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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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The content/illustrations shared in the presentation is based on information available from the
past budget(s)
