overall positive impact on the sector.

• To learn more about the union budget, click here.

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past budget(s)