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Battling Slowdown, Sales Slump Auto Industry Has a Long Wishlist for Budget 2020

India's Finance Minister Nirmala Sitharaman arrives to present the 2019 budget in Parliament, New Delhi, July 5, 2019. REUTERS/Adnan Abidi

India's Finance Minister Nirmala Sitharaman arrives to present the 2019 budget in Parliament, New Delhi, July 5, 2019. REUTERS/Adnan Abidi

Here are some of the recommendations and expectations of the automobile industry in India from the Union Budget 2020.

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The Narendra Modi government will present the Union Budget on Saturday. To be announced by Finance Minister Nirmala Sitharaman, there are high expectations from this budget. The automobile industry in particular is looking at this year’s budget with a keen eye given the bad phase it is going through. The ongoing sales slump, upcoming BS-VI emission norms, electric vehicle policy, GST are some of the points which the industry wants the government to address at this year’s budget.

Here are some of the recommendations and expectations of the automobile industry in India from the Union Budget 2020.

Recommendations by ION Energy on Electric Vehicles:

Helping manufacturers reduce lithium-ion cell production costs

Currently, Li-ion batteries amount to 45% cost in EVs which means that the cost of an EV is directly proportional to the cost of its batteries. We strongly support SIAM in suggesting the government to abolish the customs duty of 5 percent on li-ion cells. It is imperative to incentivize local manufacturing of lithium-ion battery cells which can further enable battery packs to be manufactured and assembled locally, reducing import costs.

Promoting the EV ecosystem and adoption

Offering incentives and reducing the upfront cost of installing charging stations, battery swapping stations and facilitate land acquisitions to support the creation of EV charging infrastructure. Poor infrastructure, low speed and unaffordable have been the key challenges hindering EV adoption in the country. Localization of EV components, improved availability of battery technology and extensive charging infrastructure setup can reduce the overall cost of EVs, making them viable for shared mobility as well as for personal use.

Recommendations by ACMA on Automotive Components:

Technology Development & Acquisition Fund

A fund needs to be created for supporting R&D and indigenous technology development especially in light of the technological disruptions the automotive industry is witnessing. The fund could be utilised for technology development of e-mobility components, and to meet new regulations on safety, emission and environment, among others. Such a fund could also be utilised for in-house development or for acquisition and assimilation of technologies through licensing agreements, acquisitions etc.

Incentivising R&D Spend

To encourage domestic R&D and testing, it is important to provide exemption on import duty on auto component prototypes. Also retaining of weighted tax deduction on R&D expenditure is critical. The 2016-17 Budget reduced weighted deduction benefit from 200 per cent to 150 per cent and has further restricted the deduction to 100 per cent from 1st April 2020.

Investment Allowance

Provision to reintroduce investment allowance at 15 per cent for manufacturing companies that invest more than Rs 25 crore in plant and machinery.

Expectations of Automobile industry:

Rajeev Chaba, President & Managing Director - MG Motor India

"The budget announcements will be key to setting the tone for 2020 for the automotive industry. The government’s recent announcements on the promotion of EVs in India, especially for government use and public transport, is encouraging. However, we feel that more work needs to be done to promote EV adoption in India not only in public transport but amongst private customers as well. We hope that the government provides the right policy, incentives, and charging infrastructure to put more EVs on the road. It should also look at providing incentives to stakeholders for sourcing critical raw materials for EV battery manufacturing in India. This will enable a strong EV-centric ecosystem and will be beneficial for the long-term growth of this high-potential space.”

Sohinder Gill, Director General, Society of Manufacturers Of Electric Vehicles (SMEV)

“For a nascent and disruptive industry like EV that is heavily dependent on the government policies, there needs to be one voice from the policymakers. The EV policy needs to be clear, supportive and long term. We strongly believe that in the short to medium run, both the EV and IC sectors can grow and complement each other and policy statements should not give jitters to either of them. We hope there are announcements in the budget that give confidence to the EV industry and bring cheers to its users. There is a strong possibility of India playing a significant role in the global EV market with its “value for money” two, three and four-wheelers, provided we quickly reach a good scale in the domestic market. We should make concerted efforts to remove the kinks that have inadvertently cropped up in Fame 2. The policy should be completely redrafted, if needed, so that substantial investments both from within and outside India can flow into the EV sector to push the exponential growth that everyone has been expecting for some years.”

Deepak Jain, President, ACMA

“The auto component industry contributes significantly towards employment generation and exports. To meet the Government of India’s Vision of a USD 5 trillion economy by 2025, of which the manufacturing industry would be USD 1 trillion, it is critical that steps be taken to get the automotive industry back on track. The automotive industry accounts for almost half of India’s manufacturing economy, while the component industry accounts for a quarter. We are hopeful that the Government would consider our long-standing recommendation of 18 per cent GST on all auto components as also extend impetus to R&D and indigenous technology development.”

Suresh KV, President, ZF India

“Without a doubt the Indian Automotive industry is one of the prominent growth drivers of our economy. It contributes about 7% to the country’s GDP. With the transition to BS-VI, April 2020 onwards vehicle costs are expected to go up. I believe that a reduction in the GST rates which will help arrest the incessant price hike in vehicles would be the right step at this juncture. Apart from this, an incentive-based vehicle scrappage scheme could also act as a catalyst to effectively spur the demand. I am positive that the government will steadfastly rollout the scrappage policy which would be effective to generate demand.”

Jatin Ahuja, Founder & MD, Big Boy Toyz

"We are aware that there has been a downturn in the overall auto industry lately and the challenges have directly affected the mainstream luxury car industry. The pre-owned luxury car segment is eyeing 50% growth with this year’s Union Budget. We are also expecting the government to align its electric mobility vision with challenges faced by automakers and auto-dealers in terms of innovation and elasticity. The automobile sector is a crucial contributor in country’s GDP and so the government must take steps to ease the implementation of Bharat Stage VI norms which may lower the demand until the public fully understands the policies."

Roland Bouchara, Senior Vice President, Sales & Marketing, Citroën India

“While the government is committed to the growth of manufacturing sector through ‘Digital India’ and ‘Make in India’ initiatives, it should further strengthen policy frameworks to support and encourage manufacturing sector. Also, manufacturing industry provides great opportunities for investment and employment in the country. We hope the government further encourages the automobile industry and lays down long-term roadmap to help the sector plan its investments in new technologies and skill development. Further, we expect the government to take adequate measures in terms of improving liquidity which will lead to increase in consumer spending and in turn, boost the economy and GDP.”

Jeetender Sharma- Founder & MD, Okinawa Autotech Pvt. Ltd.

"The revival of the automobile industry is expected to be on the priority list in the upcoming Budget session. Low market sentiment and the transition to BS VI emission standards were said to be the prime reasons for the industry slowdown last year. The industry is hopeful that the government will announce policies to support the industry and increase the demand in the market. Another buzzing word is about the growth of the electric vehicle segment in India. EV revolution has certainly picked up well in India. The government has also fuelled the market with subsidies and incentives to accelerate adoption. However, the cost of components and import duty remains a big concern for EV manufacturers. Certain parts of products are still imported, due to lack of manufacturing facilities, and this forms a major part of the overall product cost."

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