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However, most automotive segments continue to record volumes well below what was seen in 2019. Appropriate impetus at this time is therefore key to accelerating the pace of the resurgence.
Second, the industry is undergoing an overhaul in terms of technology. Technological advances collectively known as “CASE” (Connected, Automotive, Shared, Electric) lead to cleaner powertrains, added safety, connected and autonomous capabilities. They see cars as a shared service rather than an asset to own.
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At the same time, transmissions, mechanical and electronic systems are also becoming more sophisticated.
While the industry is tackling the disruption head-on, this year we have seen electrification gain momentum quickly and increase the share of other clean technologies such as hybrids and CNG, while flex fuels, hydrogen, Future technologies such as fuel cells need momentum. Transform into commercial reality.
Third, the structural nature of the automotive industry itself requires it to remain robust. We support multiple sectors as part of a long value chain. Major industries such as steel, rubber, plastics and other semi-finished and intermediate parts are important end users. Retail, services, banking, insurance, refueling, charging, logistics, and personal and commercial mobility are some of the key forward linkages.
In context, budgets should focus on the following measures:
It rewards increased capital expenditures (capex) as well as investment allowances and research and development (R&D) spending. As before, the 200% higher deduction benefit can be recovered. Such benefits are available to companies in China and Southeast Asia.
Cleaner technology, lower Goods and Services Tax (GST) for mass transit: GST for vehicles currently ranges from 5% to 50% (including compensation tax). 5% for electric vehicles and 50% for larger sport utility vehicles (SUVs) with larger engines.
Internal combustion engine (ICE) powertrains, as well as battery-powered plug-in and more powerful hybrid vehicles are inherently more costly due to the use of dual technology, Environmentally beneficial. These vehicles attract 28% GST for smaller vehicles (
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Motorcycles and commercial vehicles for mass public commuting and goods movement may also be subject to GST rationalization.
Long-term policy for EV: FAME-2 has been extended for two years until 2024. This budget will help announce long-term policy support for the EV industry.
Uniform GST for components: The Production Linked Incentive (PLI) scheme supports, among other means, advances in transmission and electronic systems. However, his GST rates on auto parts are doubled at 18% and 28%, facilitating distribution in the aftermarket gray market. This is a security issue on the one hand and an incentive to the informal economy and loss of his GST revenues on the other. So it makes sense to apply his GST rate of 18% to all auto parts.
Tire PLI: The automotive tire industry caters to local demand and has great foreign currency earning potential for India. The industry also sees the introduction of new technologies such as run-flat tires, smart tires, noise reduction, puncture protection and EV tires. These advances require companies to invest heavily in capital expenditures and research and development.expansion of PLI scheme The change to tires is a welcome step for the industry and will help it become more competitive with countries such as China, Thailand and Vietnam in export markets.
Measures to strengthen exports: The rupee trade with important trading partners developing countries (eg Egypt, Nigeria, Turkey) will help sustain exports as the foreign exchange/dollar crisis has restrained imports. Free trade agreements with countries that do not manufacture cars, such as the recently concluded trade agreement between Australia and the United Arab Emirates, will also help boost car exports.
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Reevaluate the RoDTEP cap. You can also make your exports more competitive by keeping local taxes from being exported. However, for motor vehicles and parts, the current Duty and Tax Exemption (RoDTEP) rates for exported goods are not sufficient to cover all local taxes in India. Unit and weight caps for utilizing RoDTEP exacerbate the problem.
Recently, the RoDTEP committee revised the RoDTEP rates for some of these items, but there are still items that need to be considered for higher remissions. Additionally, the recent increase in diesel prices has also increased the tax burden on the final price. Therefore, a reassessment of the RoDTEP fee and removal of the cap is required.
(Hemal Thakkar is Director Consulting, Market Intelligence & Analysis at CRISIL. Opinions are personal)
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