With the Union Budget for the financial year 2024-25 drawing near, experts underline the industry's hopes for measures that will drive growth, innovation, and sustainability in the automotive sector.
Analysts opine that after a tighter-than-expected election race, the new NDA government might prioritise rural spending over capital expenditure, aiming to boost rural demand. Favorable monsoon forecasts also support the anticipated recovery of the rural market.
These factors are likely to increase disposable income for rural consumers, thereby driving demand in the automobile sector, especially for two-wheelers.
Meanwhile, automobile sales in May showed strong performance in the SUV segment and positive trends in Commercial Vehicles (CVs). Year-to-date (YTD) growth for two-wheelers and SUVs was robust, driven by improved consumer sentiment, successful price hikes, new model launches, and a gradual revival of rural markets.
The industry hopes for the Budget to maintain capital expenditure on infrastructure projects, which will benefit the automotive sector, and emphasise promoting green mobility to accelerate EV adoption.
Any measure that leads to increase in the disposable income of taxpayers will be a big positive for auto manufacturers. The extension of the FAME subsidy will also help EV adoption further. Steps to improve the charging infrastructure across the length and breadth of the country will be a major positive. Promoting exports of EVs through PLI schemes or other measures will give the auto sector a boost in this Budget.
1) FAME scheme continuation particularly for 2Ws (also 4Ws) should be brought in as there is no growth in EVs. The government should accelerate e-buses program
2) Faster compliance of PLI schemes and fund release (quarterly basis) for higher EV adoption
3) Lower GST rate for entry 2Ws
4) Government programs toward rural recovery
5) Increase spending on infrastructure
6) Custom duty increase on auto parts like tyres and advance batteries/components
7) Implementation of scrappage policy with rigor particularly for trucks and buses
Firstly, the PLI scheme has significantly supported the automotive industry. However, industry bodies advocate for consistency in its structure and fewer frequent changes by the government to reduce confusion, thereby enabling increased private sector capital expenditure.
Secondly, the industry would like the Faster Adoption and Manufacturing of Electric Vehicle (FAME) scheme to continue with some rationalisation. The impetus to charge infrastructure and energy storage systems, government support in R&D for clean energy, green mobility, and semiconductors will help the auto sector. Some allocation towards incentives for building academic or skill training courses on EVs is also expected.
- The government could consider implementing tax cuts to boost consumption, positively impacting the automobile industry.
- The Budget could include welfare schemes aimed at enhancing rural consumption, potentially spurring recovery in the currently subdued tractor and entry-level motorcycle markets.
The auto sector is looking forward to several key measures in the upcoming Budget. A reduction in GST rates could provide much-needed relief to the industry, making vehicles more affordable for consumers. Scrappage incentives are anticipated. Support for research and development in electric vehicles (EVs) is crucial, as it can drive innovation and help India become a leader in EV technology. Additionally, investments in rural infrastructure development could enhance market access and increase demand for vehicles in rural areas. There is also hope for a reduction in import duties on EV components.
The automotive industry stakeholders are eagerly awaiting the Budget's stance on supporting greener technologies, particularly electric vehicles. They are keenly anticipating updates on potential FAME 3 schemes designed to incentivise EV production, along with proposals for reducing GST on lithium-ion batteries and introducing production-linked incentives. Furthermore, there is a strong call for lowering the GST on entry-level internal combustion engine two-wheelers, currently set at 28 percent.
Overall, industry expectations are for the Budget to maintain capital expenditure on infrastructure projects, which would benefit the automotive sector. The emphasis remains on promoting green mobility to accelerate the adoption of electric vehicles.
