While Finance Minister Nirmala Sitharaman’s Union Budget brought cheer to the electric vehicle (EV) sector, it failed to meet most demands of the auto sector.
The auto industry was expecting a cut in GST, simplification of the compensation cess, an announcement for the implementation of the vehicle scrap policy and a stimulus package, however, none were part of the Budget dossier.
“…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 recognized the distress in the auto sector and not come out with any kind of support or stimulus,” Rajan Wadhera, president of Society of Indian Automobile Manufacturers (SIAM), said.
Wadhera welcomed the support measures announced for the adoption of electric vehicles, but added that they “will not help the automotive industry in emerging from the current steep slowdown it is facing today.”
Auto dealers and original equipment manufacturers were gunning for implementation of the vehicle scrappage policy and seeking MSME status for auto dealerships, both of which demands were left out in the Budget.
Instead, the finance minister announced an additional cess on petrol and diesel, which the industry is afraid might further drive down sentiment and increase the cost of vehicle ownership in an industry that’s already battered by a historical decline in demand. The industry had demanded a reduction in customs duty on SKD (semi-knocked down) and CKD (completely knocked-down vehicles)
However, one saving grace was the measure announced to improve the health of “fundamentally sound” NBFCs, and small businesses.
The auto industry largely reflects the state of the economy, and plummeting auto sales have coincided with a 20-quarter low in economic activity. The finance minister announced several measures for MSME lending, like the interest subvention scheme for which Rs 350 crore has been earmarked, and also the creation of a platform for MSME financing.
Auto dealers were disappointed by the Budget. Jay Kale, Vice President at Elara Capital, told CNBC-TV18 that the time to implement the vehicle scrappage policy was now more pressing than ever.
According to experts, the industry could see a growth pickup if the overall economic growth improves, as projected by the Economic Survey.
"There isn’t much in the budget for the auto industry, but if overall GDP growth happens as projected, then the auto industry will benefit too”, said Ashish Kale, President, Federation of Automobile Dealers Association.
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